Reach (LSE:RCH) — Half Year Results

0:02 Good afternoon, ladies and gentlemen, and welcome to the REACH PLC Half Year Results Investor Presentation. Today's presentation contains no new financial or price sensitive information following the publication of the half year results this week. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question 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

0:34 appropriate to do so. These will be available via your Investor Meet company dashboard, and we'll notify you by email when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we'd like to submit the following poll. And if you give that your kind attention, we would be most grateful. And I'd now like to hand over to Matt Schaff, Jim Mullen, CEO and Simon Fuller, CFO from REACH PLC. Good afternoon to you all. Good afternoon. Thank you, Mark. Good afternoon, everyone. Thank you for joining, and I appreciate your time and interest in our company. I know you have enough opportunities to look at, so we don't take it for granted. So we'll try and get you as much information as we can today. I'm just going to sorry. I've also got my CFO, Simon Fuller, here who will be taking over the the financial and the operating details, and I will take you through the transformation and then go on to the strategic strategic delivery. So I'm just gonna switch off our cameras and start the presentation.

1:38 So firstly, I'll speak about how we've transformed the business over the last sixteen months. The the the previous six months to that was the evolution of our strategy, and we didn't waste any time in its application. And before we start that, I would just like to to remind everyone because not everyone knows this about the scale of our organization. And we are the largest commercial news publisher in The United Kingdom and by a significant distance. But, obviously, we're we're also the largest sports publisher commercial sports publish publisher in The UK.

2:24 And as well as that, we're we're actually the fifth largest digital asset in The UK as well behind Facebook, Apple, Amazon, and Microsoft. We're the only UK platform against those American tech platforms. And it's important for you to understand that because every month, we access roughly 42, 43,000,000 online individuals in United Kingdom who consume our news and our sport. Now that's obviously the opportunity for our company, the ability to grow our digital business and the opportunity that's in front of us, but we're also well funded, and we're well funded by, essentially, our newspapers.

3:09 Now there is that, to use the phrase of Tom Sawyer, the the exaggerated use of of our death, I. E, the death of newspapers is wrong because it's not the case. We have nine national newspapers. We have a 110 regional newspapers that goes through 50,000 retailers, we sell 8,000,000 newspapers every week, which is not an insignificant number. And we have found that that audience for newspaper buyers has been super resilient during the pandemic. We we were actually genuinely surprised ourselves about how people make sure the habits of getting a daily news is is basically, delivered. And, that is one of the reasons why we're in such a strong position from a cash position because that also helps direct fund our digital business.

4:06 An online audience in The UK is roughly 80% of The UK digital population. What does that mean? It means that every brand and advertiser will at some point go through us to reach their audiences. And, obviously, we satisfy that audience demand by publishing nearly 900,000 stories last year, and that's up 62%. And with that sport audience that I spoke to you about, the gap between us and the second most popular sports media publisher is around 20%, so we are not insignificant. Now people are often surprised by that. They shouldn't be because I often say in my team, all news is local. And sometimes when you follow primarily, say, you follow football, you think that football is maybe six, seven, or eight teams because that's all Gary Lineker and Alan Cheer have talked about. But, actually, football is local.

5:03 So if you want to follow Bristol Rovers or Yeovu Town or Ipswich or Motherwell or Dundee or Swansea or Exeter, then it's usually through our titles. And when you add up all of the followers of those clubs outside the big six, you'll actually find it significant, in fact, even more as the response to the European Super League had proven. There is a lot of local clubs and local regions, and the only way they can get that content is through our sites and newspapers, which just proves the value of what we do. Now we are now on a clear pathway to profitable growth, and I'll start this point with saying that we now employ more journalists than we did in 2019.

5:54 Now despite of being a global pandemic and the consequence of that pandemic has been an economic crisis, which we haven't seen since the Wall Street crash of the twenties, and we're still employing more journalists than we did before the start of it. And that thing I think that's a significant point. Why? It basically means that the only reason we can employ journalists is because we can afford to, And the only reason why we can afford to is because there is enough ad inventory to actually there's not enough ad inventory, but there's enough ad inventory at the moment to satisfy the demand for our our readers and customers. So the more journalists that we provide, the more demand and eyeballs that we create, and the more ads that we can sell.

6:43 And despite some of the naysayers we're talking about, the the difficulties in The UK economy, and The UK economy is still taking over. We are seeing that because we are selling more advertising, and we have more people coming to view it, and therefore, we employ more journalists to do so. In order for our brands to maintain that position of being a trusted source, then we continue to be champions, campaigners, change makers. And we take this seriously in a world of fake news, in a world of where is the source of my news coming from, in a world where I'm sitting at home, how do we affect change and for things to happen? Well, our titles do that. And in the last twelve months, we've changed four laws. We've represented communities who are underrepresented, and that that creates a loyalty within our within our newspaper base. If you take the mirror, the star, and the express, we're lucky enough to have three titles which naturally, socially, and demographically self select. The medals, obviously, are left of center title.

