Reach (LSE:RCH) — Interim Results

0:00 Good afternoon and welcome to the REACH PLC Interim Results Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you to Jim Mullen, CEO. Good afternoon to you, sir.

0:30 Thank you very much. Good afternoon, everyone. Some of you will have, met me or heard this presentation before. I'm Jim Mullen, chief executive of REACH PLC. I'm gonna be joined today by our CFO, Darren Fisher, who's gonna take you through the half year results and the financials of the business. And I also have Joe Gritton, who's our director of, investor relations. So and Joe will be able to answer some any questions regarding our investment and investment strategy, etcetera. Right. So I just want to start on giving you an overview of the organization. The background to this is I've been in the business for about five and a half years now. It came in 2019.

1:19 And before that, I was the chief executive of Labrokes and Labrokes Coral after the merger with Coral. And then the reason why I came to the business is, firstly, I mean, I'm ex News International, so I was there for five or six years as strategy director. And but I'm also passionate in news media. So some of you grown up may have read Iliad or Treasure Island or some good Charles Dickens novel, maybe Stephen King. My first memory of reading was 1974, which was Scotland's remarkable draw with Brazil in the back of the daily record. That's what I get read to as a child, and it stayed with me since then. And one of the reasons why I'm with the organization is I think there's a fantastic opportunity for us, But I'm also gonna leave the daily record, which is a metaphor for all of our titles, in a better place than I found it.

2:11 And and the reason why I think we can do that is one simple reason. News media has, for some time, decided not to build one to one relationships with its readers and customers, so it doesn't use data. 2019, we probably had data on about 340,000 of our customers, of which most of them, if not all of them, were print subscribers. So we didn't know where really where our re our readers lived online. We didn't know what age they were. We didn't know what interests are. We couldn't really tell which content they're engaging with or where they spent time on it. And because of that, advertising would be sent through via cookies. So the relationship between our readers, our customers, and with the audience was essentially via Google.

3:02 And we decided that we can do better than that because we have loyalty. And why do we have loyalty? Because these are some of the the brands or all of the brands that we have. So you've got Daily Mirror, left of center, title, Daily Express, blue collar conservative, Daily Star, essentially trades, but fun. You know, everyone remembers the lettuce. And then you go into the big nations and regions. We've the dealer record in Glasgow. We've got the MEN in Manchester. We've got the Liverpool Echo in Merseyside. We own Merseyside, Liverpool Echo because of history of historical tragedies that happened there. But, essentially, if you're an advertiser and you want to basically announce your offer for Iceland or a new store opening to compete with Aldi with Tesco, or if you're Aldi and you're opening the store to compete against Tesco, There's one place you can go where you can reach the fill nation, and that's REACH PLC.

3:58 So we we had that we had that when I started in 2029. What we didn't have was the ability to deliver and articulate and evidence proven results in the marketing spend. So how can I improve the CTR, the click through rate of a mom in Surrey or in Cheshire who's basically looking to get the kids back to school? So we can prove that. How can I prove that I can get someone in maybe Surrey who's interested in niche sport with Scottish football? Me, you know, by my postcode and also by where I live that I've got a drive at home. And because I've got a drive, I probably drive a marked car, and therefore, you can sell me more expensive insurance. How do I do that? We couldn't do that in 2029, but we now can. That was the customer value strategy.

4:55 We now have over 12,000,000 of our customers registered. We have the postcode. We know the behaviors. We know which content they like. We know when they access the content. And we put all of that together, and we take it to clients, and we go, rather than spend £500,000 with a certain level of response, why don't you spend less of that and you'll get a higher response, but sell it more frequently? And that's what we do. You know? And if you wanna find young people who are not familiar with the brand that really wanna understand Arsenal and maybe they grew up not reading the mirror, Well, we can get to them too because we now have that the biggest Arsenal WhatsApp group in in the world. So we're using WhatsApp to direct it. And then we have we have another generation who's maybe over 40, 50, 60, where the Mirror brand is really strong or the Express brand is really strong and they read the same Arsenal content on the Mirror newsletters.

5:50 But because we know their age, because they've signed up, we can basically get in touch with them, and that's what we do. So those in the WhatsApp group who are a certain age, you'll find that they'll be reading the same story about Arsenal's chances to win the Premier League this this year, but they'll be getting ads on the likes of JD Sports or Nando's. And then the same story, which is getting read by some of my friends who are Arsenal fans who are in their fifties, will be on the mirror, and they'll be getting ads on Rolex, Range Rover, Villa plus VIP holidays. Probably same article. Why is that? Because we know who we are. Right? So that's the basis of the customer value strategy. Now one of the benefits of our organization is that we have scale. You can see some of the numbers here. You know, we have over 500,000,000 of revenues.

6:47 You've got a significant profit, over 100,000,000 of profit, but we are fundamentally a lean and very, very strong business. But when I started back in 2019, we carried two legacy items. One was the dispute with the member of pensions. We we have pension obligations, which come but when you look at all of it in the round, it's about 60 odd million of obligations. And on top of that, we also had HLI, which is basically code, legal code for phone hacking. Now part of my job when I started and then Dan coming in later and then Joe starting was to resolve these two gating items. Because why are they important? Well, firstly, I didn't steal any pension money. Right? Proper Max will bid. Okay?

7:37 I didn't hack any phones or, basically, get information about people using private detectors. But the organization has admitted that fault, but we have to resolve that. Why? Because it's such a significant part of our profit. So last year, q three twenty twenty four, we finally came to an agreement with the minor pension scheme and the other pension holders, and we now know how much we are obligated to pay up until 2028. Right? And, absolutely, those pension holders deserve that, but we we are now out of dispute. There is no dispute. And in 2028, that obligation, all things been equal, disappears. And then in HLI, we finally got to a decision by a judge that basically says the time in which you can claim for historical legal or wrongdoings for accessing information is over.

