REG - Reach PLC - Reach plc - Half-year Report
31/07/2024 07:00
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RNS Number : 4767Y Reach PLC 31 July 2024
Reach plc ("The Company") Half Year Results - Six months to 30 June 2024
31 July 2024
Customer Value Strategy driving performance, on track to deliver full year
expectations
Jim Mullen Chief Executive
"We are pleased to have delivered further operational progress this year, with
our commercial and editorial teams making the most of the strong news agenda.
Our Customer Value Strategy continues to deliver long-term success, with an
increasing share of data-driven digital revenue as well as digital growth
returning in Q2. Alongside our expertise in managing our print product, we
have traded our digital assets hard and delivered an operating margin
improvement.
We continue to build a stronger, more resilient business and are on track with
our plans for the year."
Results overview: Improved operating profit margin through effective cost
management
Financial Summary((1))
6 months 30 June 24 Adjusted results((2)) Statutory results
HY24 HY23 Change HY24 HY23 Change
Revenue £m 265.0 279.4 (5.2%) 265.0 279.4 (5.2%)
Operating profit £m 44.5 36.1 23.1% 36.8 11.1 232.2%
Operating profit margin % 16.8 12.9 3.9% 13.9 4.0 9.9%
Earnings per share Pence 10.1 8.7 7.8 1.5
Net (debt)/cash ((3)) £m (12.3) (3.5) (12.3) (3.5)
Dividend per share Pence 2.88 2.88 2.88 2.88
· Revenue declined 5.2% to £265.0m with digital revenue of £60.0m broadly in
line with last year (HY23: £60.8m), and momentum improving across the period
(Q124: (8.5)%, Q224: +6.7%).
· Both print circulation revenue £149.9m (HY23: £155.4m) and print advertising
revenue £32.7m (HY23: £37.0m) outperformed volume decline, which remains in
line with historical trends.
· Early and effective action on costs has delivered targeted cost savings. Total
adjusted operating costs reduced by 9.3% to £221.8m (HY23: £244.6m).
· Adjusted operating profit increased by 23.1%, and at an improved margin of
16.8% (HY23: 12.9%, FY23: 17.0%).
· Continue to deliver returns for shareholders with the interim dividend
maintained at 2.88p.
Further progress with our Customer Value Strategy
· The Customer Value Strategy is driving data-driven revenue growth of 9% to
£27.2m (HY23: £24.9m). These revenues now represent 45% of total digital
revenues (HY23: 41%).
· Strong trading of digital assets, along with continued diversification into
non-advertising revenues, including partnerships, ecommerce and affiliates. As
a direct result, yield (revenue per thousand page views) increased by 32%.
· Growing secure audience by 4% year-on-year((5)), including 9m customers
receiving content directly to their devices.
· Page view volumes declined 25% over the period due to ongoing impact of 2023's
referrer deprioritisation of news. Trends are improving and open market prices
for mass scale programmatic advertising have stabilised.
FY24 Outlook: On track to deliver market expectations
We remain focused on delivering our operational plans for the year as we build
a more sustainable digital business. Our Customer Value Strategy is continuing
to grow data-driven revenues and we expect our print performance to remain
resilient despite the tough macro backdrop.
We are trending slightly ahead of a full year reduction in operating costs of
5-6%. The phasing of cost initiatives and inflation during 2023 and 2024 means
that operating profits will be more equally weighted between the first and
second half of the year.
At the end of the period, we saw elevated levels of advertising spend
supported by events such as the European Football Championships. July is
trading in line with our expectations.
We continue to work against the backdrop of the dominant tech platforms and
their impact on search and referral traffic. As we have seen, this dynamic can
create some volatility across our distribution, however, we are building more
resilience through our Customer Value Strategy and we remain on track to
deliver market expectations.((6))
Q2 Trading: Digital revenue back in growth
2024 Q1 YOY Q2 YOY HY YOY
% % %
Digital revenue (8.5) 6.7 (1.3)
Print revenue (6.0) (6.2) (6.1)
circulation revenue (3.4) (3.7) (3.6)
advertising revenue (10.7) (12.3) (11.5)
Group revenue (6.7) (3.6) (5.2)
The performance over the second quarter has been bolstered by strong
multi-platform content around key events, including the European Football
Championships, UK general election and Taylor Swift Eras tour. As expected,
yield continued to improve, driving growth across the digital estate. We
remain focused on optimising our digital inventory with the increase in yield
more than compensating for the 16% decline in page views.
Data-driven revenues, which are higher value and enable more targeted
advertising, now make up 45% of digital revenues. Across the quarter these
revenues grew 13% (year-on-year) due to the strong growth in direct
advertising revenues and non-advertising revenues, including partnerships,
ecommerce and affiliates.
Mass-scale programmatic advertising market has benefitted from a stabilisation
in open market prices. It is too early to characterise this as a recovery, but
the early indicators are positive.
In Print, circulation revenues have proven again to be a reliable revenue
stream and the teams have mitigated the circulation volume headwind with cover
price increases, strong promotional activity and standalone products tying
into popular events. Print advertising revenue performed well due to the
continued demand for this ad format, particularly from the food retailers.
Notes:
((1)) The results have been prepared for the six months ending 30 June 2024 and the
comparative period has been prepared for the 26-week period ending 25 June
2023.
((2)) Set out in note 18 is the reconciliation between the statutory and adjusted
results.
((3)) Net debt balance comprises cash and cash equivalents of £12.7m (inclusive of
£1.9m restricted cash) less bank borrowings of £25.0m, but excludes lease
obligations (note 14).
((4)) An adjusted cash flow is presented in note 19 which reconciles the adjusted
operating profit to the net change in cash and cash equivalents. Note 20
provides a reconciliation between the statutory and adjusted cash flows.
((5)) Average increase Q224 v Q223.
((6)) Market expectations compiled by the company are an average of analyst
published forecasts - consensus adjusted operating profit for FY24 is £97.8m.
Enquiries
Reach plc
Jim Mullen, Chief Executive Officer communications@reachplc.com
Darren Fisher, Chief Financial Officer +44 (0)7557 557 447
Lija Kresowaty, Head of External Communications
Jo Britten, Investor Relations Director
Teneo reachplc@teneo.com
Giles Kernick, David Allchurch 020 7353 4200
About Reach
We're Reach plc, the UK's and Ireland's largest commercial news publisher.
We're home to more than 120 trusted brands, from national titles like the
Mirror, Express, Daily Record and Daily Star, to local brands like MyLondon,
BelfastLive and the Manchester Evening News, to our recently launched U.S.
titles. Every month, 47 million people come to us, via print and online, for
trusted news, entertainment and sport.
LEI: 213800GNI5XF3XOATR61
Classification: 1.2 Half yearly financial reports and audit reports/limited
reviews
Jim Mullen, Chief Executive Officer and Darren Fisher, Chief Financial Officer
will be hosting a webcast at 9:00am (UK) on 31 July 2024. It will be followed
by a live question and answer session. The presentation slides will be
available on www.reachplc.com from 7.00am (UK).
You can join the webcast to watch the presentation or listen to the Q&A
via the following weblink, which you can copy and paste into your browser:
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Please try to allow at least 10 minutes prior to the start time to provide
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Forward looking statements
This announcement has been prepared in relation to the financial results for
the six months ended 30 June 2024. Certain information contained in this
announcement may constitute 'forward-looking statements', which can be
identified by the use of terms such as 'may', 'will', 'would', 'could',
'should', 'expect', 'seek, 'anticipate', 'project', 'estimate', 'intend',
'continue', 'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the
negatives thereof) or words of similar meaning. Forward-looking statements can
be made in writing but also may be made verbally by members of management of
the Company (including, without limitation, during management presentations to
financial analysts) in connection with this announcement. These
forward-looking statements include all matters that are not historical facts
and include statements regarding the Company's intentions, beliefs or current
expectations concerning, among other things, the Company's results of
operations, financial condition, changes in global or regional trade
conditions, changes in tax rates, liquidity, prospects, growth and strategies.
By their nature, forward-looking statements involve risks, assumptions and
uncertainties that could cause actual events or results or actual performance
or other financial conditions or performance measures of the Company to differ
materially from those reflected or contemplated in such forward-looking
statements. No representation or warranty is made as to the achievement or
reasonableness of and no reliance should be placed on such forward-looking
statements. The forward-looking statements reflect knowledge and information
available at the date of this announcement and the Company does not undertake
any obligation to update or revise any forward-looking statement, whether as a
result of new information or to reflect any change in circumstances or in the
Company's expectations or otherwise.
Chief Executive's Review
Steady performance and strong operational delivery
I am pleased with our overall performance in the first half, despite
continuing industry headwinds. This is testament to the success of our
Customer Value Strategy enabling strong trading of our digital inventory, as
well as the ongoing resilience in our print circulation and advertising sales.
Our digital revenue has returned to growth (Q224: 7%) and we have delivered an
improved operating margin.
We continue to expertly manage print performance, with circulation revenue
performing well (H124: (4)%) in the face of anticipated volume declines. Our
teams have carefully implemented cover price increases while in turn,
strengthening the customer proposition with additional content and strong
promotional offers.
Print advertising also performed well, exceeding the volume trend. This was in
part thanks to some strong advertiser opportunities in the first half of the
year, as well as increased market competition in some sectors driving
advertising spend, particularly in the food retail sector. Clearly, market
trends are changeable, but this demonstrates the value that advertisers place
on both our print and digital inventory.
I want to thank all of our teams for their efforts, talents and energy as we
delivered against a continuing challenging backdrop.
Balance sheet benefitting from well-managed costs
Our proven track record in cost management continues to keep us competitive
through market changes.
We took early and decisive cost action in 2023. While difficult, as a result
of this action the business has benefitted from an improved operating margin
during the half year.
We are also currently seeing the benefits of our expertise in controlling
print costs, with a number of well-negotiated contracts creating more
stability in our cost base.
As we have shown, we continue to manage cost issues responsibly and
proactively.
Customer Value Strategy providing resilience and growth
In the face of declining audience volumes, and as the industry continues to
evolve, our Customer Value Strategy has ensured that we can offer our
commercial partners contextual and behavioural targeting, therefore increasing
the value of our content. We continue to work with a large pool of rich
customer and contextual data, which we have used to develop and refine our
advertising technology platform, Mantis.
As we shared in March, these developments mean that we have been able to
improve our yield over time so that, for every 1,000 page views, we now bring
in over 30% more revenue year-on-year. Our operations are supported here by
best-in-class digital traders who optimise the pricing and yield of our online
pages.
Overall, our data-driven revenues have grown 9% over the first half of the
year, with these higher value revenues now representing 45% of total digital
revenues.
Further progress in diversifying digital revenues
Our Customer Value Strategy has also successfully diversified our revenue
base, and we continue to see promising growth in some of these initiatives,
particularly in ecommerce and affiliates.
Last month, we marked the 500,000(th) OK! Beauty Box sold, with year-on-year
revenue growth of 34%. Ecommerce will continue to be a focus in 2024 and, this
month, we expanded our ecommerce proposition by soft launching Yimbly, a
dedicated marketplace platform.
As we shared in March, we have invested further in our in-house advertising
technology platform Mantis, to maximise B2B revenue. We now have a strong
senior team in place, with a recently appointed managing director, and the
expanded proposition has secured its first partners with deals to licence its
contextual targeting tools.
Our large-scale and diverse audience continues to support our long-term
sustainability, and our American expansion continues to progress according to
plan as we steadily build our capability there.
Engaging audiences with impactful journalism
Our teams have delivered impactful content for their audiences this year,
delivering on our purpose to enlighten, empower and entertain. Our local
titles continue to hold power to account, for example the Liverpool Echo which
doggedly pursued a story uncovering two local councillors who had received
court summons over late or non-payment of council tax. As always, our titles
continue to campaign for causes important to their readers, for example the
Express's petition around the right to assisted dying, which sparked a
Parliamentary debate on the issue, and the Mirror's Justice for our Daughters
campaign, which led to then-Prime Minister, Rishi Sunak, agreeing to end the
practice of shorter sentences for domestic murders.
With the election just behind us, the importance of this work is clearer than
ever. Our editorial brands give millions of people a voice, providing
free-to-access news for our audiences across the political spectrum. This is a
responsibility we take very seriously.
We have also made changes to enable our teams to be more forward-thinking in
how we get our content to our audiences, particularly in a more multiplatform
way. We have seen good progress in H1, with the newly formed Studio team
producing strong video content, with election-related vodcasts, including The
Division Bell, Poll Position and Planet Holyrood. The team also secured its
first exclusive sponsorship deal for a new production just last month for its
Euros vodcast, Euro Thrash.
In order to meet growing audience demand for video, we will continue to focus
on developing not only our video content, but our routes to monetising this
output. This work is still in its early days, but audience engagement with our
video content is growing with overall views up 20% year-on-year and TikTok
views more than doubling. YouTube is a focus area for us, with revenues
growing 14% year-on-year. For the time being, these represent a small part of
our overall mix, but continue to be an important focus area for us to expand
our reach by producing content for multiple platforms.
