Reach (LSE:RCH) — Full Year Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the REACH PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor meet company dashboard, and we'll notify you by email when these are ready for your review. Before we begin, I would like to submit the following poll. And if you'd give that your kind attention, I'm sure the company will be most grateful. And I'd now like to hand you over to CEO, Jim Mullen. Good afternoon to you, sir. Thank you. Hi, everyone. Thanks for joining us today. We appreciate your interest, continued interest in our company. I've got myself, Jim Mullen, Chief Executive of REACH, and I'm joined by Simon Fuller, our Chief Financial Officer.

0:59 Hi, Simon. So just before I hand over to Simon on the financial highlights, I just want to take you through some of the key ops and strategic highlights of the business in 2021. We're proud to say that REACH has delivered like for like revenue growth. This has been the first time in over a decade, closer to fifteen years. And we're happy to say that a lot of that is digital growth offsetting a print decline. We did say we would move to that flow and we have done. Our digital revenue mix, as you can see, is now 24% and that's a 25% growth in 2021.

1:46 So that's something we're really pleased about. The main thing I really want to highlight our registration. Some of you who have heard this before, we spoke about, we set ourselves a target of 7,500,000 registrations at the beginning of last year. We gradually moved up to eight to nine, and now we've got to 10, which is a revised target. Now, the reason why we set those targets is Simon and I in the business could see how our readers were getting far more engaged with our content and we're happy to say that we reached that 10,000,000 target ten months before we expected to. The key thing about those 10,000,000 registrations, and we'll come on to it later, is that these are explicit first party consensual registrations.

2:33 So basically our readers have given us the opportunity to track their data and to obviously serve ads and content which is relevant to them and I'm sure we'll come on to that later. Our print recovery, really encouraging. We went into the pandemic looking at what would print do with a very, very loyal reader base, would we lose more, would it maintain? We're happy to say it maintained. Came out of the pandemic and it's proven to be a very habitual, loyal readership and it just demonstrates the amount of cash that our newspapers deliver into the business, which helps obviously support our digital growth. We're going to also talk about Neptune. Neptune is we are not just a mass media anonymous business anymore, we do have data specialists and our own data IP that we use to mine our 10,000,000 registrations and that's the Neptune suite of products.

3:35 Essentially what it does, of those 10,000,000, we can actually go to clients with specific categories and cohorts of readers and users where their products and services is far more relevant. So the days of just mass media marketing, or even though we still do that from a brand perspective, we can actually find you clients which are relevant to, I don't know, renewal of your car insurance, Cheltenham's coming up, most betting companies have most of the legal betters in The UK, there's probably 200,000 of a gap, we can find them for you, estate agents, non food retailer in particular regions. Our Neptune products allow us to do that data targeting. And from that, we've ran over 200 campaigns in Neptune with our Plus B2B product. And these are those campaigns I've spoke to you about. The interesting thing for me is that of every 10 campaigns that we run, eight of our clients come back to run another campaign, which proves to us that it's more effective.

4:43 And because it's more effective, we on average deliver an eight times better yield than just basically mass marketing on the open digital platform. Despite inflationary pressures and the challenges of COVID, we've invested a significant amount of money in supporting further investment. We intend to continue that. I mean, we've already invested in 400 more journalists. We now have more journalists working for REACH than we ever had in the last twenty years. Now, that's a very important thing because our business is journalism and content. That's why our readers and our customers come to the firm, to basically to read stuff that's interesting to them, not just important journalism around whether it's Quizgate, Partygate, changing the laws for the better, etcetera, but also in stuff like sports and entertainment.

5:34 And we will continue to invest in our journalism, that's why we satisfy the demand. And then finally, you'll probably get some questions about how do you maintain and retain your talent? It's not just about basically, if you wanted a journalist come to REACH, or you want to be working in data come to REACH, it's not just about the hygiene factors of, yeah, we're competitive in our pay, but it's also things like well-being, employee development, D and I. Within twelve months, we became one of The UK's top 50 inclusive employers. We're changing our culture for the better, so that people feel that it's an organisation where they would want to work, not just to find a job somewhere. Part of that is we obviously review the working structure.

