Half-year Report

Reach PLC

25 July 2023

Reach plc - Interim Results - 26 weeks to 25 June 2023

25 July 2023

Customer Value Strategy driving stronger, more sustainable revenue

Cost actions support stronger H2 performance; full year profit expectations maintained

Jim Mullen Chief Executive

"We continue to execute on our Customer Value Strategy, which is driving higher quality, more sustainable digital revenues. Digital growth for the period has been materially affected by lower referral traffic across the sector, particularly following Facebook's deprioritisation of news content, which has driven page view declines for publishers.

In spite of this and continued macroeconomic uncertainty, our focus on customer data means we're driving more diversified, higher performing revenues, with greater exposure to directly sold, higher value advertising. Our scale audience and base of registered customers supports the growth of first party data, a key advantage in a market moving closer to a future without third party cookies.

The ongoing resilience and predictability of print underpins continued investment in a strong digital offering, with circulation revenue growing and newsprint costs starting to decline. Cash generation is supported by a focus on driving efficiencies, with cost reductions on plan and expected to support a stronger second half performance. We expect full year profits for 2023 to be in line with the current market consensus. The business has a strong balance sheet which supports long term growth, dividend and pension commitments. "

Business Highlights

Digital revenue impacted by sector decline in page views, data-led outperformance improves digital mix

•	Data-driven revenue⁽¹⁾ continues to outperform; now representing 41% of digital (H122: 35%, FY19: 24%)
•	Overall digital revenue reflects 16% page view decline (2% excluding Facebook) and lower open market yields
•	Registrations 13.2m (H122: 11.5m) with 5.4m 28 day actives
•	US operation established; editorial team of more than 30, Express.com launched, Mirror.com live in coming months
•	Innovation continuing; agreements to share Mantis data with Google and Amazon and trials of metered paywalls

Growing circulation revenue, cost action phasing supports stronger H2 profit delivery

•	Strong print circulation performance - revenue up by 2% and volumes in line with our expectations
•	Newsprint pricing beginning to decline driven by lower cost of energy
•	On track to deliver 5-6% reduction in overall operating cost base, with the majority of savings during H2

Results Overview

Financial Summary
26 weeks to 25 June 2023		Adjusted results⁽²⁾			Statutory results
		2023	2022	Change	2023	2022	Change
Revenue	£m	279.4	297.4	(6.1%)	279.4	297.4	(6.1%)
Operating costs	£m	244.6	251.6	2.8%	268.9	263.6	(2.0%)
Operating profit	£m	36.1	47.2	(23.5%)	11.1	34.5	(67.8%)
Earnings per share	Pence	8.7	12.0	(27.5%)	1.5	8.1	(81.5%)
Net (debt)/cash	£m	(3.5)	43.8	NA	(3.5)	43.8	NA
Dividend per share	Pence	2.88	2.88	-	2.88	2.88	-

Group revenue down 6.1% - strong circulation performance; page view decline impacting digital

•	Print £217.3m (H122: £223.4m) down 2.7%, circulation up 2.4%, advertising down 18.3%
•	Digital revenue £60.8m (H122: £72.5m) down 16.1%; data-led revenue £24.9m broadly flat but outperforming; with other digital down 24% to £35.9m (H122: £47.2m) predominantly driven by page view decline
•	Circulation growth reflects print resilience; volumes continuing as expected after latest price increases
•	Print advertising revenue continuing to move in line with circulation volumes

Quarterly Year-on-Year Revenue Movements

2023	Q1 YOY %	Q2 YOY %	H1 YOY %
Digital Revenue	(13.4%)	(18.7%)	(16.1%)
Print Revenue	(3.0%)	(2.5%)	(2.7%)
- circulation revenue	2.6%	2.2%	2.4%
- advertising revenue	(21.1%)	(15.7%)	(18.3%)
Group Revenue	(5.6%)	(6.5%)	(6.1%)

Newsprint inflation easing, cost reduction running to plan - savings H2 weighted

•	Adjusted operating profit of £36.1m down £11.1m or 23.5% (H122: £47.2m); reflecting decline in revenue
•	Significant reduction in wholesale energy costs driving quarter on quarter reduction in the price of newsprint
•	Lower overall operating costs; on track for full year reduction of 5-6% with savings H2 weighted
•	Statutory operating profit of £11.1m (H122: £34.5m) down 67.8%, driven by revenue decline and an increase in adjusting items, £25.0m (H122: £12.7m), which include the legal costs of the HLI trial and higher restructuring charges in relation to cost savings
•	Statutory EPS of 1.5p (H122: 8.1p) down 81.5% due to lower operating profit

Pensions

•	The IAS19 pension accounting deficit (net of deferred tax) at the half year was £106.4m (FY22: £113.9m), with the increase in discount rate and contributions, offset by reduction in asset values
•	We continue to work with Trustees of the one remaining scheme to achieve resolution of the 2019 triennial review of pensions. Discussions with Trustees around the 2022 triennial review of pension commitments now ongoing

Cash & Capital Allocation

•	Lower adjusted operating cash flow⁽³⁾ of £18.9m (H122: £39.2m) reflects both lower in period profit and restructuring payments £12.1m (H122: £4.0m) following cost reduction plans
•	Net debt⁽⁴⁾ of £3.5m is a decrease in cash of £28.9m versus the FY22 closing position of £25.4m. The movement includes payments of £3.5m related to historical legal issues and the £7.0m final deferred consideration in respect of the Express & Star. Credit facility of £120m had a drawing of £15.0m at the reporting date
•	Interim dividend proposed of 2.88 pence per share (H122: 2.88p) reflecting Board's confidence in the resilience of the Reach business model and understanding of the importance of dividends to shareholders

Full Year Outlook

We remain on track with expectations for the full year, despite macroeconomic uncertainty and the year on year decline in page views. Although external factors are impacting digital growth for 2023, our focus on customer engagement and diversifying digital revenues is helping to mitigate the impact and we expect to benefit from less demanding second half comparatives.

In print, while we annualise the uplift from last year's cover price changes during H2, revenues remain resilient and predictable, with lower newsprint prices supporting profitability.

Plans to reduce full year operating costs by 5-6% are on track with H2 weighted savings supporting profit expectations for 2023 which remain in-line with the current market consensus.⁽⁵⁾

The High Court trial around historic legal issues has now concluded - we expect a judgement on time limitation during the autumn. The balance sheet remains strong with full year cash conversion benefiting from an improved working capital position. We expect a small net debt position at the year end. Reach is well positioned to benefit when external conditions improve, with more diversified revenues, growing customer engagement and audience expansion supporting a stronger digital future.

Notes

(1)	Includes revenue from advertising activity which utilises data generated via registrations, audience behavioural or Mantis contextual. It also includes other strategically driven revenues, less dependent on audience volumes such as affiliates, partnerships and ecommerce. Revenues included in 'data-driven' has been revised to reflect the continued evolution of the Customer Value Strategy. Comparatives have been restated to reflect this change. Full disclosure of historic comparatives can be found within the Finance Review and in the appendices of our interims slide presentation.
(2)	Set out in note 18 is the reconciliation between the statutory and adjusted results. The current period is for the 26 weeks ended 25 June 2023 ('2023') and the comparative period is for the 26 weeks ended 26 June 2022 ('2022').
(3)	An adjusted cash flow is presented in note 19 which reconciles the adjusted operating profit to the net change in cash and cash equivalents. Note 20 provides a reconciliation between the statutory and adjusted cash flows.
(4)	Net debt balance comprises cash and cash equivalents of £11.5m (note 14) less bank borrowings of £15.0m (note 14) but excludes lease obligations.
(5)	Market expectations compiled by the Company are an average of analyst published forecasts - consensus adjusted operating profit for FY23 £94.9m.

Enquiries

Reach
Jim Mullen, Chief Executive Officer Darren Fisher, Chief Financial Officer Lija Kresowaty, Head of External Communications Matt Sharff, Investor Relations Director	communications@reachplc.com 07341 470 722
Teneo	reachplc@teneo.com
Giles Kernick / David Allchurch	020 7353 4200

Jim Mullen, Chief Executive Officer and Darren Fisher, Chief Financial Officer will be hosting a webcast at 9:00am (BST) on 25 July 2023. It will be followed by a live question and answer session.

The presentation slides will be available on www.reachplc.com from 7.00am (BST). An archive of all materials, including a Q&A transcript will also be available after the event.

You can join the webcast to watch the presentation or listen to the Q&A via the following weblink, which you can copy and paste into your browser: https://edge.media-server.com/mmc/p/9bcqwxcf

To participate in the Q&A session and register to ask a question, please access the following weblink and register your details https://register.vevent.com/register/BI4ad40d19b9cd48bbb4cf13a12c7d0ad4

Please try to allow at least 10 minutes prior to the start time to provide sufficient time to access the event.

Forward looking statements

This announcement has been prepared in relation to the financial results for the 26 weeks ended 25 June 2023. Certain information contained in this announcement may constitute 'forward-looking statements', which can be identified by the use of terms such as 'may', 'will', 'would', 'could', 'should', 'expect', 'seek, 'anticipate', 'project', 'estimate', 'intend', 'continue', 'target', 'plan', 'goal', 'aim', 'achieve' or 'believe' (or the negatives thereof) or words of similar meaning. Forward-looking statements can be made in writing but also may be made verbally by members of management of the Company (including, without limitation, during management presentations to financial analysts) in connection with this announcement. These forward-looking statements include all matters that are not historical facts and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, changes in global or regional trade conditions, changes in tax rates, liquidity, prospects, growth and strategies. By their nature, forward-looking statements involve risks, assumptions and uncertainties that could cause actual events or results or actual performance or other financial condition or performance measures of the Company to differ materially from those reflected or contemplated in such forward-looking statements. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements. The forward-looking statements reflect knowledge and information available at the date of this announcement and the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information or to reflect any change in circumstances or in the Company's expectations or otherwise.

Chief Executive's Review

Execution of strategy supports long term growth

We are executing our strategy and creating a platform for digitally led growth over the long term. While external market conditions have impacted our financial performance, limiting our near term growth potential, we are committed to strengthening and diversifying our digital offering, ensuring that we're well positioned to grow as the macro environment improves.

Our strategy is focused around getting to know our customers better, using data-led insights to create more relevant content and a more engaging customer experience. And we are delivering. With a greater proportion of revenue now supported by first party data, we are diversifying digital revenues and generating more from higher value advertising while reducing our reliance on the open market. Since implementing the Customer Value Strategy in 2019, we have registered close to 30% of our UK audience, with just over 40% of digital revenue now 'data-driven' which will grow further as advertisers continue to seek alternatives to third party cookie based targeting.

Near term digital performance held back by external factors

In the near term, it's clear that performance reflects significant external headwinds, which have inflated operating costs and suppressed topline growth.

While group revenue continues to benefit from strong and predictable print circulation, digital has been held back by a decline in traffic which is affecting the sector more broadly. Following a three-year period in which the business generated around 10% annual growth in page views (from c.1.3bn per month to 1.7bn per month) recent changes to Facebook's news feed have driven a significant decrease in customers being referred to our sites. As a result, page views during H1 fell by 16% (2% excl. Facebook) to 1.4bn which was a material driver of digital revenue decline in the period.

Driving deeper engagement; growing new audiences

Despite this, we remain the UK's largest commercial publisher and sixth largest digital business with an audience equal to three quarters of the digital population¹. We have 13.2 million registered customers, with 5.4 million active on a monthly basis (up 14%).

Engagement is central to our digital strategy and we're continually exploring new ways to build stronger relationships with our wider audience. During the period, this included both web push browser notifications and the use of WhatsApp Communities, in addition to our well established roster of newsletters, as part of a focus on broadening the ways we directly communicate with customers.

We continue to upgrade our machine learning tools to improve the site experience and extend customer time on site, with further upgrades in content recommendation tools. We're also continuing to drive a better on-site customer experience with the trial of a new front end platform which should improve page load speeds which is key to how our sites rank in search.