7:48 The express is right of center. And The Daily Star, even though some people think that it's it's a humorous publication, it's actually more than that. The Daily Star is now carrying the tradition. The the great British tradition of lampooning rose and power, where it used to be private eye. And back in the seventies, it used to be Monty Python. Actually, it's now The Daily Star. So it actually has a serious purpose. And if you think that you can get away with things, then both are are right and left leading national titles and our regional titles will address that. But the Daily Star will come and get you and make fun of you. So we're keeping an eye on those in power. And that's important because it's attracting audiences. They trust and believe our content, which means that they're more engaged in the way I've ever before.

8:36 The big challenge, obviously, we have for our business is that we have to to we have to transform and transfer our business into a digital platform. And when Simon and I started the company a couple of years ago, one of the one of the main reasons that we came was that here was a company which was the fifth biggest digital asset in UK, reached 42,000,000, roughly 40,000,000 when we started. And we asked the question, how much of our audience do we know? I who's registered? What's on the database? Do we know if this individual's particular interested in sport, politics, or entertainment? And when they ask the question, that was roughly 200. Therein lies the opportunity. Because we know if we can get content to people at the right time, we can keep them glued to that content for longer, and we can give them advertising where the propensity for them to cut through is much higher.

9:32 That's where our digital shift and our rerating will go, but it gets better than that. If you look at digital only businesses that are similar to ours and you look at their their their their value multiple, it's ten, twelve, thirteen, fourteen times. Now why can't we get that? Because we have something that they don't. We have a resilient newspaper business, which is actually funding that digital transformation. And Simon will speak later about our operating margin. He'll speak later about the transformation. They'll also talk a wee bit about the fact that this newspaper audience is super resilient and stuck in with us. And even though there's some negativity around an audience that's in decline, yes, it is. It's getting smaller, but it's not get it's not getting as smaller as you think.

10:19 We have done the mortality models that look at the average age of our our our newspaper audiences between mid fifties and and late fifties. The average mortality rate in The United Kingdom is twenty five years. Even if you layer on the decline rate, there is decades of loyal purchasing leadership in our newspaper business. It is highly cash generative, and it is basically an interest free funding vehicle for our digital business. Much more than those large digital properties can get on the on the multiples on on profitability. That's the key, and it's something that you need to understand. That enables sustainable and profitable investment in journalism and content because we have the cash and we're growing our digital business. Our digital business grew at 43%, and that in itself pays for itself with additional funding from the newspaper business. We are now on a clear path to long term sustainable growth.

11:18 We do not have to buy other newspaper groups to squeeze out synergies to buy us another six, twelve, or eighteen months. We are self sufficient. We are now investing in journalists. We are investing in tech and platforms. This business is transforming. It's different from what it was two years ago. So some of the key highlights. Part of our strategy has actually been to get customers to register. Of that 42,000,000, we already have 6,700,000 customers who have registered with all of our titles and live sites, and we are actively every day, every hour, every minute as they engage. We are picking up information about them, what they read, when they read it, how long they read it for, what story they click on to next, what email, what comments they make. We are building a profile of our customers through the registrations.

12:10 That has that has helped us grow digital revenues to 43%. It's also showed you that digital is now almost a quarter of our business, compared to what it was in h one twenty twenty, and it's actually greater than print advertising. Our position have been number one for sport in a summer where we've had the Euros. The Olympics is still to come. Track and field is still to come within the Olympics where you see a sharp uptake. And then, obviously, if football season starts again, not to mention the lions on tour, then it's no surprise that our sports business is growing. And then circulation, that's returning to post COVID levels. I'll leave those numbers to Simon, but we've got low single digit decline. Last year during the COVID pandemic, we didn't know what to expect, so we went through a transformation program.

13:00 Now that transformation program is coming through credit to our our executive team for delivering it, and we've got nearly 23% operating margin, the best that it's been for some time. That's left us with 55,000,000

13:13 of net cash even though we have a lending facility. In the half year, we've got 55,000,000 of cash to support our business. That is the highlight of what we've done in h one, and it's slightly ahead where even Sai and I expect it to be. We are in a positive place. We are in good health.

13:36 So let me hand over to Simon just to give you some of that evidence around the financials on those numbers. Simon, just over to you, sir. Thanks, Jim. Good afternoon, everyone. Thanks very much for joining this webinar. So I'm not sure how much you followed the company. I can see from the poll that quite a lot of you are shareholders. So you'll perhaps remember that 2020 was a year of transition for us. Jim's just mentioned the transformation, the launch of our new strategy, which we launched about a month before the first lockdown relating to COVID. And really, that was an accelerated year. But what we always described through the course of 2020 was that that was about building the foundation for 2021 and beyond.

14:21 And so what I'd like to sort of take you through over the next eight or ten minutes is is a little summary of where are we seeing that progression, what are the proof points, as Jim's been describing of the strategy working, and what should you expect next as we continue that journey. So if I start with financial progress, we describe this as an ahead of expectations performance, ahead of our expectations and also ahead of analyst expectations in terms of the writing and the research that's in the market. And that really can be summarized across a number of the p and l lines and also progression on the balance sheet. So in revenue terms, as Jim's already mentioned, we actually had total revenue growth and also like for like growth. So revenue growth of 4%, like for like growth of 2.6%.

