Half-yearly Financial Report

RNS Number : 9454G

Reach PLC

29 July 2019

Reach plc

29 July 2019

Half-Yearly Financial Report

For the 26 weeks ended 30 June 2019


Results	Adjusted results⁽¹⁾			Statutory results
	2019	2018	Change	2019	2018
	£m	£m	%	£m	£m
Revenue	352.6	353.8	(0.3)	352.6	353.8
Operating profit/(loss)	71.3	66.5	7.2	63.7	(107.3)
Profit/(loss) before tax	69.9	64.7	8.0	58.2	(113.5)
Earnings/(loss) per share	19.1p	18.2p	4.9	15.9p	(39.4)p
Dividends per share	2.50p	2.37p	5.5	2.50p	2.37p

Financial and Operational Highlights

· Revenue decreased by 0.3% to £352.6 million benefiting from the Express & Star acquisition

· On a like for like basis⁽²⁾ revenue fell by 6.3%, an improvement on the like for like fall of 7.2% in the first half of 2018, helped by resilient circulation revenue

· Strong performance in Group digital⁽³⁾ with like for like revenue increasing by 9.7% (13.6% in the second quarter) and average monthly page views in 2019 growing by 16% year on year to 1.2 billion

· Acquisition synergies of £6 million delivered and on target to deliver annualised savings of at least £15 million in 2019 and £22 million in 2020, ahead of £20 million previously signalled

· Structural cost savings achieved of £5 million and on target to deliver £10 million commitment for 2019

· Adjusted operating profit increased by 7.2% to £71.3 million, with adjusted operating margin increasing from 18.8% to 20.2%, driven by optimisation strategy

· Statutory operating profit of £63.7 million reflecting reduced adjusting operating items compared with the first half of 2018

· Accounting pension deficit (IAS 19) fell by £0.4 million to £348.2 million (£284.8 million net of deferred tax)

· Strong cash generated from operations⁽⁴⁾ of £70.4 million, up 16.0% year on year, supporting low leverage with net debt⁽⁵⁾ falling by £27.9 million to £12.9 million

· Interim dividend of 2.50 pence per share, an increase of 5.5%

Strategy and Outlook

· We continue to make good strategic progress through our three pillars: Optimise, Grow and Commercialise

· The optimisation of our highly cash generative print business provides the necessary resources to accelerate our digital audience and revenue, which will enable long term sustainable growth

· The Board anticipates trading for the year to be in line with market expectations⁽⁶⁾

Commenting on the interim results for 2019, Simon Fox, Chief Executive, Reach plc, said:

"I am pleased with our robust performance in the first half of the year and with the strengthening of our digital audience and revenue growth in quarter two. We remain focused on cost and cash management resulting in net debt of only £12.9 million at the end of June. Our first half performance provides a solid platform from which to continue to deliver upon the three pillars of our strategy: Optimise, Grow and Commercialise."

Enquiries
Reach	Brunswick
020 7293 3553	020 7404 5959
Simon Fox, Chief Executive Simon Fuller, Chief Financial Officer and Company Secretary	Nick Cosgrove, Partner Will Medvei, Director

Notes

(1) Set out in note 17 is the reconciliation between the statutory and adjusted results.

(2) Set out in note 19 is the reconciliation between the statutory and like for like revenue. The like for like trends for 2019 include Express & Star as if it had been owned from the beginning of 2018 and exclude from the 2018 comparative the impact of portfolio changes and the disposal of Communicator Corporation.

(3) Print revenue comprises circulation, advertising (including digital classified which is predominantly upsold from print), printing (including third party printing contracts) and other (contract publishing, syndication, reader offers and events). Digital revenue comprises the combined display and transactional revenue streams. Set out in note 18 is the reconciliation between the classifications in the prior period to the classifications in the current period.

(4) Cash generated from operations has been extracted from the consolidated cash flow. An adjusted cash flow is presented in the Management Report which reconciles the adjusted operating profit to the net change in cash and cash equivalents.

(5) Bank borrowings of £39.7 million less cash and cash equivalents of £26.8 million (note 14).

(6) The market consensus range for adjusted profit before tax for the 52 weeks ended 29 December 2019 is £140.6 million to £144.9 million. This range includes estimates from the analysts that have issued notes since our annual results announcement on 25 February 2019. Adjusted profit before tax excludes operating adjusted items (restructuring charges in respect of cost reduction measures, pension administrative expenses and amortisation of intangible assets) and the pension finance charge.

(7) Comparative period is for the 26 weeks ended 1 July 2018.

Investor presentation

A presentation for analysts and shareholders will be held today at 9.30 am (telephone number: 0800 3767922 or +44 (0) 2071 928000; confirmation code: 8386603). The web-ex, which will display our presentation, can be accessed at the URL: https://edge.media-server.com/m6/p/p6hhcdzc. The presentation will also be live on our website: www.reachplc.com at 9.30 am and a playback will be available from 2.00 pm.

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 results and like for like trends will provide investors with useful supplemental information about the financial performance of the Group, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key performance indicators used by management in operating the Group and making decisions. Although management believes the adjusted basis is important in evaluating the Group, they are not intended to be considered in isolation or as a substitute for, or as superior to, financial information on a statutory basis. 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 17 and note 19 respectively sets out the reconciliation between the statutory and adjusted results and the reconciliation between the statutory and like for like revenue.

Forward looking statements

Statements contained in this Half-Yearly Financial Report are based on the knowledge and information available to the Company's directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, the statements concerning the risks and uncertainties facing the Company in this Half-Yearly Financial Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this Half-Yearly Financial Report contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Company undertakes no obligation to update these forward looking statements.

Management Report

Operating Performance

The Group delivered a robust performance in the first half of 2019 with adjusted operating profit increasing by 7.2% to £71.3 million and adjusted operating margin increasing by 1.4 percentage points to 20.2%.

Group revenue fell marginally (by 0.3% or £1.2 million) to £352.6 million including Express & Star for six months in the current period versus four months in the comparative period. To better reflect how we view and operate the business, the Group has amended the presentation of revenues in the current period aligning our revenue streams with the strategy. Group Print revenue comprises circulation, advertising (including digital classified which is predominantly upsold from print), printing (including third party printing contracts) and other (contract publishing, syndication, reader offers and events); this corresponds to Optimise. Group Digital revenue comprises the combined display and transactional revenue streams; this corresponds to Grow and Commercialise. Group Other revenue comprises revenue from our specialist digital recruitment websites.

On a like for like basis, Group revenue fell by 6.3% compared to a like for like fall of 7.2% in the first half of 2018. Group Print declined by 8.2% with the more resilient circulation declining by 3.9% and the more structurally challenged advertising declining by 21.1%. The circulation revenue decline benefited from cover price increases and increased availability while the advertising decline was impacted by the agreed reduction in Health Lottery advertising as part of the Express & Star acquisition (excluding this effect, advertising declined by 19.0%). Group Digital increased by 9.7%, driven by page view growth with revenue growth accelerating from 5.6% in the first quarter to 13.6% in the second quarter.

The acquisition of Express & Star coupled with our continued focus on tightly managing the cost base ensured we delivered a solid performance with adjusted operating profit growing by 7.2% or £4.8 million to £71.3 million. We delivered synergy cost savings of £6 million from the integration of Express & Star and we are on target to deliver synergy cost savings of at least £12 million (annualised at least £15 million following the £3 million delivered in 2018) from integrating Express & Star. We have updated our view of synergies to be at least £22 million of annualised savings in 2020. Structural cost savings of £5 million have been achieved and we are on track to deliver structural cost savings of £10 million in 2019.

The continued strong cash flows generated by the business ensured that adjusted financing costs were £1.4 million, a decrease of £0.4 million from the prior year due to repayment of borrowings drawn to fund the acquisition of Express & Star. Adjusted profit before tax increased by 8.0% to £69.9 million. Adjusted earnings per share increased by 4.9% to 19.1 pence per share.

A statutory operating profit of £63.7 million was reported for the half year compared to a statutory operating loss of £107.3 million in the prior half year which was impacted by a non-cash impairment charge. The total impact of the items excluded from adjusted operating profit (note 5) was a charge of £7.6 million (2018: £173.8 million). Statutory financing costs were £5.5 million (2018: £6.2 million) and statutory profit before tax was £58.2 million compared to a statutory loss before tax of £113.5 million in the prior half year. Statutory earnings per share for the half year of 15.9 pence per share compares to a statutory loss per share of 39.4 pence in the prior half year.

Net Debt

Net debt reduced by £27.9 million from £40.8 million at the year end to £12.9 million at the half year.

Net debt at the reporting date comprised £39.7 million drawings on the Acquisition Term Loan ('ATL') less cash balances of £26.8 million. The Group had no drawings at the reporting date on the Revolving Credit Facility ('RCF').

In the period, the Group repaid early the £20.3 million due under the ATL in December 2019. The outstanding £39.7 million drawn on the ATL is repayable in two instalments of £20.3 million in December 2020 and £19.4 million in December 2021.

The Group also has access to an undrawn £75.0 million amortising RCF which is committed until December 2021. The RCF amortises by £8.33 million every six months from December 2019 to December 2020 down to £50.0 million for the last year of the term.

Deferred consideration of £59.0 million in respect of the acquisition of Express & Star is included in trade and other payables. Of this amount, £18.9 million is classified as current liabilities (payable on 28 February 2020) and £40.1 million is classified as non-current liabilities amounting (payable £16.0 million on 28 February 2021, £17.1 million on 28 February 2022 and £7.0 million 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 accrued on these payments.

Leverage is less than half of a full year adjusted EBITDA (adjusted operating profit plus depreciation) and the strong cash flows generated by the Group provide resilience and financial flexibility to invest in the business, meet pension funding obligations and pay a progressive dividend.

