Annual Results for 52 weeks ended 26 December 2021

RNS Number : 1134D

Reach PLC

01 March 2022

Reach plc - Full Year Results - 52 weeks to 26 December 2021

1 March 2022

Initial phase of digital growth strategy complete; on track to double digital revenue by the end of 2024

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+ ⁽¹⁾ 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."

Financial Summary
52 weeks to 26 Dec 2021		Adjusted results⁽²⁾			Statutory results
		2021	2020	Change	2021	2020	Change
Revenue	£m	615.8	600.2	2.6%	615.8	600.2	2.6%
Operating profit	£m	146. 1	133.8	9.2%	79.3	7.6	N/A
Operating profit margin	%	23. 7%	22.3%	140bps	12.9%	1.3%	N/A
Earnings/(loss) per share	Pence	37.6	34.4	9.3%	0.9	(8.6)	N/A
Net cash	£m	6 5.7	42.0	56.4%	65.7	42.0	56.4%
Dividend per share ⁽³⁾	Pence	7.21	4.26	N/A	7.21	4.26	N/A

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⁽⁴⁾; 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⁽⁴⁾ 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⁽⁵⁾

· Strengthening business performance supports expanded credit facility, increased to £120m with minimum four-year term, providing increased flexibility for investment

· Cash⁽⁶⁾ 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.

Notes

(1) PLUS+ describes our portfolio of data-led products which we started to roll-out to brands and advertising agencies in Q2 2021.

(2) Set out in note 20 is the reconciliation between the statutory and adjusted results. The current period is for the 52 weeks ended 26 December 2021 ('2021') and the comparative period is for the 52 weeks ended 27 December 2020 ('2020').

(3) Full year dividend of 7.21 pence per share comprised of interim dividend of 2.75 pence per share and proposed final dividend of 4.46 pence per share. This compares to a non-cash bonus issue of shares issued in lieu of and with a value equivalent to an interim dividend in 2020 of 2.63 pence per share and a final dividend for 2020 of 4.26 pence per share.

(4) The Group presents results on an actual and like-for-like (LFL) basis. The LFL trends exclude the Independent Star acquisition and the impact of portfolio changes which impacts print revenues only. A table showing LFL revenue movements on a one year basis versus 2020 and a two year basis versus 2019 is included in the Financial Review on page 9. Set out in note 21 is the reconciliation between the statutory and LFL revenue.

(5) An adjusted cash flow is presented in note 22 which reconciles the adjusted operating profit to the net change in cash and cash equivalents. Note 23 provides a reconciliation between the statutory and adjusted cash flows.

(6) Cash balance comprises cash and cash equivalents of £65.7m.

Enquiries

Reach
Jim Mullen, Chief Executive Officer Simon Fuller, Chief Financial Officer Ciaran O'Brien, Director of Communications Matt Sharff, Investor Relations Director	communications@reachplc.com 07341 470 722
Tulchan Communications	reachplc@tulchangroup.com
Giles Kernick	020 7353 4200

Jim Mullen, Chief Executive Officer, Simon Fuller, Chief Financial Officer and Lloyd Embley, Group Editor-in-Chief, will be hosting a live webcast at 9:00am (UK) on 1 March 2022. 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). An archive of the webcast and the presentation script and slides will also be available.

You can join the webcast via https://edge.media-server.com/mmc/p/c8k88o4g . Please copy and paste the link into your browser.

Please either listen to the Q&A session via the webcast or to ask a question, please use the dial-in details below. Please dial-in at least 15 minutes prior to the start time to provide sufficient time to access the event. You will be asked to provide the conference ID number below.

Conference ID No: 1385903

United Kingdom: +44 (0) 20 7192 8338 or toll free: 0800 279 6619

Forward looking statements

This announcement has been prepared in relation to the financial results for the 52 weeks ended 26 December 2021. 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 condition 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

An expanded team delivering on our core purpose

2021 has been a year of investment in journalism, with the successful recruitment of over 400 new roles. We invested behind our national social teams, expanded our national sports coverage and expanded a number of regional newsrooms.

The expansion demonstrates the progress we are making in creating the Reach of tomorrow. Reach is transitioning from a company that was primarily focused on managing print decline to one that is establishing a sustainable future with a digital business that is growing strongly.

It also reinforces our purpose as champions, campaigners and changemakers for communities throughout the UK and Ireland.

26 new sites were launched during the year, to deliver on our promise of local digital news coverage across every county in England and Wales, and more counties in both Northern Ireland and Scotland. The investment enabled us to deepen MyLondon's borough-by-borough coverage, more than quadrupling the team to over 80 roles, including the site's first Race and Diversity Editor. An expansion of our sports team means we will be offering more and better sports coverage, including coverage of Formula 1, where the Daily Express recruited a new correspondent, reflecting its historic associations with the sport.

Our newsbrands have had another incredible year of campaigning, winning awards and delivering real change that has impacted people's lives for the better. From the Express's award-winning environmental campaigning to the Daily Record's Campaign of the Year in Scotland on the decriminalisation of drugs, our journalism has been widely praised by campaigners and politicians.

And of course our newsbrands have set the agenda throughout the year from the Mirror's exposure of the Downing Street lockdown gatherings that have rocked the Government, to six of our Northern titles sharing the same 'Trainspotting' front page in response to the Government's U-turn on HS2.

When a number of Premier League clubs were plotting to set up a European Super League, nine of our regional titles combined to campaign for 'Our Clubs, Our Future', voicing the fans' anger and leading to a swift climbdown from the club executives. Special mention must go to the Manchester Evening News for their coverage of the Manchester bomb inquiry and to Birmingham Live for their coverage of the tragic case of Arthur Labinjo ‑ Hughes. The Irish Daily Star was also recognised at the NewsBrands Ireland Journalism Awards, including the award for Crime Journalist of the Year.

These awards reflect the strength of our editorial culture and our core purpose, and we will continue to hold power to account, highlight hypocrisy and champion the voices of our communities. This ongoing focus on journalism and content ensures the continued strength of our audience, acting as the foundation for the Customer Value Strategy.

Strong growth in customer registrations and engagement

The trust in our titles is a key reason we continue to achieve the biggest monthly audience of any commercial publisher, with just under 42m people visiting our sites every month. The growth of accessing news digitally has disrupted publishers' business models but continues to represent a huge opportunity for Reach with more people than ever reading our content across print and digital. Our scale audience represents the UK's fifth-largest digital asset and a huge opportunity, given that we have not historically achieved our full digital potential.

While page views declined set against numbers inflated by pandemic-related stories in the spring and summer of 2020, they have grown strongly on a two-year basis, up 29% compared to 2019. Our investment in content began to drive increased volume during the latter part of H2, with page views in Q4 growing at 4%, with that uplift strengthening significantly in the early part of 2022.

Data is central to the Customer Value Strategy, with the first stage about focusing on growing our registered audience, enabling us to understand more about our customers. We set a target of 10m by the end of 2022, and by the end of 2021 we had already achieved over 9m - up from 5m at the end of 2020. We achieved our 10m target in early 2022, several months ahead of schedule.

In October, we launched 'one tap' registration, which has led to a step change in the customer registration experience, making it more seamless than before. It enables users to register and then log in with one click, significantly increasing the number of logged in sessions per month. With more of our registered customers logged in we can track their content consumption and develop the insights that are key to our data-led advertising products. While the initial development benefits Google users, we are already planning to launch other frictionless log-in services.

Newsletters also remain a key source of customer registrations and enable us to build daily relationships with our readers. We have launched over 300 newsletters which cover daily briefings, common interests and 'obsessions.' The latter focuses on areas which generate spikes in interest around topics readers obsess about in short-term bursts such as the Olympics or the latest TV series which our reader data tells us will be popular. Total page views from newsletters more than doubled during 2021 and they drive over 50m page views a month.

In October we began assembling our customer relationship management (CRM) team under a new Audience Transformation Director. The focus of these roles is to develop editorial products to drive customer loyalty and engagement. Increasing the use of data and insights in our newsrooms will be key for the team as we look to increase our focus on customer acquisition, retention and activity.

PLUS+ products help drive digital growth

Our commercial team has put in a strong performance this year - fully justifying their Campaign Commercial Team of the Year and Consumer Business of the Year awards. The team delivered another year of strong digital revenue growth of 25% with two-year growth at 39%. This is another major step towards our key objective of doubling digital revenue by the end of 2024 from the 2020 base.

Key to the performance has been our suite of data-led PLUS+ products which has contributed significantly to digital revenue growth this year, despite having only launched in Q2 of 2021. These products enable us to categorise data sets by geography, by reader behaviour and preferences, and produce targeted data sets for client campaigns. PLUS+ driven campaigns are driving improved results for advertisers, while attracting significantly higher digital revenue yield.

These campaigns also utilise our AI tool Mantis to refine the data sets for emotion and context, in addition to content subject matter ensuring greater accuracy. These products have far exceeded our expectations with over 200 campaigns run during 2021.

There is more potential to come as we enrich our customer data, adding breadth and depth over time with additional content consumption, as well as modelling the behaviour of unknown or unregistered customers based on the behaviour of our registered customer base.

Brands are starting to recognise the importance of news publishers' digital offerings, and a number of agencies have launched their own curated marketplaces to enable ease of access for their clients to news publisher inventory. We anticipate extending use of our data sets to these marketplaces, increasing the scale opportunity to extend access to PLUS+.

While we continue to see a decline in print advertising revenue, the trends in early 2022 are more moderate than those seen in early 2021. Although structural challenges remain and some sectors, such as leisure and travel, have yet to fully recover post the pandemic, others, like food retail, have remained buoyant. Cover-wraps are an effective marketing or promotional tool and we continue to see strong interest from the likes of Sainsbury's and Coca-Cola.

The commercial team has also placed greater emphasis on partnerships with a promising tie-up with Imagine Cruises, a beer club and a partnership with Rank Group. Campaign wins from the likes of Barclays, BT and Tesco demonstrate the ongoing appeal of print campaigns and we continued to benefit from the industry-wide Government advertising spend.

Resilience in print and continued efficiencies

Our print titles continued to generate the bulk of our revenues during 2021 and saw a resilient performance despite the ongoing challenges of COVID-19, with a like-for-like revenue decline of 4.7% for the year. We increased availability of our titles and have closely managed distribution based on latest data sets from the various outlet types. The regular use of front-page free offers for customers has also helped support sales including free books, free bets and shopping discounts.

We began to see the impact of increasing inflation towards the end of the year, particularly in the cost of newsprint, which is being heavily impacted by rising energy costs. We expect this to continue in 2022.

A responsible business - focus on Diversity and Inclusion (D&I), wellbeing and sustainability

We continue to prioritise D&I in the business. Key to any D&I policy is benchmarking and data, and we carried out a Company-wide survey for the first time. Over 87% of colleagues participated, providing us with a detailed breakdown of race, gender, disability and religion. This data will help shape the next stage of our D&I journey in 2022.

We signed up to the 30% Club and Valuable 500 to show our commitment to increase representation of women at senior levels, as well as ethnicity, and to focus on disability inclusion. These initiatives, together with our inclusion groups and champions, helped Reach secure a place in the Inclusive Top 50 Employers list for the first time. While we are pleased with the progress to date, we will continue to prioritise D&I during 2022.

Colleague wellbeing has continued to be a focus with both Sanctus mental health coaching and free access to the meditation app Headspace proving popular.