8:30 So by the end of next year, maybe a few months into 2026, HLI obligations will go. What does that mean? Why is that important? It basically means we can plan for the future beyond 2028 and start those plans now, which we have done. Now, we have a benefit in our business if you look at it here, we've got a significant revenue cash input in print. Now people say print is dying. It is, but it's huge. You know? We sell roughly about eight eight hundred thousand newspapers a day. Okay? Of those newspapers at home, it probably reaches about three and a half three and a half people. You know? It still gets to a cohort, which is over fifties. I'm 50 now. My last health check, I'm pretty healthy.

9:24 I've got some big plans for my future. I don't feel as if I'm dying. You know? This is the audience that we have. And because it's an over fifties audience, it's sort of dismissed. But let me tell you a wee bit about print. Those who read the printed newspaper hold the cash in in The UK economy. You know? They're at the end of their mortgage payments. They're in employment. They've not everyone, but they've got savings. They're usually subsidizing the the younger mobile users, but that's where the cash is. Not only have they got cash, but they're actually the most politically active. So if you take over fifties and over sixties, they are the most politically active group in United Kingdom. So these titles have influence. The Mirror used to be the paper of the opposition. It's now the paper of but used to be The Telegraph as a paper of power. It's now the Mirror. You know?

10:14 The Express is now the the blue collar conservative paper of opposition, and there is a very, very active base there who are reading it. Right? So it's really, really important. Now it's declining. The volume is declining roughly about 17%. Right? And people get alarmed at that. I wouldn't get too alarmed at it because we are good at managing this decline. So if you look at our ability to manage these print assets, over the last five years, we've taken costs out of the business. We now have three print sites when I started with five. We've actually six, five operational. We've now got three. We only need three because we we represent the North, the Midlands, North and Scotland, the Midlands, and the South. And we have Watford, we have Manchester, and we have Glasgow. Right? So we've managed those costs. We're also experts at managed cover price increases.

11:05 And the thing about newspaper these days, some of you on this call remember, you said the Sunday night advertising and marketing for the sun, fight in the mirror, fight in the mail, fight in the star, fight in news of the world. That doesn't happen anymore. So if you're a mirror reader, you're a mirror reader. If you're a a Sunreader, you're a Sunreader. If you read the Express, you read the Express. There's a better crossover in the mail, but that crossover of titles doesn't occur anymore. So when we actually need to increase our cover prices and we do it very, very cleverly and subtly, they don't take our readers for granted, we find that the yield that we get from our papers despite the downturn in volumes, the yield is actually performing much better. So print advertising is still very strong. Why? Because those who have the wallets and the money to buy are still reading the paper. Okay?

11:58 And then and over a period of time, the volume decline has been beaten by the revenue decline that we deliver even though it's declining over time. The final thing about the newspapers is that, yep, we have these pension and have these HLI obligations, which will end. The newspapers are essentially funding growing digital business. Right? So I've been running public companies for some time. I think cash is important. Right? Valuations are important as well. But if you're investing in an asset, well, you need to see a risk a return for your shareholders. There needs to be money at the end of it at some point for whether it's dividends, whether it's investment CapEx to be paid. Right? So we cannot run this company in a valuation. So what we have in this business, we have a significant revenue stream that is funding our digital growth.

12:52 Right? So we don't really go I mean, over the short term, we use our credit facility, but this this paper bit of our business makes so much money. It's funding our digital growth. And it was that which funded all of the I the platforms for understanding our customers, all of the platforms for delivering advertising, all of the platforms for delivering what we call Mantis, which is a brand safety tool that essentially allows advertisers to advertise their products without worrying about the tragedy of the starving children in Afghanistan, one of the breaking stories today, or what's going on in Ukraine. And these brands will go I don't want it to be associated with that sort of content. We have that IP, and we now actually sell that to other publishers' media assets.

13:37 All of that was funded by this revenue created by newspapers. You know? And it's time to basically pivot this view of papers. Now at some point, newspapers will get to a a position where there's a question over the profitability. At that point, digital will be growing. It has done. I mean, it's not as growing as it quick as it was during COVID, which we'll come on to in a minute, but it is still there is growth in there. And at that point, with that declining volume, we will still be committed to delivering newspaper in the regions to give the likes of Tesco and JD Sports and Iceland and Volkswagen dealerships the ability to get to Paisley, Middlesbrough, Liverpool, Bristol, Yeovil, Plymouth, all of those places. So we'll still be funding that.

14:25 But that's about seven or eight years forward. And in that time, we've proven over the last four or five years, we can deliver. How have we proven it? Twenty nineteen, twenty twenty, twenty twenty one, we get hit with COVID. Right? No one knew it was gonna happen. And what we found in COVID, remarkably, was we've seen a spike in digital growth because everyone was sitting at home having these meetings, you know, pretending that they're listening intently to what I'm saying, but, essentially, they're buying banana bread mixes off Amazon. That's what was going on. That's the reality of it. Right? So everyone's having meetings at home. You know, everyone's working from home. We've actually went from a home working environment. We changed our contracts. But everyone knows this is an easy thing to talk about. At some point, you were buying a book or you were buying gardening equipment online.

15:15 And what we've seen during that time is digital revenue up a 147,000,000. Right? But it was not a true reflection of the growth. Right? It was a it was a it it it was not a true environment of growth. So we've seen this spike, and we're back into this normalized growth since we come out of the recession. Once RISH spent the money to fund The UK economy and then drove up inflation cycle and then people worried about their jobs, we then seen a downturn. The reason why the customer value strategy has worked so well is that during that downturn, we are, in our competitive set, the highest yielding news media asset because we know our customers better. So when we go in and pitch, take Tesco we have won the Tesco pitch for the last five years. Why do they come to us?