Pension Schemes

The IAS 19 pension deficit in respect of the Group's six defined benefit pension schemes fell by £0.4 million to £348.2 million (£284.8 million net of deferred tax). Group contributions, strong asset returns and a reduction in the expected rate of improvement in mortality have been mostly offset by an unfavourable movement in financial assumptions driven by a fall in the discount rate and higher inflation increases.

Group contributions to the defined benefit pension schemes in the first half were £24.5 million (2018: £65.6 million including a contribution of £41.2 million to the Express & Star schemes relating to the acquisition). Contributions have been agreed at £48.9 million per annum for 2019 and 2020, £56.1 million per annum for 2021 to 2023, £55.3 million per annum for 2024 to 2026 and £53.3 million for 2027.

Changes in the accounting pension deficit do not have an immediate impact on the agreed funding commitments. The next valuation for funding of all six pension schemes will be as at 31 December 2019 and this is required to be completed by 31 March 2021, although we anticipate this to be completed by 31 December 2020.

Dividends

An interim dividend of 2.50 pence per share for 2019, an increase of 5.5% will be paid on 27 September 2019 to shareholders on the register on 6 September 2019.

The Board continues to adopt a progressive dividend policy which is aligned to the free cash generation of the Group. The free cash generation for the purposes of assessing the dividend 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 as a result of any substantial increase in dividends and/or capital returns to shareholders. Based on the Board's expectation of future cash flows, the Board expects dividends to increase by at least 5% per annum.

People

We thank all our colleagues for their contribution to the robust performance in the first half of 2019.

On 1 March 2019, Simon Fuller became Chief Financial Officer and Company Secretary, taking over from Vijay Vaghela, who stepped down from the Board on the same date.

On 18 June 2019, Anne Bulford became Chair of the Audit & Risk Committee and a Non-Executive Director, taking over from Lee Ginsberg who stepped down from the Board on 30 April 2019,

Outlook

Whilst there are uncertainties arising from the UK's exit from the European Union, we are confident that our strategy will enable continued progress to support profit and cash flow. The Board anticipates trading for the year to be in line with market expectations.

Strategic Update

Our strategic objective is to deliver sustainable growth in revenue, profit and cash flow through delivering on our three strategic pillars of:

· Optimise: enhance our print brands and extend their longevity by improving the quality of content and operational efficiency of our print business

· Grow: grow our digital reach by leveraging technology, data and content

· Commercialise: improve revenue performance by seeking new opportunities to accelerate revenue growth and commercialising our scale and reach

Optimise focuses on maximising the cash flow from our print brands which in turn enables us to invest in our business in order to drive our strategic pillars of Grow and Commercialise.

We will consider merger and acquisition opportunities which accelerate progress on all three pillars of our strategy and where the financial and business case meets our requirements.

We believe growth from digital and new revenue streams will begin to offset print declines on an aggregate basis, leading to a future stabilisation of revenue. This, combined with our inbuilt and relentless focus on efficiencies, makes the Board confident that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future, for the benefit of all stakeholders.

Each of the three strategic pillars is strongly interlinked and this year's Champions League Final in Madrid between Liverpool and Tottenham provides a living example to demonstrate how our three strategic pillars came together around a single event:

· Optimise: The Liverpool Echo team showed publishing creativity by printing special editions of the Liverpool Echo in Madrid ahead of the game and a souvenir edition of the Sunday Echo following Liverpool's win which resulted in sales of more than four times the previous week. The extensive coverage of the victory parade that took place in the city of Liverpool on Sunday meant that the Monday edition of the Liverpool Echo gained a 93% uplift week-on-week. Additionally, our editorial team in Madrid produced content for all seven of our national print titles resulting in sales uplifts across our portfolio, particularly in the Merseyside area.

· Grow: In digital, we enjoyed record levels of Champions League Final and Liverpool football related traffic with 17 million page views generated over 72 hours of the event (1-3 June) across our Mirror, Express, Star, Liverpool Echo and Football.London websites. Our reporters live blogged at the airport as fans were travelling out, were on the victory parade bus taking in the atmosphere and Blood Red (podcast) created 13 podcast editions with over a million streams during a four-week period straddling the day of the Champions League Final. Our extensive coverage demonstrated that this was about far more than simply 90 minutes and a trophy.

· Commercialise: Advertisers were keen to capitalise on the event with BT, Ladbrokes, Coral, Paddy Power and Lidl amongst the highest spenders in print and online. We enjoyed market leading advertising share over the semi-final and final whilst also promoting our new venture with thepools.com, driving new registrations.

Alongside this specific case study, we set out below other key highlights during the half year underpinning each of the strategic pillars:

Optimise

We continue to improve the value and breadth of our print assets to drive circulation revenue:

· Editorial improvements were made to the Daily Express, increasing its pagination by eight pages per day including four pages of puzzles, which has proved popular with readers;

· Following the success of the Sunday edition of the Liverpool Echo, we launched the Manchester Evening News on Sunday on 10 February with negligible increase in resource required, again demonstrating the efficiency of our editorial and publishing operating model; and

· We continue to innovate our products with the Daily Mirror publishing a special edition in May, called Daily Mirror Next Gen Edition, written entirely by young people from schools across the country, providing a platform for their voices to be heard more clearly and highlighting the issues that they felt passionate about. This special edition proved particularly popular amongst our advertisers, including SEAT, who were masthead sponsors for the edition.

We also continue to optimise the print cost base:

· The OK! bumper pack comprising OK!, New and Star magazine has been evolved with Star magazine being replaced with a 7-day TV listings magazine (Star TV) which is a re-branded version of "We Love TV" which already appears in the Daily Mirror on Saturday. This has added value to the OK! bumper pack at a lower cost; and

· We also continue to review our portfolio of regional titles and closed three titles during the first half of this year.

Grow

We are a digital player of scale in the UK, reaching 40 million unique users each month making us the sixth largest online property (ComScore multiplatform UK May 2019) and reaching over 50% of the population in the big cities that we serve on a weekly basis (Google Analytics April 2019 and ONS Mid Year for 2017).

We continue to enjoy strong organic growth in our digital audience with growth in page views accelerating over the first half of 2019.

We also continue to open new digital-only sites in areas or segments where we do not currently have a print presence (e.g. Cork Beo and Business Live which brings together all our regional business coverage onto a single site).

Additionally, we expect to launch a new front end to our mobile sites which includes an AI driven personalised recommendation engine which we hope will keep people circulating on our sites for longer as they find further articles to read that are of particular interest to them (driving advertising revenue).

Apart from our websites, we also have a stable of podcasts, including our hugely successful Blood Red Liverpool podcast, with monthly listens growing steadily. More recent podcast launches include coverage on topics such as mental health and parenting.

Commercialise

We recognise that solely growing our digital audience is insufficient and we must grow our digital revenue alongside it, which we have done with digital revenue growing 9.7% on a like-for-like basis across the first half of 2019.

Key initiatives that we expect to drive continued digital revenue growth include:

· Continued optimisation of the advertising yield for each impression and each page;

· Strong revenue growth from InYourArea where we have a range of self-serve products for local advertisers including estate agents, jobs, local deals and a business membership and directory;

· The growth and development in our Ozone partnership, with News UK, The Telegraph and The Guardian; and

· Our partnership with The Football Pools in providing a sports betting and gambling platform - thepools.com branding has been refreshed and a new Footie5 app with best-in-class user experience and functionality have just launched. To date, we have had over 10 million page views to thepools.com site since launching late last year. We anticipate further strong growth with the new football season

Overall, good progress has been made with our digital transformation, with key digital KPIs of monthly page views, page views per sessions and digital revenue all up year-on-year. Looking ahead, we see opportunities to drive each of these harder.

Beyond digital revenue, we continue seeking ways to diversify, for example, through events (leveraging our association with Brand Events), our book publishing business and Reach Sport (our sports media publishing business).

Key Performance Indicators

To track delivery of our strategy, the following KPIs are reported on for 2019:

Financial measure	Group KPIs
Digital revenue growth	At least 15% pa
Circulation revenue	Single digit declines
Print advertising revenue	At least in line with national market trends
Operating margin	Grow operating margin to support profits
Dividend growth	At least 5% pa

Digital revenue growth: like for like growth of 9.7% for the half year is below the target with the first quarter growing by 5.6% (in part due to our digital audience continuing to be negatively impacted by the changes in algorithms undertaken by Facebook and Google early in 2018) and 13.6% in the second quarter of the year.

Circulation revenue: like for like decline of 3.9% is in line with the target with cover price increases partially mitigating volume declines.

Print advertising revenue: national print advertising trends have been broadly in line with market trends.

Operating margin: adjusted operating margin improved by 1.4 percentage points from 18.8% in the first half of last year to 20.2% in the first half of this year.

Dividend growth: the interim dividend of 2.50 pence per share is an increase of 5.5% on the interim dividend last year.

Income Statement Review

	Statutory results		Adjusted results
	2019	2018	2019	2018
	£m	£m	£m	£m
Print	301.8	306.4	301.8	306.4
Digital	48.7	41.5	48.7	41.5
Other	2.1	5.9	2.1	5.9
Revenue	352.6	353.8	352.6	353.8
Costs	(289.5)	(461.6)	(282.3)	(288.1)
Associates	0.6	0.5	1.0	0.8
Operating profit/(loss)	63.7	(107.3)	71.3	66.5
Financing	(5.5)	(6.2)	(1.4)	(1.8)
Profit/(loss) before tax	58.2	(113.5)	69.9	64.7
Tax	(11.2)	0.4	(13.4)	(12.4)
Profit/(loss) after tax	47.0	(113.1)	56.5	52.3
Earnings/(loss) per share	15.9p	(39.4)p	19.1p	18.2p

The results have been prepared for the 26 weeks ended 30 June 2019 (2019) and the comparative period is for the 26 weeks ended 1 July 2018 (2018). The results are presented on a statutory and adjusted basis and revenue trends are presented on a statutory and like for like basis. The like for like trends for 2019 include Express & Star as if it had been owned from the beginning of 2018 and exclude from the 2018 comparative the impact of portfolio changes and the disposal of Communicator Corporation. Note 17 sets out the reconciliation between the statutory and adjusted results and note 19 sets out the reconciliation between the statutory and like for like revenue.