The expansion of our US business is progressing well with an editorial staff of more than 30 now up and running in our New York office. We're seeing a good pick up of our US content by aggregators like MSN and expect to drive a growing level of on site traffic during H2 following the recent launch of the Express US site and Mirror, which launches shortly.

Diversifying revenues

As well as using data to grow engagement and differentiate our ad supply, we've continued to focus on areas less dependent on direct customer volumes. Our development of revenues from ecommerce, partnerships and affiliates in particular are all supporting the growing proportion of data-driven revenues.

We've made good progress on the development of curated marketplace revenues, signing new data partnerships with Google, Microsoft and Amazon. The Google Ad Exchange agreement is the first time that publisher data has been used to enrich the value of ad slots on the open market, while the Amazon deal makes Reach the first external partner hosting ads with first party data signals on behalf of the site's own ad sales operation. We're also exploring opportunities for direct customer revenues, testing a metered paywall on the M.E.N. app and introducing a series of paid for newsletters.

(1)	Data from Ipsos Iris - Reach average UK audience Jan-May 2023: 37.2m (Jan-May 2022: 38.6m). Total UK internet population Jan-May 2023: 50.0m (Jan-May 2022: 49.9m)

Exploring AI opportunities

We continue to explore the ways in which AI could benefit our business, with our ad tech, product and editorial teams working closely on several pilot initiatives as we test and learn. We are in the early stages, focusing on the ways that tools can improve efficiency, for example in interrogating data and information gathering, potentially freeing up time to produce more content. While we do this work, it's important we maintain trust with our audience and advertisers, which is why we've also been establishing editorial principles for transparency, for example, making clear to readers when AI tools have been used in creating a story.

Growth in circulation revenue supports strong print cashflow

The performance of our print business remains resilient. Circulation revenue grew during the period by just over 2%, volumes continue to be predictable and advertising has been robust, moving in-line with newspaper volumes and down c.18%. With over 70% of print revenue generated by circulation, revenue and cashflow are supported by the habitual nature of newspaper consumption - one in five UK adults read a Reach print title last month. Revenue growth in H1 has been driven by cover price increases, but also through the growing use of themed one-off specials. These one-off publications included 'Rising Dragons', a celebration of Wrexham's promotion to league two, 'Treble Winners' a Man City souvenir publication and 'Love TV', a celebration of the best of British television.

We continue to think creatively around maximising value from our print assets. The Reach Sport business continues to grow revenue from programme production and sales for Premier League clubs, with the Rugby World Cup to come during H2. We're also consolidating our archival assets with over 200 million original photographs helping grow revenue through syndication and licensing.

Revenue management is also supported by detailed footfall and frequency modelling which means we align volume supplied and availability by outlet type. Since 2019 we have increased availability from c.80% to c.90% across key national and regional titles to support this. Continuous improvement of production and distribution ensures we maximise sales at lowest cost. We're reducing the cost of energy in print sites with the installation of solar panels, have lowered the cost of ink and printing plates and expect to benefit from reducing newsprint costs during H2.

Telling the stories of our communities

This year our local titles have done a tremendous job telling the stories of their communities, whether uncovering injustices or celebrating the happy moments. The Manchester Evening News has earned well-deserved recognition for their Awaab's Law investigation and campaign. Their exposé into the housing shortfalls in Rochdale and the tragic death of Awaab Ishak earned them Scoop of the Year at the Regional Press Awards, an Orwell Prize shortlisting and an INMA Global Media Award. SussexLive also dug deep into their own local housing crisis, with a special investigation, while Nottinghamshire Live sensitively led the way on the tragic university murders that have shaken the community.

Meanwhile, our national newsbrands continue to break the stories which rock the political landscape, notably this year the Sunday Mail in Scotland which first broke the story on the SNP membership scandal.

And so often our titles excel at bringing out the fun in life. WalesOnline have made the most of Wrexham FC becoming an unlikely celeb hotspot, the Liverpool Echo made themselves the trusted guide to all things Eurovision, and the Daily Star continue to turn heads with their irreverent front pages, whether covering politics or UFOs. Their world-famous Lizzie Lettuce continued her hot streak well into 2023, with the team taking home a bronze from the prestigious Cannes Lions International Festival of Creativity.

We also continue to tell stories in different ways, whether with the written word, snappy videos or with podcasts. Our increasingly popular Curiously TikTok channel has found particular success reaching a younger audience with wellness, pop culture and gaming content and these learnings have also proven useful in informing the video strategies of our more established newsbrands.

We've won several awards for our podcasts this year so far, including the Northern Agenda winning Best Local & Community Podcast at the Publisher Podcast Awards, and our commercial team winning in the branded content category at the Campaign Media Awards for their Let's Talk About Grief Podcast for Co-op, while our D&I team won Best New Podcast at the Quill Podcast Awards for their D&I Spy podcast.

Building our culture around sustainability

The challenges currently faced by businesses, their people, their customers and by society in general are significant. We've made real progress to ensure we're sustainable and able to grow as these challenges subside. The changes we're making are not always easy and I want to recognise the dedication of everyone at Reach and thank them for their hard work and professionalism as we continue to deliver our strategy and evolve.

Now that we have built a formalised ESG framework and strategy, we continue to gather the data we need to build a clearer picture of Scope 3 emissions - this essential work will inform our science based targets and net zero goals. Just to name one example of progress in this area, this summer our teams are working to install 9000m² of solar panels at our print sites in Watford, Glasgow and Oldham, a project which will be not only environmentally friendly but both cost and energy efficient.

A key part of our sustainability roadmap is to better educate and engage all of our colleagues in our efforts, and our newest colleague network, called ReachSustainability, will play a crucial role in this work. Earlier this spring our gender equality network, ReachEquality, and the industry body Women in Journalism, worked together with our Online Safety Editor Dr Rebecca Whittington to deliver a groundbreaking piece of research, which received widespread industry praise and paved the way for further cross-industry cooperation to find solutions. Keeping our journalists safe remains one of our top priorities and we are proud to be leading the way in this area.

Continuing to drive efficiencies

Increased inflation had a significant impact on our profitability during 2022, particularly due to a 60% increase in the like for like cost of newsprint. To help mitigate the impact of external headwinds we announced plans to reduce our operating cost base by 5-6% for the year. We remain on track with those plans which are enabling continued investment in digital expansion and are expected to deliver stronger H2 profits.

Addressing future cashflows - HLI and pensions

The High Court trial relating to allegations of historical voicemail interception and other forms of unlawful information gathering which was heard in May and June, has now completed. We expect a judgement around time limitation during the Autumn.

We have concluded the 2019 triennial valuation review of pension commitments for five of the six Group's defined benefit pension schemes. We are continuing discussions with trustees of the MGN scheme. Discussions on the 2022 triennial valuation reviews are now underway for all of the groups' schemes.

Balance sheet strength underpins cash commitments

The reliability of our cash flows and strength of our balance sheet provides a strong base for the growth in the long term. It ensures we can continue to build our digital capabilities and support all ongoing commitments, to both pension holders and to investors.

Jim Mullen

Chief Executive Officer

25 July 2023

Finance Review

While we continue to deliver our Customer Value Strategy our first half digital performance reflects a significant reduction in page views from Facebook which is impacting the whole sector, and the impact of ongoing macroeconomic uncertainty. Print revenue has been robust, with growth in circulation revenues driven by cover price increases. The cost reduction plans we put in place at the start of the year have helped to mitigate the ongoing impact of inflation, with overall operating costs lower by around 3%, partly offsetting the impact of lower revenue on operating profit.

Our statutory performance reflects a period on period increase in adjusted items, which include the legal costs of the HLI trial and higher restructuring charges in relation to cost reduction plans. The Group has a strong balance sheet and liquidity with a closing cash balance of £11.5m and a £15.0m drawdown on the facilities resulting in a net debt position of £3.5m. The expiry date of the Group's revolving credit facility of £120.0m is November 2026.

Summary income statement

	Adjusted 2023 £m	Adjusted 2022 £m	Statutory 2023 £m	Statutory 2022 £m
Revenue	279.4	297.4	279.4	297.4
Costs	(244.6)	(251.6)	(268.9)	(263.6)
Associates	1.3	1.4	0.6	0.7
Operating profit	36.1	47.2	11.1	34.5
Finance costs	(1.3)	(1.3)	(4.4)	(2.5)
Profit before tax	34.8	45.9	6.7	32.0
Tax charge	(7.6)	(8.5)	(2.1)	(6.8)
Profit after tax	27.2	37.4	4.6	25.2
Earnings per share - basic	8.7	12.0	1.5	8.1

Group revenue fell by £18.0m or 6.1% with print down 2.7% and digital revenue down 16.1%.

Adjusted costs decreased by £7.0m or 2.8%, partially offsetting the decline in revenue. The H1 cost base benefitted from newsprint cost inflation easing and cost savings delivered through the ongoing cost programme. Statutory costs were higher by £5.3m or 2.0%, driven by the increase in operating adjusted items of £12.3m (£24.3m in 2023 versus £12.0m in 2022).

Adjusted operating profit declined £11.1m or 23.5%. The adjusted operating margin of 12.9% in 2023 compares to 15.9% for 2022. Statutory operating profit decreased by £23.4m or 67.8% primarily due to the increase in operating adjusted items.

Adjusted earnings per share decreased by 3.3p or 27.5% to 8.7p. Statutory earnings per share decreased by 6.6p to 1.5p, principally due to the decrease in operating profit.

Revenue

	2023 Actual £m	2022 Actual £m
Print	217.3	223.4
Circulation	155.4	151.8
Advertising	37.0	45.3
Printing	10.3	11.5
Other	14.6	14.8
Digital	60.8	72.5
Other	1.3	1.5
Total revenue	279.4	297.4

	Actual Q1 2023 YOY %	Actual Q2 2023 YOY %	Actual H1 2023 YOY %	Actual H1 2022 YOY %
Digital revenue	(13.4)	(18.7)	(16.1)	5.4
Print revenue	(3.0)	(2.5)	(2.7)	(3.9)
Circulation	2.6	2.2	2.4	(5.1)
Advertising	(21.1)	(15.7)	(18.3)	(9.9)
Total Revenue	(5.6)	(6.5)	(6.1)	(1.6)

Revenue bridge

	Actual £m	YOY %
2022HY revenue	297
Circulation	3	2.4
Advertising	(8)	(18.3)
Printing	(1)	(10.4)
Other	-	(1.4)
Print	(6)	(2.7)
Digital	(12)	(16.1)
Other	-	(13.3)
2023HY revenue	279	(6.1)

Print revenue decreased by £6.1m or 2.7% (2022: down 3.9%).

Strong circulation performance with revenue up 2.4% (2022: down 5.1%) for the period driven by cover price increases, which were above recent historical levels during the second half of 2022.

Print advertising revenue declined 18.3% (2022: down 9.9%). H122 benefited from elevated government spending on public health messaging during the period. Entertainment, media and retail were the biggest drivers on the year on year decline partially offset by growth in holidays and travel and a small decline in telecoms.

Print revenue also includes external or third-party printing revenues and other print-related revenues. Printing revenue decreased by 10.4% (2022: up 19.8%) impacted by the year end closure of one print plant which reduced spare capacity available for third-party printing. Other print revenue decreased marginally by 1.4% (2022: up 18.4%).

Digital revenue decreased by 16.1% to £60.8m (2022: £72.5m). Revenue has been impacted by lower advertising demand in a continued period of macroeconomic uncertainty and due to a material impact from reduced page views following Facebook's deprioritisation of news content which has driven a reduction in referral traffic for publishers across the sector. Strategically driven or 'data-led revenues' of £24.9m were down 1.2% and now represent 41% of digital (2022 35%, FY2019 24%).

Revised data-driven revenue definition

As explained in footnote 1 on page 3, the definition of 'data-driven' revenue has been revised to reflect the continued evolution of the Customer Value Strategy. This includes revenue from advertising activity which utilises data generated via registrations, audience behavioural or Mantis contextual. It also includes other strategically driven revenues, less dependent on audience volumes such as affiliates, partnerships and ecommerce. Comparatives have been restated to reflect this change. As previously disclosed, data-driven revenues were; £12.5m in H12021, £30.6m in FY2021, £22.5m in H12022, £47.7m in FY2022. Under revised definition those comparatives are; £16.6m in H12021, £37.8m in FY2021, £25.2m in H12022, £57.6m in FY2022.