16:02 Because they know if they have a new food range, a new clothing range, then they get better returns on their spend with REACH because they know there's an expat, Scott Knee, sitting in Surrey. They know that that lady who's looking at Aston Villa content, but it's in Northeast London, an ex Brummie, but lives in London now. So what I'm gonna do, I'm gonna put the back to school advertising in London Live in my London. Sorry. And I'm gonna there's someone in London being an Aston Villa content. We find out that it's a mom who and then so we'll put the back to school Tesco content on a Villa supporter living in London. That means you're gonna get higher click through rate. We do that all across The UK with all of our population, right, which is around 80% of UK population.

16:47 That's why we deliver higher higher yields.

16:54 Now just to finish off in print, everyone thinks that it's dead. It's not. No. It will at some point. It's dying. It's declining at 17%, but we produce stuff that people like. Taylor Swift too gave a good to the economy. We we got we did well from that. We created these. These are just a selection of some of the stuff that we're doing. The Euro $20.24, we produced that. We we always do stuff for for gardeners in the winter. These are high priced, high quality items. And when people tell you that, well, print is dead, well, look at behind me. You know? There's another one in this site, so I can probably get through a book maybe every couple of weeks. You know? I've got my Kindle, but I don't really like it. There's a huge market for printed products. Right? We are not saying that's the future.

17:40 It's a lower valuation. It's a rerating. It provides the funding for us to go forward. You know? Now in order to do that, they need to make sure that there's money left and Dan will come on to this. There's a margin left for us to deliver and and and invest in digital. And the way we do that, again, we have a really strong track record of driving efficiencies. Right? Now I think chief executives and CFOs need to be brave in public markets. And some of you will know my investors. I've had investors who have been with me since the lab groups have known me for nine years. I do not go in and cut costs just because I can and get a boost. So back in 2020, we could have taken out a load of costs in the business, but we didn't because we had to bring our editorial leadership with us, so we took it out gradually.

18:28 Right? Over time, we didn't cut deep. We sliced it as much as we could. The efficiency drive was done over four or five years. And we only did that to maintain the margin that we need for the investment that was required, knowing that if there's a further conflation in Ukraine or there is a another energy crisis, there's somewhere we could go and we didn't have a boom and bust approach, I. E, we didn't take all out in in 2020. That allows us to to to really maintain our margin and also allows us to grow our digital business. Now what does that digital business therefore look like? You've got a British company who have the sixth biggest digital asset in The UK. Right? The five above us are four of them are Americans, and one's a BBC. Right? So you got Microsoft.

19:18 You've got Meta, ex Facebook. You've got Google. You've got the BBC, you've got Amazon. Right? So the BBC are arguably the only British platform. In fact, you could probably outside of Telegram and Facebook and and some of the Chinese ones, the BBC is a successful British platform. Well, we sit in sixth place. We've had that position since we started '19, and it's been growing. We now reach 69% of The UK audience. You know? We like to blow a trumpet. That's how big we are. We've got a 120 brands who have loyalty. So it's not brands that have just appeared. It's brands that your father, your cousins, your mother, you've read, and you're now becoming loyal to. And the average monthly digital audience is 34,000,000.

20:04 Okay? Think channel four is big. Think ITV is big. Think the BBC is big. You know, that's that's how big we are. We sell advertising in that network, and we're delivering growth in a secure audience. What's a secure audience? That's the Arsenal WhatsApp. That's governing. That's the expat Scott living in Surrey who's interested in niche sport, which is Scottish football. And when I get up in the morning, they know who I am. But this morning, I got my Celtic newsletter. I read my four stories before I even read Dan's trading report. And, remarkably, in those four stories, I got two adverbs. I got one for for Land Rover because my wife drives a Land Rover. How did how we picked we how we picked up, I don't know, but we did. And I got premium insurance offer.

20:51 Another one I got was Villa Plus VIP Holidays to book a villa anywhere 25,000 a month, which you can't afford, actually, but I got that. Now I know my friends back in Glasgow did not get those adverts. They probably got ASDER, probably got Morrison's, etcetera, etcetera. That's an action. That's a secure audience, and that's going at 4%. That also then leads into personalized content. So when I now go into the deal record with the Mirror, I get content I'm interested in. So I'm just, for some reason, interested in UK defense and the war in Ukraine. So I read all the stuff. The front page in the mirror today is about Liam Gallagher and OASIS. And then on the recommender tool, I get UK defense, war in Ukraine.

21:38 I go into that because I'm interested in it. Why is that important? Because it's likely that Jim Mullen is gonna read the start of that article right down to the bottom. And if within that, there's gonna be four or five ad blocks, and all of those ad blocks earn this money. That's why personalized content recommendation is really important. What we used to do in 2020, 2019 was I would read that, and I would get what the editor wanted to publish. Right? So we're not restricting editorial. All we're saying that everything that your journalists are producing, let the algorithm select what's important. That's the difference from now from what it was then.