Following recent acquisitions and disposals and changes to the management structure, management have reviewed the segment disclosure and have concluded that the performance of the Group should be presented as a single reporting segment (note 3). As noted on page 3, the Group has amended the presentation of revenues. Note 18 sets out the reconciliation of statutory revenue categories.

Revenue

Group revenue fell by 0.3% or £1.2 million to £352.6 million including Express & Star for six months in the current period versus four months in the comparative period. Group revenue is the same on a statutory and adjusted basis. On a like for like basis, Group revenue fell by 6.3% compared to a like for like fall of 7.2% in the first half of 2018.

Group Print revenue comprises:

	2019	2018
	£m	£m
Circulation	185.1	175.7
Advertising	78.0	95.4
Printing	19.7	17.5
Other	19.0	17.8
Group Print	301.8	306.4

Group Print revenue fell by 1.5% or £4.6 million to £301.8 million benefitting from the acquisition of Express & Star.

On a like for like basis Group Print revenue declined by 8.2% (compared to 9.1% in the first half of 2018), with the more resilient circulation revenue declining by 3.9% (which now accounts for 61% of Group Print revenue) while the more structurally challenged advertising revenue declining by 21.1%. The circulation revenue decline benefited from cover price increases and increasing availability while the advertising decline was impacted by the agreed reduction in Health Lottery advertising as part of the Express & Star acquisition (excluding this effect, advertising declined by 19.0%).

The like for like decline in circulation revenue saw volume declines partially mitigated by cover price increases and increased availability. Circulation volume declines for the Group's national titles (excluding the impact of sampling) fell by 13.9% which compares to a decline for the UK tabloid market of 10.3%. Volume declines for our regional titles were 13.8% for paid-for dailies, 21.0% for paid-for weeklies and 1.9% for paid-for Sundays. Our regional Sunday volumes are impacted by the launch of MEN on Sunday and the benefit the Sunday Echo received following Liverpool FC Champions League victory in June. The circulation volumes for the paid-for magazines, OK! and New!, declined at a combined rate of 17.4%. The circulation volume trends in the market have been impacted by cover price differentials.

The like for like decline in advertising revenue reflects the impact of the reduction in Health Lottery advertising and the absence of the World Cup which was in June (and July) in the prior year. Our nationally sourced advertising performed better than locally sourced revenues. Print advertising volume market share on the Group's national titles on a like for like basis was broadly similar to 2018.

Printing like for like revenue increased by 9.4% benefitting from new printing contracts for a number of Metros including the Metro in London (started in October 2018) partially offset by lower third party volumes. Higher newsprint prices also benefitted printing revenues where the Group supplies newsprint as part of the printing contract.

Other like for like revenue declined by 0.5%.

Group Digital revenue comprises the combined display and transactional revenue streams which are predominantly directly driven by page views. We have accelerated our digital audience growth, establishing ourselves as a digital player of true scale and we continue to find ways to monetise this scale and reach. Digital revenues were £48.7 million in the first half.

Group Digital revenue on a like for like basis was up by 9.7%, driven by page view growth with revenue growth accelerating from 5.6% in the first quarter to 13.6% in the second quarter. The growth in the first quarter was impacted by our digital audience continuing to be negatively impacted by the changes in algorithms undertaken by Facebook and Google early in 2018 while the second quarter benefited from our digital initiatives.

Average monthly page views in 2019 grew by 16% year on year to 1.2 billion. The first quarter saw page view growth of 9% while the second quarter saw page view growth of 23%. In the first half mobile page views grew by 27% while desktop page views fell by 9%.

Group Other revenue in the first half comprises revenue from our specialist digital recruitment websites. In 2018 this also included revenue from our specialist digital marketing services business which was disposed of in September 2018 and third party rental and other services income to tenants in Canary Wharf which ended as we terminated sub leases following the contraction of office space from four to two floors in June 2018.

Operating costs

Group operating costs on a statutory basis include the operating adjusted items (note 5) and which are excluded for the adjusted results. Operating costs include costs relating to Express & Star for six months in the current period versus four months in the comparative period. A key priority for the Group is maintaining quality journalism whilst maintaining the commercial viability and profitability of our brands into the future. To achieve this we continue to drive efficiencies which do not adversely impact quality journalism. The Group tightly manages the cost base with cost savings delivered through natural mitigation where volumes decline, day to day management action, structural costs savings which permanently remove costs and the synergy savings related to the acquisition of Express & Star.

Group operating costs comprises:

	Statutory results		Adjusted results
	2019	2018	2019	2018
	£m	£m	£m	£m
Labour	(121.7)	(120.4)	(121.7)	(120.4)
Newsprint	(40.2)	(37.8)	(40.2)	(37.8)
Depreciation	(11.0)	(11.1)	(11.0)	(11.1)
Other	(116.6)	(292.3)	(109.4)	(118.8)
Operating adjusted items	(7.2)	(173.5)	-	-
Other	(109.4)	(118.8)	(109.4)	(118.8)
Costs	(289.5)	(461.6)	(282.3)	(288.1)

Statutory operating costs decreased by £172.1 million to £289.5 million due to a reduction in operating adjusted items of £166.3 million and the benefit of cost savings despite the inclusion of Express & Star costs for an additional two months and higher newsprint prices.

The total impact of the items excluded from adjusted operating costs (note 5) was a charge of £7.2 million (2018: £173.5 million). Operating adjusted items comprise restructuring charges in respect of cost reduction measures of £6.1 million (2018: £7.9 million), pension administrative expenses of £1.1 million (2018: £1.6 million). In 2018 operating adjusted items also included a non-cash impairment of goodwill and publishing rights and titles of £150.0 million, a £7.5 million increase in the provision for dealing with and resolving civil claims arising from historical phone hacking and a charge for other items of £6.5 million.

The acquisition of Express & Star coupled with our continued focus on tightly managing the cost base ensured we delivered a solid performance with adjusted operating profit growing by 7.2% or £4.8 million to £71.3 million. Adjusted operating margin increased by 1.4 percentage points from 18.8% in 2018 to 20.2% in 2019 reflecting our optimisation strategy.

We delivered synergy cost savings of £6 million from the integration of Express & Star and we are on target to deliver synergy cost savings of at least £12 million (annualised at least £15 million following the £3 million delivered in 2018) from integrating Express & Star. We have updated our view of synergies to be at least £22 million of annualised savings in 2020. Structural cost savings of £5 million have been achieved and we are on track to deliver structural cost savings of £10 million in 2019.

These savings are achieved by a series of initiatives across the business, including editorial, commercial, printing, senior management structures and all back office functions. We also drive longer term infrastructure and operational benefits by reducing office space, moving data centres to the cloud, investing in new and improved systems. In addition to cost savings we will drive further optimisation initiatives through maximising the utilisation of our printing network by securing new or retaining existing print contracts or securing external printing for our newspapers where appropriate and managing the profitability of our titles and closing titles where there is no path to profitability.

Financing

Financing on a statutory basis includes the pension finance charge (note 13) which is excluded for the adjusted results.

	Statutory results		Adjusted results
	2019	2018	2019	2018
	£m	£m	£m	£m
Investment revenues	0.1	-	0.1	-
Pension finance charge	(4.1)	(4.4)	-	-
Finance costs	(1.5)	(1.8)	(1.5)	(1.8)
Financing	(5.5)	(6.2)	(1.4)	(1.8)

Statutory financing costs fell by £0.7 million to £5.5 million reflecting the reduction in the pension finance charge on a lower opening pension deficit and the reduction in finance costs as borrowings drawn to fund the acquisition of Express & Star are repaid and investments revenues from cash balances.

Tax

The statutory tax charge of £11.2 million (2018: credit of £0.4 million) comprises a current tax charge of £10.8 million (2018: £10.6 million) and a deferred tax charge of £0.4 million (2018: credit of £11.0 million).

The statutory effective tax rate is higher (2018: lower) than the standard rate of corporation tax for the reasons set out in the reconciliation below:

Reconciliation of tax (charge)/credit	2019 %	2018 %
Standard rate of corporation tax	(19.0)	19.0
Items not deductible in determining taxable profit (non qualifying depreciation/costs/impairment)	(0.4)	(18.7)
Tax effect of share of results of associates (brought in post tax)	0.2	0.1
Tax (charge)/credit rate	(19.2)	0.4

The adjusted tax charge of £13.4 million (2018: £12.4 million) represents 19.2% (2018: 19.2%) of adjusted profit before tax. The rate is in line with the statutory effective tax rate (2018: rate is higher than the statutory effective tax rate due to the impact of the non-cash impairment charge).

Earnings per share

	Statutory results		Adjusted results
	2019	2018	2019	2018
	£m	£m	£m	£m
Profit/(loss) after tax	47.0	(113.1)	56.5	52.3
Weighted average number of shares (000's)	296,032	287,174	296,032	287,174
Earnings/(loss) per share	15.9p	(39.4)p	19.1p	18.2p

Statutory profit after tax amounts to £47.0 million compared to a loss after tax of £113.1 million in the prior year due to the impact of the operating adjusted items. Adjusted profit after tax increased by £4.2 million or 8.0% to £56.5 million.

The weighted average number of shares increased year on year reflecting the shares issued (25,826,746) on 28 February 2018 as part of the purchase of Express & Star.