6:23 Have majority of our staff now are based at home, they come in two, maybe three days a week to our offices. So we're very flexible in how we approach employee working habits. A good example is we have a senior employee who lives in the North East in Whitley Bay, don't have to, no longer do you have to come to London if you are good at what you do and you have a family somewhere else in The United Kingdom, we can accommodate that. So that's the key highlights of the business, that's why we've delivered such strong numbers for 2021. And just on that note, I'm going to hand you over to Simon, who's going to take you through some of the financial details. Simon? Thanks very much, Jim. Good afternoon, everyone. So look, I'm just going to quickly spin you through the highlights of what's been a pivotal year for the business, really demonstrating the fact that the customer value strategy is delivering and that we're transforming our prospects as a business and we've seen demonstrable evidence of that. So if I just quickly highlight a few elements of the financial performance on this slide. So you can see that as Jim's mentioned, we moved to our first organic growth since 2007.

7:31 And just to remind you pre the pandemic, so in 2018 and 2019, we were declining at a rate of around 5% to 6%. And so moving from that decline rate to top line stabilisation and then to growth is a really key moment for the business. We've increased our profitability and our margins which is demonstrated on this slide. We've done that through both increasing our digital mix, so the proportion of our revenue from digital which is now almost a quarter. And also through the transformation of our business. So driving a more efficient operating model that has at its heart what we call the REACHWire, which is effectively a way of sharing editorial content across our entire business.

8:19 And then just finally on this slide we also showed strong operating cash flows which were well up year on year and resulted us increasing our total cash by just over 50%. That enabled us to increase our dividend year on year and on a like for like basis we increased our dividend by just shy of 5%. So a stronger balance sheet, a stronger operating performance and an increase in our annual dividend. If I take you to the next slide, you can see the component parts that made up our like for like movements. We saw circulation return to a similar decline rate to pre COVID. 2019 was minus 4.5, 2021 was minus 4.6.

9:06 So you can see that that has been a very resilient part of our business.

9:11 Print advertising, we saw some bounce back as advertisers started to return and some level of market recovery. And then on the printing side, I mean the principal reason why we were down by almost a fifth was that we actually had a couple of site closures. But those were ultimately the right thing to do to drive the right cost base for the business and profit. But we actually consolidated our supply into four sites having previously had six. And then on print other we have within that like for like growth partly because of the resumption of events and REACH Sport. But the standout story on this slide is the scale and growth of digital revenue up by more than 25% which fueled the overall growth in revenue that I mentioned on the previous slide.

10:01 Now if we look at the movements in our operating profit, again there's a number of different moving parts. In 2021 we had to lap 2021 offs. So we gained benefits from furlough and pay cuts and bonus suspensions, which we'll put in place in 2020 to protect the business. Clearly, we didn't have those in 2021. But what more than compensated for those reversals was the savings that we achieved through our transformation program. We transformed editorial, commercial and back office. We had those printing site changes that I mentioned on the previous slide. And we also had changes in our office estate. So we've moved from 55 offices to 14 hubs.

10:48 And we've given people a lot more flexibility as Jim mentioned with that colleague example on his overview. We did have some inflation but really the most important bars probably on this slide are the last couple in terms of those moving parts before it gets to the total. That is we reinvested the benefits of revenue and mix changes. So being a bigger digital business into investment to drive future growth. That was investment across editorial, the 400 colleagues that Jim had on his opening slide, plus investments in customer and product capabilities and data. Our operating margin continues to progress. The margin is up by about a quarter over the past four years, up from around 20% to almost 24%.

11:43 And actually if you look at the construct of our cost base, we've actually invested more into labor year on year, which really sort of speaks to that investment in digital and data capability. And that's been funded, as I say, through continuing to manage our overall sort of business model and efficiency. We did see some inflation in the back end of the year, more significant inflation, which has flowed through into 2022. But overall, the story, as you can see over the last four or five years, has been a progressive one in terms of our operating margin. And in the longer term we expect that to continue to be progressive. In terms of digital performance, really these stats show progress on all fronts.

12:32 Revenue up on a one and two year basis, paid views stable on a one year basis and then significantly up on a two year basis. It requires a quick explanation. 2020 we saw a big step up in paid views versus the prior year partly driven by COVID content and lockdown. And we lapped that in 2021 and yet still managed to sustain that overall page view performance at broadly the same level. And on a two year basis you can see pay per views up by almost 30%. Audience year on year broadly flat but actually if you look at on a two year basis slightly up. We expect audience to be moving up by a couple of percent a year as an average.

13:19 But really this is a story about more revenue per page, higher ARPU and continuing to drive that revenue growth ahead of the page view growth. And the reasons we believe that will continue to be possible is as we drive to higher yielding products and we increase engagement through those 10,000,000 registrations that Jim has mentioned. If we move on to the next slide, it really sort of shares with you the story of that progressive digital revenue. There is some seasonal shape to our revenue. We tend to have a strongest Q4 and we tend to have Q1 to Q3 as a progressive shape. And that partly reflects seasonal demand. But the most important thing to call out really is that sort of continued momentum in digital.

