Reach Plc Regulatory News (RCH)

7 May 2020

Reach plc trading update for the 4-month period to 26 April 2020

Informing and engaging customers during an unprecedented crisis

Reach plc ('the Group') is issuing a trading update for the 4-month period from 30 December 2019 to 26 April 2020 ('the period'), ahead of its 2020 Annual General Meeting today.

Revenue trends1

Group revenue in the period was down 13.1% with print revenue down 15.8%, while digital revenue grew by 4.7%. Having started the year well, with encouraging digital growth, the COVID-19 crisis began impacting the business from mid-March. Since that time the Group has seen declines in circulation sales, falls in print advertising revenue at a national and local level, reduced printing requirements from third parties, impacts from cancelled events and a reduction in digital yields due to lower advertising demand.

Despite this we have seen unprecedented demand for news and content across our digital titles, with 42 million online users in the UK in March, ensuring Reach retained its position as the 5th largest UK online property2. April saw total page views of 1.7 billion (up 57%)3, average daily app users rose by 47% to 674,000, and our hyperlocal news platform InYourArea surpassed 650,000 registered users4. This progress towards our key strategic objectives of increasing customer registrations and securing enhanced customer data and insight, provides strong foundations for future progress.

April represented a full month of impact from the lockdown and saw Group revenue fall by 30.5%, with print revenue down by 31.8% and digital revenue falling 22.5%, with higher page volumes not able to offset declines in advertising yields. While in some areas we have recently seen a stabilisation in trends, circulation remains significantly below pre-COVID-19 levels and advertising remains very challenging and uncertain, with regional advertising particularly impacted.

Key mitigating actions

On 6 April, we confirmed that a number cash conservation and cost reduction measures had already been introduced. Further to these actions we also announced additional measures including pay reductions, suspensions of all 2020 bonus schemes and furloughing of a number of colleagues, as well as the cancellation of the 2019 final dividend. These changes were successfully implemented shortly after the announcement. In addition, we began discussions with pension funds about a three-month deferral of monthly contributions which has now been agreed.

Balance sheet and liquidity

The Group continues to have access to sufficient liquidity. Net cash surplus as at the 26 April 2020 was £33.2 million reflecting the proactive steps taken to conserve cash. This represents a cash balance of £58.2 million less £25.0 million which has been drawn down from the Group's revolving credit facility of £65 million, which is available until December 2023. The business has a proven track record for disciplined cost control and strong cash management which will continue to be vital in the current uncertain trading environment. 

Outlook

While revenue performance for the year is expected to be significantly impacted by the COVID-19 crisis, the cost mitigation measures introduced will partially protect profitability levels and cash generation. Given the continued uncertainty about the severity and length of the crisis, Reach continues to suspend guidance. We came into this crisis with a robust financial position and continue to run an efficient business.

Jim Mullen, Reach plc Chief Executive, commented:

"Our priority in this crisis has been to ensure the health and safety of our colleagues and I would like to thank all of them for the positive way they have responded throughout this process. Our teams continue to focus on producing the award-winning journalism and content that is so valued by our customers at this critical time. We continue to build on our position as the UK's largest commercial national and regional news publisher. Our strategy is now even more relevant than before the crisis so we are accelerating plans to drive digital engagement and capture the customer insight and data that is so key. This will ensure a strong and sustainable future for Reach's trusted news brands."

Notes

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

2 Source: Comscore UK multi-platform March 2020

3 Source: Google Analytics

4 Source: Reach data

Enquiries

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 financial results for the four months ended 26 April 2020 and trading in the period 30 December 2019 to 7 May 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.