As previously mentioned, we have continued to carefully increase the use of AI
in our newsrooms, led by our editorial teams. We have seen some clear
efficiency wins in reducing time spent on repetitive tasks and, for example,
estimate that we have doubled the speed at which an average story can be
uploaded to our Content Management System. We continue to robustly test a
number of AI opportunities to support both our editorial teams and the wider
business.
Being a more responsible business
We have further implemented our formal sustainability framework this year and
have continued to focus on progressing our environmental reporting, gathering
the data that will guide us on our path to net zero. We have been undergoing a
rigorous process in order to determine our Science Based Target (SBT), which
we expect to submit later this year. In March, our technology team donated
over 1,300 used devices to The National Device Bank, an initiative that
supports individuals and communities in need through digital skills training
and resources, while also reducing technology waste.
We continue to prioritise inclusion and last month, for the first time, the
Mirror was the media partner for Pride in London. I am proud to say we have
also boosted our efforts to increase social mobility in the industry and, this
summer, launched a paid summer internship scheme with a focus on attracting
people who may not have thought a career in journalism was open to them.
Well positioned in a changing market
We continue to operate in a fluid market, impacted by the dominant tech
platforms, and will continue to engage with Government and regulators on these
issues. We have a solid record in navigating the evolving landscape and have
made good progress in putting the business, our brands and our content in a
strong position to face continued industry change. Our performance in the
first six months of the year is testament to this work and we are confident in
the outlook for the full year.
Jim Mullen,
Chief Executive Officer
31 July 2024
Finance Review
Delivering our financial plans
We delivered our plans in the first half, despite the challenging industry
backdrop. This is due to the increasing resilience we have built across the
business with our Customer Value Strategy, along with our operational
expertise in driving yield in digital, managing the volume decline across the
print business and controlling our cost base.
Our yield performance is driven by our Customer Value Strategy. Data-driven
revenues grew 9% to £27.2m, and are more valuable to advertisers and higher
yielding. Print continued to perform reliably, supported by an experienced
team and strong news agenda. Print delivered £204.0m (HY23: £217.3m) of
revenue, with a solid performance in both circulation and print advertising.
Maintaining strong cost discipline
We continue to focus on driving efficiencies and we took decisive and early
actions to drive savings across our cost base. Our adjusted operating costs
reduced by £22.8m or 9.3% year-on year, mainly attributable to the
restructuring we undertook during 2023 alongside the reduction in newsprint
costs. Together, these actions have meant that we delivered a 17% adjusted
operating margin, which is an increase in adjusted operating profit of £8.4m.
Focus on cash
Cash management remains a priority. During the period, we completed two
property disposals generating £13.1m of cash. The Group closed the period
with net debt of £12.3m (inclusive of £1.9m restricted cash) which is made
up of £12.7m of cash and the revolving credit facility was drawn at £25m.
The Group's facility of £120.0m remains in place until November 2026.
Group cash conversion was strong at 130% benefitted from working capital
inflows, most of which we expect to unwind in the second half of the year. Our
key financial obligations are unchanged. As we previously communicated, we
gained clarity on resolving our historical legal issues. This year, we have
made further progress on settling outstanding claims with our financial
estimates and timetable unchanged from those communicated at the full year. As
we said then, we expect the majority of issued claims, if not all to be
resolved by the end of 2025.
We continued to invest in our business, including Mantis, our advertising
technology platform, as well as our US business. This month we soft launched
Yimbly, an ecommerce marketplace which we expect to scale through the year. We
are also rolling out a new platform for our websites to improve the user
experience.
Looking ahead
Our financial priorities remain unchanged with a focus on profitability and
cash management. We will continue to carefully manage our print business, grow
our digital revenues prioritising our data-driven strategy and control costs.
At the start of the year, we committed to reducing total operating costs by
5-6%, and we are trending slightly ahead of this target. However, the relative
level of savings will contract across the second half of the year and we
expect profitability to be more equally weighted between the first and second
half.
Summary income statement
Adjusted Adjusted Statutory Statutory
HY 2024 HY 2023 HY 2024 HY 2023
£m £m £m £m
Revenue 265.0 279.4 265.0 279.4
Costs (221.8) (244.6) (228.8) (268.9)
Associates 1.3 1.3 0.6 0.6
Operating profit 44.5 36.1 36.8 11.1
Finance costs (2.2) (1.3) (3.9) (4.4)
Profit before tax 42.3 34.8 32.9 6.7
Tax charge (10.5) (7.6) (8.3) (2.1)
Profit after tax 31.8 27.2 24.6 4.6
Earnings per share - basic 10.1 8.7 7.8 1.5
The results have been prepared for the six months to 30 June 2024. The
comparative period has been prepared for the 26-week period ending 25 June
2023.
Group revenue reduced by £14.4m or 5.2% with print down 6.1% and digital
revenue down 1.3%.
Adjusted operating costs decreased by £22.8m or 9.3%, more than offsetting
the decline in revenue. The cost base benefitted from the restructure
implemented at the end of 2023, alongside lower volumes and prices, with
inflation continuing to unwind.
Statutory operating costs were lower by £40.1m or 14.9%, driven by the
decrease in operating adjusted items of £17.3m (£7.0m in HY24 versus £24.3m
in HY23).
Adjusted operating profit increased £8.4m or 23.1%. The adjusted operating
profit margin of 16.8% in HY24 compares to 12.9% for HY23. Statutory operating
profit increased by £25.7m, primarily due to the decrease in operating
adjusted items and cost savings delivered through the cost programme.
Adjusted earnings per share increased by 1.4p or 16.1% to 10.1p. Statutory
earnings per share increased by 6.3p to 7.8p, principally due to the increase
in operating profit.
Revenue
HY 2024 HY 2023 YOY
Actual Actual Change
£m £m %
Digital 60.0 60.8 (1.3)
Print 204.0 217.3 (6.1)
Circulation 149.9 155.4 (3.6)
Advertising 32.7 37.0 (11.5)
Printing 8.8 10.3 (15.2)
Other 12.6 14.6 (13.1)
Other 1.0 1.3 (22.7)
Total revenue 265.0 279.4 (5.2)
Actual Actual Actual Actual
Q1 2024 Q2 2024 HY 2024 HY 2023
YOY YOY YOY YOY
% % % %
Digital revenue (8.5) 6.7 (1.3) (16.1)
Print revenue (6.0) (6.2) (6.1) (2.7)
Circulation (3.4) (3.7) (3.6) 2.4
Advertising (10.7) (12.3) (11.5) (18.3)
Total Revenue (6.7) (3.6) (5.2) (6.1)
Revenue bridge
Actual YOY
£m %
2023HY revenue 279
Digital (1) (1.3)
Circulation (6) (3.6)
Print advertising (4) (11.5)
Printing & print other (3) (14.0)
Other - (22.7)
2024HY revenue 265 (5.2)
Digital revenue decreased by 1.3% to £60.0m (HY23: £60.8m). The impact from
the sector-wide decline in referral traffic from major platforms has started
to normalise, with digital page views declining 25%. The volume impact is
mitigated by actions to diversify digital revenues and trade digital assets
more effectively. As a result, the yield, the amount we earn from each page
view, increased by over 30% year-on-year. Mass-scale programmatic yield has
also improved with a stabilisation in open market prices. It is too early to
call this a recovery, but the early indicators are positive.
The print business continued to perform reliably, with print revenue declining
by £13.3m to £204.0m (HY23: £217.3m). Solid circulation performance with
revenue down 3.6% to £149.9m (HY23: up 2.4%) as the teams expertly managed
the cover price increases to offset volume decline with strong promotional
activity and strategic special editions around big news events.
Print advertising declined by £4.3m, or 11.5% year-on-year; this performance
has continued to outperform volume trends which were down 17% year-on-year,
supported by continued strong demand from food retailers.
Print revenue also includes third-party printing revenues and other
print-related revenues. Printing revenue decreased by 15.2% (HY23: down
10.4%). Other print revenue decreased by 13.1% (HY23: down 1.4%). These
revenues are largely contracted on a cost-plus basis, and reflect the external
market demand for print.
Costs
Adjusted Adjusted YOY Statutory Statutory YOY
HY 2024 HY 2023 Change HY 2024 HY 2023 Change
£m £m % £m £m %
Labour (105.9) (114.5) 7.6 (105.9) (114.5) 7.6
Newsprint (22.2) (33.4) 33.7 (22.2) (33.4) 33.7
Depreciation and amortisation (9.7) (10.3) 5.8 (9.7) (10.3) 5.8
Production and sales related costs (32.6) (35.0) 6.8 (32.6) (35.0) 6.8
Other (51.4) (51.4) (0.2) (58.4) (75.7) 22.9
Total costs (221.8) (244.6) 9.3 (228.8) (268.9) 14.9
By taking early action to drive savings across the cost base, we were able to
reduce adjusted operating costs by £22.8m or 9.3% to £221.8m (HY23:
£244.6m). This reduction is mainly attributable to the restructure undertaken
during 2023. As a result over the last 12 months headcount has reduced by 14%.
Newsprint costs are also lower from reduced newsprint volumes alongside lower
prices as inflation continues to unwind. Longer-term supply contracts have
been negotiated to provide more stability and locked-in some of these savings.
Production and sales-related costs include production, distribution, marketing
and sales related costs. Key components of 'Other' include: IT related costs
£16.4m (HY23: £16.6m), Utilities, rates & other office costs £12.4m
(HY23: £12.1m) and other editorial costs £9.8m (HY23: £11.4m).
Statutory costs were lower by £40.1m or 14.9% due to lower operating costs
and lower adjusted items which were £17.3m lower at £7.0m.
Operating adjusted items included in statutory costs related to the following:
Statutory Statutory
HY 2024 HY 2023
£m £m
Provision for historical legal issues - (5.9)
Restructuring charges in respect of cost reduction measures (2.7) (10.2)
Property-related items 2.0 0.3
Pension administrative expenses (2.4) (2.6)
Other items (3.9) (5.9)
Operating adjusted items in statutory costs (7.0) (24.3)
The Group estimates for historical legal issues are unchanged. As a result,
there is no increase in the provision relating to the costs associated with
dealing with and resolving civil claims in relation to historical phone
hacking and unlawful information gathering (HY23: £5.9m).
Restructuring charges of £2.7m (HY23: £10.2m) principally relate to cost
management actions taken in the period.
Pension costs of £2.4m (HY23: £2.6m) comprise external pension
administrative expenses.
Property-related items comprise the profit on sale of assets of £4.1m (HY23:
£0.3m), less vacant freehold property-related costs of £1.1m and onerous
lease and related costs of £1.0m.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£0.3m), adviser costs in relation to the defined benefit
pension schemes (£1.7m), internal pension administrative expenses (£0.2m),
corporate simplification costs (£0.3m), and other restructuring-related
project costs (£1.4m).
In the first half of 2023, other adjusted items related to the Group's legal
fees in respect of historical legal issues (£4.6m), adviser costs in relation
to the triennial funding valuations (£1.2m), internal pension administrative
expenses (£0.3m) and corporate simplification costs (£0.2m), less a
reduction in National Insurance costs relating to share awards (£0.4m).
Adjusted operating profit bridge
Adjusted
£m
HY23 36
Revenue mix (14)
Inflation & volume 4
Efficiencies 20
Investment (3)
Other 1
HY24 44
Adjusted operating profit of £44.5m was up £8.4m or 23.1%, with the actions
on costs resulting in a decrease in adjusted operating costs of 9.3% more than
offsetting the decline in revenue of 5.2%. Efficiencies of £20m mainly
related to labour costs which were lower following the cost reduction
programmes along with further property savings. Investments were made into
Mantis, our AI-powered ad tech, and our US operations alongside digital
product development.
Together, this meant that adjusted operating margin increased by 3.9
percentage points from 12.9% in HY23 to 16.8% in HY24.
Reconciliation of statutory to adjusted results
HY2024 Statutory results Operating Pension
£m adjusted finance charge Adjusted results
items £m £m
£m
Revenue 265.0 - - 265.0
Operating profit 36.8 7.7 - 44.5
Profit before tax 32.9 7.7 1.7 42.3
Profit after tax 24.6 5.9 1.3 31.8
Basic earnings per share (p) 7.8 1.9 0.4 10.1
The Group excludes operating adjusted items and the pension finance charge
from the adjusted results. Adjusted items relate to costs or income that
derive from events or transactions that fall within the normal activities of
the Group, but are excluded from the Group's adjusted profit measures,
individually or, if of a similar type in aggregate, due to their size and/or
nature, in order to better reflect management's view of the performance of the
Group.
Items are adjusted on the basis that they distort the underlying performance
of the business where they relate to material items that can recur (including
impairment, restructuring and tax rate changes) or relate to historic
liabilities (including historical legal and contractual issues and defined
benefit pension schemes which are all closed to future accrual).