15:17 And I think there's a couple of things I'd want to call out about that. One is that somewhat reflects a bounce back from COVID. It does show the resilience of our print business and and both circulation and print advertising were actually in like for like growth in q two. But but more than that, it also demonstrates the larger digital business now, which is a growth engine within the overall business. It's it's a testament to the mix change that we have now that our digital business with the growth rate rates that we're now achieving is able to drive a level of total company growth. And that's a a clearly significant moment for the business. On the cost side, you'll see in front of you that the cost stayed broadly stable, actually slightly slightly lower, 1,300,000 lower.

16:09 Now within that, there's there's a lot of moving parts. You might remember that in half one twenty twenty, we put a number of people on furlough. At its peak, we put about a thousand people on furlough at the at the toughest point of the the pandemic, particularly in our regional business. We also put in pay cuts. We we suspended bonuses. This was all at the toughest point of the pandemic in order to protect the business. Now as we moved through 2020, those measures were relaxed and reduced. And that that was as we saw revenue recovering as we saw digital acceleration. And in 2021, none of those measures are in place.

16:58 Everything is business as usual in terms of the cost base. And yet, even with that extra investment and none of the benefit of those one offs and with a higher revenue number by 11,500,000 as you can see on the screen, we're actually able to reduce costs. And that is because we're now running a much more efficient operation. What through the course of COVID we did was we looked at the end to end business model. We looked at editorial, commercial, and back office operations. We looked at our printing functions. And more recently, we've looked at our office estate and transformed us to a a twenty first century business, a business that's that's ready for 2021 and beyond. And we've looked at all of the different structures and and and improved our efficiency. And that's what's driven that operating margin improvement in part alongside, the benefit of a bigger digital business, which is margin accretive.

17:58 And and you can see the operating profit move forward 14,000,000. The margin, as Jim's mentioned, move forward just less than 4%. The same story flows through to EBITDA, our earnings. We're pleased to announce a 2.75p dividend per share. That's up five point roughly 5%, just just shy of 5%. And that demonstrates our confidence to to pay a cash dividend. Our stated policy is to grow our dividend over time, and we believe we can successfully do that in conjunction with investing more in the business for organic growth and also continuing to meet our pension obligations and so on, all of the other stakeholder obligations.

18:49 Operating cash flow you can see was very strong in the half, up 30%. Net cash similarly up 30%. And then the other call out was our net pensions deficit, so that's net of deferred tax because as you'll be aware when we make a pensions payment, we're able to claim a tax deduction on that. That deficit came down significantly and that's laid out on the slide. That's because we saw an increase in the discount rate, so reducing our future liability. And look. That's that's similar throughout the the marketplace based on forward views of interest rates and yields. But from our perspective, it's a further strengthening of our balance sheet.

19:35 So I've said it's a significant year or half year financial progress. Let's just dip into some of the details a bit more. So this slide shows something of the digital revenue progression. And as you can see from the left hand bar chart, we've seen a real step forward in our digital revenue. In fact, for both 2019 and 2020, digital revenue is in the forties of millions. In fact, it was also in the forties of millions in 2018 as well. And you can see that the mix percent of our total revenue was in the teens. In 2021, we've now broken into the twenties into well into the twenties.

20:20 And the digital business we have at £69,000,000 in the first half is equivalent to our full year digital business only as recent as 2017. In fact, just to remind you, our total digital business annual digital business in 2015 was £30,000,000. We've now done more than double that in the first half of twenty twenty one. So you can see that there's been a real acceleration in the digital progress, particularly in the last eighteen to twenty four months. We've seen a growth which is the middle chart in our unique visitors or our unique audience. This is what makes us, as Jim's already mentioned, the fifth biggest digital asset. And then just worth a comment on the worldwide page views per month.

21:08 The the the piece that we particularly call out is the two year growth, which you can see on there, up 24%. We did have some, twenty twenty volatility due to due to COVID, particularly during the lockdown months where everyone was stuck at home, perhaps accessing a disproportionate amount of content, particularly around COVID topics, and that did, particularly boost our traffic. But but we are still showing steady progression on an underlying basis, and, that's really important because it demonstrates the engagement with our product. If I then just move on to the way in which our mix has changed comparing to print advertising, and again, I've gone back this time to 2015 just as I did a moment ago with the voice over of the total mix.

21:58 And this really demonstrates how consumer shifts have happened as well as how our business focus has evolved over the last six or or so years. And you can see that in 2015, we had a 14% of our total print advertising plus digital was digital. It's now 58%. And that's on a an actually an increased overall twelve month quantum. So you can see how much things have shifted but but if you look at the the right hand side of that bar chart, you can see that it's particularly shifted over the last few years. We saw a very big shift from 2019 to 2020. And that that was a that actually was the inflection point where print, through the course of 2020, became print advertising became smaller than digital.