22:16 We've got 9,000,000 sign ups. They you sometimes read the business pages, and there's a lot of thing about Netflix, how many subscriptions they've got, and what's Apple Plus doing and Disney Plus and everything else. We've got 9,000,000 people that sign up to our content. Right? We are not a subscription service. We have a we have a philosophy about why should people pay for news. Probably not in this presentation, but we strongly believe that if the government is making decisions about what's going on or your local council's making decisions of what's going on, why should you have to pay for it? Why do you need to have money in your pocket to pay £19 a month? We don't believe in that. Right? So if the Scottish government are are an investigation into corruption, we believe the deal letter should be free to Scottish people to make their own minds up about whether or not someone's using party funds to buy a camper van. We don't think people should be paying for that. So we needed to find another model. So we have another model, and we've got 9,000,000 people signed up. Now they don't subscribe, but what they do is the deal is we say, if you read the full article, we will get you five ads, and we will get the advertisers to pay for it.

23:23 So indirectly, they do. But we've got 9,000,000, and it's working, and it's growing, and it's doing really well. And that's why our digital business is actually more sophisticated than people give us credit for. And then I spoke to you about WhatsApp and got hands up. We were the first to use WhatsApp. Right? It's now all over other media outlets. We use WhatsApp to get our stuff out there, and it's it is what it says in the time. You can sign up then from WhatsApp, and you'll get a few stories a day. And the more you read the stories, we'll then send you more content and give you more advertising. So so that's that's why it's important. Now we call it secure audiences. This slide is really important. What what this slide is basically saying, why would the marketing director or the CMO, chief marketing officer at Tesco, spend money with us?

24:12 Well, the reason why they do it is something called CTR, cut through rate. So if you take Tesco, and there's an example that we're gonna come on to, it basically says, well, we get 10,000,000 to spend or 20,000,000 to spend this year. How much of it am I gonna get away? Just to let you know, for the fifth year in a row, we've won the main Tesco advertising spend is because they know if you spend it with REACH, the the click through rate, the propensity to click through to the offer is much higher. And why is that? Because it's it's within an article or a piece of video that they know that the reader is interested in in engaging us, and they'll probably get to the bottom of it. And over a period of time, the algorithm knows that if you get to articles you're engaged in and the same ad comes up, you will click on it. Right? And when you click on it, when you go on to our site, you'll see a page that says, agree your consent to pay, and that basically says we may share your data with other partners, and that's what we do.

25:16 When you click on the Tesco ads for that back to school, we will send and code some of the data of who you are. And if you're a mom or whatever, you will then it's up to Tesco to give you an offer, which is good for you. That's what we do. We hand over prospects. That's our business. It's very, very simple. Back in the day when people were doing it with used to fill in stuff in your your newspaper and send it off and you'll get you'll get mail landing your door. It's the same thing, but it's more sophisticated. And we do that tens of millions of people, which is why our click through rate has went up 20% and why we maintain these advertising clients. You then get to the point to go, well, look, we're doing really well in The UK. Where else can we do well? So we started to look at The US.

26:03 So US expansion is progressing to plan. We said it would be profitable a year ago and month in q four. It will be. It may be profitable today, or it may be profitable December. We may have decided to say Dan might have said, you know something, mister MD of The US? I thought you keep the money and do some more investments. You're doing well. I'm not gonna tell you which one it is. We are gonna say, though, that the time of your full year results, we will announce that it's it's profitable. We might just be thinking at the moment that we're gonna take some of that and reinvest it because it it's progressing really well. Joe's probably terrified. I'm giving too much away, but don't I think I'm okay. I think I'm on the right side, Joe. So I'm I'm okay there. So we're doing that to secure audience, and that's why it's important.

26:48 So here's some of the examples. A lot of chief executives will talk about ideas. These are real things. And this has been really good for our half year results because one of the challenges that we had is it's really quite difficult to get clients to agree for Yem to use your your examples. So Tesco spoke about Volkswagen is a classic example of the power of our network. So they will do a national ad campaign on their new

27:14 hybrid car. Right? And it's just like McDonald's, and then all the dealers will be waiting in Glasgow and Manchester and Norwich and Cardiff for all those prospects to come in. And the reason why Volkswagen went with us is our national campaign had regional activation. So all of our websites and newspapers had offers all at the same time or at different times for depending upon how much stock Volkswagen had. There is no point going into a Volkswagen dealer in Saint Helens if you're gonna have to wait three weeks for a test drive. Right? So we worked with Volkswagen and the data, see what we're gonna send them into the regions. And over a period of time, we got to every dealership and made sure that the test drive ability could be really quick when you speak to that salesperson.

28:03 Only we can do that, you know, because we've got this regional business. So when you go into the regions and it's it's quite I always find that not being from London. It's quite interesting in London. Everyone thinks London is everything. It's not it's not. You know? And this is where we make our money. We get people going into dealerships at St. Helens, but the the the Volkswagen dealership in Hamilton or Motherwell in Lanich in Scotland may have got the offer two or three weeks ago. But there's not enough stock for the test drive. That's why Volkswagen went with us. And then with Boots Boots are the most sophisticated, I think, CRM, the Boots Club card. They've got a really, really intelligent team. We've been trying to crack Boots for years. We've now got to the situation where Boots wear Volkswagen's high value cars, which is essentially selling finance, but with sun tan lotion and skin cream.

28:52 You know, it's maybe averaging about £12, £9 a a purchase. This was about volume, getting people to go in just before their holidays, whether it's voucher codes or everything else, getting them to come in and redeem. And that's what they wouldn't let us use the examples if it didn't. So it's just an example of some some of the stuff that we do.

29:15 We have in our business entrepreneurs, right, and we have probably the biggest beauty product in The UK, and it's called the beauty box. We've shipped half a million units. Right? It was launched via Okay Magazine right on the customer value strategy. Started with women who are interested in beauty products, now moved into gifting. We're now doing it for men. Half a million units shipped. It's been so successful for us. The reason why we can't smash it is that we can't get product. You know? We could be I think we can sell a million, but the team have to get good product. So we're working with our suppliers to get product. What it proves, though, is that when you get the right product with editorial behind it and the data, these are the levels of stuff that you can ship. Now behind us, just for full disclosure, for every for every success, we have three or four ship failures.