14:08 As the slide shares, less than a sixth of our revenue was digital in 2019. It's now almost a quarter. If you went back six years, it was actually onetwentieth of our revenue. So we've come a long way from onetwentieth to one quarter in the last six years, and we expect that proportion to further improve as we double digital by 2024, which is our target. Print circulation has been robust. Even in 2020 during the very COVID impacted year, we hit between ninety three percent and ninety four percent of our original circulation budget. And that speaks to the resilience of that line. It's a habitual purchase and we've included some information around expectancy and longevity because that really shows us we've got decades more revenue from our titles and you can see that in the little chart on the screen.

15:12 And that's what gives us the confidence that we both will continue to drive cash flows from that part of our business and that we'll continue to see that sort of stability within our print position in terms of that long term decline rate that it's going to stay around that mid single digits and it will be consistent at that level. So my final slide, in terms of profit drivers, I mean what we're guiding the market now on is a stable revenue in 2022. And again, I just don't want to underestimate how important that is as a signal To go from a business that was declining by five to 6% to a stable top line business that's driving towards growth is a very significant change in our fortunes.

16:04 In terms of investment efficiency and inflation, that's about managing the balance between the different factors. And look, as I've described, we did see some inflationary impacts at the back end of last year that will continue through into 2022. And that's why we guided the market that there would be a modest profit reduction and the market generally reduced our profit forecast by 5% to 6%. But the most important thing to point out is in the absence of that more significant inflation around energy and newsprint and wages, if we'd had a more normal year of inflation, we would have been expecting both profit and margin growth. And that is the longer term prospect for the business. As we become a bigger digital business, we will continue to drive an increased margin and will drive growth.

16:59 And then on the revenue year to date, seasonally lower months, January and February, which is why the digital growth at 10% is not in line with our full year expectation, is broadly double that growth rate. And we're confident on that based on the progression around our digital products that Jim mentioned. So I'll sign off there. We're now a materially different business to what we were in 2019. We've got a higher quality revenue, a stronger balance sheet, a better operating model and we're really now starting to make the use of our unique assets like our scale audience to drive value. And that's why we're confident in the future of the business. So I'll hand back over to Jim.

17:51 Thank you, Simon. So look, the point of this next section is about how did we deliver the strategy that supported the numbers and the finances that Simon's just taken you through. And we hope that after I've been through this section, you'll understand that you can't invest unless you do. So that's basically the objective of this section of the presentation. So, let's start at the top level. Let's talk about data.

18:19 So Simon and I come from a background where customer data was really important to the growth of the business. Simon's ex Tesco, I'm ex the gaming world, Labroutes and Coral, where if you don't understand your customers, then really you're toast. So we had this fantastic opportunity at REACH where we were the biggest commercial news publisher in The UK. We discovered that we're the fifth biggest digital asset in The UK, but then we asked, well, how many of those data records of our customers do we have? And it was less than 10,000. It was remarkable. So we knew, therefore, there was an opportunity. But before we started out, where is the opportunity? Well, the opportunity comes, a lot of cases, in the regulation and the approach to data privacy, particularly in advanced markets like the EU, the EEA, The United Kingdom, North America, etcetera.

19:15 And what's actually happening is that as customers and audiences are becoming more aware of the value and the

19:25 sensitivity around their data, they're coming much more understanding of consent and so are governments. So people think like the Googles of this world, the Facebook Metas, the Microsoft, the Amazons, etcetera, are trailing government regulation around data, actually they're not, they're ahead of it. They're already seeing where regulation is going and regulation is going to anonymize user data, so is that my data and your data is not explicitly available online, particularly with all these cases of people stealing data. So the likes of, if you take Google, for instance, they will remove the third party cookie from their Chrome browser. So how do they then determine what I'm interested in?

20:11 They do it through anonymized topics. So every 30, you'll get into your Google Chrome browser and you will browse all the content they used to browse and they will build a profile of you and stick you in categories called topics. And you will actually still then see ads that are relevant to you, whether it's sport, photography, hi fi equipment, economics, and you'll be wondering why they know it's you, you're just an anonymized record in a topic. Now, the gold standard of data usage is if we can get explicit consent. And there are a number of beautiful business models out there, Times Online, Financial Times, New York Times, Netflix.