Costs

	Adjusted 2023 £m	Adjusted 2022 £m	Statutory 2023 £m	Statutory 2022 £m
Labour	(114.5)	(119.0)	(114.5)	(119.0)
Newsprint	(33.4)	(38.8)	(33.4)	(38.8)
Depreciation and amortisation	(10.3)	(9.9)	(10.3)	(9.9)
Other	(86.4)	(83.9)	(110.7)	(95.9)
Total costs	(244.6)	(251.6)	(268.9)	(263.6)

Adjusted costs of £244.6m (2022: £251.6m) decreased by £7.0m or 2.8%. This was driven by reduction in circulation volumes, in addition to reduced labour costs as a result of our cost reduction programme. Other costs increased due to continued inflation on overheads. Statutory costs were higher by £5.3m or 2.0% primarily due to higher operating adjusted items which were £12.3m higher at £24.3m.

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

	Statutory 2023 £m	Statutory 2022 £m
Provision for historical legal issues	(5.9)	(5.9)
Restructuring charges in respect of cost reduction measures	(10.2)	(5.4)
Pension administrative expenses	(2.6)	(2.2)
Other items	(5.6)	1.5
Operating adjusted items in statutory costs	(24.3)	(12.0)

The Group has incurred a £5.9m (2022: £5.9m) increase in the provision for historical legal issues relating to the costs associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering.

Restructuring charges of £10.2m (2022: £5.4m) incurred in respect of cost reduction measures are principally severance costs that relate to cost management actions taken in the period.

Pension costs of £2.6m (2022: £2.2m) comprise external pension administrative expenses.

Other adjusted items comprise the Group's legal fees in respect of historical legal issues (£4.6m), adviser costs in relation to the triennial funding valuations (£1.2m), internal pension administrative expenses (£0.3m) and corporate simplification costs (£0.2m), less a reduction in National Insurance costs relating to share awards (£0.4m) and the profit on sale of impaired assets (£0.3m).

In 2022 other adjusted items related to adviser costs in relation to pension valuation costs (£0.8m), less a reduction in National Insurance costs relating to share awards (£1.9m) and the profit on sale of an impaired asset (£0.4m).

Profit

Adjusted operating profit of £36.1m was down £11.1m or 23.5% reflecting the decline in revenue of 6.1% partially offset by a decrease in adjusted operating costs of 2.8%.

This is also reflected in our adjusted operating margin which decreased by 3.0 percentage points from 15.9% in 2022 to 12.9% in 2023.

Adjusted operating profit bridge	Adjusted £m	YOY %
2022HY adjusted operating profit	47
Revenue mix	(18)
Inflation	(8)
Investment	(5)
Efficiencies	22
Other	(2)
2023HY adjusted operating profit	36	(24%)

Reconciliation of statutory to adjusted results

2023	Statutory results £m	Operating adjusted items £m	Pension finance charge £m	Adjusted results £m
Revenue	279.4	-	-	279.4
Operating profit	11.1	25.0	-	36.1
Profit before tax	6.7	25.0	3.1	34.8
Profit after tax	4.6	20.2	2.4	27.2
Basic earnings per share (p)	1.5	6.4	0.8	8.7

The Group excludes from the adjusted results: operating adjusted items and the pension finance charge. Adjusted items relate to costs or income that derive from events or transactions that fall within the normal activities of the Group, but are excluded from the Group's adjusted profit measures, individually or, if of a similar type in aggregate, due to their size and/or nature in order to better reflect management's view of the performance of the Group.

Items are adjusted on the basis that they distort the underlying performance of the business where they relate to material items that can recur (including impairment, restructuring and tax rate changes) or relate to historic liabilities (including historical legal and contractual issues, defined benefit pension schemes which are all closed to future accrual).

Other items may be included in adjusted items if they are not expected to recur in future years, such as the property rationalisation in the previous years and items such as transaction and restructuring costs incurred on acquisitions or the profit or loss on the sale of subsidiaries, associates or freehold buildings.

Management excludes these from the results that it uses to manage the business and on which bonuses are based to reflect the underlying performance of the business and believes that the adjusted results, presented alongside the statutory results, provide users with additional useful information. Further details on the items excluded from the adjusted results are set out in note 5.

Balance sheet and cash flows

Historical legal issues provision

The historical legal issues provision relates to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering. Payments of £3.5m have been made during the year and the provision has been increased by £5.9m. At the half year a provision of £45.4m remains outstanding and this represents the current best estimate of the amount required to resolve this historical matter. Further details relating to the nature of the liability, the calculation basis and the expected timing of payments are set out in note 15.

Decrease in accounting pension deficit

The IAS 19 pension deficit (net of deferred tax) in respect of the Group's defined benefit pension schemes decreased by £7.5m from £113.9m at year end to £106.4m at the half year. The increase in the discount rate and Group contributions has been partially offset by reductions in asset values. The triennial valuations for funding of the defined benefit pension schemes as at 31 December 2019 have been agreed for five of the schemes, with one scheme outstanding. We continue to work with both the Trustees of the one remaining scheme and the Pensions Regulator. The process to determine the 31 December 2022 valutions has now commenced.

During 2022, the Trustees of the Express Newspapers Senior Managers Pension Fund purchased a bulk annuity (at no cost to the Group) and the scheme now has all pension liabilities covered by annuity policies. In 2021, the Trustees of the West Ferry scheme purchased a bulk annuity and the scheme now has all pension liabilities covered by annuity policies. Group contributions in respect of the remaining four defined benefit pension schemes in the first half were £23.3m (2022: £23.0m) under the current schedule of contributions. Contributions in 2023 are expected to be £55.8m under the current schedule of contributions for the four schemes.

Deferred consideration

Deferred consideration is attributable to the acquisition of the Express & Star. The third and final payment of £7.0m was made on 28 February 2023. There is no remaining liability in relation to deferred consideration.

Adjusted cash flow

	£m	£m
Adjusted EBITDA		46
Tax	1
Restructuring	(12)
Capital expenditure	(7)
Lease repayments	(2)
Interest inc. on leases	(1)
Working capital movements	(6)
Adjusted operating cash flow		19
Historical legal issues	(4)
Pension payments	(23)
Dividends	(14)
Adjusted net cash flow		(22)
Payment for Express & Star	(7)
Cash movement		(29)

Cash balances

Net debt at the half year is £3.5m, a result of a £28.9m reduction in cash balances during the year, from a net cash position of £25.4m at the end of 2022. The Group has £15.0m drawn down on the Group's revolving credit facility, with the overall total cash position of £11.5m at the half year. The Group has a revolving credit facility of £120.0m, which expires during November 2026.

Cash generated from operations on a statutory basis was £24.8m (2022: £47.5m). The Group presents an adjusted cash flow which reconciles the adjusted operating profit to the net change in cash and cash equivalents, which is set out in note 19. A reconciliation between the statutory and the adjusted cash flow is set out in note 20. The adjusted operating cash flow was £18.9m (2022: £39.2m).

Dividends

The Board paid a final dividend for 2022 of 4.46 pence per share in June 2023. An interim dividend for 2023 of 2.88 pence per share will be paid on 22 September 2023 to shareholders on the register on 11 August 2023.

In declaring interim dividend of 2.88 pence per share for 2023 (2022: 2.88 pence per share), the Board has considered all investment requirements and its funding commitments to the defined benefit pension schemes.

Principal risks and uncertainties

The Group recognises the importance of the effective understanding and management of risk in enabling us to identify factors, both externally and internally, that may materially affect our ability to achieve our goals. There is an ongoing process for the identification, evaluation and management of the principal risks faced by the Group, including emerging risks. Appropriate mitigating actions are in place to minimise the impact of the risks and uncertainties which are identified as part of the risk process. All risks are considered in the context of our strategic objectives, the changing regulatory and compliance landscape and enabling the continuity of our operations.

These principal risks and uncertainties, the risk appetite in relation to these and the resulting actions are set out in the Reach plc 2022 Annual Report which is available on our website at www.reachplc.com.

The principal risks and uncertainties continue to be: deterioration in macroeconomic conditions; print revenue decline acceleration; insufficient digital revenue growth; cyber security breach; data protection failure; supply chain failure; health and safety issue; lack of funding capability; inability to recruit and retain talent and brand reputation damage.

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 2022 Annual Report. Further information is set out in the Reach plc 2022 Annual Report.

At the half year, the directors have reviewed the going concern assessment, specifically any potential impact of the downturn in pages views experienced in the digital market during 2023. The Group undertakes regular forecasts and projections of trading, identifying areas of focus for management to improve delivery of the Strategy and to continue to mitigate the current impact of macroeconomic headwinds. The Group has a strong balance sheet and liquidity with a cash balance of £11.5m. The Group has drawn £15.0m of its revolving credit facility which expires during 2026, with £105.0m remaining available.

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 UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' 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.

By order of the Board of Directors

Darren Fisher

Chief Financial Officer 25 July 2023

Condensed interim consolidated financial statements

Consolidated income statement

for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks ended 25 December 2022)

	notes	Adjusted 26 weeks ended 25 June 2023 (unaudited) £m	Adjusted Items 26 weeks ended 25 June 2023 (unaudited) £m	Statutory 26 weeks ended 25 June 2023 (unaudited) £m	Adjusted 26 weeks ended 26 June 2022 (unaudited) £m	Adjusted Items 26 weeks ended 26 June 2022 (unaudited) £m	Statutory 26 weeks ended 26 June 2022 (unaudited) £m	Adjusted 52 weeks ended 25 December 2022 (audited) £m	Adjusted Items 52 weeks ended 25 December 2022 (audited) £m	Statutory 52 weeks ended 25 December 2022 (audited) £m

Revenue	4	279.4	-	279.4	297.4	-	297.4	601.4	-	601.4
Cost of sales		(178.4)	-	(178.4)	(187.3)	-	(187.3)	(375.7)	-	(375.7)
Gross profit		101.0	-	101.0	110.1	-	110.1	225.7	-	225.7
Distribution costs		(19.1)	-	(19.1)	(19.9)	-	(19.9)	(38.1)	-	(38.1)
Administrative expenses		(47.1)	(24.3)	(71.4)	(44.4)	(12.0)	(56.4)	(84.3)	(33.4)	(117.7)
Share of results of associates		1.3	(0.7)	0.6	1.4	(0.7)	0.7	2.8	(1.4)	1.4
Operating profit		36.1	(25.0)	11.1	47.2	(12.7)	34.5	106.1	(34.8)	71.3
Interest income	6	0.6	-	0.6	-	-	-	0.1	-	0.1
Pension finance charge	13	-	(3.1)	(3.1)	-	(1.2)	(1.2)	-	(2.3)	(2.3)
Finance costs	7	(1.9)	-	(1.9)	(1.3)	-	(1.3)	(2.9)	-	(2.9)
Profit before tax		34.8	(28.1)	6.7	45.9	(13.9)	32.0	103.3	(37.1)	66.2
Tax charge	8	(7.6)	5.5	(2.1)	(8.5)	1.7	(6.8)	(18.8)	4.9	(13.9)
Profit for the period attributable to equity holders of the parent		27.2	(22.6)	4.6	37.4	(12.2)	25.2	84.5	(32.2)	52.3

Earnings per share	Notes	2023 Pence		2023 Pence	2022 Pence		2022 Pence	2022 Pence		2022 Pence
Earnings per share - basic	10	8.7		1.5	12.0		8.1	27.1		16.8
Earnings per share - diluted	10	8.6		1.5	11.7		7.9	26.7		16.5

The above results were derived from continuing operations. Set out in note 18 is the reconciliation between the statutory and adjusted results.