30:06 So we tried pets. Pets markets, probably the second most profitable FMCG category outside the beauty and fem care. We tried pets, it didn't work. I think we did it wrong. We're gonna maybe go back and do it again. Beauty was a success. Pets was a failure. There was nothing wrong with failure because we've got Beauty Box out there. So that's really working. And then affiliates is really working. If you're reaching 40,000,000 of The UK population, then you must have an affiliates business, and we didn't do it. So we just launched affiliates. That's taken off. That's a 7 figure business. Right? 7 figure business, which took off only 18 months, two years ago. The other thing about us I just want to speak about is that because we have this newspaper heritage, people actually think that we're fairly laggards. We're not. You know? It's like there's this saying in Scottish football if all these young Scots players said maybe Italian names and sounded like an Italian mid midfielder, they might have lost 10 or 15,000,000 rather a 100,000, putting aside the fact that maybe they can't play as well. But but what we do is we have really forward thinking technology people in our business, and they've created this platform called Mantis.

31:15 And no one knows about it. And what Mantis does is if you want brand safety, which I've spoke about, Mantis will deliver it. If you want to do contextual advertising, which we already have, Mantis will deliver it. If you want to take your behavioral data, put it into an algorithm, Mantis will put the ads together. Mantis is being used with other news and media clients and is now a business on its own. It would be valued about 14 times if it was setting up in Old Street, but it's setting with us, and it's doing really, really well. So we have all of these products in our business, which have been funded, remember the model, has been funded by all the the revenue that's generated from our newspapers to fund this digital business. And it's just important that prospective investors see that we're not just a newspaper business. We are a digital business, but sometimes a reputation with print and with HLI and pensions sort of shadows the all the good stuff that we're doing, but with a really, really strong innovative digital business.

32:14 I've touched on this. I won't spend too much time on it. We have two revenue streams essentially in digital. One is AV, which is audience variable. That's the open market. And the open market is essentially where do you take the price. You know, it's programmatic. You know, if a price is set for an ad block at 20p, you usually take it 20p. And then another one is nonaudience, which is where, essentially, we set the price. So we are saying, if you want access to the moms who are going back to school, if you want access to the expat Scots who are looking at this content, if you want access to kids who are doing JD sports stuff, we can give you that, but we will set the price. And what we do is go into the market and say it's not 20. It might be a pound, and we'll see how much response we get.

33:01 And if it's too high, we'll set it too low and we move. And if it's too low, then we'll set it too high and we move back. And we've got a trading team who trade that. We didn't have that before 2019. But because we now have the the data, we now trade digital asset. It's like a it's like you would find in in your trading teams and your financial institutions. You can see them trading. They're all trading the data, and that's what we do. So we've grown AV revenues. We've grown video. Video delivers higher yield because people are engaged. Our data revenue, which is more relevant, is higher yield also on that. And then you've got an e com and affiliate in there. And the RPMs are essentially revenue per thousand pages. And as you can see, since last year, we've grown that by 32%.

33:47 It basically means for a page that you viewed in your device, any device, the yield for that page just went up 322%. That's because of the data that we have to support them. Customer value strategy, data driven. Couple of things that we're doing. We have a content hub. This is about efficiency driving. We used to basically basically if if you you read the Daily Mirror, The Daily Star, and The Daily Express, and you put newspapers on your dining room table, or if you open up three screens and you put them up and you look at England's last game against Ireland, the byline, which is the author who's written it and some of the photographs, they'll be the same. You know? If it's a if it's just a report on the game, not commentary, which is opinion, they'll be the same. When I started, we would have feared three or four different sports teams. And I say three or four because you'd have another sports team who would just be back up.

34:42 We now have one. You know? We might have a dozen photographers. Now we just we could we could go to games and there'll be three or four photographers. Liverpool Everton, Liverpool Liverpool Man United would have the Liverpool Echo photographer, the MEN photographer, the Mirror photographer, the Express photographer, staff photographer would all be there. And maybe even some of the Southeast, because there's loads of other pro man united funds down here, would send some photographer. You know, you have one, maybe two, rather than eight. So that's that content hub is bringing all this together, and we keep the editors editorial desk with their opinions on the and what the banner stands for, but we now share most of the data. We have a studio which produces our own video content, and we use AI to generate actual content now. So if you're basically going, and Ron Yates, famous Liverpool center half passed away yesterday, AI has produced some content that says, Ron Yates, 10 best games for Liverpool.

35:38 That wasn't written by a journalist. That was written by AI, but it was signed off by an editor. And just because this call has been recorded and is really, really important, all of this is driven by editorial. None of the management team get involved in how AI is applied to editorial content. That's that's really important. So we're an additive organization. Brilliant multi platform stuff. You see all the stuff that we're doing there. Basically, our statement is enlighten, empower, and entertain. We will challenge governments. We will call out corruption. We will publish about party gate. We will publish about COVID. We will challenge the new labor government. You've seen that as well in the express. But, also, we'll take coverage of Taylor Swift. You know? And we'll have some funny stuff about Alethis, and we'll tell you about aliens that are gonna land on on on the Suffolk Downs in the star, and we'll have something that will brightens up your day and will entertain you. But as whilst we're doing that, the the government should know and local councils and those making decisions, We're watching it.