22:53 And that's clearly a very important moment in terms of the the mix of our business and the benefits that come from that digit that larger digital business.

23:05 Jim referred to the the robustness of print revenue and and and this slide has got quite a lot of data on it. I I recognize that. But we're trying to capture quite a a complicated story. But you can see on the the bar chart as you read from left to right how significant our print business still is and how robust that has been. Both circulation and advertising were in like for like growth in q two. Advertising by over 20%. Circulation by by a small single digit percent. But the thing that's very important is that circulation now is a very significant part of our print revenue, almost 70%.

23:50 You wouldn't have to go back very many years for it to be more like 50% or 55%. So why is that important? Well, in the longer term, circulation revenue

24:03 has a slower decline rate, and that's because we can protect that revenue through cover price inflation. We've been successfully able to put in cover price inflation for many years now as a business. Our business still represents or or our products still within our business still represent very very good value for money as we believe. 55 p to buy the the Daily Star or or 90 p to buy the Daily Mirror, 75 p for the Daily Express. For a 64 page book as it is, we think that represents good value for money and therefore we are able to continue that that cover price inflation which does protect that revenue stream. Print advertising is still a scale business and throughout COVID, we've continued to have strong print advertising from food retail, from telecoms, from financial services, from home leisure.

25:02 And really, it's only certain sectors that that are yet to to recover to where they would have been. And and particularly, we think of of areas like travel and and and out of home leisure. Jim's mentioned the operating profit progress we've made and the operating margin progress we've made. The aspiration that we have, which is twenty five percent plus longer term margin, we feel is very achievable. And and that's not on the basis of continuous cost cutting. That's not on the basis of of of squeezing the margin in a in a unsustainable way. This is about investing for the future. It's about growing our digital capability.

25:50 As our digital mix becomes larger and because it's got a larger margin in the longer term, that will be accretive. That will add to our company margin. And therefore, sometimes we are asked, is is is the current margin that you've got the end of the journey? Is that the end of the story? And and we are very clear that it isn't. And then just in conclusion, strong adjusted operating cash flow. We actually had a more than 100% conversion of EBITDA profit into into operating cash flow partly because of a working capital swing. Some of that, it was seasonal. But but even putting that aside, we're a highly cash generative business that can meet our historical obligations such as pensions or historical legal issues, can pay a strong dividend, and also can retain cash and invest more cash in organic growth, or acquisitive growth. And and so we continue to have high levels of confidence.

26:55 Jim mentioned it earlier about the the the continued cash generation of the print side of our business, but but also the cash generation of our digital business to be able to recycle that not just to grow the margin, but also to to continue to improve our future prospects. And then just very finally, our capital allocation framework is is relatively simple and straightforward. We have a positive net cash. We have a strong and strengthening balance sheet. In the past, we have taken bank debt to expand, and we would consider doing that for the right value opportunities, but we will be very picky and and make sure that it does meet the necessary hurdle rates. But in terms of the customer value strategy, we will continue to flow in investment.

27:45 Since February 2020, we flowed in around about £20,000,000 of additional investment into the customer value strategy and content. We will continue to meet our pension obligations. And as I've said earlier, we have a policy to grow our dividends. So that's really it for me. 2021 is a really important year. It's a it's a year of demonstration of the strategy. And if you look at the first six months, we think there's a lot of proof that the strategy the customer value strategy is working and that that is, as Jim said, transforming our prospects. I'll hand back over to Jim.

28:27 Thank you, Simon. So, look, that was the the numbers behind the progress that we've made so far. So let me just talk for a wee bit just about our strategic delivery. Now some of you will be aware of our strategy. Some of you might be new to you. So let me just briefly go through what it is. The the the strategy is essentially, it's about getting to know our customers better. And if you get to know them better, then you can extract more value. So how do we do that? Well, firstly, we increase customer engagement. So making the experience much better, build relationships, accept give them content that they're interested in. That could well be if you're reading the love of cool echo, but maybe content that they would record in Glasgow and what's on politics or in the matter that you might not be aware of.

29:18 So using the power of our network to give content to particular leaders who may not have access it because they they deal with one title. We also need to build a single view of the customer. Now a lot of you will have heard of this term before. Essentially, what it means is we build a profile of customers. So like Google does already or Facebook and with your cookies when you go online, everything that you do has been tracked. Well, we do it the same, but we do we do it within the trust of the brand. And when you register or whether you sign up to a newsletter, a REACH ID is allocated to you. So if you're reading a story about European Super League and then you go and follow European football, if you want to know about vaccine efficacy, all that is tagged to you. So as we know the information that you're interested in in one single view, We have the it used to be well, if we had it, it was on numerous databases throughout the company. Now we have one single view of that.