Consolidated statement of comprehensive income

for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks ended 25 December 2022)

	notes	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Profit for the period		4.6	25.2	52.3

Items that will not be reclassified to profit and loss:
Actuarial (loss)/gain on defined benefit pension schemes	13	(7.9)	42.9	(35.0)
Tax on actuarial (loss)/gain on defined benefit pension schemes	8	2.0	(10.7)	7.4
Share of items recognised by associates after tax		-	-	(1.7)
Other comprehensive (loss)/income for the period		(5.9)	32.2	(29.3)

Total comprehensive (loss)/income for the period		(1.3)	57.4	23.0

Consolidated cash flow statement

for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks ended 25 December 2022)

	notes	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m
Cash flows from operating activities
Cash generated from operations	11	24.8	47.5	80.1
Pension deficit funding payments	13	(23.3)	(23.0)	(55.1)
Income tax received/(paid)		0.5	(4.0)	(5.0)
Net cash inflow from operating activities		2.0	20.5	20.0
Investing activities
Interest received		0.3	-	0.1
Dividends received from associated undertakings		-	-	2.5
Proceeds on disposal of property, plant and equipment		0.5	0.4	0.4
Purchases of property, plant and equipment		(1.7)	(3.1)	(3.0)
Expenditure on internally generated development	12	(6.0)	(4.0)	(10.7)
Interest received on leases		0.3	-	-
Finance lease receipts		0.6	-	-
Deferred consideration payment	14	(7.0)	(17.1)	(17.1)
Net cash used in investing activities		(13.0)	(23.8)	(27.8)
Financing activities
Interest and charges paid on bank borrowings		(0.9)	(0.9)	(1.9)
Dividends paid	9	(14.0)	(13.9)	(22.9)
Interest paid on leases		(0.5)	(0.5)	(1.1)
Repayments of obligations under leases		(2.5)	(2.3)	(5.6)
Purchase of own shares	16	-	(1.0)	(1.0)
Drawdown of borrowings		-	-	15.0
Net cash used in financing activities		(17.9)	(18.6)	(17.5)

Net decrease in cash and cash equivalents		(28.9)	(21.9)	(25.3)
Cash and cash equivalents at the beginning of the period	14	40.4	65.7	65.7
Cash and cash equivalents at the end of the period	14	11.5	43.8	40.4

Consolidated statement of changes in equity

for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks ended 25 December 2022)

	Share capital £m	Share premium account £m	Merger reserve £m	Capital redemption reserve £m	(Accumulated loss) / retained earnings and other reserves £m	Total £m

At 26 December 2022 (audited)	32.2	605.4	17.4	4.4	(21.9)	637.5
Profit for the period	-	-	-	-	4.6	4.6
Other comprehensive loss for the period	-	-	-	-	(5.9)	(5.9)
Total comprehensive loss for the period	-	-	-	-	(1.3)	(1.3)
Purchase of own shares	-	-	-	-	-	-
Credit to equity for equity-settled share-based payments	-	-	-	-	0.9	0.9
Dividends paid (note 9)	-	-	-	-	(14.0)	(14.0)
At 25 June 2023 (unaudited)	32.2	605.4	17.4	4.4	(36.3)	623.1

At 27 December 2021 (audited)	32.2	605.4	17.4	4.4	(20.6)	638.8
Profit for the period	-	-	-	-	25.2	25.2
Other comprehensive income for the period	-	-	-	-	32.2	32.2
Total comprehensive income for the period	-	-	-	-	57.4	57.4
Purchase of own shares	-	-	-	-	(1.0)	(1.0)
Credit to equity for equity-settled share-based payments	-	-	-	-	1.1	1.1
Dividends paid	-	-	-	-	(13.9)	(13.9)
At 26 June 2022 (unaudited)	32.2	605.4	17.4	4.4	23.0	682.4

At 27 December 2021 (audited)	32.2	605.4	17.4	4.4	(20.6)	638.8
Profit for the period	-	-	-	-	52.3	52.3
Other comprehensive loss for the period	-	-	-	-	(29.3)	(29.3)
Total comprehensive income for the period	-	-	-	-	23.0	23.0
Purchase of own shares	-	-	-	-	(1.0)	(1.0)
Credit to equity for equity-settled share-based payments	-	-	-	-	1.8	1.8
Deferred tax credit for equity-settled share-based payments	-	-	-	-	(2.2)	(2.2)
Dividends paid	-	-	-	-	(22.9)	(22.9)
At 25 December 2022 (audited)	32.2	605.4	17.4	4.4	(21.9)	637.5

Consolidated balance sheet

at 25 June 2023 (at 26 June 2022 and 25 December 2022)

	notes	25 June 2023 (unaudited) £m	26 June 2022 (unaudited) £m	25 December 2022 (audited) £m
Non-current assets
Goodwill	12	35.9	35.9	35.9
Other intangible assets	12	836.8	827.6	832.9
Property, plant and equipment		134.8	153.1	140.1
Right-of-use assets		11.7	11.1	10.9
Finance lease receivable		9.8	-	10.4
Investment in associates		15.2	18.1	14.6
Retirement benefit assets	13	56.4	94.4	51.2
		1,100.6	1,140.2	1,096.0
Current assets
Inventories		12.7	7.5	12.9
Trade and other receivables		88.2	91.2	95.2
Current tax receivable	8	12.2	13.1	13.9
Finance lease receivable		0.6	-	0.6
Cash and cash equivalents	14	11.5	43.8	40.4
		125.2	155.6	163.0
Total assets		1,225.8	1,295.8	1,259.0
Non-current liabilities
Trade and other payables		(2.8)	(6.2)	(4.5)
Lease liabilities	14	(27.0)	(27.8)	(26.8)
Retirement benefit obligations	13	(197.6)	(185.8)	(202.1)
Provisions	15	(43.7)	(40.6)	(36.6)
Deferred tax liabilities		(189.9)	(201.2)	(191.6)
		(461.0)	(461.6)	(461.6)
Current liabilities
Trade and other payables		(104.6)	(110.5)	(106.7)
Deferred consideration	14	-	(7.0)	(7.0)
Borrowings		(15.0)	-	(15.0)
Lease liabilities	14	(4.5)	(5.9)	(4.9)
Provisions	15	(17.6)	(28.4)	(26.3)
		(141.7)	(151.8)	(159.9)
Total liabilities		(602.7)	(613.4)	(621.5)
Net assets		623.1	682.4	637.5

Equity
Share capital	16	32.2	32.2	32.2
Share premium account	16	605.4	605.4	605.4
Merger reserve	16	17.4	17.4	17.4
Capital redemption reserve	16	4.4	4.4	4.4
(Accumulated loss)/retained earnings and other reserves	16	(36.3)	23.0	(21.9)
Total equity attributable to equity holders of the parent		623.1	682.4	637.5

Notes to the consolidated financial statements

for the 26 weeks ended 25 June 2023 (26 weeks ended 26 June 2022 and 52 weeks ended 25 December 2022)

1. General information

The financial information in respect of the 52 weeks ended 25 December 2022 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' report was unqualified, did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report 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 25 June 2023 and the 26 weeks ended 26 June 2022 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 at the end of this announcement.

The half-yearly financial report was approved by the directors on 25 July 2023. 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 policies

Basis of preparation

The Group's annual consolidated financial statements are prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual profit or loss. There are no material changes to the nature and type of related party transactions since the 2022 Annual Report.

Going concern

Accordingly, the directors have adopted the going concern basis of accounting in the preparation of the Group's 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.

In addition to the accounting policies disclosed in the Group's latest annual consolidated financial statements, the Group also opts to present cash flows relating to the use of its revolving credit facility net where the loans drawn down through use of the facility are repaid within 3 months of the initial draw down.

Alternative performance measures

The Company presents the results on a statutory and adjusted basis and revenue trends on a statutory and like-for-like basis. The Company believes that the adjusted basis and like-for-like trends will provide investors with useful supplemental information about the financial performance of the Group, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key performance indicators used by management in operating the Group and making decisions. Although management believes the adjusted basis is important in evaluating the Group, they are not intended to be considered in isolation or as a substitute for, or as superior to, financial information on a statutory basis. Revenue trends on an actual and like-for-like basis are the same for the 26 weeks ended 25 June 2023. 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 18 sets out the reconciliation between the statutory and adjusted results. An adjusted cash flow is presented in note 19 which reconciles the adjusted operating profit to the net change in cash and cash equivalents. Set out in note 20 is the reconciliation between the statutory and adjusted cash flow.

Adjusted items

Adjusted items relate to costs or incomes that derive from events or transactions that fall within the normal activities of the Group, but are excluded from the Group's adjusted profit measures, individually or, if of a similar type in aggregate, due to their size and/or nature in order to better reflect management's view of the performance of the Group. The adjusted profit measures are not recognised profit measures under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Details of adjusted items are set out in notes 5 and 18.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

Historical Legal Issues (note 15)

The historical legal issues provision relates to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering. There are three parts to the provision: known claims, potential future claims and common court costs. The key uncertainties in relation to this matter relate to how many claims will be received, how each claim progresses, the amount of any settlement and the associated legal costs. Our assumptions have been based on historical trends, our experience and the expected evolution of claims and costs.

During the first half of the year, the associated settlement costs have been ahead of historical trends and experience. This has resulted in a change to the provision estimate and a further charge of £5.9m in the year. At the period end, a provision of £45.4m remains outstanding and this represents the current best estimate of the amount required to resolve this historical matter. The majority of the provision is expected to be utilised within the next three years.

Our view on the range of outcomes at the reporting date for the provision, applying more and less favourable outcomes to all aspects of the provision is £35m to £64m (26 June 2022: £32m to £53m and 25 December 2022: £32m to £56m). However, it is unknown how long it will take to fully resolve this matter and despite making a best estimate of the provision, the timing of utilisation and possible range, the total universe of claims is unknown and there are both ongoing legal matters (including a trial which commenced in May 2023 and finished on 30 June 2023 where we expect a verdict from the trial at some point in the latter part of 2023) and the potential for new legal matters which could mean that the final outcome is outside of the range of outcomes. Due to these unquantifiable uncertainties, a contingent liability has been highlighted in note 17.

Taxation (note 8)

There is uncertainty as to the tax deductibility of expenditure relating to historical legal issues in the current year and additional tax liabilities that may fall due in relation to earlier years. At the reporting date, the maximum amount of the additional unprovided tax exposure relating to this uncertain tax item is £8.4m (26 June 2022: £7.7m and 25 December 2022: £8.1m). There is uncertainty as to the final outcome and timing of this item, with a possible range of outcomes for the potential tax exposure being nil to £28.6m (26 June 2022: nil to £26.2m and 25 December 2022: nil to £27.2m).

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. These result in risk of a volatile valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current assessed liability value. Advice is sourced from independent and qualified actuaries in selecting suitable assumptions at each reporting date.

Impairment review (note 12)

There is uncertainty in the value-in-use calculation. The most significant area of uncertainty relates to expected future cash flows for each cash-generating unit. Determining whether the carrying values of assets in a cash-generating unit are impaired requires an estimation of the value in use of the cash-generating unit to which these have been allocated. The value-in-use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are based on both internal and external market information and reflect past experience. The discount rate reflects the weighted average cost of capital of the Group. 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. For the 26 weeks to 25 June 2023, there have been no indicators of impairment and therefore no review has been undertaken.

Restructuring and property provisions (note 15)

Provisions are measured at the best estimate of the expenditure required to settle the obligation based on the assessment of the related facts and circumstances at each reporting date. There is uncertainty in relation to the size and length of property related provisions.

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, described above, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements:

Indefinite life assumption in respect of publishing rights and titles (note 12)

There is judgement required in continuing to adopt an indefinite life assumption in respect of publishing rights and titles. The directors consider publishing rights and titles (with a carrying amount of £818.7m) have indefinite economic lives due to the longevity of the brands and the ability to evolve them in an ever-changing media landscape. The brands are central to the delivery of the Customer Value Strategy which is delivering digital revenue growth. At each reporting date management review the suitability of this assumption.