Statutory earnings per share of 15.9 pence compares to a loss per share of 39.4 pence in the prior year due to the impact of the operating adjusted items. Adjusted earnings per share increased by 0.9 pence or 4.9% to 19.1 pence.

Adjusted Cash Flow

	2019	2018
	£m	£m
Adjusted operating profit	71.3	66.5
Depreciation	11.0	11.1
Adjusted EBITDA	82.3	77.6
Working capital and other	(7.8)	(3.8)
Restructuring payments	(7.7)	(7.9)
Net capital expenditure	(1.6)	(6.3)
Adjusted operating cash flow	65.2	59.6
Historical legal issues payments	(1.6)	(6.6)
Dividends paid	(11.2)	(10.5)
Pension funding payments	(24.5)	(24.4)
Adjusted net cash flow	27.9	18.1
Bank facility net (repayment)/borrowings	(20.3)	80.0
Express & Star acquisition related cash flow	-	(90.1)
Net increase in cash and cash equivalents	7.6	8.0

Adjusted operating cash flow of £65.2 million is up 9.4% year on year. The increased adjusted operating profit flows through to an increase in adjusted operating cash flow with increased working capital and other offset by reduced capital expenditure. Working capital and other includes working capital movements, income tax paid, net interest paid and add backs for the share of results of associates (less dividends) and the share-based payments charge.

Other Items

Principal risks and uncertainties

There is an ongoing robust process for the identification, evaluation and management of the principal risks and uncertainties faced by the Group. Appropriate management actions are in place to minimise the impact of the risks and uncertainties which are identified as part of the risk process. These principal risks and uncertainties, the risk appetite in relation to these and the resulting actions are set out in the Reach plc 2018 Annual Report which is available on our website at www.reachplc.com. The principal risks and uncertainties continue to be:

· Strategy - the overall strategy or elements of the strategy are inappropriate and the delivery of the strategy is badly executed. This results in accelerated revenue loss for existing products (print advertising/newspaper sales) and a failure to attract new revenues (digital) quickly enough;

· Pensions - pension deficits grow at such a rate so as to affect the viability of the Group itself or so that the annual funding costs consume a disproportionate level of cash flow;

· Historical legal issues - damage to our reputation arising from historical events, direct financial impact from legal claims and distraction of senior management time from delivering the strategy; and

· Brexit - there is significant uncertainty created by the process of the UK exiting the European Union. Brexit has increased our overall risk profile in the short term due to the potential implications on several areas of our business. These include an adverse effect on commercial revenue (economic uncertainty, potential data transfer issues), pension deficit levels, supply chain issues (newsprint), cost pressures arising from any further devaluation of Sterling and employment challenges with EU Nationals.

We continue to progress with historical legal issues; other than payments of £1.6 million during the first half there has been no change made to the level of the provision. We have concluded that current developments have, overall, not led to changes in the required provision levels in the first half. Consistent with prior years the provision requirements will be subject to a full reassessment as at 29 December 2019 in light of developments at that time.

Reach recognises the potential impact caused by the Brexit uncertainty and has taken a number of actions as set out in the Reach plc 2018 Annual Report. The impact of Brexit remains unknown, with the date of exit currently now set at 31 October 2019. In the meantime reasonable precautionary steps continue to be taken by the business. For example, in the latest negotiations for newsprint, the proportion of UK sourced product increased.

Related party transactions

The Group has a number of associated undertakings. There were no material non trading transactions during the half year.

Going concern statement

The directors assessed the Group's prospects, both as a going concern and its longer term viability, at the time of approval of the Group's 2018 Annual Report. Further information is set out in the Group's 2018 Annual Report.

At the half year, the directors have reviewed the assessment and concluded that there have been no factors occurring since then which change the conclusions. Accordingly, the directors have adopted the going concern basis of accounting in the preparation of the Group's half-yearly financial report.

Statement of directors' responsibilities

The directors are responsible for preparing the half-yearly financial report in accordance with applicable laws and regulations. The directors confirm to the best of their knowledge:

a) that the interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 namely:

i. an indication of important events that have occurred during the first six months and their impact on the interim condensed consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

ii. material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

b) the interim condensed consolidated financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole.

Except for the changes indicated in the Management Report under the People section the directors of Reach plc are listed in the Reach plc Annual Report for 30 December 2018. A list of current directors is maintained on the Reach plc website: www.reachplc.com.

By order of the Board of directors

Simon Fox	Simon Fuller
Chief Executive	Chief Financial Officer and Company Secretary

Consolidated income statement

for the 26 weeks ended 30 June 2019 (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018)

	notes	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Revenue	4	352.6	353.8	723.9
Cost of sales		(191.7)	(183.2)	(377.4)
Gross profit		160.9	170.6	346.5
Distribution costs		(27.6)	(33.8)	(61.2)
Administrative expenses:
Operating adjusted items	5	(7.2)	(173.5)	(252.9)
Other administrative expenses		(63.0)	(71.1)	(140.8)
Share of results of associates:
Results before operating adjusted items		1.0	0.8	1.1
Operating adjusted items	5	(0.4)	(0.3)	(0.3)
Operating profit/(loss)		63.7	(107.3)	(107.6)
Investment revenues	6	0.1	-	0.1
Pension finance charge	13	(4.1)	(4.4)	(8.6)
Finance costs	7	(1.5)	(1.8)	(3.8)
Profit/(loss) before tax		58.2	(113.5)	(119.9)
Tax (charge)/credit	8	(11.2)	0.4	0.3
Profit/(loss) for the period attributable to equity holders of the parent		47.0	(113.1)	(119.6)

Statutory earnings/(loss) per share		2019 Pence	2018 Pence	2018 Pence
Earnings/(loss) per share - basic	10	15.9	(39.4)	(41.0)
Earnings/(loss) per share - diluted	10	15.8	(39.4)	(41.0)

Set out in note 10 is the calculation of adjusted earnings per share and set out in note 17 is the reconciliation between the statutory and adjusted results.

Consolidated statement of comprehensive income

for the 26 weeks ended 30 June 2019 (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018)

	notes	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Profit/(loss) for the period		47.0	(113.1)	(119.6)

Items that will not be reclassified to profit and loss:
Actuarial (loss)/gain on defined benefit pension schemes	13	(18.9)	59.3	4.6
Tax on actuarial (loss)/gain on defined benefit pension schemes	8	3.2	(11.3)	(0.8)
Share of items recognised by associates		-	-	3.2
Other comprehensive (loss)/income for the period		(15.7)	48.0	7.0

Total comprehensive income/(loss) for the period		31.3	(65.1)	(112.6)

Consolidated cash flow statement

for the 26 weeks ended 30 June 2019 (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018)

	notes	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m
Cash flows from operating activities
Cash generated from operations	11	70.4	60.7	137.8
Pension deficit funding payments	13	(24.5)	(65.6)	(90.1)
Income tax paid		(3.8)	(6.0)	(12.5)
Net cash inflow/(outflow) from operating activities		42.1	(10.9)	35.2
Investing activities
Interest received		0.1	-	0.1
Proceeds on disposal of property, plant and equipment		-	0.7	6.6
Purchases of property, plant and equipment		(1.6)	(7.0)	(11.2)
Acquisition of subsidiary undertaking		-	(42.6)	(43.1)
Proceeds on disposal of subsidiary undertaking		-	-	6.4
Acquisition of associate undertaking		-	-	(4.5)
Dividends received from associated undertakings		0.1	-	-
Net cash used in investing activities		(1.4)	(48.9)	(45.7)
Financing activities
Dividends paid		(11.2)	(10.5)	(17.5)
Interest paid on borrowings		(1.6)	(1.7)	(3.8)
Draw down on bank borrowings		-	80.0	80.0
Repayment of bank borrowings		(20.3)	-	(45.0)
Net cash (used in)/received from financing activities		(33.1)	67.8	13.7

Net increase in cash and cash equivalents		7.6	8.0	3.2
Cash and cash equivalents at the beginning of the period	14	19.2	16.0	16.0
Cash and cash equivalents at the end of the period	14	26.8	24.0	19.2

Consolidated statement of changes in equity

for the 26 weeks ended 30 June 2019 (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018)

	Share capital £m	Share premium account £m	Merger reserve £m	Capital redemption reserve £m	Retained earnings and other reserves £m	Total £m

At 30 December 2018 (audited)	(30.9)	(606.7)	(17.4)	(4.4)	101.7	(557.7)
Profit for the period	-	-	-	-	(47.0)	(47.0)
Other comprehensive loss for the period	-	-	-	-	15.7	15.7
Total comprehensive income for the period	-	-	-	-	(31.3)	(31.3)
Credit to equity for equity-settled share-based payments	-	-	-	-	(0.4)	(0.4)
Dividends paid	-	-	-	-	11.2	11.2
At 30 June 2019 (unaudited)	(30.9)	(606.7)	(17.4)	(4.4)	81.2	(578.2)

At 31 December 2017 (audited)	(28.3)	(606.7)	(37.9)	(4.4)	10.5	(666.8)
Loss for the period	-	-	-	-	113.1	113.1
Other comprehensive income for the period	-	-	-	-	(48.0)	(48.0)
Total comprehensive loss for the period	-	-	-	-	65.1	65.1
Issue of shares	(2.6)	-	(17.4)	-	-	(20.0)
Merger reserve transfer	-	-	37.9	-	(37.9)	-
Credit to equity for equity-settled share-based payments	-	-	-	-	(0.4)	(0.4)
Dividends paid	-	-	-	-	10.5	10.5
At 1 July 2018 (unaudited)	(30.9)	(606.7)	(17.4)	(4.4)	47.8	(611.6)