Online abuse towards journalists has become a concerning trend, so we surveyed our people to better understand the scale of the problem. As a result, in October we announced an industry-leading step to tackle online abuse, by appointing an Online Safety Editor. The role is dedicated to supporting colleagues and working with social media platforms to find solutions.

During 2021, we launched our hybrid working policy after extensive research with colleagues. The model promotes flexible working and helps attract people from broader talent pools across the country.

Our titles continue to highlight the climate emergency, and it was pleasing to see the Express Environment Correspondent John Ingham receive the British Journalism Award for Energy and Environment.

In recognition of the increasing importance placed on Environmental, Social and Governance (ESG) by the Board and stakeholders, we established a Sustainability Committee to review the Company's approach to sustainability and its wider ESG strategy.

In advance of that process we, together with a number of industry peers, committed to the Ad Net Zero commitment through Newsworks, which will see us ensure we produce our advertising without impacting the environment through carbon emissions. During 2022, we will evolve our approach following a review of the wider ESG landscape.

The Customer Value Strategy in 2022 - B2C focus

The introduction of 'One Tap' registration to our sites has increased the number of logged-in user sessions, significantly enhancing our ability to gather data and enrich customer profiles. During 2022, we aim to grow the number of our registered customers using more than one product or platform which we believe is an early opportunity to drive engagement and loyalty.

A new, more personalised user experience will help with this target, as will our own in-house developed content recommendation tool and a tool to prioritise next actions - from serving an ad, to promoting content or registration to data-gathering opportunities.

The day-to-day operation of our newsrooms will be increasingly data-led and our CRM approach more sophisticated. Data and insights will inform our approach to drive customer retention, engagement frequency and dwell time to grow overall digital average revenue per user.

The Customer Value Strategy in 2022 - B2B focus

In January 2022, we built further on our progress with data-led advertising products by launching Neptune - our ad tech solution. Neptune brings together all the elements of our first-party data platform with our growing slate of data matching capabilities and custom-built AI contextual tools. We also recently announced the creation of a dedicated in-house Ad Tech Workshop, unique in the publishing space in that the team will sit in the commercial division and focus entirely on commercial product development - both for in-house use and, where appropriate, to license to other publishers.

Looking forward, we will continue to innovate and enhance our use of AI and other tech solutions to help monetise our first-party data sets. We will also build on the early success of our PLUS+ products which have now been used in over 200 campaigns. Our teams are focused on extending access to data-led campaigns via curated marketplaces, which an increasing number of agencies are launching to provide clients with alternatives to the traditional programmatic routes for digital advertising, OMP (Open Market Place).

The progress in registrations and data capabilities has enabled us to grow yields through offering advertisers more targeted campaigns. However, there is more potential in this area and we are still at a relatively early stage. As we enrich our data sets by geography, content interest and demographic, and utilise contextual tools to provide further insight, we are able to offer a wider choice of data-led campaigns and drive higher yields.

Building a culture where people can thrive

The workplace has changed forever as a result of the pandemic, and we continue to focus on evolving the culture of the business. In an increasingly competitive job market, a strong employer value proposition is key to ensuring we attract and retain the right people. We have made strong progress through the introduction of our hybrid working policy and by developing an extensive package of wellbeing support. Moving forward, we will seek to leverage the strength of the organisation's core purpose more effectively across the business. We have initiated an employer value proposition process to refine what Reach stands for as an employer and will bring this to the fore in recruitment and communications. In terms of talent development, we are introducing a new management and leadership development programme to develop leaders of the future, and we're increasing our focus and investment in training and recruiting the next generation of talent through outreach activity and work experience placements.

Balance sheet strength

In November, we announced that we had secured an increase in our revolving credit facility with an expanded syndicate of relationship banks. The increase in available facilities from £65m to £120m demonstrates growing confidence in the strength of the business and provides us with the optionality to accelerate our growth plans should we identify investment opportunities which enable us to progress faster towards becoming a data-led, insight-driven business.

Investing in the future

With digital revenue now 24% of our overall revenues, up from just 15% two years ago, and growing strongly, the potential of the business is clear.

We will continue to seek cost efficiencies as we transition to a more digitally-driven future. This will help to fund our investment and partially mitigate the impacts of inflation, where we are seeing significant increases in the cost of newsprint in particular.

In 2022, machine learning and AI will deliver insights across customer relationship management, editorial, marketing and ad tech, and will to continue to drive our digital transition.

As we enter the next phase of the Customer Value Strategy, we are on track to double digital revenue from the 2020 base by the end of 2024.

Jim Mullen

Chief Executive Officer

1 March 2022

Financial Review

Investing to grow Reach

Our financial results this year reflect a strong recovery against a year significantly impacted by COVID-19, while also demonstrating the benefits of strategic delivery. The Group has delivered like-for-like growth in revenue for the first time since 2007, with growth of digital revenue (which was 24% of Group revenue in 2021) more than offsetting the decline in print and other revenues.

From a profit perspective, our results show a recovery in adjusted operating profit, with top-line growth and cost savings from last year's transformation programme supporting investment in the Customer Value Strategy. Our statutory performance was impacted by adjusting items and the impact of the future change in the corporation tax rate.

Our business remains cash generative, delivering £141.3m of adjusted operating cash flow during the year, with cash balances growing to £65.7m and no bank debt. The Group has continued to maintain a strong balance sheet with liquidity enhanced by the recent expansion of our revolving credit facility which has been increased from £65.0m to £120.0m, supporting resilience and investment optionality.

	Adjusted 2021 £m	Adjusted 2020 £m	Statutory 2021 £m	Statutory 2020 £m
Revenue	615.8	600.2	615.8	600.2
Costs	(472.9)	(469.0)	(538.1)	(594.0)
Associates	3.2	2.6	1.6	1.4
Operating profit	146.1	133.8	79.3	7.6
Finance costs	(2.6)	(2.5)	(6.0)	(7.2)
Profit before tax	143.5	131.3	73.3	0.4
Tax charge	(26.9)	(24.9)	(70.4)	(27.1)
Profit/(loss) after tax	116.6	106.4	2.9	(26.7)
Earnings/(loss) per share - basic (p)	37.6	34.4	0.9	(8.6)

Revenue

Revenue is presented on an actual and like-for-like basis which excludes the impact of the Irish Daily Star acquisition from 2021 and 2020 and the impact of portfolio changes from 2020, both of which affect print comparisons only. Further details on the reconciliation between the actual and like-for-like revenue are set out in note 21.

	Actual 2021 £m	Actual 2020 £m	Like-for-like 2021 £m	Like-for-like 2020 £m
Print	465.1	479.3	454.5	476.8
Circulation	312.9	319.7	304.2	318.9
Advertising	103.3	108.4	101.5	106.7
Printing	20.4	25.2	20.4	25.2
Other	28.5	26.0	28.4	26.0
Digital	148.3	118.3	148.3	118.3
Other	2.4	2.6	2.4	2.6
Total revenue	615.8	600.2	605.2	597.7

Revenue increased by £15.6m or 2.6% on an actual basis and by £7.5m or 1.3% on a like-for-like basis. Like-for-like adjustments relate to a £9.6m full year benefit from the Irish Daily Star (£10.6m in 2021 less £1.0m in 2020) partially offset by the impact of £1.5m from other portfolio changes (nil in 2021 less £1.5m in 2020) both of which impact print not digital.

On a like-for-like basis print revenue fell by £22.3m or 4.7%, digital revenue grew by £30.0m or 25.4% and other revenue fell by £0.2m or 7.7%. The growth in digital exceeded the fall in print and other revenues on both an actual and like-for-like basis.

Revenue bridge

	Actual £m	YOY LFL %
2020 revenue	600
Circulation	(7)	(4.6)
Advertising	(5)	(4.9)
Printing	(5)	(19.0)
Other	2.5	9.2
Print	(14)	(4.7)
Digital	30	25.4
2021 revenue	616	1.3; 2.6% Act

Revenue was significantly impacted by COVID-19 during 2020, particularly during Q2 and Q3 (down 27.5% and 14.8% respectively), before beginning to ease towards the end of the year. Consequently, year-on-year revenue comparisons reflect both the progress made during 2021 and the relatively soft comparatives of 2020. For this reason and to provide additional insight into our performance, we show revenue movements on a two-year like-for-like basis in the table below:

	YOY H1 %	YOY H2 %	YOY FY %	2yr H1 %	2yr H2 %	2yr FY %
Digital	42.7	13.3	25.4	41.4	36.3	38.6
Print	(5.2)	(4.1)	(4.7)	(23.9)	(20.5)	(22.2)
Circulation	(5.1)	(4.0)	(4.6)	(16.0)	(15.7)	(15.9)
Advertising	(4.3)	(5.3)	(4.9)	(33.7)	(26.8)	(30.3)
Total revenue	2.6	Flat	1.3	(14.9)	(11.0)	(13.0)

YOY compares 2021 with 2020 and 2yr movement compares 2021 with 2019

Print declined by £22.3m or 4.7% on a like-for like basis (2020: -18.9%), a stronger performance than we had originally anticipated. The two-year decline was 22.2% with recent performance more reflective of expected trends going forward.

Circulation revenue was down 4.6% on a like-for-like basis (2020: -11.6%), with second-half volume declines easing, following the lows brought about by COVID-19 related lockdowns. Circulation volumes (excluding the impact of sampling) for our national daily titles fell by 10.1%, with national Sunday titles down 12.6%. Volume declines for our regional titles were 12.5% for paid-for dailies, 18.5% for paid-for weeklies and 13.3% for paid-for Sundays. The circulation volume trend is impacted by cover price differentials and reflects our strategy to increase cover prices annually to protect revenue performance.

Advertising revenue was down 4.9% on a like-for-like basis (2020: -28.9%), a much improved performance. Nationally sourced advertising continues to outperform locally sourced activity. At a national level, while certain sectors, such as leisure and travel remained subdued throughout much of the year, others, such as food, retail and entertainment, have remained buoyant. We've also benefitted from additional Government spend generated by public health messaging. The impact of the pandemic on locally sourced advertising has been more prolonged, with many smaller businesses not advertising at all, combined with much reduced classified activity.

Print revenue also includes external printing revenues and other print-related revenues. Printing revenue decreased 19.0% on a like-for-like basis (2020: -34.5%) due to a further reduction in contract print volumes and the closure of two of our six print plants at the end of 2020. Other print revenue increased by 9.2% on a like-for-like basis (2020: -32.6%), with event-driven enterprise revenues and sports contract printing returning in the second half of the year.

Digital revenue increased by £30.0m or 25.4% (up 38.6% on a two-year basis) reflecting both a recovery in the digital advertising market and our Customer Value Strategy, which focuses on growing reader consumption of our content (or page views) and delivering more targeted or relevant advertising to our customers.

Digital is an increasing part of the business and was 24% of Group revenue in 2021 (2019: 15%), with growth supported by strong strategic delivery, in particular relating to our new data-led advertising product portfolio, PLUS+, demand for which has helped grow our digital yield. Worldwide page views declined by 2.8%, though 2020 benefitted from significant one-off digital traffic, driven by COVID-19 related stories, which did not contribute significantly to revenue. On a two-year basis page views were up 29%.

Costs

Adjusted costs of £472.9m (2020: £469.0m) increased by £3.9m or 0.8%. Statutory costs decreased by £55.9m or 9.4% primarily due to lower operating adjusted items which were £59.8m lower (£65.2m compared to £125.0m in 2020).