Other items may be included in adjusted items if they are not expected to
recur in future years, such as property rationalisation, and items such as
transaction and restructuring costs incurred on acquisitions, or the profit or
loss on the sale of subsidiaries, associates or freehold buildings.
Management excludes these from the results that it uses to manage the business
and on which bonuses are based to reflect the underlying performance of the
business and believes that the adjusted results, presented alongside the
statutory results, provide users with additional useful information. Further
details on the items excluded from the adjusted results are set out in note 5.
Balance sheet and cash flows
Historical legal issues provision
The historical legal issues provision relates to the cost associated with
resolving civil claims in relation to historical phone hacking and unlawful
information gathering. Payments of £5.2m have been made during the period. At
the half year, a provision of £13.0m remains outstanding and this represents
the current best estimate of the amount required to resolve this historical
matter. Further details relating to the nature of the liability, the
calculation basis and the expected timing of payments, are set out in note 16.
Decrease in accounting pension deficit
The IAS 19 pension deficit (net of deferred tax), in respect of the Group's
defined benefit pension schemes, decreased by £42.6m from £77.1m at year end
to £34.5m at the half year. The pension deficit has fallen primarily due to
the £31.0m of contributions made during the period and an increase in the
discount rate which has reduced the present value of the scheme liabilities,
partially offset by the reduction in asset values. The triennial valuations
for funding of the defined benefit pension schemes, as at 31 December 2022,
have been agreed for all of the schemes.
Group contributions in respect of the remaining four defined benefit pension
schemes in the first half were £31.0m (HY23: £23.3m) under the current
schedule of contributions. Contributions paid to the schemes in 2024 are
expected to be £61.1m under the current schedule of contributions for the
four schemes.
Profit to cash measure
This ratio is a measure of our effectiveness at working capital management. It
is calculated as our adjusted operating cash flow as a proportion of adjusted
operating profit.
In order to calculate this measure, adjusted operating cash flow was aligned
to the definition of adjusted operating profit. The change was largely driven
by the exclusion of the cash flow impact of restructuring payments and other
items classified as adjusted items in the income statement. This has resulted
in an increase in adjusted operating cash flow in HY23 of £19.3m to £38.2m.
HY 2024 HY 2023
£m £m
Adjusted operating profit 44.5 36.1
Depreciation and amortisation 9.7 10.3
Adjusted EBITDA 54.2 46.4
Working capital movement 14.1 1.3
Other 0.7 1.1
Associates (1.3) (1.3)
Adjusted cash generated from operations 67.7 47.5
Lease payments (4.4) (2.1)
Capital expenditure (5.6) (7.2)
Adjusted operating cash flow 57.7 38.2
Profit to cash ratio 130% 106%
During the period, adjusted operating profit was £44.5m (HY23: £36.1m) and
the adjusted operating cash inflow was £57.7m (HY23: £38.2m) with a profit
to cash ratio of 130% (HY23: 106%). There is an ongoing focus on cash and cash
management. The improved working capital inflow is attributable to timing
differences most of which we expect to unwind over the year.
The table below shows how the Group is using the cash generated from
operations to meet its financial obligations. Adjusted cash generated from
operations is adjusted operating cash flow, excluding the impact of net lease
payments and capital expenditure.
HY 2024 HY 2023
£m £m
Adjusted cash generated from operations 67.7 47.5
Pension payments (31.0) (23.3)
Historical legal issues (5.2) (3.5)
Restructuring (12.9) (12.1)
Capital expenditure (5.6) (7.2)
Proceeds from disposal of property 13.1 -
Final payment on acquisition - (7.0)
Other (14.2) (9.3)
Cash flow before returns to shareholders 11.9 (14.9)
Dividends paid (14.1) (14.0)
Cash flow after returns to shareholders (2.2) (28.9)
Net debt (12.3) (3.5)
Material uses for cash include pension contributions totalling £31.0m (HY23:
£23.3m) and restructuring payments of £12.9m (HY23: £12.1m) which mainly
relate to 2023 cost reduction programmes. The final payment on acquisition in
2023 of £7.0m relates to the Express and the Daily Star. Other comprises
professional fees in respect of historical legal issues and adviser costs in
relation to the defined benefit pension schemes of £2.2m (HY23: £5.8m), net
lease payments of £4.4m (HY23: £2.1m), net interest paid on borrowings of
£1.5m (HY23: £0.6m) and other movements which account for the balance of
cash flows.
The Group paid a dividend in the period of £14.1m (HY23: £14.0m).
Cash balances
Net debt at the half year is £12.3m (inclusive of £1.9m restricted cash), an
increase of £2.2m from £10.1m at the end of 2023. The Group has £25.0m
drawn down on its revolving credit facility, with the overall total cash
position of £12.7m at the half year. The Group has a revolving credit
facility of £120.0m, which expires during November 2026.
Cash generated from operations on a statutory basis was £43.1m (HY23:
£24.8m). The Group presents an adjusted cash flow which reconciles the
adjusted operating profit to the net change in cash and cash equivalents,
which is set out in note 19. A reconciliation between the statutory and the
adjusted cash flow is set out in note 20. The adjusted operating cash flow was
£57.7m (HY23: £38.2m).
Dividends
The Board paid a final dividend for 2023 of 4.46 pence per share in May 2024.
An interim dividend for 2024 of 2.88 pence per share will be paid on 20
September 2024 to shareholders on the register on 16 August 2024.
In declaring an interim dividend of 2.88 pence per share for 2024 (HY23: 2.88
pence per share), the Board has considered all investment requirements and its
funding commitments to the defined benefit pension schemes.
Principal risks and uncertainties
The Group recognises the importance of the effective understanding and
management of risk in enabling us to identify factors, both externally and
internally, that may materially affect our ability to achieve our goals. There
is an ongoing process for the identification, evaluation and management of the
principal risks faced by the Group, including emerging risks. Appropriate
mitigating actions are in place to minimise the impact of the risks and
uncertainties which are identified as part of the risk process. All risks are
considered in the context of our strategic objectives, the changing regulatory
and compliance landscape and enabling the continuity of our operations.
These principal risks and uncertainties, the risk appetite in relation to
these and the resulting actions are set out in the Reach plc 2023 Annual
Report which is available on our website at www.reachplc.com.
The principal risks and uncertainties continue to be: deterioration in
macroeconomic conditions; deceleration of digital growth alongside
acceleration in decline of print revenues; cyber security breach; supply chain
disruption; health and safety incident; lack of funding capability; inability
to recruit and retain talent, damage to brand reputation, and data protection
failure.
Going concern statement
The directors assessed the Group's prospects, both as a going concern and its
longer term viability, at the time of approval of the Group's 2023 Annual
Report. Further information is set out in the Reach plc 2023 Annual Report.
At the half year, the directors have reviewed the going concern assessment,
specifically the continued reduction in print volumes, the impact of the
sector-wide decline in referral traffic from major platforms experienced
during 2023 and the benefit of stronger yields. The Group undertakes regular
forecasts and projections of trading, identifying areas of focus for
management to improve delivery of the Strategy. The Group has a strong balance
sheet and liquidity with a cash balance of £12.7m and £25.0m drawn from its
revolving credit facility which expires towards the end of 2026, with an
additional £95.0m remaining available.
Accordingly, the directors have adopted the going concern basis of accounting
in the preparation of the Group's half-yearly financial report.
Statement of directors' responsibilities
The directors are responsible for preparing the half-yearly financial report
in accordance with applicable laws and regulations. The directors confirm to
the best of their knowledge:
a) that the condensed consolidated interim financial statements have
been prepared in accordance with UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
i. an indication of important events that have occurred during the
first six months and their impact on the condensed consolidated interim
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
ii. material related-party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report.
By order of the Board of Directors
Darren Fisher
Chief Financial Officer 31 July 2024
Condensed consolidated interim financial statements
Consolidated income statement
for the 6 months ended 30 June 2024 (26 weeks ended 25 June 2023 and 53 weeks
ended 31 December 2023)
Adjusted Items Adjusted Items Adjusted Items
Adjusted 6 months ended Statutory Adjusted 26 weeks ended Statutory Adjusted 53 weeks ended Statutory
6 months ended 30 June 6 months ended 26 weeks ended 25 June 26 weeks ended 53 weeks ended 31 December 2023 53 weeks ended
notes 30 June 2024 (unaudited) 30 June 25 June 2023 (unaudited) 25 June 31 December 2023 (audited) 31 December 2023
2024 (unaudited) £m 2024 (unaudited) 2023 (unaudited) £m 2023 (unaudited) (audited) £m (audited)
£m £m £m £m £m £m
Revenue 4 265.0 - 265.0 279.4 - 279.4 568.6 - 568.6
Cost of sales (154.0) - (154.0) (178.4) - (178.4) (344.7) - (344.7)
Gross profit 111.0 - 111.0 101.0 - 101.0 223.9 - 223.9
Distribution costs (18.1) - (18.1) (19.1) - (19.1) (36.9) - (36.9)
Administrative expenses (49.7) (7.0) (56.7) (47.1) (24.3) (71.4) (93.4) (48.9) (142.3)
Share of results of associates 1.3 (0.7) 0.6 1.3 (0.7) 0.6 2.9 (1.5) 1.4
Operating profit 44.5 (7.7) 36.8 36.1 (25.0) 11.1 96.5 (50.4) 46.1
Interest income 6 0.1 - 0.1 0.6 - 0.6 1.0 - 1.0
Finance costs 7 (2.3) - (2.3) (1.9) - (1.9) (4.5) - (4.5)
Pension finance charge 13 - (1.7) (1.7) - (3.1) (3.1) - (5.9) (5.9)
Profit before tax 42.3 (9.4) 32.9 34.8 (28.1) 6.7 93.0 (56.3) 36.7
Tax charge 8 (10.5) 2.2 (8.3) (7.6) 5.5 (2.1) (24.6) 9.4 (15.2)
Profit for the period attributable to equity holders of the parent 31.8 (7.2) 24.6 27.2 (22.6) 4.6 68.4 (46.9) 21.5
Earnings per share Notes 2024 2024 2023 2023 2023 2023
Pence Pence Pence Pence Pence Pence
Earnings per share - basic 10 10.1 7.8 8.7 1.5 21.8 6.8
Earnings per share - diluted 10 10.0 7.7 8.6 1.5 21.6 6.8
The above results were derived from continuing operations. Set out in note 18
is the reconciliation between the statutory and adjusted results.