Identification of cash-generating units (note 12)

There is judgement required in determining the cash-generating unit relating to our Publishing brands. At each reporting date management review the interdependency of revenues across our portfolio of Publishing brands to determine the appropriate cash-generating unit. The Group operates its Publishing brands such that a majority of the revenues are interdependent and revenue would be materially lower if brands operated in isolation. As such, management do not consider that an impairment review at an individual brand level is appropriate or practical. As the Group continues to centralise revenue generating functions and has moved to a matrix operating structure over the past few years, all of the individual brands in Publishing have increased revenue interdependency and are assessed for impairment as a single Publishing cash-generating unit.

3. Segments

The performance of the Group is presented as a single reporting segment as this is the basis of internal reports regularly reviewed by the Board and chief operating decision maker (executive directors) to allocate resources and to assess performance. The Group's operations are primarily located in the UK and the Group is not subject to significant seasonality during the year.

4. Revenue

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Print	217.3	223.4	448.6
Circulation	155.4	151.8	307.7
Advertising	37.0	45.3	86.9
Printing	10.3	11.5	23.1
Other	14.6	14.8	30.9
Digital	60.8	72.5	149.8
Other	1.3	1.5	3.0
Total revenue	279.4	297.4	601.4

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

5. Operating adjusted items

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Provision for historical legal issues (note 15)	(5.9)	(5.9)	(11.0)
Restructuring charges in respect of cost reduction measures (note 15)	(10.2)	(5.4)	(15.5)
Pension administrative expenses and past service costs (note 13)	(2.6)	(2.2)	(14.8)
Sublet of closed print site	-	-	16.6
Other items (note 18)	(5.6)	1.5	(8.7)
Operating adjusted items included in administrative expenses	(24.3)	(12.0)	(33.4)
Operating adjusted items included in share of results of associates	(0.7)	(0.7)	(1.4)
Total operating adjusted items	(25.0)	(12.7)	(34.8)

Operating adjusted items relate to costs or incomes that derive from events or transactions that fall within the normal activities of the Group, but are excluded from the Group's adjusted profit measures, individually or, if of a similar type in aggregate, due to their size and/or nature in order to better reflect management's view of the performance of the Group. The adjusted profit measures are not recognised profit measures under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Set out in note 18 is the reconciliation between the statutory and adjusted results which includes descriptions of the items included in adjusted items.

The Group has incurred a £5.9m (26 weeks ended 26 June 2022: £5.9m and 52 weeks ended 25 December 2022: £11.0m) increase in the provision for historical legal issues relating to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering (note 15).

Restructuring charges of £10.2m (26 weeks ended 26 June 2022: £5.4m and 52 weeks ended 25 December 2022: £15.5m) incurred in respect of cost reduction measures are principally severance costs that relate to cost management actions taken in the period.

Pension costs of £2.6m (26 weeks ended 26 June 2022: £2.2m and 52 weeks ended 25 December 2022: £14.8m) comprise pension administrative expenses of £2.6m (26 weeks ended 26 June 2022: pension administrative expenses of £2.2m and 52 weeks ended 25 December 2022: pension administrative expenses of £4.2m and past service costs relating to a Barber Window equalisation adjustment of £10.6m).

In the 52 weeks ended 25 December 2022, the sublet of the vacant print site which was closed in 2020 has resulted in the reversal of an impairment in right-of-use assets of £11.0m and previously onerous costs of the vacant print site of £5.6m. The impairment and onerous closure costs of the vacant print site were recognised in operating adjusted items in 2020.

Other adjusted items comprise the Group's legal fees in respect of historical legal issues (£4.6m), adviser costs in relation to the triennial funding valuations (£1.2m), internal pension administration expenses (£0.3m) and corporate simplification costs (£0.2m), less a reduction in National Insurance costs relating to share awards (£0.4m) and the profit on sale of impaired assets (£0.3m).

In the 26 weeks ended 26 June 2022, other adjusted items related to adviser costs in relation to triennial funding valuations (£0.8m), less a reduction in National Insurance costs relating to share awards (£1.9m) and the profit on sale of impaired assets (£0.4m).

In the 52 weeks ended 25 December 2022, other adjusted items comprise the Group's legal fees in respect of historical legal issues (£5.2m), adviser costs in relation to the triennial funding valuations (£1.6m), impairment of vacant freehold property (£4.2m) and plant and equipment (0.8m) less a reduction in National Insurance costs relating to share awards (£2.7m) and the profit on sale of impaired assets (£0.4m).

6. Interest income

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m
Interest income on bank deposits	0.3	-	0.1
Interest on finance lease receivable	0.3	-	-
Interest income	0.6	-	0.1

7. Finance costs

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Interest and charges on bank borrowings	(1.4)	(0.8)	(1.8)
Interest on lease liabilities	(0.5)	(0.5)	(1.1)
Finance costs	(1.9)	(1.3)	(2.9)

8. Tax charge

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Corporation tax charge for the period	(1.8)	(4.4)	(4.5)
Prior period adjustment	-	-	(0.7)
Current tax charge	(1.8)	(4.4)	(5.2)
Deferred tax charge for the period	(0.3)	(2.4)	(9.0)
Prior period adjustment	-	-	0.3
Deferred tax charge	(0.3)	(2.4)	(8.7)
Tax charge	(2.1)	(6.8)	(13.9)

Reconciliation of tax charge			£m
Profit before tax	6.7	32.0	66.2
Standard rate of corporation tax of 23.5% (2022: 19%)	(1.6)	(6.1)	(12.6)
Tax effect of permanent items that are not included in determining taxable profit	(0.1)	(0.8)	(1.2)
Overseas profits taxed at rate lower than UK	(0.5)	-	-
Prior period adjustment	-	-	(0.4)
Tax effect of share of results of associates	0.1	0.1	0.3
Tax charge	(2.1)	(6.8)	(13.9)

The standard rate of corporation tax for the period is 23.5% (2022: 19%). The tax effect of items that are not deductible in determining taxable profit includes certain costs where there is uncertainty as to their deductibility. The current tax receivable amounted to £12.2m (26 June 2022: £13.1m receivable and 25 December 2022: £13.9m receivable). At the reporting date the maximum amount of the unprovided tax exposure relating to uncertain tax items is some £8.4m (26 June 2022: £7.7m and 25 December 2022: £8.1m). There is uncertainty as to the final outcome and timing of this item, with a possible range of outcomes for the potential tax exposure being nil to £28.6m (26 June 2022: nil to £26.2m and 25 December 2022: nil to £27.2m).

The tax on actuarial gains or losses on defined benefit pension schemes taken to the consolidated statement of comprehensive income is a deferred tax credit of £2.0m (26 weeks ended 26 June 2022: charge of £10.7m and 52 weeks ended 25 December 2022: credit of £7.4m).

9. Dividends

	26 weeks ended 25 June 2023 (unaudited) Pence Per share	26 weeks ended 26 June 2022 (unaudited) Pence Per share	52 weeks ended 25 December 2022 (audited) Pence Per share
Amounts recognised as distributions to equity holders in the period
Dividends paid per share - prior year final dividend	4.46	4.46	4.46
Dividends paid per share - interim dividend	-	-	2.88
Total dividend paid per share	4.46	4.46	7.34

Dividend proposed per share but not paid nor included in the accounting records	2.88	2.88	4.46

The Board has approved an interim dividend for 2023 of 2.88 pence per share.

On 3 May 2023, the final dividend proposed for 2022 of 4.46 pence per share was approved by shareholders at the Annual General Meeting and was paid on 2 June 2023. The total dividend payment amounted to £14.0m.

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 25 June 2023 (unaudited) Thousand	25 weeks ended 26 June 2022 (unaudited) Thousand	52 weeks ended 25 December 2022 (audited) Thousand

Weighted average number of ordinary shares for basic earnings per share	313,768	311,636	312,153
Effect of potential dilutive ordinary shares in respect of share awards	3,214	6,848	4,828
Weighted average number of ordinary shares for diluted earnings per share	316,982	318,484	316,981

The weighted average number of potentially dilutive ordinary shares not currently dilutive was 5,614,749 (26 June 2022: 4,414,629 and 25 December 2022: 5,406,814).

Statutory earnings per share	26 weeks ended 25 June 2023 (unaudited) Pence	26 weeks ended 26 June 2022 (unaudited) Pence	52 weeks ended 25 December 2022 (audited) Pence

Earnings per share - basic	1.5	8.1	16.8
Earnings per share - diluted	1.5	7.9	16.5

Adjusted earnings per share	26 weeks ended 25 June 2023 (unaudited) Pence	26 weeks ended 26 June 2022 (unaudited) Pence	52 weeks ended 25 December 2022 (audited) Pence

Earnings per share - basic	8.7	12.0	27.1
Earnings per share - diluted	8.6	11.7	26.7

Set out in note 18 is the reconciliation between the statutory and adjusted results.

11. Cash flows from operating activities

	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Operating profit	11.1	34.5	71.3
Depreciation of property, plant and equipment	6.9	7.7	15.2
Depreciation of right-of-use assets	1.3	1.5	2.9
Amortisation of other intangible assets	2.1	0.7	2.1
Share of results of associates	(0.6)	(0.7)	(1.4)
Share-based payments charge	0.9	0.9	1.5
Impairment of property, plant and equipment	-	-	5.0
Impairment of right-of-use assets	0.2	-	-
Reversal of impairment of right-of-use assets	-	-	(11.0)
Profit on disposal of property, plant and equipment	(0.3)	(0.4)	(0.4)
Pension administrative expenses and past service costs	2.6	2.2	14.8
Operating cash flows before movements in working capital	24.2	46.4	100.0
Decrease/(increase) in inventories	0.2	(2.0)	(7.4)
Decrease in receivables	6.9	11.0	7.2
Decrease in payables	(6.5)	(7.9)	(19.7)
Cash generated from operations	24.8	47.5	80.1

12. Goodwill and other intangible assets

		Other intangible assets
	Goodwill	Publishing rights and titles	Internally generated assets	Total
	£m	£m	£m	£m
Cost
At 25 December 2022 (audited)	189.9	2,100.3	16.7	2,306.9
Additions	-	-	6.0	6.0
At 25 June 2023 (unaudited)	189.9	2,100.3	22.7	2,312.9

Accumulated depreciation and impairment
At 25 December 2022 (audited)	(154.0)	(1,281.6)	(2.5)	(1,438.1)
Charge for the period	-	-	(2.1)	(2.1)
At 25 June 2023 (unaudited)	(154.0)	(1,281.6)	(4.6)	(1,440.2)

Carrying amount
At 25 December 2022 (audited)	35.9	818.7	14.2	868.8
At 25 June 2023 (unaudited)	35.9	818.7	18.1	872.7

During the period, the Group has capitalised internally generated assets relating to software and website development costs of £6.0m (26 weeks ended 26 June 2022: £4.0m and 52 weeks ended 25 December 2022: £10.7m). These assets are amortised using the straight-line method over their estimated useful lives (3-5 years).

Publishing rights and titles are not amortised. There is judgement required in continuing to adopt an indefinite life assumption in respect of publishing rights and titles. The directors consider publishing rights and titles (with a carrying amount of £818.7m) have indefinite economic lives due to the longevity of the brands and the ability to evolve them in an ever-changing media landscape. The brands are central to the delivery of the Customer Value Strategy which is delivering digital revenue growth. This, combined with our inbuilt and relentless focus on maximising efficiency, gives confidence that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future.

There is judgement required in determining the cash-generating units. At each reporting date management review the interdependency of revenues across our Publishing brands to determine the appropriate cash-generating unit. The Group operates its Publishing brands such that a majority of the revenues are interdependent and revenue would be materially lower if brands operated in isolation. As such, management do not consider that an impairment review at an individual brand level is appropriate or practical. As the Group continues to centralise revenue generating functions and has moved to a matrix operating structure over the past few years all of the individual brands in Publishing have increased revenue interdependency and are assessed for impairment as a single Publishing cash-generating unit.

The Group tests the carrying value of assets at the cash-generating unit level for impairment annually or more frequently if there are indicators that assets might be impaired. The review is undertaken by assessing whether the carrying value of assets is supported by their value-in-use which is calculated as the net present value of future cash flows derived from those assets, using cash flow projections. If an impairment charge is required this is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the cash-generating unit but subject to not reducing any asset below its recoverable amount. No indicators have been identified as at 25 June 2023. The last annual impairment test was undertaken as at 25 December 2022. The details of the impairment assessment are included in note 16 of the 2022 Annual Report.