20:56 These where you have explicit consent to use my data, that's what we do. We have 10,000,000 customers who have given us their explicit consent to speak directly to Jim Mullen, to know where his postcode is, to know which content he browses, to know even more importantly, when he browses it, because at that point we can send them ads that he may click through and the propensity to click through at the right time with the right content is higher. Explicit consent is usually valuable. Now, the reason why we believe we have an advantage in this, if for example, you are the subscriber to Blood Red, which is a Liverpool Football Club newsletter, there is an implicit trust in Merseyside through Liverpool Echo.

21:43 You know if things go wrong, you can write to the editor. And if the editor even contacts me as chief executive, then that wrong will be put right, because that is the relationship that we have with our readers. We have 10,000,000 of those registrations, essentially 25% of our UK audience. Advertisers are now demanding more effective advertising because agencies are finding it much tougher. So agencies are now coming to media owners and asking how can they be effective against

22:16 traditional anonymous mass marketing. That's why our first party data is so important. So if I take you on to how are we then monetizing that? Well, we have a suite of products called Neptune, just to go with the sort of the ocean and the water metaphor. Neptune is because there is a huge amount of fish in the sea, the ability to target this rich, basically ocean of data in a data lake. And it started essentially at REACH through a product called Mantis. Now, what Mantis does is behaviorally target content and advertising to each reader. So for example, if you're reading today's news, which has unfortunately been covering the Ukraine, if you're reading other news, which might not be the most positive, there aren't many advertisers who want to be associated with it. So Mantis was a behavioural and contextual targeting tool, that's how it started.

23:22 The IP is owned by REACH. It was developed in partnership with IBM. We license it to other media owners and it's probably the premier contextual advertising tool. However, what we found was if we apply it with first party consent and data cohorts, not only can we apply behavioural and contextual advertising, but we can actually use the same technology

23:49 to say, well, when do people actually access the content? When is the appropriate time to send a newsletter? When is the appropriate time to send a piece of content which is relevant to the content that we're currently reading so we can link page views?

24:04 And every time we do that, because it's a piece of content that Mantis has said is relevant, we can serve ads that are therefore relevant. That basically means more time spent on page, higher engagement, the higher propensity to read the headline and get to the bottom of the page. That allows us more times to serve ads, which is how we serve higher yield products. So this is how we do it, try to keep it simple, want you to leave the presentation understanding how we do it. Essentially, there are two elements to it. There's a B2C customer volume, so more relevant content at the right time. Simplify that by saying, I'm usually reading content between 05:40 to 06:15. Before I get into the shower, I'll read what's happening in today's news, I'll pick up The Mirror, The Star, The Express, The Daily Record.

24:55 Because I'm registered, the Neptune's platform knows that if you want to get

25:01 to Jim Mullen, that half hour before 06:15 in the morning is when he's highly engaged, because the rest of the day I'm too busy in my job. And then the next time I'm engaged is when I'm on that train from Waterloo, just after seven to just after eight, I'm highly engaged again. Mantis and Neptune are picking up all of that data. Not only are they picking up when I'm interested in it, they're picking up what I'm interested in. So that's the B2C site. So it's given me links, suggested another links and it's serving me ads based on my profile. This increases page views. That's the B2B side of the Neptune product. On a B2B element, we then go to agencies and say, We have 10,000,000 Jim Mullins.

25:47 We know when he actually accesses it, we know which content he's looking at, we know that he's interested in these four relevant brands or topics or categories. If you want to advertise, then we can get to him. And the more advertisers and the more agencies and the more clients that we go to, we split these cohorts up, that's our B2B business. And as we do it, we build up more effectiveness profiles of myself and everyone else who's registered. And we then take that back into advertising agencies and we back to them and we show them how effective our AI driven data tools can be. Now, the sales team then

26:31 negotiate the yields personally with each advertiser, each agency, and each client, Because if we don't do that and just rely on the open market with third party cookies, we're essentially market takers. Now, there's nothing wrong with that. That's still around 70%, 75% of our business, but we take the price. With Neptune, we negotiate and we set the price, which is why the yields are higher. So what does that mean when you get to know people better? Well, if you look at it on a two year view, and the reason why we look in a two year view is because the pandemic saw it was an outlier. But since we know people better, we've seen engagement go up 6%. Loyal users are users who roughly visit our sites about between sixteen and seventeen times, that's went up 71%.

27:22 Why is that the case? Because content is being positioned to them, which is more relevant at the right time. Page views per visitor, quite simply, if I'm reading one story and you know who I am, why don't you actually suggest another story which is relevant? That encourages people to actually click through. So the page views go up and because I'm interested in the content, then I spend more time on the page. Again, the objective is when you leave this presentation is to really simplify our understanding of the business. On any page, we roughly have about four ad slots. If we can increase the time spent on page by 42%, by 35%, the amount of page views per visitor, and the amount of new visitors coming in up by 6%, those four ad slots can reset to another advertising brand. So rather than just seeing, say, one ad brand, by the time you're on the page, you might see two, three, four or five. This has allowed us to grow engagement and obviously page views by 8% year to date in 2022.