Consolidated statement of comprehensive income
for the 6 months ended 30 June 2024 (26 weeks ended 25 June 2023 and 53 weeks
ended 31 December 2023)
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
notes
Profit for the period 24.6 4.6 21.5
Items that will not be reclassified to profit and loss:
Actuarial gain/(loss) on defined benefit pension schemes 13 29.8 (7.9) (0.5)
Tax on actuarial gain/(loss) on defined benefit pension schemes 8 (7.5) 2.0 0.1
Share of items recognised by associates after tax - - 0.4
Other comprehensive gain/(loss) for the period 22.3 (5.9) -
Total comprehensive income/(loss) for the period 46.9 (1.3) 21.5
Consolidated cash flow statement
for the 6 months ended 30 June 2024 (26 weeks ended 25 June 2023 and 53 weeks
ended 31 December 2023)
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
notes
Cash flows from operating activities
Cash generated from operations 11 43.1 24.8 76.4
Pension deficit funding payments 13 (31.0) (23.3) (60.0)
Income tax (paid)/received (1.8) 0.5 (0.5)
Net cash inflow from operating activities 10.3 2.0 15.9
Investing activities
Interest received 0.1 0.3 0.6
Dividends received from associated undertakings - - 1.9
Proceeds on disposal of property, plant and equipment 13.1 0.5 0.9
Purchases of property, plant and equipment (0.4) (1.7) (3.5)
Expenditure on capitalised internally generated development 12 (5.2) (6.0) (12.8)
Interest received on leases - 0.3 0.4
Finance lease receipts - 0.6 0.2
Deferred consideration payment - (7.0) (7.0)
Net cash generated from/(used in) investing activities 7.6 (13.0) (19.3)
Financing activities
Interest and charges paid on borrowings (1.6) (0.9) (3.1)
Dividends paid 9 (14.1) (14.0) (23.1)
Interest paid on leases (0.6) (0.5) (1.2)
Repayments of obligations under leases (3.8) (2.5) (4.7)
(Repayment)/drawdown of borrowings (5.0) - 15.0
Net cash used in financing activities (25.1) (17.9) (17.1)
Net decrease in cash and cash equivalents (7.2) (28.9) (20.5)
Cash and cash equivalents at the beginning of the period 14 19.9 40.4 40.4
Cash and cash equivalents at the end of the period 14 12.7 11.5 19.9
Consolidated statement of changes in equity
for the 6 months ended 30 June 2024 (26 weeks ended 25 June 2023 and 53 weeks
ended 31 December 2023)
Retained earnings / (accumulated loss) and other reserves
Share premium Capital £m
Share account Merger redemption
capital £m reserve reserve Total
£m £m £m £m
At 1 January 2024 (audited) 32.2 - 17.4 4.4 583.2 637.2
Profit for the period - - - - 24.6 24.6
Other comprehensive income for the period - - - - 22.3 22.3
Total comprehensive income for the period - - - - 46.9 46.9
Credit to equity for equity-settled share-based payments - - - - 0.9 0.9
Dividends paid (note 9) - - - - (14.1) (14.1)
At 30 June 2024 (unaudited) 32.2 - 17.4 4.4 616.9 670.9
At 26 December 2022 (audited) 32.2 605.4 17.4 4.4 (21.9) 637.5
Profit for the period - - - - 4.6 4.6
Other comprehensive loss for the period - - - - (5.9) (5.9)
Total comprehensive loss for the period - - - - (1.3) (1.3)
Credit to equity for equity-settled share-based payments - - - - 0.9 0.9
Dividends paid - - - - (14.0) (14.0)
At 25 June 2023 (unaudited) 32.2 605.4 17.4 4.4 (36.3) 623.1
At 26 December 2022 (audited) 32.2 605.4 17.4 4.4 (21.9) 637.5
Profit for the period - - - - 21.5 21.5
Other comprehensive loss for the period - - - - - -
Total comprehensive income for the period - - - - 21.5 21.5
Credit to equity for equity-settled share-based payments - - - - 1.3 1.3
Dividends paid - - - - (23.1) (23.1)
Capital reduction - (605.4) - - 605.4 -
At 31 December 2023 (audited) 32.2 - 17.4 4.4 583.2 637.2
Consolidated balance sheet
at 30 June 2024 (at 25 June 2023 and 31 December 2023)
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
notes £m £m £m
Non-current assets
Goodwill 12 35.9 35.9 35.9
Other intangible assets 12 842.5 836.8 840.8
Property, plant and equipment 108.7 134.8 113.6
Right-of-use assets 12.1 11.7 13.0
Finance lease receivable - 9.8 -
Investment in associates 15.1 15.2 14.5
Retirement benefit assets 13 73.8 56.4 66.0
1,088.1 1,100.6 1,083.8
Current assets
Inventories 8.0 12.7 11.4
Trade and other receivables 81.1 88.2 85.1
Current tax receivable 8 8.3 12.2 8.1
Finance lease receivable - 0.6 -
Cash and cash equivalents 14 12.7 11.5 19.9
110.1 125.2 124.5
Assets classified as held for sale 15 2.5 - 11.0
112.6 125.2 135.5
Total assets 1,200.7 1,225.8 1,219.3
Non-current liabilities
Trade and other payables - (2.8) (1.1)
Lease liabilities 14 (26.5) (27.0) (28.5)
Retirement benefit obligations 13 (119.9) (197.6) (168.8)
Provisions 16 (20.2) (43.7) (26.6)
Deferred tax liabilities (214.1) (189.9) (200.1)
(380.7) (461.0) (425.1)
Current liabilities
Trade and other payables (104.1) (104.6) (96.2)
Borrowings (25.0) (15.0) (30.0)
Lease liabilities 14 (4.0) (4.5) (4.7)
Provisions 16 (16.0) (17.6) (26.1)
(149.1) (141.7) (157.0)
Total liabilities (529.8) (602.7) (582.1)
Net assets 670.9 623.1 637.2
Equity
Share capital 17 32.2 32.2 32.2
Share premium account 17 - 605.4 -
Merger reserve 17 17.4 17.4 17.4
Capital redemption reserve 17 4.4 4.4 4.4
Retained earnings/(accumulated loss) and other reserves 17 616.9 (36.3) 583.2
Total equity attributable to equity holders of the parent 670.9 623.1 637.2
Notes to the consolidated financial statements
for the 6 months ended 30 June 2024 (26 weeks ended 25 June 2023 and 53 weeks
ended 31 December 2023)
1. General information
The financial information in respect of the 53 weeks ended 31 December 2023
does not constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. A copy of the statutory accounts for that period has
been delivered to the Registrar of Companies and is available at the Company's
registered office at One Canada Square, Canary Wharf, London E14 5AP and on
the Company's website at www.reachplc.com. The auditors' report was
unqualified, did not include reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report and did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information for the 6 months ended 30 June 2024 and the 26 weeks
ended 25 June 2023 do not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006 and have not been audited. No statutory
accounts for these periods have been delivered to the Registrar of Companies.
This half-yearly financial report constitutes a dissemination announcement in
accordance with Section 6.3 of the Disclosure and Transparency Rules.
The auditors, PricewaterhouseCoopers LLP, have carried out a review of the
condensed consolidated interim set of financial statements and their report is
set out at the end of this announcement.
The half-yearly financial report was approved for issue by the directors on 31
July 2024. This announcement is available at the Company's registered office
at One Canada Square, Canary Wharf, London E14 5AP and on the Company's
website at www.reachplc.com.
2. Accounting policies
Basis of preparation
The Group's annual consolidated financial statements are prepared
in accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. The condensed consolidated financial statements
included in this half-yearly financial report have been prepared in
accordance with the UK-adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. Taxes on
income in the interim period are accrued using the tax rate that would be
applicable to the expected total annual profit or loss for the year. There are
no material changes to the nature and type of related party transactions since
the 2023 Annual Report.
Going concern
The directors assessed the Group's prospects, both as a going concern and its
longer term viability, at the time of approval of the Group's 2023 Annual
Report. Further information is set out in the Reach plc 2023 Annual Report.
At the half year, the directors have reviewed the going concern assessment,
specifically the continued reduction in print volumes, the impact of the
sector-wide decline in referral traffic from major platforms experienced
during 2023 and the benefit of stronger yields. The Group undertakes regular
forecasts and projections of trading, identifying areas of focus for
management to improve delivery of the Strategy. The Group has a strong balance
sheet and liquidity with a cash balance of £12.7m. The Group has drawn
£25.0m of its revolving credit facility which expires towards the end of
2026, with an additional £95.0m remaining available.
Accordingly, the directors have adopted the going concern basis of accounting
in the preparation of the Group's half-yearly financial report.
Changes in accounting policy
The same accounting policies, presentation and methods of computation are
followed in the condensed consolidated interim financial statements as applied
in the Group's latest annual consolidated financial statements.
Alternative performance measures
The Company presents the results on a statutory and adjusted basis and revenue
trends on a statutory and like-for-like basis. The Company believes that the
adjusted basis and like-for-like trends will provide investors with useful
supplemental information about the financial performance of the Group, enable
comparison of financial results between periods where certain items may vary
independent of business performance, and allow for greater transparency with
respect to key performance indicators used by management in operating the
Group and making decisions. Although management believes the adjusted basis is
important in evaluating the Group, they are not intended to be considered in
isolation or as a substitute for, or as superior to, financial information on
a statutory basis. Revenue trends on an actual and like-for-like basis are the
same for the 6 months ended 30 June 2024. The alternative performance measures
are not recognised measures under IFRS and do not have standardised meanings
prescribed by IFRS and may be different to those used by other companies,
limiting the usefulness for comparison purposes. Note 18 sets out the
reconciliation between the statutory and adjusted results. An adjusted cash
flow is presented in note 19 which reconciles the adjusted operating profit to
the net change in cash and cash equivalents. Set out in note 20 is the
reconciliation between the statutory and adjusted cash flow.
Adjusted items
Adjusted items relate to costs or income that derive from events or
transactions that fall within the normal activities of the Group, but are
excluded from the Group's adjusted profit measures, individually or, if of a
similar type in aggregate, due to their size and/or nature in order to better
reflect management's view of the performance of the Group. The adjusted profit
measures are not recognised profit measures under IFRS and may not be directly
comparable with adjusted profit measures used by other companies. Details of
adjusted items are set out in notes 5 and 18.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year,
are discussed below:
Historical Legal Issues (note 16)
The historical legal issues provision relates to the cost associated with
resolving civil claims in relation to historical phone hacking and unlawful
information gathering. The provision consists of known claims and the
associated costs. The key uncertainties in relation to this matter relate to
how each claim progresses, the amount of any settlement and the associated
legal costs. Our assumptions have been based on historical trends, our
experience and the expected evolution of claims and costs.
In December 2023, a judgment was handed down in respect of four test claims
and as a result all claims issued after 31 October 2020 are now likely to be
dismissed as time barred, other than where individuals can demonstrate
specific exceptional circumstances. This significantly reduced the amounts
that are expected to be paid out. On 17 May 2024, the Claimants' Application
for Permission to Appeal that decision was refused. This means that the
Judge's ruling on limitation stands and no further appeal against it is
possible. This provides us with further certainty in respect of the level of
our provisioning. There have been no changes to the provision other than
settlements made during the period. The majority of the provision is expected
to be utilised within the next two years.
Our view on the range of outcomes at the reporting date for the provision,
applying more and less favourable outcomes to all aspects of the provision is
£7m to £16m (25 June 2023: £35m to £64m and 31 December 2023: £12m to
£22m). Despite making a best estimate, the timing of utilisation and ongoing
legal matters related to the provided for claims could mean that the final
outcome is outside of the range of outcomes.
Retirement benefits (note 13)
Actuarial assumptions adopted and external factors can significantly impact
the surplus or deficit of defined benefit pension schemes. Valuations for
funding and accounting purposes are based on assumptions about future economic
and demographic variables. These result in risk of a volatile valuation
deficit and the risk that the ultimate cost of paying benefits is higher than
the current assessed liability value. Advice is sourced from independent and
qualified actuaries in selecting suitable assumptions at each reporting date.
Impairment review (note 12)
There is uncertainty in the value-in-use calculation. The most significant
area of uncertainty relates to expected future cash flows for each
cash-generating unit. Determining whether the carrying values of assets in a
cash-generating unit are impaired requires an estimation of the value in use
of the cash-generating unit to which these have been allocated. The
value-in-use calculation requires the Group to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable discount rate
in order to calculate present value. Projections are based on both internal
and external market information and reflect past experience. The discount rate
reflects the weighted average cost of capital of the Group. The Group tests
the carrying value of assets at the cash-generating unit level for impairment
annually or more frequently if there are indicators that assets might be
impaired. For the 6 months to 30 June 2024, there have been no indicators of
impairment and therefore no review has been undertaken.
Property provisions (note 16)
Provisions are measured at the best estimate of the expenditure required to
settle the obligation based on the assessment of the related facts and
circumstances at each reporting date. There is uncertainty in relation to the
size and period over which the provision will be utilised.
Critical judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, described above,
management has made the following judgements that have the most significant
effect on the amounts recognised in the financial statements:
Indefinite life assumption in respect of publishing rights and titles (note
12)
There is judgement required in continuing to adopt an indefinite life
assumption in respect of publishing rights and titles. The directors consider
publishing rights and titles (with a carrying amount of £818.7m) have
indefinite economic lives due to the longevity of the brands and the ability
to evolve them in an ever-changing media landscape. The brands are central to
the delivery of the Customer Value Strategy which is delivering digital
revenue growth. At each reporting date management review the suitability of
this assumption.
Identification of cash-generating units (note 12)
There is judgement required in determining the cash-generating unit relating
to our Publishing brands. At each reporting date management review the
interdependency of revenues across our portfolio of Publishing brands to
determine the appropriate cash-generating unit. The Group operates its
Publishing brands such that a majority of the revenues are interdependent, and
revenue would be materially lower if brands operated in isolation. As such,
management do not consider that an impairment review at an individual brand
level is appropriate or practical. As the Group continues to centralise
revenue generating functions and has moved to a matrix operating structure
over the past few years, all of the individual brands in Publishing have
increased revenue interdependency and are assessed for impairment as a single
Publishing cash-generating unit.
Historical Legal Issues (note 16)
Following the judgment handed down on 15 December 2023, all claims issued
after 31 October 2020 are now likely to be considered time barred and
subsequently dismissed, other than where individuals can demonstrate there
were exceptional circumstances why they could not have been aware of their
putative claims.
Subsequently, the test claimants' application for permission to appeal was
refused by the trial judge on 9 February 2024, with claimants having a further
short period to apply for permission to appeal to the Court of Appeal. On 17
May 2024, the Application for Permission to Appeal was refused by the Court of
Appeal. This means that the Judge's ruling on limitation stands and no further
appeal against the test claims being time barred is possible. As such no
contingent liability has been disclosed in the accounts.
3. Segments
The performance of the Group is presented as a single reporting segment as
this is the basis of internal reports regularly reviewed by the Board and
chief operating decision maker (executive directors) to allocate resources and
to assess performance. The Group's operations are primarily located in the UK
and the Group is not subject to significant seasonality during the year.
4. Revenue
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Print 204.0 217.3 438.8
Circulation 149.9 155.4 312.5
Advertising 32.7 37.0 76.6
Printing 8.8 10.3 20.2
Other 12.6 14.6 29.5
Digital 60.0 60.8 127.4
Other 1.0 1.3 2.4
Total revenue 265.0 279.4 568.6
The Group's operations are located primarily in the UK.