At 31 December 2017 (audited)	(28.3)	(606.7)	(37.9)	(4.4)	10.5	(666.8)
Loss for the period	-	-	-	-	119.6	119.6
Other comprehensive income for the period	-	-	-	-	(7.0)	(7.0)
Total comprehensive loss for the period	-	-	-	-	112.6	112.6
Issue of shares	(2.6)	-	(17.4)	-	-	(20.0)
Merger reserve transfer	-	-	37.9	-	(37.9)	-
Credit to equity for equity-settled share-based payments	-	-	-	-	(1.0)	(1.0)
Dividends paid	-	-	-	-	17.5	17.5
At 30 December 2018 (audited)	(30.9)	(606.7)	(17.4)	(4.4)	101.7	(557.7)

Consolidated balance sheet

at 30 June 2019 (at 1 July 2018 and 30 December 2018)

	notes	30 June 2019 (unaudited) £m	1 July 2018 (unaudited) £m	30 December 2018 (audited) £m
Non-current assets
Goodwill	12	42.0	27.2	42.0
Other intangible assets	12	810.0	856.5	810.0
Property, plant and equipment		236.8	287.1	246.2
Investment in associates		25.8	17.3	25.3
Retirement benefit assets	13	19.8	12.3	10.2
Deferred tax assets		68.2	60.2	69.8
		1,202.6	1,260.6	1,203.5
Current assets
Inventories		6.1	5.8	6.3
Trade and other receivables		110.2	111.5	108.4
Cash and cash equivalents	14	26.8	24.0	19.2
		143.1	141.3	133.9
Total assets		1,345.7	1,401.9	1,337.4
Non-current liabilities
Trade and other payables		(40.1)	(59.0)	(59.0)
Borrowings	14	(39.7)	(60.0)	(39.7)
Retirement benefit obligations	13	(368.0)	(309.3)	(358.8)
Deferred tax liabilities		(159.6)	(172.2)	(159.7)
Provisions	15	(3.5)	(2.9)	(4.1)
		(610.9)	(603.4)	(621.3)
Current liabilities
Trade and other payables		(132.5)	(115.1)	(111.3)
Borrowings	14	-	(45.0)	(20.3)
Current tax liabilities	8	(7.2)	(7.3)	(4.5)
Provisions	15	(16.9)	(19.5)	(22.3)
		(156.6)	(186.9)	(158.4)
Total liabilities		(767.5)	(790.3)	(779.7)
Net assets		578.2	611.6	557.7

Equity
Share capital	16	(30.9)	(30.9)	(30.9)
Share premium account	16	(606.7)	(606.7)	(606.7)
Merger reserve	16	(17.4)	(17.4)	(17.4)
Capital redemption reserve	16	(4.4)	(4.4)	(4.4)
Retained earnings and other reserves	16	81.2	47.8	101.7
Total equity attributable to equity holders of the parent		(578.2)	(611.6)	(557.7)

Notes to the consolidated financial statements

for the 26 weeks ended 30 June 2019 (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018)

1. General information

The financial information in respect of the 52 weeks ended 30 December 2018 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies and is available at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP and on the Company's website at www.reachplc.com. The auditors, at that time Deloitte LLP, reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial information for the 26 weeks ended 30 June 2019 and the 26 weeks ended 1 July 2018 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been audited. No statutory accounts for these periods have been delivered to the Registrar of Companies.

This half-yearly financial report constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency Rules.

The auditors, PricewaterhouseCoopers LLP, have carried out a review of the condensed set of financial statements and their report is set out on page 30.

The half-yearly financial report was approved by the directors on 29 July 2019. This announcement is available at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP and on the Company's website at www.reachplc.com.

2. Accounting polices

Basis of preparation

The Group's annual consolidated financial statements are prepared in accordance with IFRS as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual profit or loss.

Going concern

These condensed consolidated financial statements have been prepared on a going concern basis as set out in the Management Report in this half-yearly financial report.

Changes in accounting policy

The same accounting policies, presentation and methods of computation are followed in the interim condensed consolidated financial statements as applied in the Group's latest annual consolidated financial statements.

IFRS 16 (Issued) 'Leases' (effective for periods beginning on or after 1 January 2019) will be adopted by the Group in the next financial year ending 27 December 2020 as the current accounting period began on 31 December 2018. The latest assessment of the impact of adopting the standard, revealed that, based on the operating leases at the reporting date, fixed assets and lease obligations of around £45 million would be recognised on the consolidated balance sheet with no material impact on profit before tax as operating lease costs would be replaced with an equivalent depreciation and interest charge in the consolidated income statement.

The Group has not adopted any new standards and interpretations during the current financial period.

The following standards and interpretations (*denotes not yet endorsed for use in the EU), which have not been applied and when adopted are not expected to have a material impact on the Group, were in issue and will be effective for periods beginning on or after 1 January 2019 unless stated below:

· IFRIC 23 (New) 'Uncertainty over Income Tax Treatments'

· IFRS 9 (Amended) 'Financial Instruments'

· IAS 28 (Amended) 'Investments in Associates and Joint Ventures'

· IAS 19 (Amended) 'Employee Benefits'

· IFRS 3 (Amended) 'Business Combinations' - effective for periods beginning on or after 1 January 2020*

· IAS 1 (Amended) 'Presentation of Financial Statements' - effective for periods beginning on or after 1 January 2020*

· IAS 8 (Amended) 'Accounting Policies, Changes in Accounting Estimates and Errors - effective for periods beginning on or after 1 January 2020*

· Amendments to References to Conceptual Framework in IFRS Standards - effective for periods beginning on or after 1 January 2020*

· IFRS 17 'Insurance Contracts' - effective for periods beginning on or after 1 January 2021*

· Annual improvements 2015 - 2017 cycle

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:

Provisions (notes 8 and 15)

There is uncertainty as to liabilities arising from the outcome or resolution of the ongoing historical legal issues and in addition there is uncertainty as to the amount of expenditure that may be tax deductible and additional tax liabilities may fall due in relation to earlier years. 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.

Retirement benefits (note 13)

Actuarial assumptions adopted and external factors can significantly impact the surplus or deficit of defined benefit pension schemes. Valuations for funding and accounting purposes are based on assumptions about future economic and demographic variables. An estimate of the allowance for GMP equalisation of £15.8 million was included within liabilities at 30 December 2018 and there has been no change in the first half of 2019. The allowance in respect of GMP equalisation could be subject to change as more detailed member calculations are undertaken and could change as a result of future legal judgements. 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 a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times. In calculating leverage of 2.5 times, the Group assumes that pension obligations are treated as debt. The leverage calculation for the Group's financing facilities excludes pension obligations.

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 £810.0 million) have indefinite economic lives due to the longevity of the brands and the ability to evolve them in an ever changing media landscape. 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 units. At each reporting date management review the interdependency of revenues across our portfolio of newspapers and websites to determine the appropriate cash-generating unit. The Group operates its newspaper titles and websites such that the majority of the revenues are interdependent and revenue would be materially lower if titles and websites operated in isolation. As such, management do not consider that an impairment review at an individual title or website 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 titles and websites in Publishing have increased revenue interdependency and the number of cash-generating units has reduced.

3. Segments

Segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board and chief operating decision maker (executive directors) to allocate resources to the segments and to assess their performance. The Board and chief operating decision maker are not provided with an amount for total assets by segment. The Group's operations are primarily located in the UK and the Group is not subject to significant seasonality during the year.

Following recent acquisitions and disposals and changes to the management structure, management have reviewed the segment disclosure and have concluded that the performance of the Group should be presented as a single reporting segment. As such the previously reported segments of Publishing, Printing, Specialist Digital and Central are no longer reported and the Group presents the Group as a single reporting segment.

4. Revenue

	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Print	301.8	306.4	623.3
Circulation	185.1	175.7	362.1
Advertising	78.0	95.4	189.0
Printing	19.7	17.5	35.6
Other	19.0	17.8	36.6
Digital	48.7	41.5	91.3
Other	2.1	5.9	9.3
Total revenue	352.6	353.8	723.9

The Group has amended the presentation of revenues in the current period. Set out in note 18 is the reconciliation between the classifications in the prior period to the classifications in the current period.

The Group's operations are located primarily in the UK. The Group's revenue by location of customers is set out below:

	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

UK and Republic of Ireland	351.8	353.0	721.9
Continental Europe	0.7	0.7	1.8
Rest of World	0.1	0.1	0.2
Total revenue	352.6	353.8	723.9

5. Operating adjusted items

	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Impairment of goodwill and other intangible assets (note 12)	-	(150.0)	(200.0)
Pension past service costs for GMP equalisation and administrative expenses (note 13)	(1.1)	(1.6)	(18.8)
Restructuring charges in respect of cost reduction measures (note 15)	(6.1)	(7.9)	(20.0)
Provision for historical legal issues (note 15)	-	(7.5)	(12.5)
Other (a)	-	(6.5)	(1.6)
Operating adjusted items included in administrative expenses	(7.2)	(173.5)	(252.9)
Operating adjusted items included in share of results of associates (b)	(0.4)	(0.3)	(0.3)
Total operating adjusted items	(7.6)	(173.8)	(253.2)

(a) In 2018, other included: amortisation of intangible assets (26 weeks ended 1 July 2018: £0.2 million and 52 weeks ended 30 December 2018: £4.5 million), transaction costs (26 weeks ended 1 July 2018: £6.3 million and 52 weeks ended 30 December 2018: £6.3 million), profit on disposal of property (26 weeks ended 1 July 2018: £nil and 52 weeks ended 30 December 2018: £2.3 million), charge relating to property carrying value (26 weeks ended 1 July 2018: £0.2 million and 52 weeks ended 30 December 2018: £0.8 million) and profit on disposal of subsidiary undertaking (26 weeks ended 1 July 2018: nil and 52 weeks ended 30 December 2018: £3.4 million).