28:32 So, how does that then lead into these products, this insight, these additional engagement that we have? We have the PLUS product. I'm going to give you two examples of the PLUS product, just to give you, so you understand it. There are many ways that clients and agencies want to determine the effectiveness of advertising. And I'm going to take CPA, which is cost per acquisition, and I'm going to take CTR, which is click through rate. Now, cost per acquisition is usually for clients who are trying to acquire new customers, financial services, banks, insurance, Tesco club card, betting. So let me use betting because Cheltenham's next week. So if you take Labbrooks, William Hill or Paddy Power, they probably have most of the legal betting customers in The United Kingdom, but they may have a gap of say $203,100,000.

29:28 Rather than them doing a whole nationwide campaign, wouldn't it be better if they could come to a media owner and say, I only need to access 200,000 people, can you help me? And what we say is, yes, we do, we have 10,000,000. And we have in those 10,000,000 people, we have basically customers who have read racing and football content. And then we also drill down to say, of those who have read racing and football content, how many of them clicked on a betting ad? It is likely that is your customer base. We then take that product database because we have explicit consent and we cross it over with our gambling partner. And out of that, say 200,000, you might say, and actually I'm not giving these numbers away, but just to give you a rough idea, you might have 15,000 customers who our client says, We do not have them.

30:19 Now, bear in mind the cost per acquisition for, a gambling client can be as high as 300 to £400 during Cheltenham. We can negotiate a higher yield for those £10,000 to £15,000 Now you might sit there and think, that's not a lot. Well, we do that for a whole portfolio of advertisers. So that's just one example of it. So that's CPA. And the other side, you have CTR, which is a click through rate. Click through rates are usually for advertisers who are trying to get readers or our customers just to land on their site, either to do brand advertising, do promotions, or maybe capture their data. But the actual, the element of getting them on-site, then pass them through.

31:05 CTRs are notoriously low, but if we can actually do a crossover of that data because the content is relevant, then the CTRs go up. Now, our click through rate has been three times better than the open market, And the yield for those people who click through either on CTR or CPA is roughly about eight times on average. Now, I say averages, as you'll know, some of our clients have got fifteen, sixteen times yield, others have got one or two. You You can probably work out for yourself the most competitive clients who are one or two, which is still worthwhile. And some of the newer clients who have got 15 to 16 times yield. But essentially that's how the PLUS product works. Now, reason why Simon and I are fairly confident on the success of this product is that we've got more than 200 campaigns, actually quite a lot more than that. We've got over 100 customer segments, but out of every 10 new clients that come and work with us on our Plus products, eight of them return for repeat booking.

32:07 Now we think that's exceptional. Now, that return might only be once or twice a year because it could well be on a calendar basis, it could be Black Friday, could be Christmas, it could be Cheltenham, but the return, eight out of 10 return, which has given us the confidence to be pretty bold in our statement about doubling digital revenue. So that's essentially how we drive revenue through our data led products. The key to our strategy is building direct relationships. And the way to build direct relationships is through registrations. And the way to make registrations work is to reduce friction. So you've all been there, that's why PayPal is a beautiful business. One click, either facial or your password is stored and you've bought the product.

33:01 And some of us might remember the days where you had to put in your credit card details for every single e commerce transaction. So we have to make it as frictionless as possible. So how do we do that? We only ask you for an email address. So if you have a football club that you're interested in, has it got Bad Runner form or has turned its form, and you want to know more about it, just give us your email address. We don't want any more because over time we pick up all the data because remember, you've given us explicit consent and we pick up all the data we need to build a profile. So that's all we need. Logged in was our ability to use Google One Tap, which is essentially, some of you might have seen it on Chrome, if you're reading one of our content on one of our sites, you can just click on the One Tap and you're already logged in and registered.

33:48 And then in your area is the sixth largest REACH site, which is essentially hyper local, what's on, stuff like local weather, what's the traffic light, the school run, is there any particular crime in my town or village? Actually, isn't that common. It's only common when you read it on a national or regional basis, but in your street, it doesn't happen very often. In Your Area provides that data. The interesting thing about In Your Area, it gives us postcodes and we have millions of postcodes. So those of you who know about the power of the postcode will understand the value of it. But if you understand someone's postcode, you build a complete socio economic profile on them, which is hugely valuable to advertisers.