5. Operating adjusted items
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Provision for historical legal issues - (5.9) 20.2
Restructuring charges in respect of cost reduction measures (note 16) (2.7) (10.2) (26.9)
Pension administrative expenses (note 13) (2.4) (2.6) (5.5)
Property-related items (note 18) 2.0 0.3 (8.0)
Other items (note 18) (3.9) (5.9) (9.3)
Impairment of sublease - - (19.4)
Operating adjusted items included in administrative expenses (7.0) (24.3) (48.9)
Operating adjusted items included in share of results of associates (0.7) (0.7) (1.5)
Total operating adjusted items (7.7) (25.0) (50.4)
Operating adjusted items relate to costs or income that derive from events or
transactions that fall within the normal activities of the Group, but are
excluded from the Group's adjusted profit measures, individually or, if of a
similar type in aggregate, due to their size and/or nature in order to better
reflect management's view of the performance of the Group. The adjusted profit
measures are not recognised profit measures under IFRS and may not be directly
comparable with adjusted profit measures used by other companies. Set out in
note 18 is the reconciliation between the statutory and adjusted results which
includes descriptions of the items included in adjusted items.
The Group estimates for historical legal issues are unchanged. As a result,
there is no increase in the provision relating to the costs associated with
resolving civil claims in relation to historical phone hacking and unlawful
information gathering (26 weeks ended 25 June 2023: £5.9m increase and 53
weeks ended 31 December 2023: £20.2m decrease) (note 16).
Restructuring charges of £2.7m (26 weeks ended 25 June 2023: £10.2m and 53
weeks ended 31 December 2023: £26.9m) principally relate to cost management
actions taken in the period.
Property-related items comprise the profit on sale of assets £4.1m (26 weeks
ended 25 June 2023: £0.3m and 53 weeks ended 31 December 2023: £0.3m) less
vacant freehold property-related costs of £1.1m (26 weeks ended 25 June 2023:
£nil and 53 weeks ended 31 December 2023: £1.4m) and onerous lease and
related costs of £1.0m (26 weeks ended 25 June 2023: £nil and 53 weeks ended
31 December 2023: £2.6m). 53 weeks ended 31 December 2023 also included the
impairment of vacant freehold property costs of £4.3m.
Other adjusted items comprise the Group's legal fees in respect of historical
legal issues (£0.3m), adviser costs in relation to the defined benefit
pension schemes (£1.7m), internal pension administration expenses (£0.2m),
corporate simplification costs (£0.3m), and other restructuring-related
project costs (£1.4m).
In the 26 weeks ended 25 June 2023, other adjusted items comprise the Group's
legal fees in respect of historical legal issues (£4.6m), adviser costs in
relation to the triennial funding valuations (£1.2m), internal pension
administration expenses (£0.3m), corporate simplification costs (£0.2m),
less a reduction in National Insurance costs relating to share awards
(£0.4m).
In the 53 weeks ended 31 December 2023, other adjusted items comprise the
Group's legal fees in respect of historical legal issues (£5.3m), adviser
costs in relation to the triennial funding valuations (£2.5m), internal
pension administrative expenses (£0.6m), corporate simplification costs
(£0.5m), and other restructuring-related project costs (£0.7m) less a
reduction in National Insurance costs relating to share awards (£0.3m).
Following the sublet of the vacant print site during 2022 which resulted in
the reversal of an impairment in right-of-use assets of £11.0m and previously
onerous costs of the vacant site of £5.6m, the sub-lessee entered into
administration during 2023. As a result, the corresponding £10.8m finance
lease receivable was impaired along with the subsequent recognition of onerous
costs of £8.6m of the vacant site during 31 December 2023.
6. Interest income
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Interest income on bank deposits 0.1 0.3 0.6
Interest on finance lease receivable - 0.3 0.4
Interest income 0.1 0.6 1.0
7. Finance costs
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Interest and charges on borrowings (1.7) (1.4) (3.3)
Interest on lease liabilities (0.6) (0.5) (1.2)
Finance costs (2.3) (1.9) (4.5)
8. Tax charge
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Corporation tax charge for the period (1.8) (1.8) (5.5)
Prior period adjustment - - (1.1)
Current tax charge (1.8) (1.8) (6.6)
Deferred tax charge for the period (6.5) (0.3) (8.1)
Prior period adjustment - - (1.0)
Deferred tax rate change - - 0.5
Deferred tax charge (6.5) (0.3) (8.6)
Tax charge (8.3) (2.1) (15.2)
Reconciliation of tax charge
Profit before tax 32.9 6.7 36.7
Standard rate of corporation tax of 25.0% (2023: 23.5%) (8.2) (1.6) (8.6)
Tax effect of permanent items that are not included in determining taxable 0.1 (0.1) (5.8)
profit
Variance in overseas tax rates 0.6 (0.5) 0.9
Impact of change in tax rates - - 0.5
Deferred tax not recognised (0.9) - (0.4)
Prior period adjustment - - (2.1)
Tax effect of share of results of associates 0.1 0.1 0.3
Tax charge (8.3) (2.1) (15.2)
The standard rate of corporation tax for the period is 25.0% (2023: 23.5%).
The current tax receivable of £8.3m (25 June 2023: £12.2m receivable and 31
December 2023: £8.1m receivable) is net of the tax provision of £23.4m (25
June 2023: £20.2m and 31 December 2023: £23.4m).
The tax on actuarial gains or losses on defined benefit pension schemes taken
to the consolidated statement of comprehensive income is a deferred tax charge
of £7.5m (26 weeks ended 25 June 2023: credit of £2.0m and 53 weeks ended 31
December 2023: credit of £0.1m).
9. Dividends
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
Pence Pence Pence
Per share Per share Per share
Amounts recognised as distributions to equity holders in the period
Dividends paid per share - prior year final dividend 4.46 4.46 4.46
Dividends paid per share - interim dividend - - 2.88
Total dividends paid per share 4.46 4.46 7.34
Dividend proposed per share but not paid nor included in the accounting 2.88 2.88 4.46
records
The Board has approved an interim dividend for 2024 of 2.88 pence per share.
On 2 May 2024, the final dividend proposed for 2023 of 4.46 pence per share
was approved by shareholders at the Annual General Meeting and was paid on 31
May 2024. The total dividend payment amounted to £14.1m.
10. Earnings per share
Basic earnings per share is calculated by dividing profit for the period
attributable to equity holders of the parent by the weighted average number of
ordinary shares during the period and diluted earnings per share is calculated
by adjusting the weighted average number of ordinary shares in issue on the
assumption of conversion of all potentially dilutive ordinary shares.
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
Thousand Thousand Thousand
Weighted average number of ordinary shares for basic earnings per share 315,171 313,768 314,206
Effect of potential dilutive ordinary shares in respect of share awards 3,253 3,214 2,893
Weighted average number of ordinary shares for diluted earnings per share 318,424 316,982 317,099
The weighted average number of potentially dilutive ordinary shares not
currently dilutive was 6,632,678 (25 June 2023: 5,614,749 and 31 December
2023: 6,328,039).
Statutory earnings per share
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December
2024 2023 2023
(unaudited) (unaudited) (audited)
Pence Pence Pence
Earnings per share - basic 7.8 1.5 6.8
Earnings per share - diluted 7.7 1.5 6.8
Adjusted earnings per share
6 months ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December
2024 2023 2023
(unaudited) (unaudited) (audited)
Pence Pence Pence
Earnings per share - basic 10.1 8.7 21.8
Earnings per share - diluted 10.0 8.6 21.6
Set out in note 18 is the reconciliation between the statutory and adjusted
results.
11. Cash generated from operations
6 months 26 weeks 53 weeks
ended ended ended
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (audited)
£m (unaudited) £m
£m
Operating profit 36.8 11.1 46.1
Depreciation of property, plant and equipment 4.8 6.9 13.9
Depreciation of right-of-use assets 1.4 1.3 2.8
Amortisation of other intangible assets 3.5 2.1 4.9
Share of results of associates (0.6) (0.6) (1.4)
Share-based payments charge 0.9 0.9 1.3
Impairment of property, plant and equipment - - 4.7
Impairment of right-of-use assets 0.6 0.2 1.3
Profit on disposal of property, plant and equipment (4.1) (0.3) (0.3)
Pension administrative expenses and past service costs 2.4 2.6 5.5
Impairment of finance lease receivable - - 10.8
Operating cash flows before movements in working capital 45.7 24.2 89.6
Decrease in inventories 3.4 0.2 1.5
Decrease in receivables 3.7 6.9 9.5
Decrease in payables (9.7) (6.5) (24.2)
Cash generated from operations 43.1 24.8 76.4
12. Goodwill and other intangible assets
Other intangible assets
Goodwill Publishing rights Internally generated assets Total
and titles
£m £m £m £m
Cost
At 1 January 2024 (audited) 189.9 2,100.3 29.5 2,319.7
Additions - - 5.2 5.2
At 30 June 2024 (unaudited) 189.9 2,100.3 34.7 2,324.9
Accumulated amortisation and impairment
At 1 January 2024 (audited) (154.0) (1,281.6) (7.4) (1,443.0)
Charge for the period - - (3.5) (3.5)
At 30 June 2024 (unaudited) (154.0) (1,281.6) (10.9) (1,446.5)
Carrying amount
At 31 December 2023 (audited) 35.9 818.7 22.1 876.7
At 30 June 2024 (unaudited) 35.9 818.7 23.8 878.4
During the period, the Group capitalised internally generated assets relating
to software and website development costs of £5.2m (26 weeks ended 25 June
2023: £6.0m and 53 weeks ended 31 December 2023: £12.8m). These assets are
amortised using the straight-line method over their estimated useful lives
(3-5 years).
Publishing rights and titles are not amortised. There is judgement required in
continuing to adopt an indefinite life assumption in respect of publishing
rights and titles. The directors consider publishing rights and titles (with a
carrying amount of £818.7m) have indefinite economic lives due to the
longevity of the brands and the ability to evolve them in an ever-changing
media landscape. The brands are central to the delivery of the Customer Value
Strategy which is delivering digital revenue growth. This, combined with our
inbuilt and relentless focus on maximising efficiency, gives confidence that
the delivery of sustainable growth in revenue, profit and cash flow is
achievable in the future.
There is judgement required in determining the cash-generating units. At each
reporting date management review the interdependency of revenues across our
Publishing brands to determine the appropriate cash-generating unit. The Group
operates its Publishing brands such that a majority of the revenues are
interdependent and revenue would be materially lower if brands operated in
isolation. As such, management do not consider that an impairment review at an
individual brand level is appropriate or practical. As the Group continues to
centralise revenue generating functions and has moved to a matrix operating
structure over the past few years all of the individual brands in Publishing
have increased revenue interdependency and are assessed for impairment as a
single Publishing cash-generating unit.
The Group tests the carrying value of assets at the cash-generating unit level
for impairment annually or more frequently if there are indicators that assets
might be impaired. The review is undertaken by assessing whether the carrying
value of assets is supported by their value-in-use which is calculated as the
net present value of future cash flows derived from those assets, using cash
flow projections. If an impairment charge is required this is allocated first
to reduce the carrying amount of any goodwill allocated to the cash-generating
unit and then to the other assets of the cash-generating unit but subject to
not reducing any asset below its recoverable amount. No indicators have been
identified as at 30 June 2024. The last annual impairment test was undertaken
as at 31 December 2023. The details of the impairment assessment are included
in note 16 of the 2023 Annual Report.
13. Retirement benefit schemes
Defined contribution pension schemes
The Group operates defined contribution pension schemes for qualifying
employees, where the assets of the schemes are held separately from those of
the Group in funds under the control of Trustees.
The current service cost charged to the consolidated income statement for the
period of £7.8m (26 weeks ended 25 June 2023: £8.7m and 53 weeks ended 31
December 2023: £17.3m) represents contributions paid by the Group at rates
specified in the scheme rules. All amounts that were due have been paid over
to the schemes at all reporting dates.
Defined benefit pension schemes
Background
The defined benefit pension schemes operated by the Group are all closed to
future accrual. The Group has six defined benefit pension schemes:
• the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit
Scheme (the 'Trinity Scheme'), the Midland Independent Newspapers Pension
Scheme (the 'MIN Scheme'), the Express Newspapers 1988 Pension Fund (the 'EN88
Scheme'), the Express Newspapers Senior Management Pension Fund (the 'ENSM
Scheme') and the West Ferry Printers Pension Scheme (the 'WF Scheme').
Characteristics
The defined benefit pension schemes provide pensions to members, which are
based on their final pensionable salary, normally from age 65 (although some
schemes have some pensions normally payable from an earlier age) plus
surviving spouses or dependants' benefits following a member's death. Benefits
increase both before and after retirement either in line with statutory
minimum requirements or in accordance with the scheme rules if greater. Such
increases are either at fixed rates or in line with retail or consumer prices
but subject to upper and lower limits. All of the schemes are independent of
the Group with assets held independently of the Group. They are governed by
Trustees who administer benefits in accordance with the scheme rules and
appropriate UK legislation. The schemes each have a professional or
experienced independent Trustee as their Chairman with generally half of the
remaining Trustees nominated by the members and half by the Group.