36:39 You know? And we think we can do both, and we think we do it really, really well. So with that, I'll now hand over to Darren. And, Darren, over to you, sir. Thank you, Jim, and good afternoon, everybody. Thank you all for joining us. As Jim said, I'm gonna take you through just a summary of the financial highlights from the first six months of twenty twenty four. I think the first thing to say is despite the industry backdrop across this period, we have made solid progress. We've continued our digital transformation, returned our digital business to growth, and our experienced operational teams have managed to deliver solid circulation and advertising performance without losing any focus on costs and cost management.

37:28 From a revenue perspective, the overall decline in the period was £14,000,000 or 5%. Digital revenues were broadly flat, just down 1.3%. Print declined 6% or £13,000,000, which makes up the vast majority of the total revenue variance. Every year, we compensate for the 17% volume decline in print. The teams operationally have performed really well mitigating this in revenue terms. We took the difficult decisions on costs at the end of last year, which has meant we've reduced operating costs by £23,000,000 that's down 9% on 2023. Adjusted operating profit for the period was £44,000,000 £8,000,000 ahead of last year.

38:14 Adjusted operating cash flow improved by nearly £20,000,000 which meant we generated £58,000,000 over this period. As I said earlier, adjusted earnings per share was 10.1 and the interim dividend has been maintained. We ended the period with a 12,000,000 net debt balance, which is after paying 31,000,000 of pension contributions and a £14,000,000 payment relating to the 2023 final dividend. Let's look at our digital revenues more closely. It is important to think about digital revenue in two component parts with differing characteristics. The strategic revenues or data driven, these essentially form our customer value strategy. The graph on the slide bridges a digital revenue performance.

39:02 The data driven revenues, which are the turquoise blue, really demonstrate the value this strategy creates and have grown 9% despite being partly affected by the industry backdrop. In particular, we've seen strong growth from both direct advertising where we differentiate with that data and from deliberate actions to diversify into new areas, such as affiliates and ecommerce. As this graph shows, these revenues are more resilient and therefore sustainable. And so it's reassuring that these continue to represent a growing part of our revenues, having increased from 41% to 45% total digital revenue. Non data driven revenues include our audience variable elements, including open market, programmatic and marketing. This segment has declined 9%, but still outperformed the volume impact it is inherently more vulnerable to.

39:55 Open market prices have stabilized, which is a proxy for advertising demand in general and relates to our mass scale advertising. Whilst it is too soon to characterize this as a recovery, this is a positive indicator. Across the whole of our digital estate, we've traded these assets more effectively to drive ever high yields, which are up over 30%. The momentum through this half is encouraging. Digital revenue in Q1 were down 9% and grew 7% in Q2. Together, this has meant that this segment was broadly flat at GBP 60,000,000. We've also continued to focus on managing costs. Operating costs on a like for like basis reduced by 9% or £23,000,000 This reduction is a cumulative impact of cost initiatives taken halfway through 2023, in addition to the actions taken at the end of the year, alongside some unwinding of newsprint inflation.

40:54 The 9% cost saving means we are currently trending slightly ahead of the 5% to 6% range that we targeted. However, we expect a relative savings, What I mean by that is a percentage change to contract in the second half of the year. Let's take a look at the main parts. Labor costs reduced by 8%, reflecting the cost reduction and restructuring programs we have delivered, with headcount reducing by 14% year on year. Newsprint costs reduced by 34%. This is due to reducing volumes and the unwinding of inflation. We have negotiated more long term contracts to secure these savings into the second half of the year. Production and sales related costs includes production, distribution, marketing and other cost of sales. These have reduced 7%.

41:46 I've already covered the revenue movement. So let's first first to note on this slide is we continue to invest carefully. We continue to expand our footprint in The US and invest into products such as Mantis, a curated marketplace, as well as new concepts including Yimbly, an ecommerce marketplace. I'm also excited about the recent trials with our new website platform, which will improve the user experience. I expect that we will be talking about this more at the full year results next year. We have delivered £20,000,000 of efficiency savings, reflecting the strong cost management, which exists across the business. Most of the savings relate to labor, along with the rationalizing of our property portfolio and other efficiencies.

42:32 Adjusted operating profit for the period of £44,000,000 is up £8,000,000 or 23%. Profit and cash remain our priorities. This slide illustrates the cash generated from operations and where it has been allocated. Let me step you through the graph. Overall, we have seen a cash outflow of GBP 2,200,000 over the period. Adjusted cash from operations was GBP 68,000,000. We made pension payments of GBP 31,000,000 in line with the funding arrangements agreed with our trustees. As a reminder, the majority of these pension commitments unwind in 2028, at which point we will see material improvement in free cash generation. We paid £5,000,000 settling historical legal issues.

43:20 Our estimates and timetable for these costs remain unchanged, and we expect claims and related costs to be resolved by the end of twenty twenty five. Restructuring outflows of £30,000,000 relate to the cost reduction measures taken in 2023. Capital expenditure of £6,000,000 is in line with our normal level of spend. And the main parts of other include 4,400,000 of net lease payments, 1,800,000 of income tax and 1,500,000 of interest. We have started a program of property disposals, which have generated around £13,000,000 in sales proceeds during the year. We closed the year with a cash balance of 12,700,000 and net debt of 12,300,000. The revolving credit facility was drawn at £25,000,000 As a reminder, our 120,000,000 RCF facility is in place until November 26.

44:13 Cash generation was strong with 130% of our profits converting to cash, underpinned by strong working capital, some of which I expect to unwind over the course of 2024. With that, I'll hand back over to Joe. Thanks, Darwin. So it's been a pretty comprehensive overview of the company. The the strategy that we set out back in 2019 is delivering. And I think that's proven by the fact it's went through COVID, war in Europe, energy crisis, the inflation recession, everything else has went in between, and it's it's still delivering there and we're still running business. The earnings are really what's important. It's about rerating.

