Reach Plc Regulatory News (RCH)

7 July 2020

Reach plc announces transformation to accelerate customer value strategy

Reach plc, the UK's leading commercial national and regional news publisher, today provides a trading update and announces plans to transform the business to enable an accelerated delivery of its customer value strategy.

Commenting on the announcement, Jim Mullen, Chief Executive Officer, Reach plc, said:

"Structural change in the media sector has accelerated during the pandemic and this has resulted in increased adoption of our digital products. However, due to reduced advertising demand, we have not seen commensurate increases in digital revenue.

To meet these challenges and to accelerate our customer value strategy, we have completed plans to transform the business and are ready to begin the process of implementation. Regrettably, these plans involve a reduction in our workforce and we will ensure all impacted colleagues are treated with fairness and respect throughout the forthcoming consultation process.

The plans will provide a stable platform for us to accelerate our strategy, based on stronger and deeper customer relationships, increasing our appeal to advertisers. This will ensure the sustainability and profitability of the Reach business, enabling it to deliver to stakeholders over the long-term.

Award-winning journalism and content will always be at the core of our purpose. Through the transformation, Reach will realise the full potential of its business model, enabling our news brands to continue to shape the daily conversations of millions of people for years to come."

Key points:

· Q2 Group revenue declined by 27.5% impacted by reductions in circulation and advertising compared with the prior year. Slightly improved trends in June saw Group revenue fall by 23.9%

· Customer registrations have now passed the 2.5m mark for first time - exceeding our previous target for the end of 2020

· The Group's customer value strategy will be accelerated with the customer registration target increased to 10m by 2022 (previously 7m)

· The planned changes announced today will deliver £35 million in annualised savings at an estimated one-off cost of £20 million

Q2 and year-to-date trading and liquidity update1

Reach continues to attract a leading audience share with over 41 million2 unique visitors during May and continues to grow its customer registrations - now over 2.5 million3.

Q2 Group revenue to 28 June was down 27.5% compared with the corresponding period last year. Print revenue declined by 29.5% and digital revenue was down by 14.8%. Circulation remains significantly below pre-COVID-19 levels with local advertising continuing to be challenging. Year to date Group revenue to 28 June was down 17.5%, benefitting from the good start to the year before COVID-19 began impacting the business in mid-March. 

In June, we have continued to see modest but encouraging improvements in circulation and national digital revenue as the Government's lockdown restrictions have eased. Group revenue declined by 23.9% in June compared with 30.5% in April. In June Digital saw a decline of 4.9%, compared to the 22.5% fall seen in April when the impact of COVID-19 was at its worst. Print revenue in June was down 26.7% year on year compared with the 31.8% decline seen in April.

Reach continues to maintain a strong balance sheet with access to sufficient liquidity. 

Transformation of the Reach business and acceleration of our customer value strategy

In February, Reach unveiled its customer value strategy centred on building an intelligent, relevant and trusted content business for the long-term through capturing customer insight and data. The increased headwinds to circulation and advertising mean the strategy is now even more relevant.

The plans announced today will reshape the Reach business into a streamlined, efficient organisation with more focussed editorial, advertising (solutions and local commercial) and central operations. Editorial will move to a more centralised structure bringing together national and regional teams across print and digital to significantly increase efficiency and remove duplication while maintaining the strong editorial identity of our news brands. In local commercial as well as in finance, Reach will move to fewer locations and a simpler management structure, with costs geared to current market conditions.

In total the company plans a reduction in headcount of around 550 people (or 12% of its workforce). Reach will shortly begin a 45-day consultation regarding these plans.  

These changes will provide the business with a strong platform to accelerate the delivery of its customer value strategy and significantly increased customer registration targets. Reach has already surpassed its full year 2020 target in achieving over 2.5 million customer registrations. It is now increasing its 2022 target to 10 million by 2022 up from the 7 million announced in February. Through stronger and deeper personalised customer relationships the business will make its content more relevant and advertising more targeted, increasing the value of its audience.

Alongside the reshaping and refocusing of the business, Reach will invest in creating an improved digital customer experience across all newsbrands and products, with support from an expanded data and insights team. A new self-serve digital platform will also be launched to appeal to SME digital advertisers and there will be further investment in the InYourArea hyperlocal platform which has already surpassed 800,000 active registered users. 

The transformation will ensure the company's leading national and regional titles will continue to deliver quality news and content across print and digital channels for the long-term.

Delivering for all stakeholder groups

The accelerated strategy and new structure will enable Reach to end the previously announced temporary pay cuts for all colleagues except for the CEO, CFO and other Board members, whose pay will continue to be subject to a 20% reduction. All annual bonus schemes relating to 2020 remain suspended. The company will also resume its monthly contributions towards historic pension deficits following the deferral announced in April. The Reach Board recognises the importance of a dividend to our shareholders and will keep future dividends under review, restarting payments when it is appropriate to do so.

Interim results update

Reach has previously confirmed its full interim results will be announced on Monday 28 September. Further detail on the plans announced today will be provided at that time.

Notes

1 Revenue trends - Revenue on an actual and like for like basis are the same for 2020

2 Source: Comscore UK multi-platform May 2020, 3Source: Reach data

Forward-looking statements

You are not to construe the content of this announcement as investment, legal or tax advice and you should make your own evaluation of the Company and the market. If you are in any doubt about the contents of this announcement or the action you should take, you should consult a person authorised under the Financial Services and Markets Act 2000 (as amended) (or if you are a person outside the UK, otherwise duly qualified in your jurisdiction). This announcement has been prepared in relation to the trading update for the six months from 30 December 2019 to 28 June 2020. The financial information referenced in this announcement is not audited and does not contain sufficient detail to allow a full understanding of the results of the Group. Nothing in this announcement should be construed as either an offer or invitation to sell or any offering of securities or any invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group or an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (as amended). 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", "anticipate", "project", "estimate", "intend", "continue", "target", "plan", "goal", "aim" or "believe" (or the negatives thereof) or other variations thereon or comparable terminology. 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 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 Company does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in the Company's expectations.