30:19 That allows us to grow revenue and diversify. So how do we do that? Well, at the moment well, two years ago, we would basically have a yield in the market for an advertiser that wanted to access anonymous eyeballs. Well, what we do now is we build products for specific advertising segments. So whether it be gambling, betting, leisure, travel, food retail, non food retail, we're actually diversifying into specific segments, and we're building products that allow us to do that to grow and and diversify our revenue base. And then all of this is undermined by an environment where people want to work, you know, and by capability. So we've brought in brand new capability on data analytics.

31:06 We've brought status sessions and software engineers, computer programmers, data analysis, and we've also brought in more journalists. But in order to make that work, we need to build a culture, and I'm gonna talk a wee bit about the culture we're building, particularly post pandemic. So how will we double the digital revenue in the company? Well, the first thing we need to do is that we need to understand who our readers are. So we're not going to put a a big questionnaire. We don't want to know you don't have to fill a form in. All you have to do is register. How do you do that? Simply via your email address. Because as soon as you put your email address and signed up for a newsletter or put your postcode down for a new area, just one piece of information, we allocate an ID to you. It's like your cookies that are on your laptop.

32:03 We will therefore actually record. And it sounds a bit sort of the dystopian, but it's not. We record which content you're looking at. We also record when you're looking at it. That's really important because if an advertise advertiser wants to get your attention, don't send an ad to me at, say, two minutes past five on a Thursday when I'm basically presenting to retail investors. Send it to me at seven in the morning because that's when I'm fully engaged. That's when I am fully engaged. Even the time you look at content, we can record that and make your experience more worthwhile, and that's only because you've registered. Then through engagement, we give you the right content that you're interested in. So that might be content that you come across, and we still want our customers and readers to have that experience of browsing through the Manchester you can use and finding something that you didn't expect you'd be interested in. That's the beauty of reading content on an edited site.

33:04 But, also, there'll there'll be the time when you're interested in the transfer window or amberless countries going from amber to green. And at that point, we have targeted engagement. And then the content, we need to produce it, which comes back to the point of deploying more journalists. And this is journalists, not content or clickbait creators. This is proper journalists who can write, who can introduce you to a story, who can keep your attention, and actually leave you waiting for the next chapter or the next piece of breaking news. That's a skill. It's the ability to tell a story, and that's why we're obviously employing more journalists. Everyone thinks they can write, but, actually, when you read a good piece of journalism, you know the difference. And then finally, product development.

33:52 In the past, we've gotten very good at this, but the products now allow us to actually provide more targeted advertising to this content, and we'll speak about about that later in the presentation.

34:06 So registrations are advancing. We have a target of 10,000,000 by the end of twenty twenty two. I'll go on a one here. We will hit that. The 6,700,000 registered customers that we have at the moment has been growing by just over 30% since end of twenty twenty. Now granted COVID did help, when you have an audience of 42,000,000 and a lockdown forces them to stay at home, then your digital, obviously, registrations and engagement should go up. So we don't take any credit for that. The the the actual COVID lockdown did help us accelerate, but we'll tell you what, being a being a CEO and a CFO, it's it's nice now and again to get a tailwind.

34:52 And so we did get that, which was, one of the benefits from this this this drastic COVID impact that we've had. Now where is it coming from? Well, newsletters has been one of the biggest. Newsletters is really interesting because newsletters cover every aspect of content. So to give you an example of one of our most engaging pieces of content was the the BBC series, Line of Duty. Now it only lasted for six weeks, but the intensity of engagement and the newsletter content that we gave around it actually got people to register. Love Island, that impacts a much younger demographic. And even though it's an ITV program, the content that we produce actually attracts a bigger audience online.

35:43 And so our newsletters around Line of Duty and Love Island are very, very positive for us. And then you have your traditional newsletters which are segmented by your audience. So the recent incident of the the Royal Navy and the the Russian fleets nudging each other on the Black Sea was quite attractive to a daily express audience who are by by by the fall of our older right of sense of defense and and and defense and safety is quite important to them. So we've found a big uptick in that story from that audience as well. So we have newsletters that apply to numerous different types of content. We then have a product called the Inuraria. Now Inuraria was very valuable to us during the pandemic because you could go and see instances of COVID infections within your postcode area. It became an a place to go to find out how the pandemic was impacting the local community that you lived in, not just a small town or a small city, but actually maybe just a postcode level. And then just to think about in your area, it's built around postcodes.

36:56 Those postcodes are a hugely valuable piece of data. In fact, if you have someone's postcode, you can pick up so much information about the demographics, the the where they live, what their interests are, and we tie that into overall customer profile building. So that's been very beneficial for us. Engagement is growing. Page view is actually how much time people are watching the pages is went up during the pandemic. Granted, if the quality is good enough, you should accept that. So we don't take credit for that. We think our quality is good enough. Two year active grow growth rate is a problem more indicative because that takes out the pandemic outlier, and that's been strong.

37:39 And then, obviously, our engagement against the publishing sector and the Internet in general, bearing in mind, we are not just competing against other publishers. We are competing competing for people's time. So when someone's buying a book or an item on Amazon and they are reading someone else's review, that's time that they've taken away from us without reading our content. So we keep a close eye on this, but we are punching above our weight on it. We're doing very well, which is no surprise since we are the fifth biggest digital asset.