44:59 I spoke about it. I mean, it's all public. I spoke about it back in 2020 about getting to that inflection point between print and digital around 2025. You know? But I think with everything that's came our way, I I don't that is obviously, that's that's not a reasonable target, but we're still growing a digital business, and we've managed some of the blockers through the pensions. So those earnings those digital earnings are improving. I spoke to you about the yield. The yield is really important. I don't know if I came across. I was just checking my notes, but the 45% of our digital earnings, 45% of it is data driven. That's a really important fact because we're not just competing in the market. It means that we have control of it. Now the digital market's always gonna be there, but for one asset to have control of the price that we set is really, really important. So we're a growing digital business.

45:53 I shouldn't really say that's because it's been recorded, but I think it's true. And it's it's it's not just an opinion. You can see it. I I think my management team is the most skilled at cost management. If you look through all of the media pub, we're always forced to go into cost management. We have a rolling 12 at least a twelve month rolling look ahead of the cost that we need to maintain on margin and obligations. We've been doing that since I started the business. The management team is built from people who have been here, who have just came in, who have been here for thirty years. They know how much it is to refill a print press and how much that ink will be and how to trade and buy ahead of the ink to store it. They know all of that. And I think we have probably the most accomplished cost management in the The UK media industry, so I'll put that out there on a recorded vehicle.

46:45 And then don't underestimate print. It gets sort of a bad drop. You know? People still read it. People still read books. People still read papers. I used to say last year that we sold more newspapers. Print didn't sold more newspapers than Mars sold Mars bars. My IR director says that isn't true. If it's not true, it's marginal, but no one says Mars is going out of business. You know? So we serve a very loyal audience. And just remember, all of you all of you more sophisticated investors look beyond what's said in the numbers and just think about it. When people go and buy a newspaper, they go down. It's a habit to get up in the morning. They go out in the shop. They get some, shopping in the way. They come back, make themselves a cup of tea, maybe have a cigarette, and they read that newspaper.

47:33 It is a generational habit, which is hard to break. That's what we're dealing with. That is why despite the cover price increases over the last five years and the ones that we have planned, we have not seen a statistical negative consequential impact on the normal decline rate, and the normal decline rate is based on mortality. So that's how strong this habit is. So don't don't don't underestimate the print business and what underpins the cash that's generated. I'll hand you over to Jo now for any questions, and hopefully, that was informative. Jo? Can you provide more details on The U. S. Expansion strategy and how The US market has performed so far compared to expectations and your thoughts moving forward?

48:23 Yeah. I mean, the reason for The US expansion strategy was where do we take the playbook? So we've got to stage where the playbook was working, So which is essentially free content, build scale, go into the open market, sell our advertising based on that content, and the more data we we we we we get, then start to charge. And it's worked well. It was actually to be honest, it was supposed to be profitable. H two last year, I believe it was. Dan, Joe can confirm that. And the reason why there was a slight delay was essentially just because of some recession, the challenges I had in The UK. So we reset it and we said, look. The growth rates are good. The profitability will come in this year in the in q four as it's online for that. I'm trying not to give too much away, but I can guarantee it will be profitable in months. It may well be already. Dan may have decided to give them some money to reinvest.

49:21 The plan for it is, essentially, is to take the mirror, which is a sort of left of center, and Bernie Sanders' democratic view, take the Express where we had not whatever it is, basically, I'm being apolitical here now, right, with Nigel Farage writing for the Express US, which is a sort of we're trying to get a less extreme version of Trump, and we've managed to establish that. So we were the first UK publication on the Trump assassination attempt. That was their network tent in newsroom in London. We have around fifty fifty to 60 full time journalists in The US, started with most mostly English and British journalists, British and Irish journalists, and it's now mostly Americans. And we have roughly 40 to 50 US journalists working in London so as we can keep the twenty four hour shift pattern. One of the things that we did find I've I've been sort of running businesses and start an initiative. Some have been really successful. Some are okay. Some have failed. And so you expect that your things will happen that you don't expect.

50:25 We have built very much a direct traffic model so people will come to us. That's what we thought would happen in The States. That's not what happened in The States. We actually get most of our traffic through the fairs, Apple News, MSN, NBC, Yahoo, Newsbreak send us most of our traffic. Now we didn't expect that. You know? But it's actually sending really, really strong traffic. And one of the things that happens over there again for filtered sparancy, you become one of the top tier content providers, and what you find is that they switch your traffic off overnight. So we all sort of panicked, and we spoke to the American management team saying, no. It's normal. We said they're just waiting for us to pick up the phone.

51:10 And we picked up the phone, and we negotiated a yield share. So they took a bit more of a yield, but then he started to speak to them and goes, look. If you do that, we'll keep you front of the top of our book. So even though you pay them more, you get more traffic that normalizes itself. So those learnings in The States have been very good for us. We've started just the now plan, putting our own commercial team out there. The big agencies in Chicago and New York and Madison Avenue are now getting close to the scale where we can put our commercial team in the ground. At the moment, we just use the open platform. Okay. Onto the next question. Can you expand on your future plans to increase the share of digital revenue, particularly through partnerships, ecommerce, and affiliates? Yeah. I mean, ecommerce and affiliates is basically just a given for us. We we should have been doing it before I started, to be honest. I used to I ran the affiliates business for the Sun.