(b) Group's share of operating adjusted items incurred by PA Group, Brand Events and the Independent Star in Ireland.

6. Investment revenues

26 weeks ended

30 June

2019 (unaudited)

£m

26 weeks ended

1 July

2018 (unaudited)

£m

52 weeks ended

30 December 2018

(audited)

£m

Interest income on bank deposits and other interest receipts

0.1

7. Finance costs

26 weeks ended

30 June

2019 (unaudited)

£m

26 weeks ended

1 July

2018 (unaudited)

£m

52 weeks ended

30 December 2018

(audited)

£m

Interest on bank overdrafts and borrowings

(1.5)

(1.8)

(3.8)

8. Tax

	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m
Corporation tax charge for the period	(10.8)	(10.6)	(17.2)
Current tax charge	(10.8)	(10.6)	(17.2)
Deferred tax (charge)/credit for the period	(0.4)	11.0	17.5
Deferred tax (charge)/credit	(0.4)	11.0	17.5
Tax (charge)/credit	(11.2)	0.4	0.3

Reconciliation of tax (charge)/credit	%	%	%
Standard rate of corporation tax	(19.0)	19.0	19.0
Tax effect of items that are not deductible in determining taxable profit	(0.4)	(18.7)	(19.5)
Tax effect of items that are not taxable in determining taxable profit	-	-	0.7
Tax effect of share of results of associates	0.2	0.1	0.1
Tax (charge)/credit rate	(19.2)	0.4	0.3

The standard rate of corporation tax for the period is 19% (2018:19%). 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 liabilities amounted to £7.2 million (26 weeks ended 1 July 2018: £7.3 million and 52 weeks ended 30 December 2018: £4.5 million) at the reporting date and include net provisions of £1.1 million (26 weeks ended 1 July 2018: £3.8 million and 52 weeks ended 30 December 2018: £1.3 million). At the reporting date the maximum amount of the unprovided tax exposure relating to uncertain tax items is some £7 million.

The tax on actuarial losses/gains on defined benefit pension schemes taken to the consolidated statement of comprehensive income is a credit of £3.2 million comprising a deferred tax charge of £1.1 million and a current tax credit of £4.3 million (26 weeks ended 1 July 2018: charge of £11.3 million comprising a deferred tax charge of £19.0 million and a current tax credit of £7.7 million and 52 weeks ended 30 December 2018: credit of £0.8 million comprising a deferred tax credit of £8.7 million and a current tax charge of £7.9 million).

9. Dividends

	26 weeks ended 30 June 2019 (unaudited) Pence Per share	26 weeks ended 1 July 2018 (unaudited) Pence Per share	52 weeks ended 30 December 2018 (audited) Pence Per share
Dividends paid per share and recognised as distributions to equity holders in the period	3.77	3.55	5.92
Dividend proposed per share but not paid nor included in the accounting records	2.50	2.37	3.77

26 weeks ended

30 June

2019 (unaudited)

Pence

Per share

26 weeks ended

1 July

2018 (unaudited)

Pence

Per share

52 weeks ended

30 December 2018

(audited)

Pence

Per share

Dividends paid per share and recognised as distributions to equity holders in the period

3.77

3.55

5.92

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

2.50

2.37

3.77

The Board has approved an interim dividend for 2019 of 2.50 pence per share.

On 2 May 2019 the final dividend proposed for 2018 of 3.77 pence per share was approved by shareholders at the Annual General Meeting and was paid on 7 June 2019. The total dividend payment amounted to £11.2 million.

On 3 May 2018 the final dividend proposed for 2017 of 3.55 pence per share was approved by shareholders at the Annual General Meeting and was paid on 8 June 2018. An interim dividend for 2018 of 2.37 pence per share was paid on 28 September 2018. The total dividend payment in 2018 amounted to £17.5 million.

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.

	26 weeks ended 30 June 2019 (unaudited) Thousand	26 weeks ended 1 July 2018 (unaudited) Thousand	52 weeks ended 31 December 2018 (audited) Thousand

Weighted average number of ordinary shares for basic earnings per share	296,032	287,174	291,478
Effect of potential dilutive ordinary shares in respect of share awards	1,798	1,327	1,571
Weighted average number of ordinary shares for diluted earnings per share	297,830	288,501	293,049

The weighted average number of potentially dilutive ordinary shares not currently dilutive was 5,879,561 (1 July 2018: 4,521,046 and 30 December 2018: 3,964,133).

Statutory earnings/(loss) per share	Pence	Pence	Pence

Earnings/(loss) per share - basic	15.9	(39.4)	(41.0)
Earnings/(loss) per share - diluted	15.8	(39.4)	(41.0)

Adjusted earnings per share	Pence	Pence	Pence

Earnings per share - basic	19.1	18.2	39.2
Earnings per share - diluted	19.0	18.1	39.0

Set out in note 17 is the reconciliation between the statutory and adjusted results.

11. Notes to the consolidated cash flow statement

	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 31 December 2018 (audited) £m

Operating profit/(loss)	63.7	(107.3)	(107.6)
Depreciation of property, plant and equipment	11.0	11.1	22.3
Impairment of goodwill and other intangible assets	-	150.0	200.0
Amortisation of intangible assets	-	0.2	0.2
Share of results of associates	(0.6)	(0.5)	(0.8)
Charge for share-based payments	0.4	0.4	1.0
Profit on disposal of land and buildings	-	-	(1.5)
Profit on disposal of subsidiary undertaking	-	-	(3.4)
Write-off of fixed assets	-	-	0.5
Pension administrative expenses	1.1	1.6	3.0
Pension past service costs	-	-	15.8
Operating cash flows before movements in working capital	75.6	55.5	129.5
Decrease in inventories	0.2	0.6	0.1
Increase in receivables	(1.8)	(6.2)	(2.9)
(Decrease)/increase in payables	(3.6)	10.8	11.1
Cash generated from operations	70.4	60.7	137.8

12. Goodwill and other intangible assets

The Group had three cash-generating units at the prior reporting date (Publishing excluding Express & Star, Express & Star and Digital Classified Recruitment). The Express & Star business has been fully integrated within the Publishing business such that the cash inflows are largely interdependent and they have been combined into a single cash-generating unit. This reflects the scale of advertising packages sold across all titles and websites and reflects the group wide nature of our printing operations and the wholesale and distribution contracts. At the reporting date the Group has two cash-generating units (Publishing and Digital Classified Recruitment).

The carrying value of goodwill and other intangible assets is:

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

Opening carrying value	42.0	810.0	852.0
Closing carrying value	42.0	810.0	852.0

Goodwill of £42.0 million comprises Publishing £35.9 million and Digital Classified Recruitment £6.1 million. Publishing rights and titles comprises Publishing £810.0 million.

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.

There were no indicators of impairment in the first half and therefore no impairment review has been undertaken at the half year. In 2018, the total impairment charge for the year was £200.0 million (£187.1 million net of deferred tax). The charge was allocated to goodwill (£92.5 million), publishing rights and titles (£95.0 million) and freehold buildings (£12.5 million). Of the £200.0 million impairment charge, £150.0 million was charged at the 2018 half year and a further £50.0 million was charged at the 2018 year end.

When completing an impairment review, the Group prepares cash flow projections for a cash-generating unit using the latest forecasts and projections. The growth rates for the first three-year period are internal projections based on both internal and external market information and reflect past experience of and the risk associated with each asset. Cash flow projections in outer years are extrapolated based on estimated growth rates which do not exceed the average long-term growth rates for the relevant markets. The long-term growth rates are based on the Board's view of the cash-generating unit's market position and maturity of the relevant market. The current long-term growth rate for Publishing is -2.0% and for Digital Classified Recruitment is -1.0%. We continue to believe that there are significant longer term benefits of our scale local digital audiences and there are opportunities to grow revenue and profit in the longer term.

The current post-tax and equivalent pre-tax discount rate used in respect of all cash-generating units is 11.0% and 13.4% respectively. The discount rate reflects a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times. In calculating leverage of 2.5 times the Group assumes that pension obligations are treated as debt. Although we use a leverage of 2.5 times which is higher than that permissible by the Group's financing facilities (2.0 times), the Group's financing facilities exclude pension obligations in calculating leverage.

The Group's 2018 Annual Report highlighted that the impairment review is highly sensitive to reasonably possible changes in key assumptions used in the value in use calculations.

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 scale of cost saving initiatives being delivered in the short term being lower than forecast, could lead to a material impairment in the Publishing cash-generating unit. For the Digital Classified Recruitment cash-generating units, reasonably possible changes in key assumptions used in the value in use calculations would not result in an impairment charge.

13. Retirement benefit schemes

Defined contribution pension schemes

The Group operates a defined contribution pension scheme for qualifying employees: The Reach Pension Plan (the "RPP"). The two Group Personal Pension Plans (the GPP") for Express & Star employees were closed on 31 March 2019 with all members given the opportunity to join the RPP on 1 April 2019. The assets of the RPP scheme where employees have an individual account at Fidelity are held separately from those of the Group in funds under the control of Trustees.

The current service cost charged to the consolidated income statement for the period of £8.6 million (26 weeks ended 1 July 2018: £8.2 million and 52 weeks ended 30 December 2018: £14.9 million) 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 at the reporting date, the uninsured liabilities related 60% to current pensioners and their spouses or dependants and 40% related to deferred pensioners. The average term from the reporting date to payment of the remaining uninsured benefits is expected to be around 19 years. Uninsured pension payments in 2018, excluding lump sums and transfer value payments, were £64 million and these are projected to rise to an annual peak in 2031 of £101 million 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 funding valuations of the schemes: at 31 December 2016 for the MGN Scheme showed a deficit of £476.0 million, for the Trinity Scheme showed a deficit of £78.0 million and for the MIN Scheme showed a deficit of £68.2 million; at 5 April 2017 for the EN88 Scheme showed a deficit of £69.8 million and for the ENSM Scheme showed a deficit of £3.2 million; and at 31 December 2017 for the WF Scheme showed a deficit of £6.5 million.