	Adjusted 2021 £m	Adjusted 2020 £m	Statutory 2021 £m	Statutory 2020 £m
Labour	(232.1)	(217.2)	(232.1)	(217.2)
Newsprint	(52.9)	(45.8)	(52.9)	(45.8)
Depreciation	(19.3)	(27.4)	(19.3)	(27.4)
Other	(168.6)	(178.6)	(233.8)	(303.6)
Total costs	(472.9)	(469.0)	(538.1)	(594.0)

Labour costs of £232.1m were 6.9% higher year-on-year driven by three key elements; (i) the reversal of actions taken in 2020, which included the temporary salary reduction (repaid in 2021), bonus suspension and furlough, (ii) investment in the Customer Value Strategy, particularly in editorial with around 400 more journalists hired during the year and in data and technology, and (iii) the benefit of cost savings related to last year's transformation programme and print site closures and this year's Home and Hub project.

The higher cost of newsprint during the year reflects both a reduction in industry production capacity and a strong recovery in demand compared to the previous year, when demand was suppressed by COVID-19. Growing demand for packaging materials, reduced availability of recycled fibre and increasing costs of shipping and energy contributed to a significant increase in newsprint prices versus 2020.

Depreciation and other costs include the benefit of the cost-saving initiatives in 2020 and 2021.

Operating adjusted items included in statutory costs related to the following:

	Statutory 2021 £m	Statutory 2020 £m
Provision for historical legal issues	(29.0)	(12.5)
Transformation programme	-	(16.5)
Closure of two print plants	(0.7)	(65.3)
Home and Hub project	(23.7)	-
Other	(11.8)	(30.7)
Operating adjusted items in statutory costs	(65.2)	(125.0)

The provision for historical legal issues relating to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering has increased by £29.0m (2020: £12.5m).

The Group announced in July 2020 a transformation programme to reshape the Group into a streamlined, more efficient organisation across editorial, advertising and central operations which was implemented in the year. In September 2020 a review of print capacity requirements concluded with the closure of two print plants at the end of the year. The transformation programme resulted in a restructuring charge of £16.5m and the closure of the two print plants resulted in total charges of £65.3m comprising a restructuring charge of £16.9m, an impairment to property, plant and equipment of £34.7m and an impairment to right-of-use assets of £13.7m. In 2021 additional restructuring costs of £1.4m have been charged less the profit on sale of impaired assets of £0.7m.

The Group announced a Home and Hub project in March 2021 which set out the vision for how the Group's offices would look and where job roles would be based. As a consequence of the project a number of offices or floors have been closed. The project has resulted in charges of £23.7m (impairments of £2.3m relating to property, plant and equipment and £10.5m relating to right-of-use assets and a £10.9m property rationalisation charge relating to onerous costs of vacant properties).

In 2021, other operating adjusted items comprises pension administrative expenses (£3.7m), restructuring charges relating to the integration costs of the Irish Daily Star which was acquired in 2020 (£1.4m), adviser costs in relation to the triennial funding valuations (£1.2m), National Insurance costs relating to share awards (£2.6m) and the write-off of an old debit balance (£2.9m). In 2020, other operating adjusted items comprised pension administrative expenses (£4.6m), GMP equalisation charge (£1.5m), restructuring charge for other cost-saving initiatives (£3.0m), a goodwill impairment charge (£6.1m) and a charge relating to a historic property development (£15.5m).

Profit

Adjusted operating profit of £146.1m was up 9.2% or £12.3m. Adjusted operating profit increased due to the benefit of higher revenues and cost savings more than offsetting the reversal of actions taken in 2020, inflationary increases and investment in the Customer Value Strategy. The adjusted operating profit margin of 23.7% was up 140bps.

Cost include £46m of year on year savings relating to the transformation actions in 2020 and 2021. Those comprised the full year benefit from the July 2020 reshaping of the Group, the delivery of the targeted savings from the print site closures at the end of December 2020 and the in year benefit from the Home and Hub project. The reversal of the actions taken in 2020 include no furlough being taken in 2021, the repayment of the employee salary reduction and the resumption of bonuses.

Statutory operating profit was £79.3m (2020: £7.6m), significantly higher year-on-year due to the increase in adjusted profit and reduction in the level of adjusted cost items.

Adjusted operating profit bridge

	Adjusted £m	YOY %
2020 operating profit	134
2020 reversals	(23)
Transformation savings	46
2021 net costs	(11)
Investment	(14)
Revenue	14
2021 operating profit	146	9.2

Earnings per share

Adjusted earnings per share increased by 3.2p or 9.3% with lower adjusted finance costs and an adjusted tax rate broadly in line with the corporation tax rate of 19%. Statutory earnings per share of 0.9p was impacted by operating adjusted items of £66.8m and a £53.9m deferred tax charge arising from the multi-year impact of the planned future increase in the UK's corporation tax rate (2020: loss per share of 8.6p).

Reconciliation of statutory to adjusted results

	Statutory results £m	Operating adjusted items £m	Pension finance charge £m	Tax £m	Adjusted results £m
Revenue	615.8	-	-	-	615.8
Operating profit	79.3	66.8	-	-	146.1
Profit before tax	73.3	66.8	3.4	-	143.5
Profit after tax	2.9	57.0	2.8	53.9	116.6
Basic earnings per share (p)	0.9	18.4	0.9	17.4	37.6

The Group excludes from the adjusted results: operating adjusted items, pension finance charge and tax movements arising from changes in the corporation tax rate. 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, 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 the property rationalisation in the current year 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

Adjusted cash flow

	£m	£m
EBITDA		165
Tax	(15)
Restructuring	(15)
Capex	(12)
Lease payments	(8)
Working capital and other	26
Operating cash flow		141
Historic legal issues	(11)
Pension payments	(65)
Dividends	(22)
Purchase for share awards	(3)
Net cash flow		41
Payment for Express & Star	(17)
Cash retained		24
Opening cash	42
Closing cash		66

Note: All amounts are rounded.

Historical legal issues provision

The historical legal issues provision relates to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering. Payments of £11.0m have been made during the year and the provision has been increased by £29.0m. At the year-end a provision of £41.0m 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 17.

Decrease in accounting pension deficit

The IAS 19 pension deficit (net of deferred tax) in respect of the Group's six defined benefit pension schemes decreased by £138.3m from £255.5m to £117.2m. The decrease was driven by an increase in the discount rate, asset returns and as a result of Group contributions. Changes in the accounting pension deficit do not have an immediate impact on the agreed funding commitments. The triennial valuation for funding of the defined benefit pension schemes as at 31 December 2019 would usually have been completed by 31 March 2021. We have agreed the funding for three of the schemes, and the discussions with the remaining three schemes are ongoing, having been delayed by COVID-19 and more recently differences between the Group and the Trustees as to possible de-risking and the required pace of funding. We continue to be in active discussions with both the Trustees and the Pensions Regulator.

Group contributions in respect of the defined benefit pension schemes in the year were £64.7m (2020: £53.9m). This comprised £9.6m to the West Ferry scheme (in relation to closure of the Luton print site in 2021) and £55.1m under the current schedule of contributions of the remaining five schemes. The payment of £9.6m enabled the Trustees of the West Ferry scheme to purchase a bulk annuity and the scheme now has all pension liabilities covered by annuity policies. Contributions in 2022 are expected to be £55.1m under the current schedule of contributions for the remaining five schemes.

Deferred consideration

Deferred consideration is in respect of the acquisition of Express & Star. Payment of the second instalment of £16.0m was made on 28 February 2021. Of the remaining amount of £24.1m, £17.1m is classified as current liabilities (payable on 28 February 2022) and £7.0m is classified as non-current liabilities (payable on 28 February 2023).

Employee Benefit Trust

The Group funded the Trustees of the Employee Benefit Trust in the second half to enable the Trustees to purchase 883,315 shares at a total cost of £3.3m (average cost 374p per share). The shares are held by the Trustees and will be used to satisfy awards granted under the Company's employee share plans that are expected to vest in future years.

Cash balances

Cash increased by £23.7m from £42.0m at the prior year end to a cash position of £65.7m at the year end. The Group entered into a new £120m revolving credit facility in November 2021 which replaced the existing £65m facility. The new facility expires in November 2025 and is undrawn.

Cash generated from operations on a statutory basis was £163.7m (2020: £121.3m). 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 22. A reconciliation between the statutory and the adjusted cash flow is set out in note 23. The adjusted operating cash flow was £141.3m (2020: £121.8m).

Dividends

The Board proposes a final dividend of 4.46 pence per share for 2021 (2020: 4.26 pence per share). The final dividend, which is subject to approval by shareholders at the Annual General Meeting on 5 May 2022, will be paid on 10 June 2022 to shareholders on the register at 13 May 2022.

An interim dividend for 2021 of 2.75 pence per share was paid on 24 September 2021 (2020: non-cash bonus issue of shares to shareholders, in lieu of and with a value equivalent to an interim dividend for 2020 of 2.63 pence per share).

The Board recognises the importance of growing dividends for shareholders while also investing to grow the business and meeting our funding commitments to the defined benefit pension schemes. The Board expects to continue to adopt a policy of paying dividends which are aligned to the free cash generation of the Group. Free cash generation for this purpose is the net cash flow generated by the Group before the repayment of debt, dividend payments, other capital returns to shareholders and additional contributions made to the defined benefit pension schemes because of any substantial increase in dividends and/or capital returns to shareholders.

Current trading and outlook

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.

Simon Fuller

Chief Financial Officer

1 March 2022

Statement of Directors' Responsibilities

The directors are responsible for preparing the Preliminary Audited Results Announcement in accordance with applicable laws and regulations. The responsibility statement below has been prepared in connection with the Company's full Annual Report for the 52 weeks ended 26 December 2021. Certain points thereof are not included within this Preliminary Audited Results Announcement.

The directors confirm to the best of their knowledge:

a) the consolidated financial statements, which have been prepared in accordance with both international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

b) the Preliminary Audited Results Announcement includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces.

By order of the Board of Directors

Simon Fuller

Chief Financial Officer

1 March 2022

Consolidated income statement

for the 52 weeks ended 26 December 2021 (52 weeks ended 27 December 2020)

	notes	Adjusted 2021 £m	Adjusted Items 2021 £m	Statutory 2021 £m	Adjusted 2020 £m	Adjusted Items 2020 £m	Statutory 2020 £m

Revenue	4	615.8	-	615.8	600.2	-	600.2
Cost of sales		(329.4)	-	(329.4)	(303.2)	-	(303.2)
Gross profit		286.4	-	286.4	297.0	-	297.0
Distribution costs		(41.1)	-	(41.1)	(46.2)	-	(46.2)
Administrative expenses		(102.4)	(65.2)	(167.6)	(119.6)	(125.0)	(244.6)
Share of results of associates		3.2	(1.6)	1.6	2.6	(1.2)	1.4
Operating profit		146.1	(66.8)	79.3	133.8	(126.2)	7.6
Interest income	6	0.1	-	0.1	0.1	-	0.1
Pension finance charge	15	-	(3.4)	(3.4)	-	(4.7)	(4.7)
Finance costs	7	(2.7)	-	(2.7)	(2.6)	-	(2.6)
Profit before tax		143.5	(70.2)	73.3	131.3	(130.9)	0.4
Tax charge	8	(26.9)	(43.5)	(70.4)	(24.9)	(2.2)	(27.1)
Profit/(loss) for the period attributable to equity holders of the parent		116.6	(113.7)	2.9	106.4	(133.1)	(26.7)

Earnings/(loss) per share	notes	2021 Pence		2021 Pence	2020 Pence		2020 Pence
Earnings/(loss) per share - basic	10	37.6		0.9	34.4		(8.6)
Earnings/(loss) per share - diluted	10	36.5		0.9	33.6		(8.6)

The above results were derived from continuing operations. Set out in note 20 is the reconciliation between the statutory and adjusted results.