Maturity profile and cash flow
Across all of the schemes, the uninsured liabilities related 65% to current
pensioners and their spouses or dependants and 35% to deferred pensioners. The
average term from the period end to payment of the remaining uninsured
benefits is expected to be around 11.5 years. Uninsured pension payments in
2023, excluding lump sums and transfer value payments, were £75m and these
are projected on the prior reporting date assumptions to rise to an annual
peak in 2033 of £101m and reduce thereafter.
Funding arrangements
The funding of the Group's schemes is subject to UK pension legislation as
well as the guidance and codes of practice issued by the Pensions Regulator.
Funding targets are agreed between each Trustee board and the Group and are
reviewed and revised usually every three years. The funding targets must
include a margin for prudence above the expected cost of paying the benefits
and so are different to the liability value for IAS 19 purposes. The funding
deficits revealed by these triennial valuations are removed over time in
accordance with an agreed recovery plan and schedule of contributions for each
scheme (where applicable). The latest valuation date for the schemes was 31
December 2022. The ENSM Scheme commenced winding up in February 2024.
The funding valuation of the MGN Scheme at 31 December 2022 was agreed on 9
October 2023. This showed a deficit of £219.0m. The Group paid contributions
of £23.0m to this scheme in the first half of 2024 and the agreed schedule of
contributions includes payments of £46.0m per annum (pa) from 2024 until
January 2028.
The funding valuation of the Trinity Scheme at 31 December 2022 was agreed on
28 March 2024. This showed a deficit of £5.8m. The Group paid contributions
of £3.1m to this scheme in the first half of 2024, including a one-off
contribution to the Scheme to meet certain costs incurred by the Trustee in
connection with the valuation of the Scheme as at 31 December 2019, and agreed
a schedule of contributions of payments of £5.2m pa to 31 March 2024 and
£4.5m pa from 1 April 2024 to 31 December 2027, or if earlier, until the
Scheme has reached 100% funding on the technical provisions basis.
The funding valuation of the MIN Scheme at 31 December 2022 was agreed on 28
March 2024. This showed a deficit of £53.3m. The Group paid contributions of
£4.9m to this scheme in the first half of 2024 and the agreed schedule of
contributions features payments of £9.7m pa from 2024 to 2025, £10.6m pa in
2026 and 2027 and £11.4m in 2028.
The funding valuation of the EN88 Scheme at 31 December 2022 was agreed on 27
March 2024. This showed a surplus of £2.0m. In September 2023 the EN88 Scheme
agreed with the Group to divert the deficit contributions payable to the
Scheme into a separate bank account held by the Group for the period from
September 2023 to March 2024. On finalisation of the 2022 valuation it was
agreed that on and from 1 April 2024, the Company shall make a cash payment,
on the last business day of each calendar month, to the separate bank account
of an amount equal to £1.0m divided by 12 (being £83,333.33), until the
Scheme has attained Long-Term Funding Basis or 31 December 2027. During the
first half of 2024, £1.0m of payments were made into the bank account.
During 2022, the Trustees of the ENSM Scheme purchased a bulk annuity at no
cost to the Group. The Trustee of the ENSM Scheme subsequently converted this
to a buy out policy on 28 February 2024, converting all pension liabilities
previously covered by the buy in into individual annuity policies between the
insurer and former scheme members, with the value of the insured liability and
assets removed from the balance sheet. The residual cash held by the ENSM
Scheme is currently held as a surplus until all the costs of the transaction
are known.
The funding valuation of the WF Scheme at 31 December 2022 was agreed on 27
March 2024. This showed neither surplus nor deficit. The company ceased
deficit funding payments to the WF Scheme in 2021 which together with a one
off payment enabled the Trustees to purchase a bulk annuity and the scheme
now has all pension liabilities covered by annuity policies and no further
funding is expected.
Group contributions paid in respect of the defined benefit pension schemes in
the period were £31.0m (2023 H1: £23.3m). £30.1m of Group contributions
relating to these schemes are due to be paid in the second half of the year.
Following the completion of the funding valuations, the funding deficits in
the MIN, MGN and Trinity schemes were expected to be removed before or around
2028 by a combination of the contributions and asset returns. Contributions
(which include funding for pension administrative expenses) are payable
monthly. Contributions to be paid per the current schedule of contributions
are £61.1m in 2024, £60.3m in 2025, £61.1m pa in 2026 and 2027, and £15.3m
in 2028.
The future deficit funding commitments are linked to the three-yearly
actuarial valuations. Although the funding commitments do not generally impact
the IAS 19 position, IFRIC 14 guides companies to consider for IAS 19
disclosures whether any surplus can be recognised as a balance sheet asset and
whether any future funding commitments in excess of the IAS 19 liability
should be provisioned for. Based on its interpretation of the rules for each
of the defined benefit pension schemes, the Group considers that it has an
unconditional right to any potential surplus on the ultimate wind-up after all
benefits to members have been paid in respect of all of the schemes except the
WF Scheme. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19
surpluses which may emerge in future and not to recognise any potential
additional liabilities in respect of future funding commitments of all of the
schemes except for the WF Scheme. For the WF Scheme at the reporting date, the
assets are surplus to the IAS 19 benefit liabilities and the impact of IFRIC
14 removes this surplus. As no further contributions are expected to the WF
Scheme, the Group no longer recognises a deficit of its future deficit
contribution commitment to the scheme.
The calculation of Guaranteed Minimum Pension ('GMP') is set out in
legislation and members of pension schemes that were contracted out of the
State Earnings-Related Pension Scheme ('SERPS') between 6 April 1978 and 5
April 1997 will have built up an entitlement to a GMP. GMPs were intended to
broadly replicate the SERPS pension benefits but due to their design they give
rise to inequalities between men and women, in particular, the GMP for a male
comes into payment at age 65 whereas for a female it comes into payment at the
age of 60 and GMPs typically receive different levels of increase to non GMP
benefits. On 26 October 2018, the High Court handed down its judgement in the
Lloyds Trustees vs Lloyds Bank plc and Others case relating to the
equalisation of member benefits for the gender effects of GMP equalisation.
This judgement creates a precedent for other UK defined benefit schemes with
GMPs.
The judgement confirmed that GMP equalisation was required for the period 17
May 1990 to 5 April 1997 and provided some clarification on legally acceptable
methods for achieving equalisation. An allowance for GMP equalisation was
first included within liabilities at 30 December 2018 and was recognised as a
charge for past service costs in the income statement. In 2020 further
clarification was issued relating to GMP equalisation in respect of transfers
out of schemes and a further allowance for GMP equalisation was included
within liabilities at 27 December 2020 and was recognised as a charge for past
service costs in the income statement. The estimate is subject to change as
the schemes undertake more detailed member calculations, as guidance is issued
and/or as a result of future legal judgements.
Risks
Valuations for funding and accounting purposes are based on assumptions about
future economic and demographic variables. This results in the risk of a
volatile valuation deficit and the risk that the ultimate cost of paying
benefits is higher than the current assessed liability value.
The main sources of risk are:
• investment risk: a reduction in asset returns (or assumed future asset
returns);
• inflation risk: an increase in benefit increases (or assumed future
increases); and
• longevity risk: an increase in average life spans (or assumed life
expectancy).
These risks are managed by:
• investing in insured annuity policies: the income from these policies exactly
matches the benefit payments for the members covered, removing all of the
above risks. At the reporting date the insured annuity policies covered 14% of
total liabilities;
• investing a proportion of assets in other classes such as government and
corporate bonds and in liability driven investments: changes in the values of
the assets aim to broadly match changes in the values of the uninsured
liabilities, reducing the investment risk, however some risk remains as the
durations of the bonds are typically shorter than those of the liabilities and
so the values may still move differently. At the reporting date non-equity
assets amounted to 97% of assets excluding the insured annuity policies;
• investing a proportion of assets in equities: with the aim of achieving
outperformance and so reducing the deficits over the long term. At the
reporting date this amounted to 3% of assets excluding the insured annuity
policies; and
• the gradual sale of equities over time to purchase additional annuity policies
or liability matching investments: to further reduce risk as the schemes,
which are closed to future accrual, mature.
Pension scheme accounting deficits are snapshots at moments in time and are
not used by either the Group or Trustees to frame funding policy. The Group
and Trustees seek to be aligned in focusing on the long-term sustainability of
the funding policy which aims to balance the interests of the Group's
shareholders and members of the schemes. The Group and Trustees also seek to
be aligned in reducing pensions risk over the long term and at a pace which is
affordable to the Group.
The Trinity Scheme, the EN88 Scheme, and the WF Scheme have an accounting
surplus at the reporting date, before allowing for the IFRIC 14 asset ceiling.
Across the MGN Scheme and the MIN Scheme, the invested assets are expected to
be sufficient to pay the uninsured benefits due up to 2043, based on the prior
reporting date assumptions. The remaining uninsured benefit payments, payable
from 2044, are due to be funded by a combination of asset outperformance and
the deficit contributions currently scheduled to be paid up to 31 January 2028
for the MGN Scheme and 31 December 2028 for the MIN Scheme. For the MGN Scheme
and MIN Scheme, actuarial projections at the prior reporting date show removal
of the accounting deficit by the end of 2026 for MGN and 2029 for MIN due to
scheduled contributions and asset returns at the target rate assumed at the
last reporting date. From this point, the assets are projected to be
sufficient to fully fund the liabilities on the accounting basis. Subsequent
to the buy out, the ENSM Scheme has a £0.2m surplus of cash recognised on the
Balance Sheet. The Group is not exposed to any unusual, entity specific or
scheme specific risks. There were no plan amendments, settlements or
curtailments in the current and prior period which resulted in a pension cost.
In June 2023, the UK High Court (Virgin Media v NTL Pension Trustees II
Limited) ruled that certain historical amendments for contracted out defined
benefit schemes were invalid if they were not accompanied by the correct
actuarial confirmation. The Court of Appeal has since confirmed the High
Court's judgment (in July 2024). The Trustees and Group are monitoring
developments and will consider if there are any implications for the pension
schemes.
Results
For the purposes of the Group's consolidated financial statements, valuations
have been performed in accordance with the requirements of IAS 19 with scheme
liabilities calculated using a consistent projected unit valuation method and
compared to the estimated value of the scheme assets at 30 June 2024.
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities are:
30 June 25 June 31 December 2023
2024 2023 £m
£m £m
Financial assumptions (nominal % pa)
Discount rate 5.20 5.38 4.62
Retail price inflation rate 3.22 3.29 3.08
Consumer price inflation rate 1.0% pa lower than RPI to 2030 and equal to RPI thereafter 1.0% pa lower than RPI to 2030 and equal to RPI thereafter 1.0% pa lower than RPI to 2030 and equal to RPI thereafter
Rate of pension increases in deferment 2.89 2.92 2.71
Rate of pension increases in payment 3.38 3.39 3.34
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65 21.3 21.3 21.4
Female currently aged 65 23.3 23.7 23.7
Male currently aged 55 21.0 20.9 21.0
Female currently aged 55 24.1 24.1 24.2
The defined benefit pension liabilities are valued using actuarial assumptions
about future benefit increases and scheme member demographics, and the
resulting projected benefits are discounted to the reporting date at
appropriate corporate bond yields. For the 2023 year-end and 2024 half year,
the financial assumptions have been derived as a yield curve with different
rates per year, with the figures in the tables above representing a weighted
average of these rates across all of the schemes. This is considered to be a
more robust and accurate approach to setting assumptions as it allows for each
scheme's individual circumstances, rather than considering the schemes in
aggregate as has been done in the past.
The discount rate should be chosen to be equal to the yield available on 'high
quality' corporate bonds of appropriate term and currency. For the 2023
year-end and 2024 half year, the discount rate has been set to reflect the
full corporate bond yield curve.
The inflation assumptions are based on market expectations over the period of
the liabilities. For the 2023 year-end and 2024 half year, the inflation
assumptions have been set using the full inflation curve. The RPI assumption
is set based on the break-even RPI inflation curve with a margin deducted.
This margin, called an inflation risk premium, reflects the fact that the RPI
market implied inflation curve can be affected by market distortions and as a
result it is thought to overstate the underlying market expectations for
future RPI inflation. Allowing for the extent of RPI linkage on the schemes'
benefits pre and post 2030, the average inflation risk premium has been set at
0.2% per annum to 2030 and 0.4% per annum thereafter. The CPI assumption is
set based on a margin deducted from the RPI assumption, due to lack of market
data on CPI expectations. Following the UK Statistics Authority's announcement
of the intention to align RPI with CPIH from 2030 the assumed gap between RPI
and CPI inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030.