34:34 So those are the three, one of the three, some of the three, the pillars of a registration process. REACH has, in the last three years, changed the whole culture of how we approach our business. And the reason how we do that is that three years ago, we were essentially an anonymous mass media business. But now actually, we are focused on quite sophisticated CRM. The first part of our strategy was proving the hypothesis that a significant scale audience would register with the products. Now, we knew that through our testing, which is why Simon and I made some of the public promises. Of course, we said 7,500,000, we had seen the original flow coming through, we thought we could beat it, we got to 10. We're now at the stage where we need to look at churn, we need to look at engagement levels and we need to look at re engagement.

35:33 Now, this example is obviously for Liverpool, because it's one of our most popular newsletters. But let me tell you why we are lucky with regard to re engagement. If we need to re engage with a particular cohort, whether it be a Liverpool fan, whether it be someone who's interested in an ITV four part drama, or whether it's someone interested in breaking news on the war in Ukraine, if we have consent and we know there is essentially a topic that you're interested in, and we know a certain forty minutes during the day, you're hyperactive on our content, that's when we send you the newsletter. We're not asking you to re engage to ask you for money, we're not asking you to re engage to participate, we know that you're interested in this subject matter, so we will write a new newsletter for you. And that allows us to actually change behaviour and build up our engagement profile.

36:30 This element of CRM and engagement is relatively new to REACH, but we've invested significantly to build the team. We can only do that with editorial support. So those of you who've seen our editor in chief stand up, whether Simon and I, last week will understand that in order to increase basically engagement levels and our active levels and our page views, then we need the support of editorial. So we, Simon and I, do not have any influence on their editorial colleagues whatsoever. They're independent, they do exactly what needs to be done, there's editorial independence in the business. However, I can go to my editor in chief and say, I'm maybe two or 3% off where I need to be this week, Lloyd, and Moyogooka will let me have a look at some areas. And he might say, well, there's some stuff going on at man in Manchester at Man United. We're picking up from Manchester even news that the the Red fans are not happy. I'll tell you what we'll do.

37:28 This is editorially a reason for doing it. Let's do a newsletter of more con content on the disquiet within the Manchester United dressing room. So it is a valid editorial play, they'll write one, they'll put it out there and we get a smaller uplift. Across our full network, with these tools, that's how our editorial can run the business and that's how we do it. That's how we maintain the levels of engagement in our business. Again, valid editorial content, left to the editorial team to deliver it, but using the underlying measurements and KPIs to actually build and grow our business. So in summary, first part of the data is really important.

38:13 I call it the beautiful business model of consent, which a lot of the sub models have, but we also have scale. So we don't have to rely on 500,000 paying customers. We have 10,000,000, who we don't ask for a penny, but we have the first party data and that delivers higher yield. Engagement is growing through the use of content and data, and we focus on customer activity levels, both commercially and editorial. The tech has actually been invested in. Now, if anyone, if you're looking at an investment opportunity and you ask the question about how difficult is it to maintain this level of confidence in your data and your technical staff, and you say it's easy, don't believe them, it's not. But we have put in place methods and an environment where we think it's a great place to work, where you can work in new tech platforms and there is investment in place and we'll answer some questions on that.

39:08 I didn't speak much about print, but print is very, very habitual and sticky. And all of that print cash flow, despite the scaremongering years ago that it's dead, is not dead, it's declining by 4%, 56% per year. You layer on your mortality rate, print cash flow is available for decades to come. That print cash flow is going in to develop and build a digital business, which gives Simon and I the reason why we're happy, well, we are ready to give a date by when we will double digital revenue, which is end of twenty twenty four, which takes us roughly to about a 250,000,000 from a 2020 base. I hope that's given you an understanding of the business so that you know us a bit better. And I'll hand back now for Let me just ask you and Simon some of the Q and A that's come in while you've been speaking, and I think I'll start where you finished off on doubling digital revenue.

40:09 Can you talk a little bit about I mean, I I think you have already, but talk a little bit more about why you're so confident to reiterate the double digital revenue target and give the date of of '24 and perhaps talk a little bit about how the business intends to drive that. I think you've you've made it clear that it's not necessarily through subscriptions despite talking about New York Times and Netflix, etcetera. But can you talk about maybe how you're looking to grow Plus as part of of hitting that and what else is important to to hit that target? Well, hopefully those that have been listening and have maybe heard the story before is that Simon and I have made some public statements, commitments about where we would get with registrations.