The deficits in all schemes are expected to be removed before or in 2027 by a combination of the contributions and asset returns. The Group paid £90.1 million into the defined benefit pension schemes in 2018 (including an initial pension contribution of £41.2 million paid into the E&S Schemes in connection with the acquisition of Express & Star). Contributions (which include funding for pensions administrative expenses) are payable monthly and have been agreed for 2019 and 2020 at £48.9 million per annum. Thereafter, contributions per the current schedule of contributions are for £56.1 million per annum in 2021 to 2023, £55.3 million per annum in 2024 to 2026 and £53.3 million in 2027.

The Group has agreed that in respect of dividend payments in 2018, 2019 and 2020 that additional contributions would be paid at 75% of the excess if dividends paid in 2018 are above 6.16 pence per share. For 2019 and 2020 the threshold increases in line with the increase in dividends capped at 10% per annum.

The future deficit funding commitments are linked to the three-yearly actuarial valuations. There is no link to the IAS 19 valuations which use different actuarial assumptions and are updated at each reporting date. The next valuation for funding of all six defined benefit pension schemes will be as at 31 December 2019 and this is required to be completed by 31 March 2021, although we expect this to be completed by 31 December 2020.

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 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, however, to allow for IFRIC 14 the Group recognises a deficit of the value of its future contribution commitment to the scheme in line with the schedule of contributions in force at the reporting date.

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 included within liabilities at 30 December 2018 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 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 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 12% 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 that of the liabilities and so the values may still move differently. At the reporting date non equity assets amounted to 78% 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 22% 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 are 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 are also aligned in reducing pensions risk over the long term and at a pace which is affordable to the Group.

The three E&S Schemes each has an accounting surplus at the reporting date, before allowing for the IFRIC 14 asset ceiling.

Across the three TM Schemes, the invested assets are expected to be sufficient to pay the uninsured benefits due up to 2044, based on the reporting date assumptions. The remaining uninsured benefit payments, payable from 2045, 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 TM Schemes, actuarial projections at the prior 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 the current or prior period 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 30 June 2019.

The assets and liabilities of the schemes as at the reporting date are:

	TM Schemes £m	E&S Schemes £m	Total £m

Present value of uninsured scheme liabilities	(1,795.3)	(533.5)	(2,328.8)
Present value of insured scheme liabilities	(178.0)	(149.8)	(327.8)
Total present value of scheme liabilities	(1,973.3)	(683.3)	(2,656.6)
Invested and cash assets at fair value	1,433.0	581.8	2,014.8
Value of liability matching insurance contracts	178.0	149.8	327.8
Total fair value of scheme assets	1,611.0	731.6	2,342.6
Funded (deficit)/surplus	(362.3)	48.3	(314.0)
Impact of IFRIC 14	-	(34.2)	(34.2)
Net scheme (deficit)/surplus	(362.3)	14.1	(348.2)

Based on actuarial advice, the assumptions used in calculating the scheme liabilities and the actuarial value of those liabilities are:

	30 June 2019 £m	1 July 2018 £m	31 December 2018 £m
Financial assumptions (nominal % pa)
Discount rate	2.25	2.62	2.76
Retail price inflation rate	3.21	3.06	3.20
Consumer price inflation rate	2.21	1.88	2.00
Rate of pension increase in deferment	2.38	1.86	2.22
Rate of pension increases in payment (weighted average across the scheme's)	3.40	3.32	3.39
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65	21.4	21.6	21.6
Female currently aged 65	23.3	23.5	23.5
Male currently aged 55	22.0	22.2	22.3
Female currently aged 55	24.1	24.3	24.3

The estimated impact 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	-215/+235	-200/+215
Retail price inflation rate +/- 0.5% pa	+50/-46	+45/-42
Consumer price inflation rate +/- 0.5% pa	+47/-45	+48/-46
Life expectancy at age 65 +/- 1 year	+150/-150	+130/-135

The RPI sensitivity impacts the rate of increases in deferment for some of the pensions in the EN88 and ENSM schemes 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 make 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 amount 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 is as follows:

Consolidated income statement	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Pension administrative expenses	(1.1)	(1.6)	(3.0)
Past service costs	-	-	(15.8)
Pension finance charge	(4.1)	(4.4)	(8.6)
Defined benefit cost recognised in income statement	(5.2)	(6.0)	(27.4)

Consolidated statement of comprehensive income	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Actuarial gain due to liability experience	5.4	12.4	7.0
Actuarial (loss)/gain due to liability assumption changes	(216.9)	76.1	98.7
Total liability actuarial (loss)/gain	(211.5)	88.5	105.7
Returns on scheme assets greater than/(less than) discount rate	194.3	(23.9)	(98.0)
Change in impact of IFRIC 14	(1.7)	(5.3)	(3.1)
Total (loss)/gain recognised in statement of comprehensive income	(18.9)	59.3	4.6

Consolidated balance sheet	30 June 2019 (unaudited) £m	1 July 2018 (unaudited) £m	30 December 2018 (audited) £m

Present value of uninsured scheme liabilities	(2,328.8)	(2,168.9)	(2,145.3)
Present value of insured scheme liabilities	(327.8)	(319.7)	(317.5)
Total present value of scheme liabilities	(2,656.6)	(2,488.6)	(2,462.8)
Invested and cash assets at fair value	2,014.8	1,906.6	1,829.2
Value of liability matching insurance contracts	327.8	319.7	317.5
Total fair value of scheme assets	2,342.6	2,226.3	2,146.7
Funded deficit	(314.0)	( 262.3)	(316.1)
Impact of IFRIC 14	(34.2)	( 34.7)	(32.5)
Net scheme deficit	(348.2)	( 297.0)	(348.6)

Non-current assets - retirement benefit assets	19.8	12.3	10.2
Non-current liabilities - retirement benefit obligations	(368.0)	(309.3)	(358.8)
Net scheme deficit	(348.2)	(297.0)	(348.6)

Net scheme deficit included in consolidated balance sheet	(348.2)	(297.0)	(348.6)
Deferred tax included in consolidated balance sheet	63.4	54.7	64.5
Net scheme deficit after deferred tax	(284.8)	(242.3)	(284.1)

Movement in net scheme deficit	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Opening net scheme deficit	(348.6)	(377.6)	(377.6)
Acquisition of subsidiary undertakings pension schemes	-	(38.3)	(38.3)
Contributions	24.5	65.6	90.1
Consolidated income statement	(5.2)	(6.0)	(27.4)
Consolidated statement of comprehensive income	(18.9)	59.3	4.6
Closing net scheme deficit	(348.2)	(297.0)	(348.6)

Changes in the present value of scheme liabilities	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Opening present value of scheme liabilities	(2,462.8)	(1,929.2)	(1,929.2)
Acquisition of subsidiary undertakings pension schemes	-	(682.7)	(682.7)
Past service cost loss	-	-	(18.7)
Interest cost	(33.1)	(29.2)	(61.4)
Actuarial gain- experience	5.4	12.4	7.0
Actuarial gain - change to demographic assumptions	9.7	16.5	16.6
Actuarial (loss)/gain - change to financial assumptions	(226.6)	59.6	82.1
Benefits paid	50.8	64.0	123.5
Closing present value of scheme liabilities	(2,656.6)	(2,488.6)	(2,462.8)

Changes in the fair value of scheme assets	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Opening fair value of scheme assets	2,146.7	1,551.6	1,551.6
Acquisition of subsidiary undertakings pension schemes	-	673.8	673.8
Past service cost gain	-	-	2.9
Interest income	29.0	24.8	52.8
Actual return on assets greater than/(less than) discount rate	194.3	(23.9)	(98.0)
Contributions by employer	24.5	65.6	90.1
Benefits paid	(50.8)	(64.0)	(123.5)
Administrative expenses	(1.1)	(1.6)	(3.0)
Closing fair value of scheme assets	2,342.6	2,226.3	2,146.7

Changes in impact of IFRIC 14	26 weeks ended 30 June 2019 (unaudited) £m	26 weeks ended 1 July 2018 (unaudited) £m	52 weeks ended 30 December 2018 (audited) £m

Opening impact of IFRIC 14	(32.5)	-	-
Acquisition of subsidiary undertakings pension schemes	-	(29.4)	(29.4)
Increase in impact of IFRIC 14	(1.7)	(5.3)	(3.1)
Closing impact of IFRIC 14	(34.2)	(34.7)	(32.5)

Fair value of scheme assets	30 June 2019 (unaudited) £m	1 July 2018 (unaudited) £m	30 December 2018 (audited) £m

UK equities	40.6	115.5	37.4
US equities	122.5	198.4	99.5
Other overseas equities	272.1	300.4	275.8
Property	43.5	36.6	37.5
Corporate bonds	266.2	255.1	287.8
Fixed interest gilts	103.9	97.2	127.1
Index linked gilts	43.6	38.3	48.6
Liability driven investment	531.7	353.5	459.1
Cash and other	590.7	511.6	456.4
Invested and cash assets at fair value	2,014.8	1,906.6	1,829.2
Value of insurance contracts	327.8	319.7	317.5
Fair value of scheme assets	2,342.6	2,226.3	2,146.7

The majority of the scheme assets have quoted prices in active markets. Scheme assets include neither direct investments in the Company's ordinary shares nor any property assets occupied nor other assets used by the Group.