The estimated impacts on the IAS 19 liabilities and on the IAS 19 deficit at
the reporting date, due to a reasonably possible change in key assumptions
over the next year, are set out in the table below:
Effect on Effect on
liabilities deficit
£m
£m
Discount rate +/- 1.0% pa -165/+195 -140/+170
Retail price inflation rate +/- 0.5% pa +21/-21 +13/-13
Consumer price inflation rate +/- 0.5% pa +21/-19 +20/-18
Life expectancy at age 65 +/- 1 year +75/-75 +60/-60
The RPI sensitivity impacts the rate of increases in deferment for some of the
pensions in the EN88 Scheme and some of the pensions in payment for all
schemes except the MGN Scheme. The CPI sensitivity impacts the rate of
increases in deferment for some of the pensions in most schemes and the rate
of increases in payment for some of the pensions in payment for all schemes.
The effect on the deficit is usually lower than the effect on the liabilities
due to the matching impact on the value of the insurance contracts held in
respect of some of the liabilities. Each assumption variation represents a
reasonably possible change in the assumption over the next year but might not
represent the actual effect because assumption changes are unlikely to happen
in isolation. The estimated impact of the assumption variations makes no
allowance for changes in the values of invested assets that would arise if
market conditions were to change in order to give rise to the assumption
variation. If allowance were made, the estimated impact would likely be lower
as the values of invested assets would normally change in the same directions
as the liability values.
The amounts included in the consolidated income statement, consolidated
statement of comprehensive income and consolidated balance sheet arising from
the Group's obligations in respect of its defined benefit pension schemes are
as follows:
Consolidated income statement 6 months ended 26 weeks ended 53 weeks
30 June 25 June ended
2024 (unaudited) 2023 (unaudited) 31 December 2023
£m £m (audited)
£m
Pension administrative expenses (2.4) (2.6) (5.5)
Pension finance charge (1.7) (3.1) (5.9)
Defined benefit cost recognised in income statement (4.1) (5.7) (11.4)
Consolidated statement of comprehensive income 6 months ended 26 weeks ended 53 weeks
30 June 25 June ended
2024 (unaudited) 2023 (unaudited) 31 December 2023
£m £m (audited)
£m
Actuarial gain/(loss) due to liability experience 6.6 (16.9) 14.1
Actuarial gain/(loss) due to liability assumption changes 116.9 125.3 (6.9)
Total liability actuarial gain 123.5 108.4 7.2
Returns on scheme assets less than discount rate (93.7) (116.7) (8.7)
Impact of IFRIC 14 - 0.4 1.0
Total gain/(loss) recognised in statement of comprehensive income 29.8 (7.9) (0.5)
Consolidated balance sheet 30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Present value of uninsured scheme liabilities (1,439.9) (1,475.2) (1,557.7)
Present value of insured scheme liabilities (242.8) (268.4) (277.9)
Total present value of scheme liabilities (1,682.7) (1,743.6) (1,835.6)
Invested and cash assets at fair value 1,394.0 1,334.8 1,455.1
Value of liability matching insurance contracts 242.8 268.4 277.9
Total fair value of scheme assets 1,636.8 1,603.2 1,733.0
Funded deficit (45.9) (140.4) (102.6)
Impact of IFRIC 14 (0.2) (0.8) (0.2)
Net scheme deficit (46.1) (141.2) (102.8)
Non-current assets - retirement benefit assets 73.8 56.4 66.0
Non-current liabilities - retirement benefit obligations (119.9) (197.6) (168.8)
Net scheme deficit (46.1) (141.2) (102.8)
Net scheme deficit included in consolidated balance sheet (46.1) (141.2) (102.8)
Deferred tax included in consolidated balance sheet 11.6 34.8 25.7
Net scheme deficit after deferred tax (34.5) (106.4) (77.1)
Movement in net scheme deficit 6 months 26 weeks 53 weeks
ended ended ended
30 June 25 June 31 December 2023
2024 2023 (audited)
(unaudited) (unaudited) £m
£m £m
Opening net scheme deficit (102.8) (150.9) (150.9)
Contributions 31.0 23.3 60.0
Consolidated income statement (4.1) (5.7) (11.4)
Consolidated statement of comprehensive income 29.8 (7.9) (0.5)
Closing net scheme deficit (46.1) (141.2) (102.8)
Changes in the present value of scheme liabilities 6 months 26 weeks 53 weeks
ended ended ended
30 June 25 June 31 December 2023
2024 2023 (audited)
(unaudited) (unaudited) £m
£m £m
Opening present value of scheme liabilities (1,835.6) (1,860.0) (1,860.0)
Interest cost (41.0) (44.2) (88.5)
Actuarial gain/(loss) - experience 6.6 (16.9) 14.1
Actuarial gain - change to demographic assumptions 17.8 32.2 35.7
Actuarial gain/(loss) - change to financial assumptions 99.1 93.1 (42.6)
Benefits paid 53.7 52.2 105.7
Bulk transfer due to buy out 16.7 - -
Closing present value of scheme liabilities (1,682.7) (1,743.6) (1,835.6)
Changes in impact of IFRIC 14 6 months 26 weeks 53 weeks
ended ended ended
30 June 25 June 31 December 2023
2024 2023 (audited)
(unaudited) (unaudited) £m
£m £m
Opening impact of IFRIC 14 (0.2) (1.2) (1.2)
Decrease in impact of IFRIC 14 - 0.4 1.0
Closing impact of IFRIC 14 (0.2) (0.8) (0.2)
Changes in the fair value of scheme assets 6 months 26 weeks 53 weeks
ended ended ended
30 June 25 June 31 December 2023
2024 2023 (audited)
(unaudited) (unaudited) £m
£m £m
Opening fair value of scheme assets 1,733.0 1,710.3 1,710.3
Interest income at discount rate 39.3 41.1 82.6
Actual return on assets less than discount rate (93.7) (116.7) (8.7)
Contributions by employer 31.0 23.3 60.0
Benefits paid (53.7) (52.2) (105.7)
Administrative expenses (2.4) (2.6) (5.5)
Bulk transfer due to buy out (16.7) - -
Closing fair value of scheme assets 1,636.8 1,603.2 1,733.0
Fair value of scheme assets 30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
UK equities 3.1 9.8 2.2
Other overseas equities 32.8 65.7 32.5
Property 27.9 29.7 28.3
Corporate bonds 267.5 365.8 279.0
Fixed interest gilts 4.0 6.2 1.1
Liability driven investment 968.6 587.8 1,029.2
Cash and other 90.1 269.8 82.8
Invested and cash assets at fair value 1,394.0 1,334.8 1,455.1
Value of insurance contracts 242.8 268.4 277.9
Fair value of scheme assets 1,636.8 1,603.2 1,733.0
The assets of the schemes are primarily held in pooled investment vehicles
which are unquoted. The pooled investment vehicles hold both quoted and
unquoted investments. Scheme assets include neither direct investments in the
Company's ordinary shares nor any property assets occupied nor other assets
used by the Group.
14. Net debt
The net debt for the Group is as follows:
Loan repayment
1 January 2024 Cash £m IFRS 16 lease liabilities movement
£m flow
£m
30 June 2024
Interest New Leases Other movements £m
£m £m £m
Liabilities from financing activities
Borrowings (30.0) - 5.0 - - - (25.0)
Lease liabilities (33.2) 4.4 - (0.6) (0.7) (0.4) (30.5)
(63.2) 4.4 5.0 (0.6) (0.7) (0.4) (55.5)
Current assets
Cash and cash equivalents 19.9 (2.2) (5.0) - - - 12.7
Net debt less lease liabilities (43.3) (42.8)
Net debt (10.1) (2.2) - - - - (12.3)
The cash and cash equivalents disclosed above and in the statement of cash
flows include £1.9m of restricted cash relating to potential pension
contributions to the EN88 Scheme if the funding is deemed required (note 13).
This is not available for general use within the Group.
The Group has a revolving credit facility of £120.0m which expires on 19
November 2026. The Group had drawings of £25.0m at the reporting date. The
facility is subject to two covenants: Interest Cover and Net Debt to EBITDA,
both of which were met at the reporting date.
15. Assets classified as held for sale
At 30 June 2024, two properties were recognised as assets classified as held
for sale with a total carrying value of £2.5m. The properties are measured at
the lower of their carrying amount and fair value less costs to sell. The fair
value was determined by the sale price or the value of offers received on the
property.
Of the three properties classified as held for sale at 31 December 2023, two
of these properties have been sold in the first half of 2024. The third
property is expected to complete within the second half of 2024.
16. Provisions
Share-based payments Historical legal issues
£m
Property Restructuring £m Other Total
£m £m £m £m
At 1 January 2024 (audited) (0.5) (19.1) (12.7) (18.2) (2.2) (52.7)
Charged to income statement (0.2) - (2.7) - (0.1) (3.0)
Utilisation of provision 0.1 1.2 12.9 5.2 0.1 19.5
At 30 June 2024 (unaudited) (0.6) (17.9) (2.5) (13.0) (2.2) (36.2)
The provisions have been analysed between current and non-current as follows:
30 June 25 June 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Current (16.0) (17.6) (26.1)
Non-current (20.2) (43.7) (26.6)
(36.2) (61.3) (52.7)
The share-based payments provision relates to National Insurance obligations
attached to the future crystallisation of awards. This provision will be
utilised over the next three years.
The property provision relates to property related onerous contracts and
onerous committed costs related to vacant properties. The provision will be
utilised over the remaining term of the leases or expected period of vacancy.
The restructuring provision relates to restructuring charges incurred in the
delivery of cost reduction measures. The charge of £2.7m principally relates
to cost management actions taken in the period (note 5). The restructuring
provision is expected to be utilised within the next year.
The historical legal issues provision relates to the cost associated with
resolving civil claims in relation to historical phone hacking and unlawful
information gathering. The provision consists of known claims and costs. The
key uncertainties in relation to this matter relate to how each claim
progresses, the amount of any settlement and the associated legal costs. The
known and common costs provision is calculated using the most likely outcome
method.
At the period end, a provision of £13.0m remains outstanding and this
represents the current best estimate of the amount required to resolve this
historical matter. The majority of the provision is expected to be utilised
within the next two years.
Our view on the range of outcomes at the reporting date for the provision,
applying more and less favourable outcomes to all aspects of the provision is
£7m to £16m (25 June 2023: £35m to £64m and 31 December 2023: £12m to
£22m). Despite making a best estimate, the timing of utilisation and ongoing
legal matters related to provided for claims could mean that the final outcome
is outside of the range of outcomes.
The other provision balance of £2.2m at the period end relates to libel and
other matters and is expected to be utilised over the next two years.
17. Share capital and reserves
The share capital comprises 322,085,269 allotted, called-up and fully paid
ordinary shares of 10p each.
On 18 December 2023, a capital reduction of £605.4m became effective. The
balance on the share premium account of £605.4m was cancelled, creating
distributable reserves of the same amount within retained earnings. The merger
reserve comprises the premium on the shares allotted in relation to the
acquisition of Express & Star. The capital redemption reserve represents
the nominal value of the shares purchased and subsequently cancelled under
share buy-back programmes.
The Company holds 4,043,503 shares (25 June 2023: 4,314,917 shares and 31
December 2023: 4,110,884 shares) as Treasury shares. During the first half of
the year, 67,076 shares were withdrawn from Treasury to satisfy the vesting of
buy-out awards granted in 2023.
Cumulative goodwill written off to retained earnings/(accumulated loss) and
other reserves in respect of continuing businesses acquired prior to 1998 is
£25.9m (25 June 2023: £25.9m and 31 December 2023: £25.9m). On transition
to IFRS, the revalued amounts of freehold properties were deemed to be the
cost of the asset and the revaluation reserve has been transferred to retained
earnings/(accumulated loss) and other reserves.
Shares purchased by the Reach Employee Benefit Trust are included in retained
earnings/(accumulated loss) and other reserves at £2.7m (25 June 2023: £3.4m
and 31 December 2023: £3.8m). During the period, 1,063,487 were released
relating to grants made in prior years (25 June 2023: 1,025,833 and 31
December 2023: 1,229,928).
During the period, awards relating to 2,112,984 shares were granted to
executive directors on a discretionary basis under the Long Term Incentive
Plan (25 June 2023: 1,623,678 and 31 December 2023: 1,623,678). The exercise
price of each award is £1 for each block of awards granted. The awards vest
after three years, subject to the continued employment of the participant and
satisfaction of certain performance conditions, and are required to be held
for a further two years.
During the period, awards relating to 3,919,926 shares were granted to senior
managers on a discretionary basis under the Long Term Incentive Plan under the
Senior Management Incentive Plan (25 June 2023: 2,967,720 and 31 December
2023: 3,085,852). The exercise price of each award is £1 for each block of
awards granted. The awards vest after three years, subject to the continued
employment of the participant and satisfaction of certain performance
conditions.
During the period, no awards relating to shares were granted to executive
directors under the Restricted Share Plan (25 June 2023 and 31 December 2023:
nil shares).