38:11 And that loyalty is continuing. Even though people have come out of the the the lockdown, there's no sign of a rating. People are now used to where they get the content, and we're still seeing that progress continue.

38:28 Context broadening. So we're obviously seeing interest in topics that we never had a product. So for example, Northern politics, the fall of the, what what was known as the labor red wall, who's basically seen an area where we need to address, talking about issues in the North and the obviously, in the Northern powerhouse around Manchester. And people are taking more interest in their region. They're looking at the likes of Scotland and Wales having their own devolved parliaments. What does that mean to the

38:59 likes of Manchester and Leeds and Newcastle? So we've built content

39:04 around us to support the debate. And black lives matter, gender equality has created a real demand for content around that. So we're serving that through inspiring women and their ethnicity programs. And then in the short term and the great thing of the news is that it's everything is in the short term or so much so. So the euro is the Olympics. The British lines have been real high bust of activity, and we make sure that our news desks

39:33 are now ready to see what's coming. Couple of years ago, we would start talking about the lines to maybe a week or so before it started. We have no plan months ahead of how do we impact it with the customer profiles look, how much should we release in the newsletters, how many newsletters should release, should we do player profiles. The planning that goes into a content bust out are much more sophisticated than it used to be.

40:01 So this is the product. So I was talking about about how we diversify our growth. In the past, if you wanted to sell, let's see, fresh fingers through REACH or frozen food through Iceland, You do a campaign in our our our newspapers. You would take over our digital websites, and we would sell you what we call a big city package, is essentially because we are the only news group that has regional and national coverage at scale, We can see where we can get your brand campaign in the nationals, but we can also put it in Newcastle and Glasgow and Manchester and Bristol. Now that's quite effective, and we still do that. It's very effective. But what we do now is take it to another level.

40:46 We say not only do you want to sell maybe some frozen products in your your food retail and you want to be getting your brand out there, but you may be opening up new shops in Greater Manchester or in Lancashire in Scotland or in the West Country. Because of our ability to understand where these customers are, you don't have to pay for a campaign across the nation. You can actually pinpoint the people who you need to get to. Now that might mean that the campaign you might do one campaign a 100,000. We can now do campaigns where you do six, seven, or eight to 25,000 because it's highly targeted. Now we can only do that because we under we understand the readers better. And we've done that for a number of the segments, and we are seeing highly targeted campaigns of delivering a marked improvement in effectiveness.

41:41 What do I mean by effectiveness? The propensity for a reader to click through in an advertisement that is served to them. So here are some of the sectors where we've seen improvement. 46% betting and gaming, 20% education, even travel, which has been hit pretty hard, I e, becomes more competitive. Staycations have uplifted by 36 because we are targeting people who are looking at staycation content. And I'm gonna come on to a case study just to show you how that how that actually works. One of them will be if you take betting and gaming. Normally, during a Euro's final, the gaming companies would come to us and say, right, we wanna put some ads in the paper. What they really want to know is we already have all of your customers, but we want to get those customers, those fair weather fans who just want to put a a bet on England versus Italy, and they'll never come back again until the grand national arrives.

42:41 So what we would do, we would take our database of those customers who are interested in England football content, and we would match it with the other gaming database. And, usually, what you would find in that Venn diagram is a gap, which should be maybe ten, fifteen, 20,000 people. Those would be the individual customers and leaders who you would sell the ad to. Those are the one off people who would maybe put a £1 bet on outcome of the game. That's why you're seeing 46% uplift. We're much more clever and sophisticated in how we target our customers now. Now I spoke to you about we can't do this without our people, and the pandemic has put a real burden on a lot of our staff.

43:31 We've got people working from home who may have been based in London who are flat sharing, but we still expect them to do their job. And with that, we even had examples of quite a few of our team who are working from the hallway because of flat sheeting. It can be quite difficult. So we have invested, and, again, because we can, of our operating margin and well-being for everyone. We have provided scientists and headspace spaces and appointments for anyone who asks for it. And I and Simon personally have said if we reach the capacity for access to a mental well-being coach or even just someone to listen to, which is the headspace element, then we will make sure that that provision is provided for. So if anyone wants to speak to anyone, they can, and these support networks have been heavily invested in the business.

44:22 We've also appointed after the George Floyd issue, our first director of diversity inclusion. We never had that before, and we've actually put targets in both executive and the board's remuneration and made them public about where those remuneration and target used to be. So we will have ethnicity. We will have gender targets in the business. Everyone says that's not before time. I completely agree. I'm doing it now. We're not hiding behind it. We're making it public. We will be judged over the next coming year on whether or not we've delivered on them, and we are happy Simon and I are both happy to commit to that. Investing in journalism. This is essentially what we're all about. Okay?