Consolidated statement of comprehensive income

for the 52 weeks ended 26 December 2021 (52 weeks ended 27 December 2020)

	notes	2021 £m	2020 £m

Profit/(loss) for the period		2.9	(26.7)
Items that will not be reclassified to profit and loss:
Actuarial gain/(loss) on defined benefit pension schemes	15	102.9	(61.6)
Tax on actuarial gain/(loss) on defined benefit pension schemes	8	(26.0)	11.7
Deferred tax credit resulting from future change in rate	8	13.9	5.9
Share of items recognised by associates		(0.6)	(0.5)
Other comprehensive income/(loss) for the period		90.2	(44.5)
Total comprehensive income/(loss) for the period		93.1	(71.2)

Consolidated statement of changes in equity

for the 52 weeks ended 26 December 2021 (52 weeks ended 27 December 2020)

	Share capital £m	Share premium account £m	Merger reserve £m	Capital redemption reserve £m	Accumulated loss and other reserves £m	Total £m

At 30 December 2019	30.9	606.7	17.4	4.4	(24.2)	635.2
Loss for the period	-	-	-	-	(26.7)	(26.7)
Other comprehensive loss for the period	-	-	-	-	(44.5)	(44.5)
Total comprehensive loss for the period	-	-	-	-	(71.2)	(71.2)
Bonus issue of shares (note 18)	1.3	(1.3)	-	-	-	-
Credit to equity for equity-settled share-based payments	-	-	-	-	2.7	2.7
At 27 December 2020	32.2	605.4	17.4	4.4	(92.7)	566.7
Profit for the period	-	-	-	-	2.9	2.9
Other comprehensive income for the period	-	-	-	-	90.2	90.2
Total comprehensive income for the period	-	-	-	-	93.1	93.1
Purchase of own shares (note 18)	-	-	-	-	(3.3)	(3.3)
Credit to equity for equity-settled share-based payments	-	-	-	-	1.7	1.7
Deferred tax credit for equity-settled share-based payments	-	-	-	-	2.4	2.4
Dividends paid (note 9)	-	-	-	-	(21.8)	(21.8)
At 26 December 2021	32.2	605.4	17.4	4.4	(20.6)	638.8

Consolidated cash flow statement

for the 52 weeks ended 26 December 2021 (52 weeks ended 27 December 2020)

	notes	2021 £m	2020 £m
Cash flows from operating activities
Cash generated from operations	11	163.7	121.3
Pension deficit funding payments	15	(64.7)	(53.9)
Income tax paid		(14.6)	(14.2)
Net cash inflow from operating activities		84.4	53.2
Investing activities
Interest received	6	0.1	0.1
Dividends received from associated undertakings		2.5	0.5
Proceeds on disposal of property, plant and equipment		0.7	0.3
Purchases of property, plant and equipment	13	(6.5)	(1.9)
Expenditure on internally generated development	12	(6.0)	-
Deferred consideration payment	16	(16.0)	(18.9)
Acquisition of associated undertaking		(0.8)	(0.2)
Acquisition of subsidiary undertaking		-	(3.4)
Cash acquired on acquisition of subsidiary undertaking		-	2.3
Net cash used in investing activities		(26.0)	(21.2)
Financing activities
Dividends paid	9	(21.8)	-
Interest and charges paid on bank borrowings		(1.4)	(1.2)
Drawdown of bank borrowings		-	25.0
Repayment of bank borrowings		-	(25.0)
Purchase of own shares	18	(3.3)	-
Interest paid on leases	16	(1.3)	(1.5)
Repayment of obligation under leases	16	(6.9)	(7.7)
Net cash used in financing activities		(34.7)	(10.4)
Net increase in cash and cash equivalents		23.7	21.6
Cash and cash equivalents at the beginning of the period	16	42.0	20.4
Cash and cash equivalents at the end of the period	16	65.7	42.0

Consolidated balance sheet

at 26 December 2021 (at 27 December 2020)

	notes	2021 £m	Restated 2020 £m
Non-current assets
Goodwill	12	35.9	35.9
Other intangible assets	12	824.3	818.7
Property, plant and equipment	13	157.3	168.4
Right-of-use assets	14	12.7	25.3
Investment in associates		17.4	18.1
Retirement benefit assets	15	107.9	50.4
		1,155.5	1,116.8
Current assets
Inventories		5.5	4.6
Trade and other receivables		102.3	107.7
Current tax receivable		13.5	2.8
Cash and cash equivalents	16	65.7	42.0
		187.0	157.1
Total assets		1,342.5	1,273.9
Non-current liabilities
Trade and other payables		(6.4)	-
Deferred consideration	16	(7.0)	(24.1)
Lease liabilities	16	(30.7)	(35.5)
Retirement benefit obligations	15	(261.8)	(364.8)
Provisions	17	(43.6)	(25.2)
Deferred tax liabilities		(188.1)	(111.9)
		(537.6)	(561.5)
Current liabilities
Trade and other payables		(114.7)	(92.1)
Deferred consideration	16	(17.1)	(16.0)
Lease liabilities	16	(5.5)	(6.1)
Provisions	17	(28.8)	(31.5)
		(166.1)	(145.7)
Total liabilities		(703.7)	(707.2)
Net assets		638.8	566.7

Equity
Share capital	18	32.2	32.2
Share premium account	18	605.4	605.4
Merger reserve	18	17.4	17.4
Capital redemption reserve	18	4.4	4.4
Accumulated loss and other reserves	18	(20.6)	(92.7)
Total equity attributable to equity holders of the parent		638.8	566.7

The 2020 consolidated balance sheet has been restated to show the net amount of deferred tax assets and deferred tax liabilities, and to show current tax receivable separately on the face of the balance sheet.

Notes to the consolidated financial statements

for the 52 weeks ended 26 December 2021 (52 weeks ended 27 December 2020)

1. General information

The financial information, which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated cash flow statement, the Consolidated statement of changes in equity and the Consolidated balance sheet and related notes ('Consolidated Financial Information') in the Preliminary Audited Results announcement is derived from but does not represent the full statutory accounts of Reach plc. The statutory accounts for the 52 weeks ended 27 December 2020 have been filed with the Registrar of Companies and those for the 52 weeks ended 26 December 2021 will be filed following the Annual General Meeting on 5 May 2022. The auditors' reports on the statutory accounts for the 52 weeks ended 27 December 2020 and for the 52 weeks ended 26 December 2021 were unqualified, do not include reference to any matters to which the auditors drew attention by way of emphasis of matter without qualifying the reports and do not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Whilst the Consolidated Financial Information included in this Preliminary Audited Results Announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. This Preliminary Audited Results Announcement constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency Rules (DTR). The Annual Report for the 52 weeks ended 26 December 2021 will be available on the Company's website at www.reachplc.com and at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP before the end of March 2022 and will be sent to shareholders who have elected to receive a hard copy with the documents for the Annual General Meeting to be held on 5 May 2022.

The Consolidated Financial Information has been prepared for the 52 weeks ended 26 December 2021 and the comparative period has been prepared for the 52 weeks ended 27 December 2020. Throughout this report, the Consolidated Financial Information for the 52 weeks ended 26 December 2021 is referred to and headed 2021 and for the 52 weeks ended 27 December 2020 is referred to and headed 2020. The presentational and functional currency of the Group is Sterling. The Company presents the results on a statutory and adjusted basis and revenue trends on a statutory and like-for-like basis as described in note 2.

2. Accounting policies

Basis of preparation

The Consolidated Financial Information has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 ('IFRS') and the applicable legal requirements of the Companies Act 2006. In addition to complying with international accounting standards in conformity with the requirements of the Companies Act 2006, the consolidated financial statements also comply with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. These standards are subject to ongoing amendment by the International Accounting Standards Board and are therefore subject to change. As a result, the Consolidated Financial Information contained herein will need to be updated for any subsequent amendment to IFRS or any new standards that are issued. The Consolidated Financial Information has been prepared under the historical cost convention.

The accounting policies used in the preparation of the Consolidated Financial Information for the 52 weeks ended 26 December 2021 and for the 52 weeks ended 27 December 2020 have been consistently applied to all the periods presented. These Consolidated Financial Statements have been prepared on a going concern basis.

Going concern basis

The directors have made appropriate enquires and consider that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, which comprises the period of at least 12 months from the date of approval of the financial statements.

In accordance with LR 9.8.6(3) of the Listing Rules, and in determining whether the Group's annual consolidated financial statements can be prepared on a going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities, and the principal risks and uncertainties relating to its business activities.

The key factors considered by the directors were as follows:

• The performance of the business in 2021 and the progress being made in the implementation of the Group's Customer Value Strategy and the implications of the current economic environment including the continuing impact of COVID-19 and inflationary pressures. The Group undertakes regular forecasts and projections of trading, identifying areas of focus for management to improve the delivery of the Customer Value Strategy and mitigate the impact of any deterioration in the economic outlook;

• The impact of the competitive environment within which the Group's businesses operate;

• The impact on our business of key suppliers (in particular newsprint) being unable to meet their obligations to the Group;

• The impact on our business of key customers being unable to meet their obligations for services provided by the Group;

• The deficit funding contributions to the defined benefit pension schemes and payments in respect of historical legal issues; and

• The available cash reserves and committed finance facilities available to the Group. On 19 November 2021 the Group agreed a £120m facility which expires on 18 November 2025. Drawings can be made with 24 hours' notice and the facility was undrawn at the reporting date.

Having considered all the factors impacting the Group's businesses, including downside sensitivities (relating to trading and cash flows), the directors are satisfied that the Company and the Group will be able to operate within the terms and conditions of the Group's financing facilities for the foreseeable future.

The directors have reasonable expectations that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group's annual consolidated financial statements.

Changes in accounting policy

The same accounting policies, presentation and methods of computation are followed in the Consolidated Financial Information as applied in the Group's latest annual consolidated financial statements for the 52 weeks ended 27 December 2020.

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, it is not intended to be considered in isolation or as a substitute for, or as superior to, financial information on a statutory basis. 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 20 sets out the reconciliation between the statutory and adjusted results. Note 21 shows the reconciliation between the statutory and like-for-like revenues. An adjusted cash flow is presented in note 22 which reconciles the adjusted operating profit to the net change in cash and cash equivalents. Set out in note 23 is the reconciliation between the statutory and adjusted cash flow.

Adjusting items

Adjusting 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. All operating adjusting items are recognised within administrative expenses. Details of adjusting items are set out in note 20 with additional information in notes 5, 8 and 15.