18. Reconciliation of statutory to adjusted results
6 months ended 30 June 2024 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 265.0 - - 265.0
Operating profit 36.8 7.7 - 44.5
Profit before tax 32.9 7.7 1.7 42.3
Profit after tax 24.6 5.9 1.3 31.8
Basic earnings per share (p) 7.8 1.9 0.4 10.1
26 weeks ended 25 June 2023 (unaudited)
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 279.4 - - 279.4
Operating profit 11.1 25.0 - 36.1
Profit before tax 6.7 25.0 3.1 34.8
Profit after tax 4.6 20.2 2.4 27.2
Basic earnings per share (p) 1.5 6.4 0.8 8.7
53 weeks ended 31 December 2023 (audited)
Operating Pension
adjusted finance
Statutory items charge Adjusted
results (a) (b) results
£m £m £m £m
Revenue 568.6 - - 568.6
Operating profit 46.1 50.4 - 96.5
Profit before tax 36.7 50.4 5.9 93.0
Profit after tax 21.5 42.4 4.5 68.4
Basic earnings per share (p) 6.8 13.6 1.4 21.8
(a) Operating adjusted items relate to the items charged or credited to
operating profit as set out in note 5.
(b) Pension finance charge relating to the defined benefit pension schemes
as set out in note 13.
Set out in note 2 is the rationale for the alternative performance measures
adopted by the Group. The reconciliations in this note highlight the impact on
the respective components of the income statement. Items are adjusted on the
basis that they distort the underlying performance of the business where they
relate to material items that can recur (including impairment, restructuring,
tax rate changes) or relate to historic liabilities (including historical
legal and contractual issues, defined benefit pension schemes which are all
closed to future accrual). Other items may be included in adjusted items if
they are not expected to recur in future years, such as property
rationalisation and items such as transaction and restructuring costs incurred
on acquisitions or the profit or loss on the sale of subsidiaries, associates
or freehold buildings.
Provision for historical legal issues relates to the cost associated with
dealing with and resolving civil claims for historical phone hacking and
unlawful information gathering. This is included in adjusted items as the
amounts are material, it relates to historical matters and movements in the
provision can vary year to year.
Impairments to non-current assets arise following impairment reviews or where
a decision is made to close or retire printing assets. These non-cash items
are included in adjusted items on the basis that they are material and vary
considerably each year, distorting the underlying performance of the business.
The Group's defined benefit pension schemes are all closed to new members and
to future accrual and are therefore not related to the current business. The
pension administration expenses, the past service costs and the pension
finance charge are included in adjusted items as the amounts are significant
and they relate to the historical pension commitment.
The opening deferred tax position is recalculated in the period in which a
change in the standard rate of corporation tax has been enacted or
substantively enacted by parliament or when a decision is reversed. The impact
of the change in rates are included in adjusted items, on the basis that when
they occur they are material, distorting the underlying performance of the
business.
Also included in adjusted items in the six months ended 30 June 2024 are
vacant freehold property-related costs (£1.1m), onerous lease and related
costs (£1.0m), the Group's legal fees in respect of historical legal issues
(£0.3m), adviser costs in relation to the triennial funding valuations
(£1.7m), internal pension administration expenses (£0.2m), corporate
simplification costs (£0.3m), and other restructuring-related project costs
(£1.4m) less the profit on sale of assets (£4.1m).
Also included in adjusted items in the 26 weeks ended 25 June 2023 are the
Group's legal fees in respect of historical legal issues (£4.6m), adviser
costs in relation to the triennial funding valuations (£1.2m), internal
pension administration expenses (£0.3m) and corporate simplification costs
(£0.2m), less a reduction in National Insurance costs relating to share
awards (£0.4m) and the profit on sale of impaired assets (£0.3m).
Also included in adjusted items in the 53 weeks to 31 December 2023 are the
impairment of finance lease receivable of £10.8m and recognition of onerous
costs of £8.6m of a vacant print site where the sub-lessee entered into
administration during 2023, impairment of vacant freehold property (£4.3m),
vacant freehold property-related costs (£1.4m), onerous lease and related
costs (£2.6m), the Group's legal fees in respect of historical legal issues
(£5.3m), adviser costs in relation to the triennial funding valuations
(£2.5m), internal pension administrative expenses (£0.6m), corporate
simplification costs (£0.5m), and other restructuring-related project costs
(£0.7m) less a reduction in National Insurance costs relating to share awards
(£0.3m) and the profit on sale of impaired assets (£0.3m).
19. Adjusted cash flow
6 months ended 30 June 26 weeks ended 25 June 53 weeks ended 31 December 2023
2024 (unaudited) 2023 (unaudited) (audited)
£m £m £m
Adjusted operating profit 44.5 36.1 96.5
Depreciation and amortisation 9.7 10.3 21.6
Adjusted EBITDA 54.2 46.4 118.1
Working Capital Movements 14.1 1.3 (3.9)
Net capital expenditure (5.6) (7.2) (15.4)
Net interest paid on leases (0.6) (0.2) (0.8)
Finance lease receipts - 0.6 0.2
Repayment of obligation under leases (3.8) (2.5) (4.7)
Other 0.7 1.1 1.3
Associates (1.3) (1.3) (2.9)
Adjusted operating cash flow 57.7 38.2 91.9
Net interest and charges paid on borrowings (1.5) (0.6) (2.5)
Income tax (paid/received) (1.8) 0.5 (0.5)
Restructuring payments (12.9) (12.1) (18.8)
Historical legal issues payments (5.2) (3.5) (4.6)
Proceeds from disposal of property 13.1 - -
Dividends payments (14.1) (14.0) (23.1)
Pension funding payments (31.0) (23.3) (60.0)
Dividends received from associated undertakings - - 1.9
Legal fee payments in respect of historical legal issues (0.5) (4.6) (5.3)
Adviser cost payments in relation to triennial funding valuations (1.7) (1.2) (2.5)
Other adjusted items payments (4.3) (1.3) (5.0)
Adjusted net cash flow (2.2) (21.9) (28.5)
Bank facility (repayment)/drawdown (5.0) - 15.0
Acquisition-related cash flows - (7.0) (7.0)
Net decrease in cash and cash equivalents (7.2) (28.9) (20.5)
Adjusted operating cash flow was aligned to the definition of adjusted
operating profit as at 31 December 2023. The change was largely driven by the
exclusion of the cash flow impact of restructuring payments and other items
classified as adjusted items in the income statement. This has resulted in an
increase in adjusted operating cash flow in 26 weeks ended 25 June 2023 from
£18.9m to £38.2m.
20. Reconciliation of statutory to adjusted cash flow
6 months ended 30 June 2024 Statutory (a) (b) Adjusted
2024 £m £m 2024
£m £m
Cash flows from operating activities
Cash generated from operations 43.1 (10.0) 24.6 57.7 Adjusted operating cash flow
Pension deficit funding payments (31.0) - - (31.0) Pension funding payments
- - (12.9) (12.9) Restructuring payments
- - (5.2) (5.2) Historical legal issues payments
- - (0.5) (0.5) Legal fee payments in respect of historical legal issues
- - (1.7) (1.7) Adviser cost payments in relation to triennial funding valuations
- - (4.3) (4.3) Other adjusted items payments
Income tax received (1.8) - - (1.8) Income tax received
Net cash inflow from operating activities 10.3
Investing activities
Interest received 0.1 - - 0.1 Net interest and charges paid on bank borrowings
Dividends received from associated undertakings - - - - Dividends received from associated undertakings
Proceeds on disposal of property, plant and equipment 13.1 - - 13.1 Proceeds from disposal of property
Purchases of property, plant and equipment (0.4) 0.4 - - Net capital expenditure
Expenditure on capitalised internally generated development (5.2) 5.2 - - Net capital expenditure
Deferred consideration payment - - - - Acquisition-related cash flow
Net cash used in investing activities 7.6
Financing activities
Interest and charges paid on borrowings (1.6) - - (1.6) Net interest and charges paid on bank borrowings
Dividends paid (14.1) - - (14.1) Dividends paid
Interest paid on leases (0.6) 0.6 - - Net interest paid on leases
Repayment of obligations under leases (3.8) 3.8 - - Repayment of obligation under leases
Repayment of borrowings (5.0) - - (5.0) Repayment of borrowings
Net cash used in financing activities (25.1)
Net decrease in cash and cash equivalents (7.2) - - (7.2)
(a) Items included in the statutory cash flow on separate lines
which for the adjusted cash flow are included in adjusted operating cash flow.
(b) Payments in respect of adjusted items are shown separately in
the adjusted cash flow.
26 weeks ended 25 June 2023 Statutory (a) (b) Adjusted
2023 £m £m 2023
£m £m
Cash flows from operating activities
Cash generated from operations 24.8 (9.3) 22.7 38.2 Adjusted operating cash flow
Pension deficit funding payments (23.3) - - (23.3) Pension funding payments
- - (12.1) (12.1) Restructuring payments
- - (3.5) (3.5) Historical legal issues payments
- - (4.6) (4.6) Legal fee payments in respect of historical legal issues
- - (1.2) (1.2) Adviser cost payments in relation to triennial funding valuations
- - (1.3) (1.3) Other adjusted items payments
Income tax received 0.5 - - 0.5 Income tax received
Net cash inflow from operating activities 2.0
Investing activities
Interest received - 0.3 Net interest and charges paid on bank borrowings
0.3 -
Dividends received from associated undertakings - - Dividends received from associated undertakings
-
Proceeds on disposal of property, plant and equipment 0.5 (0.5) - - Net capital expenditure
Purchases of property, plant and equipment (1.7) 1.7 - - Net capital expenditure
Expenditure on capitalised internally generated development (6.0) 6.0 - - Net capital expenditure
Interest received on leases 0.3 (0.3) - - Net interest paid on leases
Finance lease receipts 0.6 (0.6) - - Finance lease receipts
Deferred consideration payment (7.0) - - (7.0) Acquisition-related cash flow
Net cash used in investing activities (13.0)
Financing activities
Interest and charges paid on borrowings - - Net interest and charges paid on bank borrowings
(0.9) (0.9)
Dividends paid (14.0) - - (14.0) Dividends paid
Interest paid on leases (0.5) 0.5 - - Net interest paid on leases
Repayment of obligations under leases (2.5) 2.5 - - Repayment of obligation under leases
Net cash used in financing activities (17.9)
Net decrease in cash and cash equivalents (28.9) - - (28.9)
(a) Items included in the statutory cash flow on separate lines which for
the adjusted cash flow are included in adjusted operating cash flow.
(b) Payments in respect of adjusted items are shown separately in the
adjusted cash flow.
53 weeks ended 31 December 2023 Statutory (a) (b) Adjusted
2023 £m £m 2023
£m £m
Cash flows from operating activities
Cash generated from operations 76.4 (20.7) 36.2 91.9 Adjusted operating cash flow
Pension deficit funding payments (60.0) - - (60.0) Pension funding payments
- - (18.8) (18.8) Restructuring payments
- - (4.6) (4.6) Historical legal issues payments
- - (5.3) Legal fee payments in respect of historical legal issues
(5.3)
- - (2.5) Adviser cost payments in relation to triennial funding valuations
(2.5)
- - (5.0) (5.0) Other adjusted items payments
Income tax paid (0.5) - - (0.5) Income tax paid
Net cash inflow from operating activities 15.9
Investing activities
Interest received - 0.6 Net interest and charges paid on bank borrowings
0.6 -
Dividends received from associated undertakings - 1.9 Dividends received from associated undertakings
1.9 -
Proceeds on disposal of property, plant and equipment 0.9 (0.9) - - Net capital expenditure
Purchases of property, plant and equipment (3.5) 3.5 - - Net capital expenditure
Expenditure on capitalised internally generated development (12.8) 12.8 - - Net capital expenditure
Interest received on leases 0.4 (0.4) - - Net interest paid on leases
Finance lease receipts 0.2 (0.2) - - Finance lease receipts
Deferred consideration payment (7.0) - - (7.0) Acquisition-related cash flow
Net cash used in investing activities (19.3)
Financing activities
Interest and charges paid on borrowings - - (3.1) Net interest and charges paid on bank borrowings
(3.1)
Dividends paid (23.1) - - (23.1) Dividends paid
Interest paid on leases (1.2) 1.2 - - Net interest paid on leases
Repayment of obligations under leases (4.7) 4.7 - - Repayment of obligation under leases
Drawdown of borrowings 15.0 - - 15.0 Bank facility drawdown
Net cash used in financing activities (17.1)
Net decrease in cash and cash equivalents (20.5) - - (20.5)
(a) Items included in the statutory cash flow on separate lines which for
the adjusted cash flow are included in adjusted operating cash flow.
(b) Payments in respect of adjusted items are shown separately in the
adjusted cash flow.
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Reach plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Results of
Reach plc for the 6 month period ended 30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
● the Consolidated balance sheet as at 30 June 2024;
● the Consolidated income statement and the Consolidated statement of
comprehensive income for the period then ended;
● the Consolidated cash flow statement for the period then ended;
● the Consolidated statement of changes in equity for the period then
ended; and
● the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Results of Reach
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Half Year Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half Year Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
31 July 2024
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