45:07 But I I make sure our edit on chief stands shoulder to shoulder with Simon and I on the the the the interim results and the field year results. And the reason why I do that is that you can't buy editors. You can't buy sign and I either, but we are here to grow value and and make money to invest it in the business and to reward our stakeholders who have supported us. But an editor isn't interested in that. All Lloyd is interested in is journalism. And so for the first time since 2019 and probably for the first time in a decade, I think by the end of this year, we'll have more journalists than we ever had. That's growing our audience by eight percent. Our page views are going up 24%. The time that an odd that a registered user and an overall user on the site is up 50%.

45:58 And because we're providing more journalists, then 62% more stories have been published. Obviously, our editors are delighted. What I'm trying to say with this slide is the editorial commercial aspect of the business are actually tied into the same objectives. Because if that's not the case, you can't grow success. And that's why I asked Lloyd to join us on stage to say, tell everyone about the editorial involvement in the business and how it's helped us grow it. That will continue to be the case because that's where our success is based. And what does that actually mean? Well, the more journalists we have and the more stories that we we create, then the bigger the audience we have and the more loyal they become. And the more loyal the audience becomes, the more data we can find out about them. And the more data we can find out about them, then the more revenue we can we can actually take from that audience because we are getting more targeted advertising, which delivers a higher yield, and that's the circle of success.

46:58 That's what's delivered the operating margin. That's what's delivered the the the the the growth, the 43% growth in digital, and that's why we're committed to more journalists in the business to deliver more content to basically deliver more data. So the company is now on the path to long term sustainable growth. We've actually said this last year, but now we're showing the invest the investors the evidence of that. A lot of our investors backed us because they've seen this happen before. They had trusted us as a management team, but we actually hadn't delivered anything, to be frank. Now we're delivering it. This is these are the first numbers that shown we're delivering it. The audience is growing. That's evidentially supported and becoming more engaged.

47:45 The investment in content and data will help us accelerate that. You don't get 43% audience growth without understanding them. And now we have an efficient operating model. We don't have to go and buy other declining print assets to squeeze out synergies to buy us another 18. We are now sufficient to transform the business. And as Simon says, that's coming through in the cash flows. We have a good credit facility, but we don't need it. So now we're looking at what we do, with that cash flow. Obviously, we will reward the stakeholders. Obviously, we will, invest in, the business, but it also gives us opportunities if we're looking at m and a. So thank you for your time. I'm going to hand back to the chair for any questions.

48:45 I'd like to remind you that the recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard. And again, we'll notify you when they're ready for your review. Finally, I'd like to also remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order the company can better understand your views and expectations. Matt, Jim, Simon, perhaps I could in the first instance, Matt, hand back to you just obviously because investors have the ability to pre submit questions and of course, you received a number of questions during the meeting itself. Perhaps I could just ask you to read out those questions and where appropriate give a response. That would be great. Sure. Thanks, Mark.

49:32 The the first one we've had in, which is probably for Jim, your valuation over the past year has seen REACH move from a two times multiple to to around nine times. What do you think the market now sees that it didn't a year ago? And do you think there's still more to come in delivering the strategy? What the market sees what it did before before the market liked our strategy, had seen it working before, understood the logic behind it, but they actually hadn't seen evidence have been delivered. So a lot of our investors had confidence in signing and I and the team that we could deliver it. Basically waited to see. Those that had the confidence are now being rewarded.

50:19 And now what we're seeing is evidence of that. So with evidence of data insights delivering value, which is why we've grown our position and obviously creating more interest in the company. One important thing to say, we are all in the foothills of the progress that we're making. So the the assumption that, well, we'll you may think we've missed a chance. We're not. We're still at the foothills of what we're doing. I'm now just showing some of the proof. Good. And I guess following on from that, another question which which asked, could you explain why you're investing more and what you're investing in? I think you've you've talked quite a lot about investment in journalism. Perhaps we might wanna talk a little bit more about the investment in data.

51:06 Yeah. We're investing a lot in data platforms. So the ability to actually hold the data in a in a legal form and a in a good order and then to run the the algorithms on it is actually a platform. It's called BlueVen, and we invested in that about six months ago. And then, obviously, we're now employing data statisticians, software engineers, data analysts. So as well as the journalism, it's the it's the data platforms and tech skills to to allow us to to to make it happen. Perhaps perhaps this is one I can direct at Simon. Is this just about replacing print revenues with digital? How should we think about the prospects for the print business with more and more people switching to online and perhaps just a little adjunct to that one that's just come in, will costs start to rise as a proportion of declining circulation and print advertising?

52:02 And if so, when will it hit you? Yeah. I mean, it's it's thanks, Matt, and and thanks for the question. I think in terms of the print business, it's still a scale business, and it continues to be a highly cash generative and very efficient business and will be for for many, many years to come. So whilst the focus of the the customer value strategy is about accelerating our digital progress, we can do that as complementary alongside continuing to deliver a very strong print performance. We've seen during the pandemic the print business be extremely robust. In fact, we've talked about the fact that we were between 9394% of our original budgeted circulation in the the year 2020.