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 (notes 17 and 19)

During 2021, the number of new claims, the progression of claims, the settlement amount and the associated legal costs have been ahead of historical trends and experience. This has resulted in a change to the provision estimate and a further charge of £29.0m in the year. At the period end, a provision of £41.0m 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 three 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 £32m to £53m. However, it is unknown how long it will take to fully resolve this matter and despite making a best estimate of the provision, the timing of utilisation and possible range, the total universe of claims is unknown and there are both ongoing legal matters and the potential for new legal matters which could mean that the final outcome is outside of the range of outcomes. Due to these unquantifiable uncertainties, a contingent liability has been highlighted in note 19.

Taxation (note 8)

There is uncertainty as to the tax deductibility of expenditure relating to historical legal issues in the current year and additional tax liabilities that may fall due in relation to earlier years. At the reporting date, the maximum amount of the additional unprovided tax exposure relating to this uncertain tax item is £7.4m (2020: £6.0m). There is uncertainty as to the final outcome and timing of this item, with a possible range of outcomes for the potential tax exposure being nil to £25.1m.

Retirement benefits (note 15)

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.

Restructuring and property provisions (note 17)

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 length of property related provisions.

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.

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

	2021 £m	2020 £m

Print	465.1	479.3
Circulation	312.9	319.7
Advertising	103.3	108.4
Printing	20.4	25.2
Other	28.5	26.0
Digital	148.3	118.3
Other	2.4	2.6
Total revenue	615.8	600.2

The Group's operations are located primarily in the UK.

5. Operating adjusted items

	2021 £m	2020 £m

Provision for historical legal issues (note 17)	(29.0)	(12.5)
Impairment of property, plant and equipment (note 13)	(2.3)	(34.7)
Impairment of right-of-use assets (note 14)	(10.5)	(13.7)
Provision for property rationalisation (note 17)	(10.9)	-
Restructuring charges in respect of cost reduction measures (note 17)	(2.8)	(36.4)
Pension administrative expenses and past service costs for GMP equalisation (note 15)	(3.7)	(6.1)
Impairment of goodwill (note 12)	-	(6.1)
Provision for historical property development (note 17)	-	(15.5)
Other items (note 20)	(6.0)	-
Operating adjusted items included in administrative expenses	(65.2)	(125.0)
Operating adjusted items included in share of results of associates	(1.6)	(1.2)
Total operating adjusted items	(66.8)	(126.2)

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 20 is the reconciliation between the statutory and adjusted results which includes descriptions of the items included in adjusted items.

The Group has recorded a £29.0m increase in the provision for historical legal issues relating to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering (note 17).

In the first half of 2021, the Group implemented a Home and Hub project which set out the vision for how the Group's offices would look and where job roles would be based. As a consequence of the project a number of offices or floors have been closed. The project has resulted in charges of £23.7m (impairments of £2.3m relating to property, plant and equipment and £10.5m relating to right-of-use assets and a £10.9m property rationalisation charge relating to onerous costs of vacant properties).

Restructuring charges include £1.4m of costs relating to the integration of the Irish Daily Star which was acquired in 2020 and a further £1.4m of restructuring relating to the closure of two print sites at the end of 2020.

Other items relate to adviser costs in relation to the triennial funding valuations (£1.2m), National Insurance costs relating to share awards (£2.6m) and the write-off of an old debit balance (£2.9m) partially offset by profit on sales of print assets (£0.7m).

6. Interest income

2021

£m

2020

£m

Interest income on bank deposits

0.1

7. Finance costs

	2021 £m	2020 £m

Interest and charges on bank borrowings	(1.4)	(1.1)
Interest on lease liabilities	(1.3)	(1.5)
Finance costs	(2.7)	(2.6)

8. Tax charge

	2021 £m	2020 £m

Corporation tax charge for the period	(4.8)	(2.7)
Prior period adjustment	0.9	-
Current tax charge	(3.9)	(2.7)
Deferred tax charge for the period	(12.8)	(5.7)
Prior period adjustment	0.2	0.3
Deferred tax rate change	(53.9)	(19.0)
Deferred tax charge	(66.5)	(24.4)
Tax charge	(70.4)	(27.1)

Reconciliation of tax charge	2021 £m	2020 £m

Profit before tax	73.3	0.4
Standard rate of corporation tax of 19% (2020: 19%)	(13.9)	(0.1)
Tax effect of items that are not deductible in determining taxable profit	(4.0)	(6.1)
Change in rate of deferred tax	(53.9)	(19.0)
Prior period adjustment	1.1	0.3
Tax effect of share of results of associates	0.3	0.3
Release of deferred tax on losses no longer expected to be recoverable	-	(2.5)
Tax charge	(70.4)	(27.1)

The standard rate of corporation tax for the period is 19% (2020: 19%). The tax effect of items that are not deductible in determining taxable profit includes certain costs where there is uncertainty as to their deductibility. The current tax receivable of £13.5m (2020: £2.8m current tax receivable) is net of the uncertain tax provision of £17.7m (2020: £13.8m). At the reporting date, the maximum amount of the additional unprovided tax exposure relating to an uncertain tax item is £7.4m (2020: £6.0m). There is uncertainty as to the final outcome and timing of this item, with a possible range of outcomes for the potential tax exposure being nil to £25.1m.

The Budget on 5 March 2021 increased the rate of corporation tax from 19% to 25% with effect from 1 April 2023. At 26 December 2021, this rate change had been substantively enacted by parliament meaning that the opening deferred tax position has been recalculated in the period resulting in a £53.9m debit in the consolidated income statement and a £13.9m credit in the consolidated statement of comprehensive income.

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 £26.0m (2020: credit of £11.7m).

The amount taken to the consolidated income statement as a result of pension contributions was £10.1m (2020: £11.7m).

9. Dividends

	2021 Pence per share	2020 Pence per share
Amounts recognised as distributions to equity holders in the period
Dividends paid per share - prior year final dividend	4.26	-
Dividends paid per share - interim dividend	2.75	-
Total dividends paid per share	7.01	-

Dividend proposed per share but not paid nor included in the accounting records	4.46	4.26

The Board proposes a final dividend for 2021 of 4.46 pence per share. An interim dividend for 2021 of 2.75 pence per share was paid on 24 September 2021 bringing the total dividend in respect of 2021 to 7.21 pence per share. The 2021 final dividend payment is expected to amount to £14.0m.

On 6 May 2021, the final dividend proposed for 2020 of 4.26 pence per share was approved by shareholders at the Annual General Meeting and was paid on 2 June 2021.

Total dividends paid in 2021 were £21.8m (2020 final dividend payment of £13.2m and 2021 interim dividend payment of £8.6m).

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.

	2021 Thousand	2020 Thousand

Weighted average number of ordinary shares for basic earnings per share	310,282	309,430
Effect of potential dilutive ordinary shares in respect of share awards	8,971	6,818
Weighted average number of ordinary shares for diluted earnings per share	319,253	316,248

The weighted average number of potentially dilutive ordinary shares not currently dilutive was 1,704,886 (2020: 2,542,234).

Statutory earnings/(loss) per share	2021 Pence	2020 Pence

Earnings/(loss) per share - basic	0.9	(8.6)
Earnings/(loss) per share - diluted	0.9	(8.6)

Adjusted earnings per share	2021 Pence	2020 Pence

Earnings per share - basic	37.6	34.4
Earnings per share - diluted	36.5	33.6

Set out in note 20 is the reconciliation between the statutory and adjusted results.

11. Cash flows from operating activities

	2021 £m	2020 £m

Operating profit	79.3	7.6
Depreciation of property, plant and equipment	15.3	20.2
Depreciation of right-of-use assets	3.6	7.2
Amortisation of other intangible assets	0.4	-
Impairment of goodwill	-	6.1
Impairment of right-of-use assets	10.5	13.7
Impairment of property, plant and equipment	2.3	36.5
Write-off of property, plant and equipment	-	1.4
Profit on disposal of property, plant and equipment	(0.7)	-
Share of results of associates	(1.6)	(1.4)
Share-based payments charge	1.7	3.6
Pension administrative expenses	3.7	4.6
Pension past service costs	-	1.5
Operating cash flows before movements in working capital	114.5	101.0
(Increase)/decrease in inventories	(0.9)	1.3
Decrease in receivables	5.6	8.9
Increase in payables	44.5	10.1
Cash flows from operating activities	163.7	121.3

12. Goodwill and other intangible assets

The carrying value of goodwill and other intangible assets is:

	Goodwill £m	Publishing rights and titles £m	Intangible assets £m

Opening carrying value	35.9	818.7	854.6
Additions	-	6.0	6.0
Amortisation	-	(0.4)	(0.4)
Closing carrying value	35.9	824.3	860.2

The Group has two cash-generating units (Publishing and Digital Classified Recruitment). All intangible assets at the reporting date relate to Publishing.

During the year, the Group has capitalised internally generated assets relating to software and website development costs of £6.0m. 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.

The impairment review in respect of the Publishing cash-generating unit concluded that no impairment charge was required.

For the impairment review, cash flows have been prepared using the approved Budget for 2022 and projections for a further nine years as this is the period over which the transformation to digital can be assessed. The projections for 2023 to 2031 are internal projections based on continued decline in print revenues and growth in digital revenues and the associated change in the cost base as a result of the changing revenue mix. The Group's medium-term internal projections are that growth in digital revenue will be sufficient to offset the decline in print revenue and that overall revenue will stabilise. The long-term growth rates beyond the 10-year period have been assessed at 0% based on the Board's view of the market position and maturity of the relevant market. We continue to believe that there are significant longer-term benefits of our scale national and local digital audiences and there are opportunities to grow revenue and profit in the longer term.

The discount rate reflects the weighted average cost of capital of the Group. The current post-tax and equivalent pre-tax discount rate used is 10.8% (2020: 10.9%) and 14.2% (2020: 13.4%) respectively.

The impairment review is highly sensitive to reasonably possible changes in key assumptions used in the value-in-use calculations and there is continued uncertainty due to COVID-19. The headroom in the impairment review is £411m. EBITDA in the 10 year projections is forecast to grow at a CAGR of 1.3%. A combination of reasonably possible changes in key assumptions such as print revenue declining at a faster rate than projected, digital revenue growth being significantly lower than projected or the associated change in the cost base being different than projected, could lead to an impairment if these resulted in the EBITDA in the 10-year projections declining at a CAGR of 5.0%. Alternatively an increase in the discount rate by 5.6 percentage points would lead to the removal of the headroom.

13. Property, plant and equipment

	Land and buildings	Plant and equipment	Assets under construction	Total
	£m	£m	£m	£m
Cost
At 27 December 2020	204.6	368.9	0.6	574.1
Additions	-	4.3	2.2	6.5
Disposals	-	(13.3)	-	(13.3)
Reclassification	-	0.6	(0.6)	-
At 26 December 2021	204.6	360.5	2.2	567.3
Accumulated depreciation and impairment
At 27 December 2020	(96.7)	(309.0)	-	(405.7)
Charge for the period	(2.6)	(12.7)	-	(15.3)
Disposals	-	13.3	-	13.3
Impairment	-	(2.3)	-	(2.3)
At 26 December 2021	(99.3)	(310.7)	-	(410.0)
Carrying amount
At 27 December 2020	107.9	59.9	0.6	168.4
At 26 December 2021	105.3	49.8	2.2	157.3

Impairment of property, plant and equipment amounted to £2.3m in the period as a result of the Home and Hub project which means that a number of offices or floors have been closed.

