Reach publishes full year results

Business Highlights

Strategy creating a stronger business

• Increase in Group revenue with digital growth more than offsetting print decline
• 10m registrations, ahead of FY22 target; first party data approach enables growth of data-led PLUS+ portfolio
• PLUS+ revenue c. 25% of growth in digital - over 200 campaigns since Q2 launch at significantly higher yields
• Page views up by 28.7% versus 2019; down only 2.8% on 2020 which benefitted from COVID-19 driven traffic
• Growing customer engagement - audience, page views per visitor and loyalty all strongly ahead versus 2019

Investment supporting future profit growth

• Strength of cash generation and balance sheet underpins investment in sustainable long-term profit growth
• Print driven cost inflation expected to affect 2022 profits, mitigated in part by ongoing efficiency programmes
• New digital tech platform, Neptune, supports more sophisticated use of data and deeper customer profiles
• Increasing focus on product development driving personalised customer experience and expansion of PLUS+

Jim Mullen Chief Executive: “We’ve made significant progress as a business and I’m grateful to the whole Reach team for making 2021 such a successful year. We’ve completed the first phase of our Customer Value Strategy delivering a strong performance, with digital growth more than offsetting print decline. We’ve now hit our 10 million registrations target ahead of time and advertisers are embracing our portfolio of data-led products, which support significantly higher yields. Despite inflationary pressures in print, we’re committed to maintaining our focus on sustainable long-term profit growth, investing in product innovation and a more personalised user experience. Our strong balance sheet and cash generation underpins continued investment as we transition to an increased mix of higher quality digital earnings.”

Results Overview

Group revenue growth as strong digital performance offsets moderated print decline

• Digital revenue £148.3m up 25.4% or 38.6% on two-year view; digital now 24% of revenue mix (2019 c.15%)
• Significant contribution to digital uplift driven by Customer Value Strategy revenues, including PLUS+ portfolio
• Print revenue LFL down 4.7% with circulation down 4.6% and advertising down 4.9%
• Print recovery better than originally anticipated; investment in availability, marketing and product enhancement supports resilient circulation
• Strong H2 performance over more normalised period of trading, having lapped soft H1 comparatives driven by COVID-19 lockdowns last year; digital up 13.3% and print down 4.1% LFL in second half

Adjusted operating profit growth in line with expectations

• Adjusted operating profit of £146.1m up £12.3m or 9.2%; profit margin 23.7% up 140bps
• Efficiency savings from 2020 transformation programme and print site closures support strategic investment including expansion of editorial (c.400 journalists), data insight and product teams
• Statutory operating profit of £79.3m impacted by £66.8m of adjusted items, largely related to property rationalisation after moving to flexible working model (‘Home & Hub’) and increased HLI provision of £29.0m.
• Operating adjusted items of £66.8m (2020: £126.2m) significantly reduced year on year, with transformation programme and print site closures costs included in 2020 comparative
• Adjusted EPS increased by 9.3%. Statutory EPS of 0.9p impacted by the operating adjusted items and the deferred tax charge resulting from the future increase in the UK corporation tax rate

Strong cash generation and balance sheet allows balanced capital allocation

• Cash conversion of 85% adjusted EBITDA to adjusted operating cash flow
• Strengthening business performance supports expanded credit facility, increased to £120m with minimum four- year term, providing increased flexibility for investment
• Cash balances up £23.7m; retained cash balance £65.7m
• Ongoing discussions to agree resolution of 2019 triennial review of pension commitments. We are committed to working towards the objective of achieving funding of all schemes as previously agreed in our 2016 triennial review, taking in to account the interests of all stakeholders
• Final dividend proposed of 4.46 pence per share, an increase of 4.7% (2020: 4.26 pence)

A responsible business – focus on Diversity and Inclusion, wellbeing and sustainability

• Investment in journalism reinforces our purpose as champions, campaigners and changemakers for communities; our newsbrands continue to challenge, inform and entertain
• Transformative year around Diversity and Inclusion, culminating in ranking in UK 50 Most Inclusive Companies
• Wellbeing focus extends healthcare provision, including mental health support to all colleagues
• Appointed Online Safety Editor, an industry first, to help protect our people and tackle rise of online abuse
• ESG strategy and net zero target to be formalised during 2022

Outlook and current trading

The Customer Value Strategy is progressing and enabling an evolution of the business, with digital revenue on track to double by the end of 2024 from its 2020 base. Trading to date has been ahead of Q4 2021. On a like-for-like basis print revenue down 4.2%, digital growing by 10.3% and overall Group revenue down 0.7% for the first 8 weeks of the year. We expect digital revenue growth to again offset print decline, with total revenue flat for the full year 2022.

The business is transitioning to become more digitally driven and the ongoing cost base reshaping will in part help fund continued investment. However, the impact from inflation, which began to affect the business towards the end of 2021, has now intensified, particularly in print production. This has primarily been reflected in the cost of newsprint (paper for printed products), which having previously been impacted by rising distribution costs and supply challenges, now also reflects the significant increase in energy prices. As a result, the gross impact of inflation in 2022 is expected to be higher than in recent years.

While ongoing efficiencies are expected to partly mitigate this impact, we anticipate the net effect to be a modest year-on-year reduction in operating profit as we continue to invest for the future.

Click here to see the full results.

Keep up-to-date with publishing news: sign up here for InPubWeekly, our free weekly e-newsletter.