40:58 Even the fact that we said we were going to double digital revenue, we said that because we the reason why we said both of those things is because we could see underlying trends in the business, as you know, Matt. And we were just waiting for the right moment to get enough data. I mean, this is all evidence based. Mean, who knows what will happen in the world, etcetera, etcetera, but in our evidence base, we are seeing these growth rates. So to your question, why are you confident and now saying, well, it's going to be by the end of twenty twenty four, is that we are seeing the trends coming through. Where are those trends coming through? Well, we're seeing a digital growth on engagement levels. We're seeing our Plus product being welcomed by agencies and clients. We've got twelve months, just over twelve months of data.

41:44 We're seeing every 10 clients, eight of them return. So they like it, you know, you don't eat eight Mars bars if you don't like them, you know, so they're coming back. And then how do we make that go forward? Well, before I hand over to Simon, two reasons how we maintain it, we continue to invest in our tech stack and our capabilities. I mean, I said last week at the presentation, pick up 1,500,000,000 signals from our readers in this data lake. We're not using all of them yet. We just need to find more ways of applying it through data capability. The other reason how we're doing it is we're funding our sales team, because despite all of the AI tools that you use, this comes down to a sales team who, just for the record, last year were voted the commercial sales team of the year. They go out to agencies and they basically say, I know times are tough for you, advertise with us, with our data and our reach, we can be more effective.

42:43 And they usually say, Let's start with 100,000, do a test run. It has to be fairly significant. And then we're finding that that then builds up to further advertising. So there are people on the ground, on phones, go and see the agencies, go and direct with the clients and pitch and being armed with all of this tech and these platforms to convince people that we are an effective home for their advertising spend. Sorry, have I missed anything? No, look, I think, I mean, just a couple of quick sound bites. I mean, we've broadly doubled our digital growth rate compared to to where we were pre pre the current strategy. So that gives you a sense of the momentum shift. And then the other thing I'd just call out is in terms of the contribution of Plus, we said that a quarter of the digital growth year on year was driven by Plus, and the quantum growth was about 30,000,000.

43:35 So you can see that Plus is now being is now becoming a really significant future driver. And and it's that's not all new revenue because some of it's an upsell from existing customers, but it shows you that, actually, that new data rich product really is, creating interest in the market, which line aligns with what Jim has just said. Very good. We did have some questions about, data changes, sort of threat or opportunity, but I think I think, Jim, you probably answered that in the presentation. It's, categorically an opportunity for us as a business. If you just sort of change pace slightly, Simon, you referenced inflation in the presentation. We're getting quite a lot of questions about the impact that we've seen on our newsprint.

44:23 Can you talk a little bit about why we've seen such an inflated newsprint cost, where it might go, whether the situation in U Ukraine from an entry perspective will have a further impact? No problems. I mean, so newsprint is a significant cost line for us. And just to remind everyone, that is the paper that we we're actually printing our newspapers on. I mean that is a significant cost base to us and it has seen a bit of a perfect storm of different things affecting it. Whether that be some transportation cost increases, energy cost increases and production, the decommissioning of some newsprint machines to produce packaging for e commerce.

45:13 There's a number of factors that have all come together and have caused an upward squeeze in newsprint prices. And therefore what we're talking about and the basis of the guidance that we've given is we're expecting more than £20,000,000 gross inflation year on year of which we've proportionately offset well over half of that, more like two thirds of it, through becoming a bigger digital business and through the efficiency programmes that we are looking at each year. But look, it is a significant year on year increase. We've not seen the scale of newsprint increases like this in recent years. And clearly we continue to look at the sort of macro picture, whether that be energy, whether that be other sort of inflationary impacts, and we're sort of measuring and monitoring that sort of very carefully.

46:10 What we're assuming in our market guidance is no better and no worse a picture on inflation through the course of this year and then into next year as well. And should there be further inflation in newsprint, we have got the opportunity to take another look at cover prices or to look at other sort of product changes that that could offset that. But it's it's certainly something that we're we're very mindful of as a business. Very good. Thank you. I was gonna ask a little bit about cover prices, but you I think you've you've made it clear that's a a potential lever for us in the in the remainder of the year. But let me let me stick with you for a second. If we could just talk about the the pension perhaps, that's that's a question a lot of investors are asking us about. Can you just give us a bit of a summary, on where we are with the actuarial, deficit and and whether the factors that are bringing the the accounting deficit down are likely to impact that and, you know, it just just a bit of a summary on where we're at and where you expect us to be going forward. No problem. So so as everyone will have seen and as I touched on briefly in the presentation, the accounting deficit. So the deficit as as assessed, using a set of accounting rules that are laid out, accounting principles that are laid out in our accounts has significantly reduced. And and look, that's a that's an audited and reviewed number and, is based on, the performance of the schemes, and particularly the discount rate. So, the the impact on our future liabilities.