52:49 So in a year where we've been so restricted, we've been able to to really deliver in 2020 on on the basis of our certainly the vast majority of our original budget. And clearly, none of that contemplated COVID. In terms of the cost base and how that evolves, we will see a continued transition of our cost base as we become more digitally focused. And therefore, will see more investment go into areas like data science. But we we don't have to worry about diseconomies of scale for our print business given how efficient we are, certainly not for for many, many years to come. That was why we did the transformation. Excellent. Very good. Another question that's come in from a from a a couple of different viewers.

53:42 Can you comment on the relationship and the payments received from the social media companies and the likely trajectory over the next few years? Probably one for Jim. Well, we we we have a quite strong relationship with Google and Facebook in particular on Google to the open market. They trade their content, and the the revenue that we get from them is is valuable and the same with Facebook instant articles. The relationship that we have is that, we will work with them commercially and positively, and we we have frequent meetings with them. But we reserve the right to lobby government because we think we should get more, And they obviously disagree or at least they they don't want to move. So they know that we speak with government. They know that we lobby for more.

54:31 We think they should be paying their fair share, but it never gets to a point where we fall out. We're not intending to to take them to court. We are gonna we're gonna use government lobbying, etcetera, in order to get a a fair share of that. And all and, also, we're not preparing just for for that. We're also building our own REACH ID, which is our own relationship with with clients so we don't rely on Google and Facebook for them to share customer data, which is one of the basis of the strategy. So it's a healthy commercial relationship, but it doesn't mean that we can't challenge them publicly or on with government and the regulators to pay us more. Excellent. Very good. Thanks, Jim. One on cash, which possibly both of you might want to say something about. Firstly, sort of two part question. Are there still more newspaper brands out there you'd like to acquire sort of allied to that? You're you're generating increasing amounts of cash whilst also being able to invest in the business.

55:32 What are your thoughts on future uses for cash? Should we be thinking about increased dividends, or do you have other plans? Shall I shall I start with that, Jim, and then and then you'll add to it? No. You can answer it. Both sides. No worries. I mean, in terms of our cash performance, I mean and and specifically talking about traditional assets. For for people who know our history, you'll you'll be familiar with the fact that we bought a large regional business in in 2015 called Local World, and we bought a large national business Express and Star in 2018. And those two together are key components of what REACH is today. A scale business as as Jim opened with with that huge digital audience and and print audience.

56:24 We don't need more scale to deliver our strategy. So we have no need to go and buy other newspaper groups. We have no need to go and acquire or consolidate other parts of the the industry. We have got a sufficiently large audience to be able to deliver our strategy. Now that doesn't mean we wouldn't contemplate it at the right pricing, but it's fair to say that we have no need to do it in order to to to continue to progress. In terms of the uses of cash, I mean, we we see that the £55,000,000 of net cash that we have now as a business gives us optionality, whether that be to invest more organically to further grow out our regional presence or to invest more in national content, whether it be about, further developing our platforms, our mobile apps, investing more in customer data platforms, or whether it be to to scan the horizon for other external things that may accelerate our strategy. We we don't write any of those offers as opportunities and and continue to pay a growing dividend.

57:29 And it is our focus to grow that dividend. If you look at the track record since 2015, other than in the COVID year where we were cash conserving, we've continually grown that dividend and we've rewarded shareholders for holding our stock. Very good. I've got one final one maybe in the last couple of minutes before half six. I've seen lots of comparisons out there between yourselves and future. Do you feel that's a fair comparison? Could you perhaps talk about any similarities or or differences that you see between your businesses? Well, there are similarities with regard to we use customer data to increase the propensity to do something. Right?

58:17 But future and I are different biz future and us are different businesses. They are obviously content and ecommerce with content. And so there are similarities in the use of data, but we are not an ecommerce business. We may have some ecommerce peripheral partnerships, but we are we are all about content. So the data thing is the data side is common, but that's probably where the similarity ends. The use of data to enhance your business is probably the common factor. Actually, I don't know if it's an opportune moment for me just to come in because, obviously, I think for every question you answer, there there is another one that comes. I think I could keep everybody here all day. But thank you to all the investors that have taken time to submit questions today. And of course, the company will review all questions. And if appropriate, we'll post responses our website.

59:11 Jim, I know feedback is important to you and to the company. And perhaps before I redirect investors to provide you with feedback, I could just ask you for a few closing comments. And then, as said, I'll direct investors to feedback. Yeah. Well, I thought two things. One to say, I think we are ahead of the curve where we expected to be, and that's encouraging. So, hopefully, investors will be of that mind. And the last thing is we know there's a lot of places where you could put your cash, and we appreciate the time that you've taken to just have a look at us. We we don't take anything for granted. So thank you very much. Jim, Simon, Matt, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as we will now automatically redirect you for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations.

1:00:01 This will only take a few moments to complete, but I am sure will be greatly valued by the company. On behalf of the management team of REACH PLC, we'd like to thank you for attending this afternoon's presentation. That concludes the session and good afternoon to you all.