13. Retirement benefit schemes

Defined contribution pension schemes

The Group operates defined contribution pension schemes for qualifying employees, where the assets of the schemes are held separately from those of the Group in funds under the control of Trustees.

The current service cost charged to the consolidated income statement for the period of £8.7m (26 weeks ended 26 June 2022: £9.0m and 52 weeks ended 25 December 2022: £18.1m) 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:

· the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit Scheme (the 'Trinity Scheme'), the Midland Independent Newspapers Pension Scheme (the 'MIN Scheme'), the Express Newspapers 1988 Pension Fund (the 'EN88 Scheme'), the Express Newspapers Senior Management Pension Fund (the 'ENSM Scheme') and the West Ferry Printers Pension Scheme (the 'WF Scheme').

Characteristics

The defined benefit pension schemes provide pensions to members, which are based on the final salary pension payable, normally from age 65 (although some schemes have some pensions normally payable from an earlier age) plus surviving spouses or dependants' benefits following a member's death. Benefits increase both before and after retirement either in line with statutory minimum requirements or in accordance with the scheme rules if greater. Such increases are either at fixed rates or in line with retail or consumer prices but subject to upper and lower limits. All of the schemes are independent of the Group with assets held independently of the Group. They are governed by Trustees who administer benefits in accordance with the scheme rules and appropriate UK legislation. The schemes each have a professional or experienced independent Trustee as their Chairman with generally half of the remaining Trustees nominated by the members and half by the Group.

Maturity profile and cash flow

Across all of the schemes, the uninsured liabilities related 60% to current pensioners and their spouses or dependants and 40% to deferred pensioners. The average term from the period end to payment of the remaining uninsured benefits is expected to be around 12 years. Uninsured pension payments in 2022, excluding lump sums and transfer value payments, were £73m and these are projected on the prior reporting date assumptions to rise to an annual peak in 2034 of £104m and reducing thereafter.

Funding arrangements

The funding of the Group's schemes is subject to UK pension legislation as well as the guidance and codes of practice issued by the Pensions Regulator. Funding targets are agreed between the Trustees and the Group and are reviewed and revised usually every three years. The funding targets must include a margin for prudence above the expected cost of paying the benefits and so are different to the liability value for IAS 19 purposes. The funding deficits revealed by these triennial valuations are removed over time in accordance with an agreed recovery plan and schedule of contributions for each scheme. The latest completed valuation for five of the Group's schemes was as at 31 December 2019, and the process to determine the 31 December 2022 valuations has now commenced.

Discussions in relation to the funding valuations of the MGN Scheme at 31 December 2019 are ongoing. The funding valuation of the MGN scheme at 31 December 2016 showed a deficit of £476.0m. The Group paid contributions of £17.0m to the MGN Scheme in the first half of 2023 and the current schedule of contributions includes payments of £40.9m pa from 2023 to 2027.

The funding valuation of the Trinity Scheme at 31 December 2019 was agreed on 21 December 2022. This showed a deficit of £57.2m. The Group paid contributions of £2.2m to this scheme in the first half of 2023 and agreed an unchanged schedule of contributions of payments of £5.2m pa from 2023 to 2027.

The funding valuation of the MIN Scheme at 31 December 2019 was agreed after the year end on 3 February 2023. This showed a deficit of £73.8m. The Group paid contributions of £2.9m to this scheme in the first half of 2023 and the agreed schedule of contributions features payments of £6.9m pa from 2023 to 2025, £7.8m pa in 2026 and 2027 and £8.6m pa in 2028 and 2029.

The funding valuations of the EN88 Scheme and ENSM Scheme at 31 December 2019 were agreed on 10 December 2021. For the EN88 Scheme this showed a deficit of £25.1m. The Group paid contributions of £1.2m to this scheme in the first half of 2023 and the agreed schedule of contributions includes payments of £2.8m pa from 2023 to 2026 and £0.8m in 2027. During 2022, the Trustees of the ENSM Scheme purchased a bulk annuity at no cost to the Group and the scheme now has all pension liabilities covered by annuity policies and no further funding is expected. The Group paid £9.6m to the WF Scheme in 2021 which together with the payment of £5.0m made in 2020 enabled the Trustees to purchase a bulk annuity and the scheme now has all pension liabilities covered by annuity policies and no further funding is expected.

Group contributions in respect of the defined benefit pension schemes in the period were £23.3m (2022 H1: £23.0m). £32.5m of Group contributions relating to these schemes are due to be paid in the second half of the year.

At the prior year end, the funding deficits in all schemes were expected to be removed before or around 2029 by a combination of the contributions and asset returns. Contributions (which include funding for pension administrative expenses) are payable monthly. Contributions per the current schedule of contributions are £55.8m pa in 2023 to 2025, £56.7m in 2026, £54.7m in 2027 and £8.6m pa in 2028 and 2029.

The future deficit funding commitments are linked to the three-yearly actuarial valuations. Although the funding commitments do not generally impact the IAS 19 position, IFRIC 14 guides companies to consider for IAS 19 disclosures whether any surplus can be recognised as a balance sheet asset and whether any future funding commitments in excess of the IAS 19 liability should be provisioned for. Based on the interpretation of the rules for each of the defined benefit pension schemes, the Group considers that it has an unconditional right to any potential surplus on the ultimate wind-up after all benefits to members have been paid in respect of all of the schemes except the WF Scheme. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19 surpluses which may emerge in future and not to recognise any potential additional liabilities in respect of future funding commitments of all of the schemes except for the WF Scheme. For the WF Scheme at the reporting date, the assets are surplus to the IAS 19 benefit liabilities and the impact of IFRIC 14 removes this surplus. As no further contributions are expected to the WF Scheme, the Group no longer recognises a deficit of its future deficit contribution commitment to the scheme.

The calculation of Guaranteed Minimum Pension ('GMP') is set out in legislation and members of pension schemes that were contracted out of the State Earnings-Related Pension Scheme ('SERPS') between 6 April 1978 and 5 April 1997 will have built up an entitlement to a GMP. GMPs were intended to broadly replicate the SERPS pension benefits but due to their design they give rise to inequalities between men and women, in particular, the GMP for a male comes into payment at age 65 whereas for a female it comes into payment at the age of 60 and GMPs typically receive different levels of increase to non GMP benefits. On 26 October 2018, the High Court handed down its judgement in the Lloyds Trustees vs Lloyds Bank plc and Others case relating to the equalisation of member benefits for the gender effects of GMP equalisation. This judgement creates a precedent for other UK defined benefit schemes with GMPs. The judgement confirmed that GMP equalisation was required for the period 17 May 1990 to 5 April 1997 and provided some clarification on legally acceptable methods for achieving equalisation. An allowance for GMP equalisation was first included within liabilities at 30 December 2018 and was recognised as a charge for past service costs in the income statement. In 2020 further clarification was issued relating to GMP equalisation in respect of transfers out of schemes and a further allowance for GMP equalisation was included within liabilities at 27 December 2020 and was recognised as a charge for past service costs in the income statement. The estimate is subject to change as we undertake more detailed member calculations, as guidance is issued and/or as a result of future legal judgements.

Risks

Valuations for funding and accounting purposes are based on assumptions about future economic and demographic variables. This results in the risk of a volatile valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current assessed liability value.

The main sources of risk are:

•	investment risk: a reduction in asset returns (or assumed future asset returns);
•	inflation risk: an increase in benefit increases (or assumed future increases); and
•	longevity risk: an increase in average life spans (or assumed life expectancy).

These risks are managed by:

•	investing in insured annuity policies: the income from these policies exactly matches the benefit payments for the members covered, removing all of the above risks. At the reporting date the insured annuity policies covered 15% of total liabilities;
•	investing a proportion of assets in other classes such as government and corporate bonds and in liability driven investments: changes in the values of the assets aim to broadly match changes in the values of the uninsured liabilities, reducing the investment risk, however some risk remains as the durations of the bonds are typically shorter than those of the liabilities and so the values may still move differently. At the reporting date non-equity assets amounted to 94% 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 6% of assets excluding the insured annuity policies; and
•	the gradual sale of equities over time to purchase additional annuity policies or liability matching investments: to further reduce risk as the schemes, which are closed to future accrual, mature.

Pension scheme accounting deficits are snapshots at moments in time and are not used by either the Group or Trustees to frame funding policy. The Group and Trustees seek to be aligned in focusing on the long-term sustainability of the funding policy which aims to balance the interests of the Group's shareholders and members of the schemes. The Group and Trustees also seek to be aligned in reducing pensions risk over the long term and at a pace which is affordable to the Group.

The EN88 Scheme, the ENSM Scheme, the Trinity Scheme and the WF Scheme have an accounting surplus at the reporting date, before allowing for the IFRIC 14 asset ceiling. Across the MGN Scheme and the MIN Scheme, the invested assets are expected to be sufficient to pay the uninsured benefits due up to 2041, based on the prior reporting date assumptions. The remaining uninsured benefit payments, payable from 2042, are due to be funded by a combination of asset outperformance and the deficit contributions currently scheduled to be paid up to 2027 for the MGN Scheme and 2029 for the MIN Scheme. For the MGN Scheme and MIN Scheme, actuarial projections at the prior reporting date show removal of the accounting deficit by the end of 2026 for MGN and 2028 for MIN due to scheduled contributions and asset returns at the target rate assumed at the last reporting date. 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 Barber Window equalisation adjustment in the prior period, there were no plan amendments, settlements or curtailments which in the current and prior period 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 25 June 2023.

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

	25 June 2023 £m	26 June 2022 £m	25 December 2022 £m
Financial assumptions (nominal % pa)
Discount rate	5.38	3.72	4.90
Retail price inflation rate	3.29	3.40	3.29
Consumer price inflation rate	1.0% pa lower than RPI to 2030 and equal to RPI thereafter	1.0% pa lower than RPI to 2030 and equal to RPI thereafter	1.0% pa lower than RPI to 2030 and equal to RPI thereafter
Rate of pension increases in deferment	2.92	3.08	2.90
Rate of pension increases in payment	3.39	3.38	3.38
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65	21.3	21.8	21.6
Female currently aged 65	23.7	24.1	24.0
Male currently aged 55	20.9	21.5	21.3
Female currently aged 55	24.1	24.6	24.5

The defined benefit pension liabilities are valued using actuarial assumptions about future benefit increases and scheme member demographics, and the resulting projected benefits are discounted to the reporting date at appropriate corporate bond yields. For the 2022 year-end and 2023 half year, the financial assumptions have been derived as a yield curve with different rates per year, with the figures in the tables above representing a weighted average of these rates across all of the schemes. This is considered to be a more robust and accurate approach to setting assumptions as it allows for each scheme's individual circumstances, rather than considering the schemes in aggregate as has been done in the past.

The discount rate should be chosen to be equal to the yield available on 'high quality' corporate bonds of appropriate term and currency. For the 2022 year-end and 2023 half year, the discount rate has been set to reflect the full corporate bond yield curve with a different average assumption for each scheme, based on the scheme-specific cash flows and set separately for uninsured and insured liabilities within each scheme, reflecting their respective durations.

The inflation assumptions are based on market expectations over the period of the liabilities. For the 2022 year-end and 2023 half year, the inflation assumptions have been set using the full inflation curve. The RPI assumption is set based on the break-even RPI inflation curve with a margin deducted. This margin, called an inflation risk premium, reflects the fact that the RPI market implied inflation curve can be affected by market distortions and as a result it is thought to overstate the underlying market expectations for future RPI inflation. Allowing for the extent of RPI linkage on the schemes' benefits pre and post 2030, the average inflation risk premium has been set at 0.2% per annum to 2030 and 0.4% per annum thereafter. The CPI assumption is set based on a margin deducted from the RPI assumption, due to lack of market data on CPI expectations. Following the UK Statistics Authority's announcement of the intention to align RPI with CPIH from 2030 the assumed gap between RPI and CPI inflation is 1.0% per annum up to 2030 and 0.0% per annum beyond 2030.