47:42 If you look at the technical deficit, which is the basis upon which we pay our annual contributions, that has improved as we continue to pay amounts into the schemes. But we're not yet concluded on the latest discussions. So there's a three year triennial process where we talk to trustees and chairs of our schemes about the right level of funding. We've not yet concluded the most recent triennial valuation. And really, overall view as a company continues to be that we pay in a significant amount into schemes and that it is appropriate to continue to pay in the amount that we're currently paying in, in order to meet our obligations, whilst at the same time having the capacity to invest more into the business.

48:33 And that's what we've been doing in 2021. So we believe that we're paying the right amount, and we continue to be in discussions with our schemes about what that might look like in the in the longer term. Great. Thank you. And then perhaps one that's that's maybe for for both of you. Maybe if we stick to Simon first, but we're we're getting questions about uses of cash going forward. Obviously, another very strong performance for the business from a cash perspective in 2021. So a question around uses of cash. Simon, you spoke a little bit about capital allocation. Obviously, you've just touched on pension, but are we then focused in in in our uses of cash outside of that on investment in the business, be it organic or m and a, or we considering increasing dividends or buybacks? So perhaps if you could give us a bit and then and then maybe Jim could talk about potentially, you know, what what maybe the business could consider if we were looking at at at acquisitions.

49:33 Yeah. Well, look, we we we keep a very open mind, on on all of these factors. I think there's been a couple of questions that have come in, for example, about things like share buybacks or other uses of capital. And look, we, keep a very open mind about, how we use the capital. Ultimately, we have to, use it in the most effective way and and wish to use it in the most effective way possible to drive the best returns. And what we did during 2021, which drove the strongest returns, was invest in the strategy of the business, principally organically in 2021. So we're very confident based on the strong cash generation of the business that we can continue to grow our dividend, invest in the business, and meet our obligations. I mean, I'll probably hand over to Jim to talk about, potentials around, for example, inorganic investment or M and A.

50:30 Yeah. Look, we have we have quite we have quite a fine tuned radar, and we have looked at most, if not all of our traditional competitors, you see our news in the market. And we will not be investing in high returns for shareholders Some of the prices are just too high back cash, some of the sellers come in with complete And they often are used as market makers, so we make sure that that's not the case, which is why we make some brief statements. We will continue to look at both vertical acquisition target capability, as well as other types of targets in the round, and I'm seeing some of the chat about buybacks and obviously the value of buybacks against maybe other equity acquisitions.

51:27 We are aware of all of that. And as shareholders, you should expect us to be careful and make sure that we're delivering value over the medium to long term, which we will. So I can't give any details of it, but we have a whole corporate development unit looking at the market and we'll make a move when appropriate. Very good. And perhaps just maybe before we we sort of hand back for some closing comments, Jim, you sort of both mentioned Ukraine, you know, at various points during the presentation. Are we are we, you know, looking at situation where the the ongoing war in Ukraine could mean more cost for the business? Could it could it impact on top line revenues? What what are you thinking at the moment?

52:17 Perhaps perhaps we'd, you know, maybe get to Simon on costs and Jim on that. Simon, do you wanna take that? Yeah. I mean, on on the on the cost side, I mean, clearly, there's been a lot of volatility in the energy market as a result of the war in Ukraine. And we constantly look at hedging strategies and think about when is the right time to lock in pricing and so on. But yeah, definitely we are mindful of the fact that there is going to be this period of volatility. And we can't, no company I think can predict with sort of absolute 2020 accuracy how that's going to flow through the course of the year. I think the thing that's probably most important from our perspective is that we have got a very efficient operating model.

53:11 We come into the current year with a strong balance sheet and with a clear strategy. And therefore, whilst there may be these cost headwinds in the near term, which is the basis of the guidance we're giving for 2022, that doesn't sort of take away from the longer term strategy. So I think we are going to have to deal with some cost headwinds. We've called those out. We've been very open about it. But what we've absolutely decided as a management team is that will not lead to a scale back in our investment because that would be the long term wrong thing to do. It would be a short termist approach, and that's why we're we're sticking to continue to invest in editorial, continue to develop our capabilities, for the future.

53:57 If you if you would just wanna give a couple of closing marks, Jim, and I think we're we'll call it a day there. Oh, well, just a couple of things. One is, firstly, thanks to your continued interest in the company. We don't take it for granted, and we just want to make sure that everything we do put out there that we deliver on, we have done so far. We were intending to continue that. So thanks again.