14. Right-of-use assets

	Properties £m	Vehicles £m	Total £m
Cost
At 27 December 2020	43.2	3.0	46.2
Additions	1.1	0.4	1.5
Derecognition at end of lease term	(1.2)	-	(1.2)
At 26 December 2021	43.1	3.4	46.5
Accumulated depreciation and impairment
At 27 December 2020	(19.9)	(1.0)	(20.9)
Charge for the period	(2.6)	(1.0)	(3.6)
Impairment	(10.5)	-	(10.5)
Derecognition at end of lease term	1.2	-	1.2
At 26 December 2021	(31.8)	(2.0)	(33.8)
Carrying amount
At 27 December 2020	23.3	2.0	25.3
At 26 December 2021	11.3	1.4	12.7

Right-of-use assets of £10.5m have been impaired as a result of the Home and Hub project which means that a number of offices or floors have been closed.

15. 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 year of £17.1m (2020: £17.4m) 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:

· Trinity Mirror schemes (the 'TM Schemes'): the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit Scheme (the 'Trinity Scheme') and the Midland Independent Newspapers Pension Scheme (the 'MIN Scheme'); and

· Express & Star schemes (the 'E&S Schemes'): 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 the final salary pension payable, 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 60% to current pensioners and their spouses or dependants and 40% to deferred pensioners. The average term from the period end to payment of the remaining uninsured benefits is expected to be around 16 years. Uninsured pension payments in 2021, excluding lump sums and transfer value payments, were £71m and these are projected to rise to an annual peak in 2034 of £104m and reducing 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 the Trustees 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. The latest valuation date for all six of the Group's schemes was 31 December 2019.

Discussions in relation to the funding valuations of the TM Schemes at 31 December 2019 are ongoing. The funding valuations of the schemes: at 31 December 2016 for the MGN Scheme showed a deficit of £476.0m, for the Trinity Scheme showed a deficit of £78.0m and for the MIN Scheme showed a deficit of £68.2m. The Group paid contributions of £52.0m to the TM Schemes in 2021 and the current schedule of contributions includes payments of £52.0m pa from 2022 to 2027.

The funding valuations of the E&S Schemes at 31 December 2019 have been agreed. For the EN88 Scheme this showed a deficit of £25.1m and for the ENSM Scheme this showed a deficit of £0.9m. The Group paid contributions of £3.1m to these schemes in 2021 and the agreed schedule of contributions includes payments of £3.1m pa in 2022 and 2023, £2.9m pa in 2024, 2025 and 2026 and £0.9m in 2027. The Group paid £9.6m to the WF Scheme in 2021 which together with the payment of £5.0m made in 2020 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 in respect of the defined benefit pension schemes in the year were £64.7m (2020: £53.9m).

At the reporting date, the funding deficits in all schemes are expected to be removed before or around 2027 by a combination of the contributions and asset returns. Contributions (which include funding for pension administrative expenses) are payable monthly. Contributions per the current schedule of contributions are for £55.1m pa in 2022 and 2023, £54.9m pa in 2024 to 2026 and £52.9m in 2027.

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 the 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 we 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 82% 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 18% 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 E&S Schemes and the Trinity 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 2047, based on the reporting date assumptions. The remaining uninsured benefit payments, payable from 2048, are due to be funded by a combination of asset outperformance and the deficit contributions currently scheduled to be paid up to 2027. For the MGN Scheme and MIN Scheme, actuarial projections at the year-end reporting date show removal of the combined accounting deficit by the end of 2025 due to scheduled contributions and asset returns at the current target rate. From this point, the assets are projected to be sufficient to fully fund the liabilities on the accounting basis. The Group is not exposed to any unusual, entity specific or scheme specific risks. Other than the impact of GMP equalisation, there were no plan amendments, settlements or curtailments in 2021 or 2020 which resulted in a pension cost.

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 26 December 2021.

Based on actuarial advice, the assumptions used in calculating the scheme liabilities are:

	2021	2020
Financial assumptions (nominal % pa)
Discount rate	1.83	1.49
Retail price inflation rate	3.46	2.86
Consumer price inflation rate	1.0% pa lower than RPI to 2030 and equal to RPI thereafter	2.26
Rate of pension increases in deferment	3.24	2.36
Rate of pension increases in payment	3.40	3.25
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65	21.8	21.9
Female currently aged 65	24.1	24.2
Male currently aged 55	21.5	21.6
Female currently aged 55	24.6	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 2021, the financial assumptions have been derived for each scheme based on their individual circumstances, rather than considering the schemes in aggregate as has been done in the past. This is considered to be a more robust and accurate approach to setting assumptions and is estimated to have increased the net deficit by £20m. Note that the assumptions provided in the table above for the 2021 are the average assumptions across all of the schemes.

The discount rate should be chosen to be equal to the yield available on `high quality' corporate bonds of appropriate term and currency. Previously the same discount rate assumption was adopted for all six schemes, having regard to the duration of the schemes' combined uninsured liabilities. For 2021, the discount rate has been set to reflect the full corporate bond yield curve with a different assumption for each scheme, based on the scheme-specific cash flows and set separately for uninsured and insured liabilities within each scheme, reflecting their respective durations.

The inflation assumptions are based on market expectations over the period of the liabilities. Previously the same inflation assumption was adopted for all six schemes, having regard to the duration of the schemes' combined inflation linkage. For 2021, the inflation assumptions have been set using the full inflation curve. The RPI assumption is set based on a margin deducted from the break-even RPI inflation curve. 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 0.3% (to broadly reflect 0.2% to 2030 and 0.4% thereafter). The CPI assumption is set based on a margin deducted from the RPI assumption, due to lack of market data on CPI expectations. Based on an analysis of the CPI-linkage of the cash flow profile of the schemes the assumed gap between RPI and CPI inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030, consistent with 2020.

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 liabilities £m	Effect on deficit £m

Discount rate +/- 0.5% pa	-195/+220	-175/+195
Retail price inflation rate +/- 0.5% pa	+45/-44	+31/-30
Consumer price inflation rate +/- 0.5% pa	+53/-48	+50/-45
Life expectancy at age 65 +/- 1 year	+155/-150	+130/-125

The RPI sensitivity impacts the rate of increases in deferment for some of the pensions in the EN88 Scheme and the ENSM 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	2021 £m	2020 £m

Pension administrative expenses	(3.7)	(4.6)
Past service costs	-	(1.5)
Pension finance charge	(3.4)	(4.7)
Defined benefit cost recognised in income statement	(7.1)	(10.8)

Consolidated statement of comprehensive income	2021 £m	2020 £m

Actuarial (loss)/gain due to liability experience	(22.0)	48.2
Actuarial gain/(loss) due to liability assumption changes	30.5	(304.6)
Total liability actuarial gain/(loss)	8.5	(256.4)
Returns on scheme assets greater than discount rate	48.6	209.6
Impact of IFRIC 14	45.8	(14.8)
Total gain/(loss) recognised in statement of comprehensive income	102.9	(61.6)

Consolidated balance sheet	2021 £m	2020 £m

Present value of uninsured scheme liabilities	(2,395.0)	(2,545.5)
Present value of insured scheme liabilities	(393.4)	(318.6)
Total present value of scheme liabilities	(2,788.4)	(2,864.1)
Invested and cash assets at fair value	2,242.9	2,278.7
Value of liability matching insurance contracts	393.4	318.6
Total fair value of scheme assets	2,636.3	2,597.3
Funded deficit	(152.1)	(266.8)
Impact of IFRIC 14	(1.8)	(47.6)
Net scheme deficit	(153.9)	(314.4)

Non-current assets - retirement benefit assets	107.9	50.4
Non-current liabilities - retirement benefit obligations	(261.8)	(364.8)
Net scheme deficit	(153.9)	(314.4)

Net scheme deficit included in consolidated balance sheet	(153.9)	(314.4)
Deferred tax included in consolidated balance sheet	36.7	58.9
Net scheme deficit after deferred tax	(117.2)	(255.5)

Movement in net scheme deficit	2021 £m	2020 £m

Opening net scheme deficit	(314.4)	(295.9)
Contributions	64.7	53.9
Consolidated income statement	(7.1)	(10.8)
Consolidated statement of comprehensive income	102.9	(61.6)
Closing net scheme deficit	(153.9)	(314.4)

Changes in the present value of scheme liabilities	2021 £m	2020 £m

Opening present value of scheme liabilities	(2,864.1)	(2,663.9)
Past service costs	-	(1.5)
Interest cost	(41.8)	(50.5)
Actuarial (loss)/gain - experience	(22.0)	48.2
Actuarial gain/(loss) - change to demographic assumptions	1.6	(93.5)
Actuarial gain/(loss) - change to financial assumptions	28.9	(211.1)
Benefits paid	109.0	108.2
Closing present value of scheme liabilities	2,788.4	(2,864.1)

Impact of IFRIC 14	2021 £m	2020 £m

Opening impact of IFRIC 14	(47.6)	(32.8)
Decrease/(increase) in impact of IFRIC 14	45.8	(14.8)
Closing impact of IFRIC 14	(1.8)	(47.6)

Changes in the fair value of scheme assets	2021 £m	2020 £m

Opening fair value of scheme assets	2,597.3	2,400.8
Interest income	38.4	45.8
Actual return on assets greater than discount rate	48.6	209.6
Contributions by employer	64.7	53.9
Benefits paid	(109.0)	(108.2)
Administrative expenses	(3.7)	(4.6)
Closing fair value of scheme assets	2,636.3	2,597.3

Fair value of scheme assets	2021 £m	2020 £m

UK equities	58.7	70.6
US equities	157.1	180.4
Other overseas equities	181.1	182.6
Property	40.5	40.2
Corporate bonds	260.9	320.6
Fixed interest gilts	34.9	99.0
Index linked gilts	18.3	72.7
Liability driven investment	903.4	819.8
Cash and other	588.0	492.8
Invested and cash assets at fair value	2,242.9	2,278.7
Value of insurance contracts	393.4	318.6
Fair value of scheme assets	2,636.3	2,597.3

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.

16. Net cash

The net cash for the Group is as follows:

	27 December 2020 £m	Cash flow £m	IFRS 16 lease liabilities movement
	27 December 2020 £m	Cash flow £m	Interest £m	New Leases £m	26 December 2021 £m
Current assets
Cash and cash equivalents	42.0	23.7	-	-	65.7

Net cash	42.0	23.7	-	-	65.7

Lease liabilities	(41.6)	8.2	(1.3)	(1.5)	(36.2)

Net cash less lease liabilities	0.4				29.5

On 19 November 2021, the Group entered into a new revolving credit facility of £120.0m which expires on 18 November 2025 and is an increase from the previous available facility of £65.0m. The Group had no drawings at the reporting date and the facility is subject to two covenants: Interest Cover and Net Debt to EBITDA, both of which were met at the reporting date.

Deferred consideration is in respect of the acquisition of Express & Star

Payment of the first instalment of £18.9m was made on 28 February 2020 and second instalment of £16.0m was made on 28 February 2021. Of the remaining amount of £24.1m, £17.1m is classified as current liabilities (payable on 28 February 2022) and £7.0m is classified as non-current liabilities (payable on 28 February 2023). There are no conditions attached to the payment of the deferred consideration and the transaction was structured such that no interest accrues on these payments. However, under the sale and purchase agreement the Group has the right to offset agreed claims arising from a breach of warranties and indemnities and can also offset any shortfalls on the contracted advertising from the Health Lottery. The deferred consideration has not been discounted as we do not believe that the impact of such discounting is material.