14. Net debt

The net debt for the Group is as follows:

	30 December 2018 (audited) £m	Cash flow £m	Loans repaid £m	30 June 2019 (unaudited) £m
Non-current liabilities
Acquisition Term Loan	(39.7)	-	-	(39.7)
	(39.7)	-	-	(39.7)
Current liabilities
Acquisition Term Loan	(20.3)	-	20.3	-
	(20.3)	-	20.3	-
Debt	(60.0)	-	20.3	(39.7)

Current assets
Cash and cash equivalents	19.2	27.9	(20.3)	26.8
Cash and cash equivalents	19.2	27.9	(20.3)	26.8

Net debt	(40.8)	27.9	-	(12.9)

Net debt at the reporting date comprised £39.7 million drawings on the Acquisition Term Loan ('ATL') less cash balances of £26.8 million. The Group had no drawings at the end of the year on the Revolving Credit Facility ('RCF'). In the period, the Group repaid early the £20.3 million due under the ATL in December 2019. The outstanding £39.7 million drawn on the ATL is repayable in two instalments of £20.3 million in December 2020 and £19.4 million in December 2021. The Group also has access to an undrawn £75.0 million amortising RCF which is committed until December 2021. The RCF amortises by £8.33 million every six months from December 2019 to December 2020 down to £50.0 million for the last year of the term.

Deferred consideration of £59.0 million in respect of the acquisition of Express & Star is included in trade and other payables in non-current liabilities amounting to £40.1 million (payable £16.0 million on 28 February 2021, £17.1 million on 28 February 2022 and £7.0 million on 28 February 2023) and in current liabilities amounting to £18.9 million (payable on 28 February 2020). There are no conditions attached to the payment of the deferred consideration and the transaction was structured such that no interest accrued 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.

15. Provisions

	Share-based payments £m	Property £m	Restructuring £m	Other £m	Total £m

At 30 December 2018 (audited)	(0.1)	(6.6)	(4.3)	(15.4)	(26.4)
Charged to income statement	-	-	(6.1)	(0.3)	(6.4)
Utilisation of provision	-	2.1	7.7	2.6	12.4
At 30 June 2019 (unaudited)	(0.1)	(4.5)	(2.7)	(13.1)	(20.4)

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

	30 June 2019 (unaudited) £m	1 July 2018 (unaudited) £m	30 December 2018 (audited) £m

Current	(16.9)	(19.5)	(22.3)
Non-current	(3.5)	(2.9)	(4.1)
	(20.4)	(22.4)	(26.4)

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 onerous property leases and future committed costs related to occupied, let and vacant properties. The majority of the provision will be utilised over the next two years and reflects 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. This provision is expected to be utilised within the next year.

The other provision relates to legal and other costs relating to historical litigation and is expected to be utilised over the next few years. The provision for costs associated with the settlement of civil claims in relation to phone hacking at the period end was £12.0 million and this represents the Board's best estimate of the amount required to settle the expected claims. This estimate is based on historical trends and experience of claims and costs, and in some cases, proposed offers to settle claims. Whilst the Board notes that there is continued uncertainty, the Group has recorded an increase in the provision in each of the last three years which highlights the challenges in making a best estimate. Certain cases are subject to court proceedings and the outcome of these cases is likely to have an impact on how much is required to settle the remaining claims. Individual court rulings can affect multiple cases and therefore the Group's current ability to settle and so mitigate further legal costs. Due to this uncertainty, a contingent liability has been highlighted in note 20.

16. Share capital and reserves

The share capital comprises 309,286,317 allotted, called-up and fully paid ordinary shares of 10p each. In 2018, the Company issued 25,826,746 shares (at 77.4 pence) relating to the acquisition of Express & Star. The Company holds 10,017,620 shares as Treasury shares.

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. Cumulative goodwill written off to retained earnings and other reserves in respect of continuing businesses acquired prior to 1998 is £25.9 million (2018: £25.9 million). On transition to IFRS, the revalued amounts of freehold properties were deemed to be the cost of the asset and the revaluation reserve has been transferred to retained earnings and other reserves.

Shares purchased by the Trinity Mirror Employee Benefit Trust (the 'Trust') are included in retained earnings and other reserves at £3.8 million (1 July 2018: £4.4 million and 30 December 2018: £4.3 million). During the period, 425,946 were released relating to grants made in prior years (26 weeks ended 1 July 2018: 421,066 and 52 weeks ended 30 December 2018: 480,280). During the period, 1,998,167 awards were granted to Executive Directors on a discretionary basis under the Long Term Incentive Plan (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018: 1,529,406). The exercise price of the granted awards is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions and are required to be held for a further two years. During the period, 2,593,910 awards were granted to senior managers on a discretionary basis under the Senior Management Incentive Plan (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018: 1,709,295). The exercise price of the granted awards is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions. During the period 77,399 awards were granted to senior managers under the Restricted Share Plan (26 weeks ended 1 July 2018 and 52 weeks ended 30 December 2018: nil). The awards vest after three years, subject to the continued employment of the participant.

17. Reconciliation of statutory to adjusted results

26 weeks ended 30 June 2019 (unaudited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	352.6	-	-	352.6
Operating profit	63.7	7.6	-	71.3
Profit before tax	58.2	7.6	4.1	69.9
Profit after tax	47.0	6.2	3.3	56.5
Basic earnings per share (p)	15.9	2.1	1.1	19.1

26 weeks ended 1 July 2018 (unaudited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	353.8	-	-	353.8
Operating (loss)/profit	(107.3)	173.8	-	66.5
(Loss)/profit before tax	(113.5)	173.8	4.4	64.7
(Loss)/profit after tax	(113.1)	161.8	3.6	52.3
Basic (loss)/earnings per share (p)	(39.4)	56.3	1.3	18.2

52 weeks ended 31 December 2018 (audited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	723.9	-	-	723.9
Operating (loss)/profit	(107.6)	253.2	-	145.6
(Loss)/profit before tax	(119.9)	253.2	8.6	141.9
(Loss)/profit after tax	(119.6)	226.8	7.0	114.2
Basic (loss)/earnings per share (p)	(41.0)	77.8	2.4	39.2

(a) Operating adjusted items relate to the items charged or credited to operating profit as set out in note 5.

(b) Pension finance charge relating to the defined benefit pension schemes as set out in note 13.

Set out on page 2 is the rationale for the alternative performance measures adopted by the Group. The reconciliations in this note highlight the impact on the respective components of the income statement. Items are adjusted for where they relate to material items in the year (impairment, restructuring, disposals) or relate to historic liabilities (historical legal issues, defined benefit pension schemes which are all closed to future accrual).

18. Reconciliation of statutory revenue categories

2018 Categories	26 weeks ended 1 July 2018 (unaudited) £m	Reclassification £m	26 weeks ended 1 July 2018 (unaudited) £m	2019 Categories
Publishing Print	282.0	24.4	306.4	Print
Circulation	175.7	-	175.7	Circulation
Advertising	88.5	6.9	95.4	Advertising
Printing	-	17.5	17.5	Printing
Other	17.8	-	17.8	Other
Publishing Digital	48.4	(6.9)	41.5	Digital
Display & Transactional	41.5	-	41.5
Classified	6.9	(6.9)	-
Printing	17.5	(17.5)	-
Specialist Digital	4.7	(4.7)	-
Central	1.2	4.7	5.9	Other
Total revenue	353.8	-	353.8	Total revenue

2018 Categories	52 weeks ended 30 December 2018 (audited) £m	Reclassification £m	52 week s ended 30 December 2018 (audited) £m	2019 Categories
Publishing Print	575.4	47.9	623.3	Print
Circulation	362.1	-	362.1	Circulation
Advertising	176.7	12.3	189.0	Advertising
Printing	-	35.6	35.6	Printing
Other	36.6	-	36.6	Other
Publishing Digital	103.6	(12.3)	91.3	Digital
Display & Transactional	91.3	-	91.3
Classified	12.3	(12.3)	-
Printing	35.6	(35.6)	-
Specialist Digital	8.0	(8.0)	-
Central	1.3	8.0	9.3	Other
Total revenue	723.9	-	723.9	Total revenue

19. Reconciliation of statutory to like for like revenue

	26 weeks ended 1 July 2018 (unaudited) £m	(a) £m	(b) £m	(c) £m	26 weeks ended 1 July 2018 (unaudited) £m
Print	306.4	26.7	(4.5)	-	328.6
Circulation	175.7	17.5	(0.5)	-	192.7
Advertising	95.4	7.3	(3.9)	-	98.8
Printing	17.5	0.5	-	-	18.0
Other	17.8	1.4	(0.1)	-	19.1
Digital	41.5	3.2	(0.3)	-	44.4
Other	5.9	-	-	(2.4)	3.5
Total revenue	353.8	29.9	(4.8)	(2.4)	376.5

(a) Inclusion of Express & Star assuming owned by the Group from the beginning of 2018.

(b) Metro handed back to DMGT in December 2018 and other portfolio changes in 2018.

20. Contingent liabilities

There is the potential for further liabilities to arise from the outcome or resolution of the ongoing historical legal issues (note 15). At this stage, due to the uncertainty in respect of the nature, timing or measurement of any such liabilities, we are unable to reliably estimate how these matters will proceed and their financial impact.

Report on the Condensed interim consolidated financial statements

Our conclusion

We have reviewed Reach plc's Condensed interim consolidated financial statements (the "interim financial statements") in the Half-Yearly Financial Report of Reach plc for the 26 week period ended 30 June 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the Consolidated balance sheet as at 30 June 2019;

· the Consolidated income statement and Consolidated statement of comprehensive income for the period then ended;

· the Consolidated cash flow statement for the period then ended;

· the Consolidated statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the Half-Yearly Financial Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual consolidated financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half-Yearly Financial Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-Yearly Financial Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Half-Yearly Financial Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half-Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

29 July 2019

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