The estimated impacts on the IAS 19 liabilities and on the IAS 19 deficit at the reporting date, due to a reasonably possible change in key assumptions over the next year, are set out in the table below:

	Effect on liabilities £m	Effect on deficit £m
Discount rate +/- 1.0% pa	-175/+210	-155/+185
Retail price inflation rate +/- 0.5% pa	+22/-22	+14/-14
Consumer price inflation rate +/- 0.5% pa	+23/-21	+22/-20
Life expectancy at age 65 +/- 1 year	+70/-70	+55/-60

The RPI sensitivity impacts the rate of increases in deferment for some of the pensions in the EN88 Scheme and the ENSM Scheme and some of the pensions in payment for all schemes except the MGN Scheme. The CPI sensitivity impacts the rate of increases in deferment for some of the pensions in most schemes and the rate of increases in payment for some of the pensions in payment for all schemes.

The effect on the deficit is usually lower than the effect on the liabilities due to the matching impact on the value of the insurance contracts held in respect of some of the liabilities. Each assumption variation represents a reasonably possible change in the assumption over the next year but might not represent the actual effect because assumption changes are unlikely to happen in isolation. The estimated impact of the assumption variations makes no allowance for changes in the values of invested assets that would arise if market conditions were to change in order to give rise to the assumption variation. If allowance were made, the estimated impact would likely be lower as the values of invested assets would normally change in the same directions as the liability values.

The amounts included in the consolidated income statement, consolidated statement of comprehensive income and consolidated balance sheet arising from the Group's obligations in respect of its defined benefit pension schemes are as follows:

Past service costs of £10.6m for the 52 weeks ended 25 December 2022 relates to a Barber Window equalisation adjustment identified by the Trustees of the MGN Scheme during 2022. The impact relates to the equalisation of retirement ages to 65, which was previously implemented from 17 May 1990, rather than the date of the Deed of Amendment of the Rules which was 4 April 1991.

Consolidated income statement	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Pension administrative expenses	(2.6)	(2.2)	(4.2)
Past service costs	-	-	(10.6)
Pension finance charge	(3.1)	(1.2)	(2.3)
Defined benefit cost recognised in income statement	(5.7)	(3.4)	(17.1)

Consolidated statement of comprehensive income	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Actuarial loss due to liability experience	(16.9)	(34.3)	(60.1)
Actuarial gain due to liability assumption changes	125.3	645.7	940.4
Total liability actuarial gain	108.4	611.4	880.3
Returns on scheme assets less than discount rate	(116.7)	(568.8)	(915.9)
Impact of IFRIC 14	0.4	0.3	0.6
Total (loss)/gain recognised in statement of comprehensive income	(7.9)	42.9	(35.0)

Consolidated balance sheet	25 June 2023 (unaudited) £m	26 June 2022 (unaudited) £m	25 December 2022 (audited) £m

Present value of uninsured scheme liabilities	(1,475.2)	(1,836.7)	(1,571.5)
Present value of insured scheme liabilities	(268.4)	(312.2)	(288.5)
Total present value of scheme liabilities	(1,743.6)	(2,148.9)	(1,860.0)
Invested and cash assets at fair value	1,334.8	1,746.8	1,421.8
Value of liability matching insurance contracts	268.4	312.2	288.5
Total fair value of scheme assets	1,603.2	2,059.0	1,710.3
Funded deficit	(140.4)	(89.9)	(149.7)
Impact of IFRIC 14	(0.8)	(1.5)	(1.2)
Net scheme deficit	(141.2)	(91.4)	(150.9)

Non-current assets - retirement benefit assets	56.4	94.4	51.2
Non-current liabilities - retirement benefit obligations	(197.6)	(185.8)	(202.1)
Net scheme deficit	(141.2)	(91.4)	(150.9)

Net scheme deficit included in consolidated balance sheet	(141.2)	(91.4)	(150.9)
Deferred tax included in consolidated balance sheet	34.8	22.3	37.0
Net scheme deficit after deferred tax	(106.4)	(69.1)	(113.9)

Movement in net scheme deficit	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Opening net scheme deficit	(150.9)	(153.9)	(153.9)
Contributions	23.3	23.0	55.1
Consolidated income statement	(5.7)	(3.4)	(17.1)
Consolidated statement of comprehensive income	(7.9)	42.9	(35.0)
Closing net scheme deficit	(141.2)	(91.4)	(150.9)

Changes in the present value of scheme liabilities	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Opening present value of scheme liabilities	(1,860.0)	(2,788.4)	(2,788.4)
Past service costs	-	-	(10.6)
Interest cost	(44.2)	(25.0)	(49.9)
Actuarial loss - experience	(16.9)	(34.3)	(60.1)
Actuarial gain/(loss) - change to demographic assumptions	32.2	(3.4)	6.7
Actuarial gain - change to financial assumptions	93.1	649.1	933.7
Benefits paid	52.2	53.1	108.6
Closing present value of scheme liabilities	(1,743.6)	(2,148.9)	(1,860.0)

Changes in impact of IFRIC 14	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m
Opening impact of IFRIC 14	(1.2)	(1.8)	(1.8)
Decrease in impact of IFRIC 14	0.4	0.3	0.6
Closing impact of IFRIC 14	(0.8)	(1.5)	(1.2)

Changes in the fair value of scheme assets	26 weeks ended 25 June 2023 (unaudited) £m	26 weeks ended 26 June 2022 (unaudited) £m	52 weeks ended 25 December 2022 (audited) £m

Opening fair value of scheme assets	1,710.3	2,636.3	2,636.3
Interest income at discount rate	41.1	23.8	47.6
Actual return on assets less than discount rate	(116.7)	(568.8)	(915.9)
Contributions by employer	23.3	23.0	55.1
Benefits paid	(52.2)	(53.1)	(108.6)
Administrative expenses	(2.6)	(2.2)	(4.2)
Closing fair value of scheme assets	1,603.2	2,059.0	1,710.3

Fair value of scheme assets	25 June 2023 (unaudited) £m	26 June 2022 (unaudited) £m	25 December 2022 (audited) £m

UK equities	9.8	53.5	27.5
US equities	27.5	159.7	48.5
Other overseas equities	38.2	102.1	28.4
Property	29.7	39.5	33.2
Corporate bonds	365.8	291.3	315.9
Fixed interest gilts	6.2	37.7	6.7
Index linked gilts	-	13.9	-
Liability driven investment	587.8	564.6	816.5
Cash and other	269.8	484.5	145.1
Invested and cash assets at fair value	1,334.8	1,746.8	1,421.8
Value of insurance contracts	268.4	312.2	288.5
Fair value of scheme assets	1,603.2	2,059.0	1,710.3

The assets of the schemes are primarily held in pooled investment vehicles which are unquoted. The pooled investment vehicles hold both quoted and unquoted investments. Scheme assets include neither direct investments in the Company's ordinary shares nor any property assets occupied nor other assets used by the Group.

14. Net cash/(debt)

The net cash/(debt) for the Group is as follows:

	26 December 2022 £m	Cash flow £m		IFRS 16 lease liabilities movement
	26 December 2022 £m	Cash flow £m	Interest £m	New Leases £m	Other movements £m	25 June 2023 £m
Liabilities from financing activities
Borrowings	(15.0)	-	-	-	-	(15.0)
Lease liabilities	(31.7)	3.0	(0.5)	(2.2)	(0.1)	(31.5)
	(46.7)	3.0	(0.5)	(2.2)	(0.1)	(46.5)
Current assets
Cash and cash equivalents	40.4	(28.9)	-	-	-	11.5

Net cash/(debt) less lease liabilities	(6.3)					(35.0)

Net cash/(debt)	25.4	(28.9)	-	-	-	(3.5)

The Group has a revolving credit facility of £120.0m which expires on 19 November 2026. The Group had drawings of £15.0m at the reporting date and the facility is subject to two covenants: Interest Cover and Net Debt to EBITDA, both of which were met at the reporting date.

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

Payment of the first instalment of £18.9m was made on 28 February 2020. The second instalment of £16.0m was made on 28 February 2021, the third instalment of £17.1m was made on 28 February 2022 and the final instalment of £7.0m was made on 28 February 2023. At the reporting date, there was no deferred consideration balance remaining.

15. Provisions

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

At 26 December 2022 (audited)	(0.9)	(9.4)	(6.6)	(43.0)	(3.0)	(62.9)
Charged to income statement	(0.1)	(0.1)	(10.3)	(5.9)	(0.5)	(16.9)
Released to income statement	0.4	0.2	0.1	-	-	0.7
Utilisation of provision	0.2	1.2	12.1	3.5	0.8	17.8
At 25 June 2023 (unaudited)	(0.4)	(8.1)	(4.7)	(45.4)	(2.7)	(61.3)

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

	25 June 2023 (unaudited) £m	26 June 2022 (unaudited) £m	25 December 2022 (audited) £m

Current	(17.6)	(28.4)	(26.3)
Non-current	(43.7)	(40.6)	(36.6)
	(61.3)	(69.0)	(62.9)

The share-based payments provision relates to National Insurance obligations attached to the future crystallisation of awards. This provision will be utilised over the next three years.

The property provision relates to property related onerous contracts and onerous committed costs related to occupied, let and vacant properties. The provision will be utilised over the remaining term of the leases or expected period of vacancy.

The restructuring provision relates to restructuring charges incurred in the delivery of cost reduction measures. The balance at the period end comprises severance costs of £2.6m and closure costs relating to a print plant of £2.1m. The severance costs provision is expected to be utilised within the next year. The closure costs provision includes £0.1m expected to be utilised within the next year and £2.0m expected to be utilised at the end of a long-term print plant lease related to the print restructure in 2020.

The historical legal issues provision relates to the cost associated with dealing with and resolving civil claims in relation to historical phone hacking and unlawful information gathering. There are three parts to the provision: known claims, potential future claims and common court costs. The key uncertainties in relation to this matter relate to how many claims will be received, how each claim progresses, the amount of any settlement and the associated legal costs. Our assumptions have been based on historical trends, our experience and the expected evolution of claims and costs. The known and common costs part of the provision is calculated using the most likely outcome method, with the expected value method used for the potential claims provision.

The other provision balance of £2.7m at the period end relates to libel and other matters and is expected to be utilised over the next two years.

16. Share capital and reserves

The share capital comprises 322,085,269 allotted, called-up and fully paid ordinary shares of 10p each.

The share premium reflects the premium on issued ordinary shares. The merger reserve comprises the premium on the shares allotted in relation to the acquisition of Express & Star. The capital redemption reserve represents the nominal value of the shares purchased and subsequently cancelled under share buy-back programmes.

The Company holds 4,314,917 shares (26 June 2022: 7,020,988 shares and 25 December 2022: 5,014,410 shares) as Treasury shares. During the first half of the year, 699,493 shares were withdrawn from Treasury to satisfy the vesting of awards granted in 2020 under the Reach Long Term Incentive Plan and buy-out awards granted in 2023.

Cumulative goodwill written off to (accumulated loss)/retained earnings and other reserves in respect of continuing businesses acquired prior to 1998 is £25.9m (26 June 2022: £25.9m and 25 December 2022: £25.9m). On transition to IFRS, the revalued amounts of freehold properties were deemed to be the cost of the asset and the revaluation reserve has been transferred to (accumulated loss)/retained earnings and other reserves.

Shares purchased by the Reach Employee Benefit Trust are included in (accumulated loss)/retained earnings and other reserves at £3.4m (26 June 2022: £5.0m and 25 December 2022: £3.9m). In 2022 the Trust purchased 521,310 shares for a cash consideration of £1.0m. The Trust received a payment of £1.0m from the Company to purchase these shares. During the period, 1,025,833 were released relating to grants made in prior years (26 June 2022: 1,118,050 and 25 December 2022: 2,621,142).