17. Provisions

	Share-based payments £m	Property £m	Restructuring £m	Historical legal issues £m	Other £m	Total £m

At 27 December 2020	(1.6)	(5.1)	(19.8)	(23.0)	(7.2)	(56.7)
Charged to income statement	(2.8)	(11.1)	(5.6)	(29.0)	(2.1)	(50.6)
Released to income statement	-	0.4	-	-	2.4	2.8
Utilisation of provision	0.4	3.5	15.1	11.0	2.1	32.1
At 26 December 2021	(4.0)	(12.3)	(10.3)	(41.0)	(4.8)	(72.4)

The provisions have been analysed between current and non-current as follows:

	2021 £m	2020 £m

Current	(28.8)	(31.5)
Non-current	(43.6)	(25.2)
	(72.4)	(56.7)

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 charge includes £10.9m of onerous property costs relating to the Home and Hub project (note 5), which has meant that a number of offices or floors have been closed. 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 includes £1.4m of costs relating to the integration of the Irish Daily Star which was acquired in 2020 and a further £1.4m of restructuring relating to the closure of two print sites at the end of 2020 (note 5). The balance at the period end comprises severance costs of £1.4m and closure costs relating to print plants of £8.9m. The severance costs provision is expected to be utilised within the next year. The closure costs provision includes £1.8m expected to be utilised within the next year and £7.1m expected to be utilised over the remaining term of a long-term print plant lease related to the print restructure in 2020.

The historical legal issues provision relates to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering. There are three parts to the provision: known claims, potential future claims and common court costs. The key uncertainties in relation to this matter relate to how many claims will be received, 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. The known and common costs part of the provision is calculated using the most likely outcome method. Due to an increase in the rate of new claims in 2021, the potential claims provision was changed to the expected value method, in order to more accurately forecast the number of potential claims included in the provision, albeit recognising the uncertainties.

The other provision balance of £4.8m at the period end relates to libel and other matters and is expected to be utilised over the next two years.

18. Share capital and reserves

The share capital comprises 322,085,269 allotted, called up and fully paid ordinary shares of 10p each. On 23 October 2020, 12,798,952 ordinary shares were issued in respect of the bonus issue of shares with the issue being made out of the share premium account in accordance with the Companies Act 2006.

The share premium reflects the premium on issued ordinary shares. 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 8,128,176 shares (2020: 10,017,620 shares) as Treasury shares. On 13 May 2021, 675,381 shares were withdrawn from Treasury and transferred to the Reach Employee Benefit Trust to satisfy the vesting of awards granted in 2018 under the Reach Long Term Incentive Plan. On 14 December 2021, 1,214,063 shares were withdrawn from Treasury to satisfy the vesting of the share award to colleagues granted in December 2020 under the Reach All-Employee Share Plan. Cumulative goodwill written off to accumulated loss and other reserves in respect of continuing businesses acquired prior to 1998 is £25.9m (2020: £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 accumulated loss and other reserves.

Shares purchased by the Reach Employee Benefit Trust are included in accumulated loss and other reserves at £5.2m (2020: £2.7m). During the year the Trust purchased 883,315 (2020: 366) for a cash consideration of £3.3m (2020: nil). The Trust received a payment of £3.3m (2020: nil) from the Company to purchase these shares. During the year, 1,241,171 were released relating to grants made in prior years (2020: 778,658).

During the year, awards relating to 608,136 shares were granted to executive directors on a discretionary basis under the Long Term Incentive Plan (2020: 1,218,530). 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 year, awards relating to 1,010,227 shares were granted to senior managers on a discretionary basis under the Senior Management Incentive Plan (2020: 2,358,715). 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 year, awards relating to 1,500,736 shares were granted to employees on a discretionary basis under the Save As You Earn Plan (2020: nil). The exercise price of each award is 246.0 pence. The awards vest after three years, subject to the continued employment of the participant. The estimated fair value of the options was £1,753,760.

In the prior year, awards relating to 50,618 shares were granted to executive directors under the Restricted Share Plan. The awards vest after three years.

19. Contingent liabilities

Historical Legal Issues

It is unknown how long it will take to fully resolve historical legal issues set out in note 17 and despite making a best estimate of the provision, the timing of utilisation and possible range, the total universe of claims is unknown and there are both ongoing legal matters and the potential for new legal matters which could mean that the final outcome is outside our view on the range of outcomes of £32m to £53m.

20. Reconciliation of statutory to adjusted results

52 weeks ended 26 December 2021

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Tax (c) £m	Adjusted results £m

Revenue	615.8	-	-	-	615.8
Operating profit	79.3	66.8	-	-	146.1
Profit before tax	73.3	66.8	3.4	-	143.5
Profit after tax	2.9	57.0	2.8	53.9	116.6
Basic earnings per share (p)	0.9	18.4	0.9	17.4	37.6

52 weeks ended 27 December 2020

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Tax (c) £m	Adjusted results £m

Revenue	600.2	-	-	-	600.2
Operating profit	7.6	126.2	-	-	133.8
Profit before tax	0.4	126.2	4.7	-	131.3
(Loss)/profit after tax	(26.7)	110.3	3.8	19.0	106.4
Basic (loss)/earnings per share (p)	(8.6)	35.7	1.2	6.1	34.4

(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 15.

(c) Tax items relate to the impact of tax legislation changes due to the change in the future corporation tax rate on the opening deferred tax position as set out in note 8.

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.

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 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. The impacts 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.

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.

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, 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.

Included in adjusted items in 2021 are costs relating to a Home and Hub project which set out the vision for how the Group's offices would look and where job roles would be based. As a consequence of the project a number of offices or floors have been closed. The project has resulted in charges of £23.7m (impairments of £2.3m relating to property, plant and equipment and £10.5m relating to right-of-use assets and a £10.9m property rationalisation charge relating to onerous costs of vacant properties). Restructuring charges include £1.4m of costs relating to the integration of the Irish Daily Star which was acquired in 2020 and a further £1.4m of restructuring relating to the closure of two print sites at the end of 2020. Other items relate to adviser costs in relation to the triennial funding valuations costs (£1.2m), National Insurance costs relating to share awards (£2.6m) and the write-off of an old debit balance (£2.9m) partially offset by profit on sales of print assets (£0.7m). These are included in adjusted items as theyrelate to historic liabilities or are one-off items not expected to recur.

Included in adjusted items in 2020 were costs relating to a transformation programme to reshape the Group into a streamlined, more efficient organisation across editorial, advertising and central operations and of print capacity requirements which concluded with the closure of two print plants. The Group also recorded a £15.5m charge reflecting a historic property development, which as a result of COVID-19 became onerous, resulting in the Group making a payment to the joint venture party to resolve the matter.

21. Reconciliation of statutory to like-for-like revenue

2021 v 2020	Statutory 2021 £m	(a) £m	Like-for-like 2021 m	Statutory 2020 £m	(a) £m	(b) £m	like-for-like 2020 £m
Print	465.1	(10.6)	454.5	479.3	(1.0)	(1.5)	476.8
Circulation	312.9	(8.7)	304.2	319.7	(0.8)	-	318.9
Advertising	103.3	(1.8)	101.5	108.4	(0.2)	(1.5)	106.7
Printing	20.4	-	20.4	25.2	-	-	25.2
Other	28.5	(0.1)	28.4	26.0	-	-	26.0
Digital	148.3	-	148.3	118.3	-	-	118.3
Other	2.4	-	2.4	2.6	-	-	2.6
Total revenue	615.8	(10.6)	605.2	600.2	(1.0)	(1.5)	597.7

(a) Exclusion of Irish Daily Star (purchased on 24 November 2020).

(b) Exclusion of Manchester Metro following ending of franchise agreement in June 2020 and other portfolio changes in 2020.

There was no adjustment made for the Manchester Metro and other portfolio changes from statutory to like-for-like revenue for the 52 weeks ending 27 December 2020.

2021 v 2019	Statutory 2021 £m	(a) £m	Like-for-like 2021 m	Statutory 2019 £m	(b) £m	Like-for-like 2019 £m
Print	465.1	(10.6)	454.5	591.3	(7.0)	584.3
Circulation	312.9	(8.7)	304.2	361.7	-	361.7
Advertising	103.3	(1.8)	101.5	152.5	(6.9)	145.6
Printing	20.4	-	20.4	38.5	-	38.5
Other	28.5	(0.1)	28.4	38.6	(0.1)	38.5
Digital	148.3	-	148.3	107.0	-	107.0
Other	2.4	-	2.4	4.2	-	4.2
Total revenue	615.8	(10.6)	605.2	702.5	(7.0)	695.5

(a) Exclusion of Irish Daily Star (purchased on 24 November 2020).

(b) Exclusion of Manchester Metro following ending of franchise agreement in June 2020 and other portfolio changes in 2019 and 2020.

22. Adjusted cash flow

	2021 £m	2020 £m

Adjusted operating profit	146.1	133.8
Depreciation and amortisation	19.3	27.4
Adjusted EBITDA	165.4	161.2
Net interest and charges paid on bank borrowings	(1.3)	(1.1)
Income tax paid	(14.6)	(14.2)
Restructuring payments	(15.1)	(18.0)
Net capital expenditure	(11.8)	(1.6)
Interest paid on leases	(1.3)	(1.5)
Repayment of obligation under leases	(6.9)	(7.7)
Working capital and other	26.9	4.7
Adjusted operating cash flow	141.3	121.8
Historical legal issues payments	(11.0)	(10.6)
Historical contract issues payments	-	(15.5)
Dividends paid	(21.8)	-
Purchase of own shares	(3.3)	-
Pension funding payments	(64.7)	(53.9)
Adjusted net cash flow	40.5	41.8
Bank facility drawdown	-	25.0
Bank facility repayment	-	(25.0)
Acquisition-related cash flow	(16.8)	(20.2)
Net increase in cash and cash equivalents	23.7	21.6

23. Reconciliation of statutory to adjusted cash flow

52 weeks ended 26 December 2021	Statutory 2021 £m	(a) £m	(a) £m	Adjusted 2021 £m

Cash flows from operating activities
Cash generated from operations	163.7	(33.4)	11.0	141.3	Adjusted operating cash flow
Pension deficit funding payments	(64.7)	-	-	(64.7)	Pension funding payments
	-	-	(11.0)	(11.0)	Historical legal issues payments
Income tax paid	(14.6)	14.6	-	-
Net cash inflow from operating activities	84.4
Investing activities
Interest received	0.1	(0.1)	-	-
Dividends received from associated undertakings	2.5	(2.5)	-	-
Proceeds on disposal of property, plant and equipment	0.7	(0.7)	-	-	Net capital expenditure
Purchases of property, plant and equipment	(6.5)	6.5	-	-	Net capital expenditure
Expenditure on internally generated development	(6.0)	6.0	-	-	Net capital expenditure
Deferred consideration payment	(16.0)	-	-	(16.0)	Acquisition-related cash flow
Acquisition of associate undertaking	(0.8)	-	-	(0.8)	Acquisition-related cash flow
Net cash used in investing activities	(26.0)
Financing activities
Dividends paid	(21.8)	-	-	(21.8)	Dividends paid
Interest and charges paid on bank borrowings	(1.4)	1.4	-	-
Purchase of own shares	(3.3)	-	-	(3.3)	Purchase of own shares
Interest paid on leases	(1.3)	1.3	-	-
Repayment of obligations under leases	(6.9)	6.9	-	-
Net cash used in financing activities	(34.7)
Net increase in cash and cash equivalents	23.7	-	-	23.7

(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 historical legal issues are shown separately in the adjusted cash flow.