52:07 And so and with two ecommerce products, which ended up we actually had three. I was responsible for two and then inherited the third one. Sun Bingo was the biggest bingo site in The United Kingdom. Sun Dream Team was the biggest fan of football. And then, eventually, when I became the strategy director, inherited the Southern Times Wine Club, which was the biggest wine club in The United Kingdom. And that model, we moved over to here. So Bengal's had its days. So we do do now Beauty. So we now get the Beauty Box, one of the biggest beauty products in The United Kingdom. We tried I told you about the stuff that failed. We failed on pets. We might go back into that. We had a beer club. That didn't work. Why was that? Because it was it was more craft beer. We tried to sort of mimic the Sunday time wine club, but the affiliates is working, and the beauty box is working. So that that will be something we will pursue in other categories and teams are looking at that. But that isn't our core business.

53:04 Our core business is learning about those readers who engage with us. So these are not the right numbers, but the scale is. If I don't know any of you on this call who decide to engage with our product and you have not given us the right to gather data, we probably trade you at £2 per thousand. Right? So the pages that you hear, every thousand pages, an advertiser will give us £2 for your ad eyeballs. That basically means you might not get to the bottom of it, and you're a you're a you're a nice you're a West Ham fan, but you're arsenal content vice versa and all that sort of stuff. If we get to know you, right, if we get to know you, that two pounds becomes closer to six or seven pounds because we know you'll get to the bottom of the article. And when you go into a website and when you go into devices, you won't see it, but there's ad blocks, visible ad blocks in there. And we get paid when it's shown, and then we get more money when you click on it. Right? And that's worth about £67 against two. So that 45% knowing your customer is a real KPI for us internally. You know, we need to grow that. And the more we grow that, we get £2 in the open market where we take the £2 price or we get £67, which is an average of a price that we set and negotiate with the likes of Tesco and JD Sports.

54:32 That's the the principle of the customer value strategy. Now before anyone asks, I know that our sites are loaded with ads. It's not maxed out, but it's sometimes quite hard. The reason why we do that is just a commercial reality. Dan and I have 65,000,000 to pay the pension holders. Right? But that ends now in 2028. So we've now rolled out a new platform called Navigator. If you look at the Liverpool Echo, you'll see it's actually much smoother. That's getting rolled out. The closer we get to 2028, you might see the reduction in the ads and the tech around it. Right? Now that will be giving up some revenue, not all of it, but some revenue because then we'll get as more people coming back. So the company experience is basically needs must that that is improving.

55:20 Moving on to print. What strategies have been most effective in maintaining print revenue? How do you see print performing in the next few years? Our CPI is probably the standard strategy of cover price increase. I I I genuinely you come in, and a lot of people don't really wanna speak about print because they see it as old hats and, you know, it's for older people. It's actually not. It's it's for over fifties. I'm 50, and I read print. And I think that when you sit down with the distribution team, they are very, very clever people, very, very statistically minded. It reminds me of my days at lab groups with the trading team. And what what they have done, and we don't take any credit for this, they have because of the loyalty to the brands, they have modeled what price increases the system can take. We often talk about a tipping point. Right? Tipping points is, as you know, based on statistics and probability theory, And they model the price increases so there is no negative consequence to the price increases, and that you should see it as modeled.

56:33 And since 2019, and we gave them a bit of money to bring in some more analysts, they have put through a cover price increase strategy that has shown no statistical negative consequence to the price that's been applied. Now we need to be very careful because, obviously, we don't want to build the gap, which is too high between our competitors because then someone might be walking through Manchester Piccadilly and pick up the sun rather than the the the the the manor. That may happen, but we're we haven't seen any of that, and we are very, very careful about it. So CPI is really, really important. So I think that's probably one of the things for print. The other thing about print is we create all these print products. I mean, the Taylor Swift was 295. It's a glossy magazine. You know? We sold thousands of them. You know? We we will I shouldn't be able say this. We'll probably do the same for Oasis. You know? An interesting thing about it, the marginal cost of producing these is so small because we create so much Taylor Swift content.

57:34 You know? We've got the biggest we've the biggest news media archive in UK up in Oldham. The the content for the Oasis glossy, if we decide to do it, most of that content's already there because we've got thirty years of Oasis content, and that's how it works. It's a marginally it's a really cost effective product. So those two are the two standouts which we'll continue to do. Thank you, Jim. I'm I'm given we're nearly up to the hour, is it worth some closing remarks before we we finish? Yeah. Look. I think the biggest issue that we have is a PR problem, always has been. I think that as a prospective investor, you need to make a judgment on whether or not you can see that digital growth. We are trying to give you evidence that it's there.

58:27 We don't just operate in the news media market, which has got a certain size, probably a billion. We operate in the digital ad market, which is a 19,000,000,000 UK market. And I think we're doing really well there. And the biggest challenge is if I was I mean, I am invested in the the company of my own, I mean, my wife's money anyway. But the biggest challenge is to say, can we fix these historical legal issues? Because I don't know how much they're gonna have to pay the pension holders, so therefore, what do they have left. When is HLI claims gonna stop? We've resolved them now. So Dan and I know that that's done in 2028, but do you need to wait until 2028? If I know that it's ending, maybe I can say, Dan, why don't we go to the bank for a bit more investment for these platforms? Because we now know we can model it. So we do that, and then you go, yeah. But, okay, what if you're on another black swan event, war in Ukraine?

59:17 I think we've proven we are good at managing costs. You know? I'm trying to give you clues in what I'm saying here. All of it is true. This is all recorded. We have twelve months ahead on our cost profile. We know next September what margin we have to maintain. The plans for doing that have already started. So you've got confidence in the management team. And then you have to make your own decisions with respect to investors if you think the the current price is valued for you, investors here at time. And that one, I can help you with. Perfect. Jim, Darren, Joe, thank you very much for updating investors today. Could I please ask investors not to close the session? As you know, we automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

1:00:02 This will only take a few moments to complete, but some should be greatly valued by the company. On behalf of the management team of REACH PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.