During the period, awards relating to 1,623,678 shares were granted to executive directors on a discretionary basis under the Long Term Incentive Plan (26 June 2022: 667,448 and 25 December 2022: 667,448). The exercise price of each award is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions, and are required to be held for a further two years. During the period, awards relating to 394,666 were granted to an executive director under the Long Term Incentive Plan representing a buy-out of awards that were forfeited on joining the Group. The awards vest in line with the original vesting dates of the forfeited awards, subject to the continued employment up to the relevant vesting dates.

During the period, awards relating to 2,967,720 shares were granted to senior managers on a discretionary basis under the Long Term Incentive Plan under the Senior Management Incentive Plan (26 June 2022: 1,138,083 and 25 December 2022: 1,256,413). The exercise price of each award is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions.

During the period, no awards relating to shares were granted to executive directors under the Restricted Share Plan (26 June 2022 and 25 December 2022: 121,575). The awards vest after three years.

17. Contingent liabilities

It is unknown how long it will take to fully resolve historical legal issues set out in note 15 and despite making a best estimate of the provision, the timing of utilisation and possible range, the total universe of claims is unknown and there are both ongoing legal matters (including a trial which commenced in May 2023 and finished on 30 June 2023 where we expect a verdict from the trial at some point in the latter part of 2023) and the potential for new legal matters which could mean that the final outcome is outside our view on the range of outcomes of £35m to £64m (26 June 2022: £32m to £53m and 25 December 2022: £32m to £56m).

18. Reconciliation of statutory to adjusted results

26 weeks ended 25 June 2023 (unaudited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	279.4	-	-	279.4
Operating profit	11.1	25.0	-	36.1
Profit before tax	6.7	25.0	3.1	34.8
Profit after tax	4.6	20.2	2.4	27.2
Basic earnings per share (p)	1.5	6.4	0.8	8.7

26 weeks ended 26 June 2022 (unaudited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	297.4	-	-	297.4
Operating profit	34.5	12.7	-	47.2
Profit before tax	32.0	12.7	1.2	45.9
Profit after tax	25.2	11.2	1.0	37.4
Basic earnings per share (p)	8.1	3.6	0.3	12.0

52 weeks ended 25 December 2022 (audited)

	Statutory results £m	Operating adjusted items (a) £m	Pension finance charge (b) £m	Adjusted results £m
Revenue	601.4	-	-	601.4
Operating profit	71.3	34.8	-	106.1
Profit before tax	66.2	34.8	2.3	103.3
Profit after tax	52.3	30.3	1.9	84.5
Basic earnings per share (p)	16.8	9.7	0.6	27.1

(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 in note 2 is the rationale for the alternative performance measures adopted by the Group. The reconciliations in this note highlight the impact on the respective components of the income statement. Items are adjusted on the basis that they distort the underlying performance of the business where they relate to material items that can recur (including impairment, restructuring, tax rate changes) or relate to historic liabilities (including historical legal and contractual issues, defined benefit pension schemes which are all closed to future accrual). Other items may be included in adjusted items if they are not expected to recur in future years, such as the property rationalisation in the previous years and items such as transaction and restructuring costs incurred on acquisitions or the profit or loss on the sale of subsidiaries, associates or freehold buildings.

Provision for historical legal issues relates to the cost associated with dealing with and resolving civil claims for historical phone hacking and unlawful information gathering. This is included in adjusted items as the amounts are material, it relates to historical matters and movements in the provision can vary year to year.

Impairments to non-current assets arise following impairment reviews or where a decision is made to close or retire printing assets. These non-cash items are included in adjusted items on the basis that they are material and vary considerably each year, distorting the underlying performance of the business.

The Group's defined benefit pension schemes are all closed to new members and to future accrual and are therefore not related to the current business. The pension administration expenses, the past service costs and the pension finance charge are included in adjusted items as the amounts are significant and they relate to the historical pension commitment.

The opening deferred tax position is recalculated in the period in which a change in the standard rate of corporation tax has been enacted or substantively enacted by parliament or when a decision is reversed. The impact of the change in rates are included in adjusted items, on the basis that when they occur they are material, distorting the underlying performance of the business.

Included in adjusted items in 2023 are restructuring charges of £10.2m, principally severance costs that relate to cost management actions taken in the period. Other adjusted items comprise the Group's legal fees in respect of historical legal issues (£4.6m), adviser costs in relation to the triennial funding valuations (£1.2m), internal pension administration expenses (£0.3m) and corporate simplification costs (£0.2m), less a reduction in National Insurance costs relating to share awards (£0.4m) and the profit on sale of impaired assets (£0.3m).

Included in adjusted items in 2022 are restructuring charges of £5.4m, principally severance costs that relate to cost management actions taken in the period. Other items relate to a National Insurance Cost credit relating to share awards (£1.9m) and the profit on sale of impaired assets (£0.4m) less adviser costs in relation to the triennial funding valuations (£0.8m).

19. Adjusted cash flow

	25 June 2023 (unaudited) £m	26 June 2022 (unaudited) £m	25 December 2022 (audited) £m
Adjusted operating profit	36.1	47.2	106.1
Depreciation and amortisation	10.3	9.9	20.2
Adjusted EBITDA	46.4	57.1	126.3
Net interest and charges paid on bank borrowings	(0.6)	(0.9)	(1.8)
Income tax received/(paid)	0.5	(4.0)	(5.0)
Restructuring payments	(12.1)	(4.0)	(13.8)
Net capital expenditure	(7.2)	(6.7)	(13.3)
Net interest paid on leases	(0.2)	(0.5)	(1.1)
Finance lease receipts	0.6	-	-
Repayment of obligation under leases	(2.5)	(2.3)	(5.6)
Working capital and other	(6.0)	0.5	(20.9)
Adjusted operating cash flow	18.9	39.2	64.8
Historical legal issues payments	(3.5)	(6.1)	(9.0)
Dividends paid	(14.0)	(13.9)	(22.9)
Purchase of own shares	-	(1.0)	(1.0)
Pension funding payments	(23.3)	(23.0)	(55.1)
Adjusted net cash flow	(21.9)	(4.8)	(23.2)
Bank facility drawdown	-	-	15.0
Acquisition-related cash flows	(7.0)	(17.1)	(17.1)
Net decrease in cash and cash equivalents	(28.9)	(21.9)	(25.3)

20. Reconciliation of statutory to adjusted cash flow

26 weeks ended 25 June 2023	2023			2023
	Statutory	(a)	(b)	Adjusted
	£m	£m	£m	£m
Cash flows from operating activities
Cash generated from operations	24.8	(9.4)	3.5	18.9	Adjusted operating cash flow
Pension deficit funding payments	(23.3)	-	-	(23.3)	Pension funding payments
		-	(3.5)	(3.5)	Historical legal issues payments
Income tax received	0.5	(0.5)	-	-
Net cash inflow from operating activities	2.0
Investing activities
Interest received	0.3	(0.3)	-	-	Net interest and charges paid on bank borrowings
Proceeds on disposal of property, plant and equipment	0.5	(0.5)	-	-	Net capital expenditure
Purchases of property, plant and equipment	(1.7)	1.7	-	-	Net capital expenditure
Expenditure on internally generated development	(6.0)	6.0	-	-	Net capital expenditure
Interest received on leases	0.3	(0.3)	-	-	Net interest paid on leases
Finance lease receipts	0.6	(0.6)	-	-
Deferred consideration payment	(7.0)	-	-	(7.0)	Acquisition related cash flow
Net cash used in investing activities	(13.0)
Financing activities
Interest and charges paid on bank borrowings	(0.9)	0.9	-	-	Net interest and charges paid on bank borrowings
Dividends paid	(14.0)	-	-	(14.0)	Dividends paid
Interest paid on leases	(0.5)	0.5	-	-	Net interest paid on leases
Repayments of obligations under leases	(2.5)	2.5	-	-
Net cash used in financing activities	(17.9)
Net decrease in cash and cash equivalents	(28.9)	-	-	(28.9)

(a) Items included in the statutory cash flow on separate lines which for the adjusted cash flow are included in adjusted operating cash flow.

(b) Payments in respect of historical legal issues are shown separately in the adjusted cash flow.

26 weeks ended 26 June 2022	2022			2022
	Statutory	(a)	(b)	Adjusted
	£m	£m	£m	£m
Cash flows from operating activities
Cash generated from operations	47.5	(14.4)	6.1	39.2	Adjusted operating cash flow
Pension deficit funding payments	(23.0)	-	-	(23.0)	Pension funding payments
		-	(6.1)	(6.1)	Historical legal issues payments
Income tax paid	(4.0)	4.0	-	-
Net cash inflow from operating activities	20.5
Investing activities
Proceeds on disposal of property, plant and equipment	0.4	(0.4)	-	-	Net capital expenditure
Purchases of property, plant and equipment	(3.1)	3.1	-	-	Net capital expenditure
Expenditure on internally generated development	(4.0)	4.0	-	-	Net capital expenditure
Deferred consideration payment	(17.1)	-	-	(17.1)	Acquisition related cash flow
Net cash used in investing activities	(23.8)
Financing activities
Dividends paid	(13.9)	-	-	(13.9)	Dividends paid
Interest and charges paid on bank borrowings	(0.9)	0.9	-	-
Purchase of own shares	(1.0)	-	-	(1.0)	Purchase of own shares
Interest paid on leases	(0.5)	0.5	-	-
Repayments of obligations under leases	(2.3)	2.3	-	-
Net cash used in financing activities	(18.6)
Net decrease in cash and cash equivalents	(21.9)	-	-	(21.9)

(a) Items included in the statutory cash flow on separate lines which for the adjusted cash flow are included in adjusted operating cash flow.

(b) Payments in respect of historical legal issues are shown separately in the adjusted cash flow.

52 weeks ended 25 December 2022	Statutory 2022 £m	(a) £m	(b) £m	Adjusted 2022 £m

Cash flows from operating activities
Cash generated from operations	80.1	(24.3)	9.0	64.8	Adjusted operating cash flow
Pension deficit funding payments	(55.1)	-	-	(55.1)	Pension funding payments
	-	-	(9.0)	(9.0)	Historical legal issues payments
Income tax paid	(5.0)	5.0	-	-
Net cash inflow from operating activities	20.0
Investing activities
Interest received	0.1	(0.1)	-	-	Net interest and charges paid on bank borrowings
Dividends received from associated undertakings	2.5	(2.5)	-	-
Proceeds on disposal of property, plant and equipment	0.4	(0.4)	-	-	Net capital expenditure
Purchases of property, plant and equipment	(3.0)	3.0	-	-	Net capital expenditure
Expenditure on capitalised internally generated development	(10.7)	10.7	-	-	Net capital expenditure
Deferred consideration payment	(17.1)	-	-	(17.1)	Acquisition-related cash flow
Net cash used in investing activities	(27.8)
Financing activities
Interest and charges paid on borrowings	(1.9)	1.9	-	-	Net interest and charges paid on bank borrowings
Dividends paid	(22.9)	-	-	(22.9)	Dividends paid
Interest paid on leases	(1.1)	1.1	-	-
Repayment of obligations under leases	(5.6)	5.6	-	-
Purchase of own shares	(1.0)	-	-	(1.0)	Purchase of own shares
Drawdown of borrowings	15.0	-	-	15.0	Bank facility drawdown
Net cash used in financing activities	(17.5)
Net decrease in cash and cash equivalents	(25.3)	-	-	(25.3)

(a) Items included in the statutory cash flow on separate lines which for the adjusted cash flow are included in adjusted operating cash flow.

(b) Payments in respect of historical legal issues are shown separately in the adjusted cash flow.

Independent review report to Reach plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Reach plc's condensed consolidated interim financial statements (the "interim financial statements") in the Interim Results of Reach plc for the 26 week period ended 25 June 2023 (the "period").

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 UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

•	the consolidated balance sheet as at 25 June 2023;
•	the consolidated income statement and the 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 Interim Results of Reach plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). 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 Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim Results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Interim Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the Interim Results, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Results based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. 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.

PricewaterhouseCoopers LLP

Chartered Accountants

London

25 July 2023

LEI: 213800GNI5XF3XOATR61
Classification: 1.2 Half yearly financial reports and audit reports/limited reviews

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