52 weeks ended 27 December 2020	Statutory 2020 £m	(a) £m	(a) £m	Adjusted 2020 £m

Cash flows from operating activities
Cash generated from operations	121.3	(25.6)	26.1	121.8	Adjusted operating cash flow
Pension deficit funding payments	(53.9)	-	-	(53.9)	Pension funding payments
	-	-	(15.5)	(15.5)	Historical contract issues payments
	-	-	(10.6)	(10.6)	Historical legal issues payments
Income tax paid	(14.2)	14.2	-	-
Net cash inflow from operating activities	53.2
Investing activities
Interest received	0.1	(0.1)	-	-
Dividends received from associated undertakings	0.5	(0.5)	-	-
Proceeds on disposal of property, plant and equipment	0.3	(0.3)	-	-	Net capital expenditure
Purchases of property, plant and equipment	(1.9)	1.9	-	-	Net capital expenditure
Deferred consideration payment	(18.9)	-	-	(18.9)	Acquisition-related cash flow
Acquisition of associate undertaking	(0.2)	-	-	(0.2)	Acquisition-related cash flow
Acquisition of subsidiary undertaking	(3.4)	-	-	(3.4)	Acquisition-related cash flow
Cash acquired on acquisition of subsidiary undertaking	2.3	-	-	2.3	Acquisition-related cash flow
Net cash used in investing activities	(21.2)
Financing activities
Interest and charges paid on bank borrowings	(1.2)	1.2	-	-
Drawdown of borrowings	25.0	-	-	25.0	Bank facility drawdown
Repayment of borrowings	(25.0)	-	-	(25.0)	Bank facility repayment
Interest paid on leases	(1.5)	1.5	-	-
Repayment of obligations under leases	(7.7)	7.7	-	-
Net cash used in financing activities	(10.4)
Net increase in cash and cash equivalents	21.6	-	-	21.6

(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 historical legal issues and historical contract issues are shown separately in the adjusted cash flow.

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, the primary one for the period ahead being identified as 'Climate Change' risk.

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. 2021 has been an economically uncertain period against the backdrop of the ongoing COVID-19 pandemic, inflationary concerns and supply chain challenges. The Board have undertaken a robust risk assessment and the principal risks deemed to be facing the Group at this time are shown below, including a description of each risk, the current positioning and key mitigating actions.

Principal risks and uncertainties

Risk

Description

Mitigation

Update

Macro-economic deterioration

No change

Macro-economic factors may have a negative impact on several areas of our business which may restrict our ability to protect profit levels.

This risk encompasses the economic impact of the COVID-19 pandemic and follow-on effects.

The global COVID-19 pandemic persists, and we will continue to monitor the impact and take necessary mitigating actions as we have previously done.

We do have a strong record of responding quickly and delivering additional cost savings as necessary when faced with unexpected revenue declines.

There remains the ongoing monitoring and assessment of macro-economic factors which may affect the risk exposure of our business.

Print revenue decline
acceleration

No change

Structural changes in the traditional publishing industry have led to ongoing decline in print advertising and circulation revenues.

Macro-economic factors contribute to a larger than expected decline.

A lack of appropriate strategic focus results in accelerated revenue loss for existing products.

Strategic development led by an experienced Board and Executive Committee.

Investment Committee in place to approve business plans when reviewed against strategic goals.

Focus on developing digital revenue streams through the Customer Value Strategy.

Continued tactical measures to minimise print revenue declines and maintain profits, such as by taking appropriate cash mitigation or pricing measures.

Governance structures which enable the ongoing review of performance against targets and strategic goals, including a weekly structured trading meeting.

Acquisition, joint venture and other corporate development opportunities, which are aligned to our Customer Value Strategy, remain under consideration.

Renewed strategic focus offset by continued revenue challenges. This risk has been amplified by the COVID-19 pandemic resulting in the acceleration of plans and the Group-wide transformation project.

The key strategic focus for the Executive Committee remains on unlocking customer value which is seen as integral to the future success of the Company and moving to overall revenue stability and then growth.

Insufficient digital revenue growth

No change

A failure to grow digital revenues quickly enough to offset print declines.

Cyber security breach

Increase

A cyber security incident which leads to a serious data breach or the loss of systems/data and reputational damage.

All business-critical systems are well established and are supported by appropriate disaster recovery plans.

Regular reviews assess our vulnerability and our ability to re-establish operations in the event of a failure.

The technical infrastructure supporting the websites is within the cloud and the sites have been designed effectively, providing adequate resilience and continued performance in the event of a significant failure.

Continued investment to be made to enhance cyber security infrastructure as necessary.

Continued recognition of the need for cyber security investment against an ever-changing - and currently heightened - external threat landscape.

Our Customer Value Strategy, with an increased focus on customer data, increases the impact of a cyber security breach.

Information security in a remote working environment provides new challenges which are being addressed.

Data protection failure

No change

A contravention of the General Data Protection Regulation (GDPR) leads to monetary penalties, reputational damage and a loss of customer trust.

Data protection governance structures have been established to direct and oversee the data protection strategy.

A Senior Data Protection team and a Data Governance team are in place to improve Group-wide oversight of how customer data is utilised.

A Data Protection Officer and Data Protection team are in place to promote and advise on data protection compliance, provide oversight and help mitigate the risk of compliance breaches.

Data protection policies and processes have been implemented to govern how colleagues carry out day-to-day activities involving the handling of personal data and compulsory awareness training has been implemented for all colleagues.

Steps have been established to ensure the organisation adopts a 'data protection by design and default' approach when developing new products and services that involve the collection and use of personal data, to ensure output deliverables are legally compliant.

The ongoing focus and challenge remains embedding data protection controls and processes, and ensuring that data protection forms part of 'business as usual' thinking.

As with the cyber security risk, the impact of a data protection failure is amplified by our strategic focus on customer data.

Supply chain failure

Increase

Our print products, which rely on a small number of key suppliers (for example, newsprint suppliers, wholesalers and distributors), are adversely affected, operationally and financially, by changes to supplier dynamics.

A major failure, breach or prolonged performance issues at a third-party provider has an adverse impact on our business. This risk is amplified due to the increasing dependency placed on the reliability and capability of key information systems and technology supplied to us.

This risk encompasses the general business continuity risk.

Well-established long-term relationships with trusted suppliers.

Strong ongoing management and/or monitoring of providers including:

- IT providers

- Outsourced ad production and planning

- Wholesalers and distributors

- Newsprint suppliers

- Manufacturing maintenance and parts providers

- Global digital partners

Business continuity/disaster recovery plans in place, including at our key partners. Our own plans were successfully invoked as a result of the COVID-19 pandemic requiring the majority of the workforce to work remotely.

Industry-wide response likely should key common elements of the publishing supply chain be compromised.

Ongoing review of the operating model, including the assessment of alternative options.

In IT, governance oversight arrangements and committee structures are in place covering areas such as risk management, change control, security and service delivery.

Appropriate contractual protections in place.

A decreasing number of key suppliers, and an increasing number of outsourced arrangements, means it becomes increasingly important to stabilise and optimise arrangements and ensure appropriate contingency plans are in place.

Our supply chains remain under pressure from the global impact of the pandemic which may have cost implications.

Health and safety issue

No change

An accident, incident or occupational ill health affecting Group employees or others linked to our business activities.

During the pandemic, there is an amplified strategic or operational risk should key employees, or their family members, be directly affected.

Health and safety management system in place. Adverse event reporting system allows timely investigations to be carried out by the Health and Safety team.

All parts of the Group are serviced by professionally qualified and experienced Health and Safety Managers and Occupational Health service providers.

Internal and external auditing to ensure continuing compliance across our print and publishing sites.

Risk assessment processes in place to cover all areas of the business, including external work in hostile and high risk environments.

Practical implementation of Government COVID-19 controls and recommendations across all areas of the Group.

Health and wellbeing, including mental health, support is in place for all Group employees.

We strive for continual improvements to maintain a culture where health and safety is prioritised.

We recognise the potential impact that online threats and abuse may have on the wellbeing of our journalists. Providing appropriate support to all our employees remains a priority for the business

We continue to follow the latest Government guidance in relation to COVID-19 control measures.

Lack of funding capability

No change

The main financial risk is the lack of funding capability to meet business needs. This may be caused by a lack of working capital, unexpected increases in interest rates or increased liabilities, in particular:

Pension deficits may grow at such a rate that annual funding costs consume a disproportionate level of profit; and

Volume and level of historical legal issues (HLI) claims may continue to have significant cost implications.

Financing

Strong cash generating business.

Committed loan facilities are in place to deliver our strategy.

Ongoing constructive relationships and regular dialogue with syndicate banks.

Regular cash flow forecasting and monitoring through Treasury reporting processes.

Limited foreign exchange fluctuation exposure.

Commitments

Regular reporting to the Board.

Regular discussions with Pension Scheme Trustees.

Ongoing review of options to de-risk pension liabilities.

Ongoing HLI claim level monitoring and management.

Working with external lawyers on HLI civil claims and related investigations.

We recognised that the global pandemic amplified the risk and quickly took appropriate mitigating action to conserve cash last year.

Financing

A re-negotiated larger facility now in place with a wider banking syndicate which reduces the immediate risk.

Commitments

We remain committed to addressing our historical pension deficits and continue to make significant payments to the schemes.

We continue to deal with the HLI claims in a professional and efficient manner, although the final outcome of the civil claims remains uncertain.

Inability to recruit and retain talent

Increase

The inability to recruit, develop and retain talent with the appropriate skills, knowledge and experience compromises our ability to deliver strategic business plans.

Ongoing considerations of:

- Digital capabilities of workforce

- Turnover levels

- Pay and benefits

- Opportunities to expand talent pool (for example, outside London)

- Recruitment channels used

- Diversity and inclusion

Retention and recruitment of appropriately skilled staff will remain an ongoing challenge.

Our Diversity and Inclusion strategy will help ensure we are recruiting and developing staff from the widest possible pool of talent.

Brand reputation damage

No change

Damage to reputation arising from employee actions or behaviours, including breaches of regulations or best practice guidelines.

Editorial errors, behaviours or tone leads to loss of readership, damaged reputation and legal proceedings.

An incident which has an adverse impact on the environment/climate.

Recruitment of highly experienced and capable people into key senior management roles.

Governance structures provide clear accountability for compliance with all laws and regulations.

Policies and procedures are designed to meet all relevant requirements.

Employees trained to comply with all relevant legislation.

Ongoing consideration of upcoming legislative changes and emerging trends.

Crisis management procedure developed and communicated.

New committee structure to develop and drive our Environmental, Social and Governance strategy.

There remains awareness that an indiscretion could lead to significant financial and reputational damage.

In editorial, we are aware of the heightened risk created in a digital-led environment due to the 24/7 nature of our operations and the need to move with pace.

Operationally, we have had to be reactive in light of the COVID-19 situation, with stretched resources at times, so it is important to recognise that an increased risk of error or oversight exists.

Climate matters are recognised as an emerging risk area for the Group, and work will be undertaken to develop a fuller picture of the associated risks and opportunities for our business.

LEI: 213800GNI5XF3XOATR61

Classification: 3.1 Additional regulated information required to be disclosed under the laws of a Member State

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