Reach plc (RCH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Reach plc Half Year Results Presentation. The presentation will be followed by a question-and-answer session from the phone and from the web. [Operator Instructions] And just to remind you all, this conference call is being recorded. I would now like to hand over to Jim Mullen, CEO. Please begin your meeting, and I'll be standing by.

Good morning, everyone. I wanted to start by recognizing the superhuman efforts of all my colleagues at Reach in responding to the challenges of COVID. From introducing home working for over 4,000 people and 65 sites almost overnight, to the safe production and continued distribution of our papers. And to the agenda-setting coverage of our journalists, the performance has been outstanding. And against this background, we have delivered and surpassed our key strategic targets. In Q2, we saw significant impact from COVID-19 on our circulation and advertising revenue that presented significant challenges to our business. The team's response was to take strong and early action and to deliver a radical change to our structure and organization. We have introduced new ways of working that maximize the potential of our national and regional business model, changes that would normally have taken years were introduced in just 3 months. When we took the tough decision to reduce our workforce, our goal was to ensure the business was in the strongest possible position to withstand further COVID-19 impacts and emerge a stronger business. So I am pleased to update that Reach today is stronger, more agile and more efficient than it was when we entered the crisis. And importantly, we are much better organized to deliver on our strategy. As we enter the final quarter of the year, we are performing materially ahead of expectations. We are cash-generative with an improving operating margin, and we have a strong balance sheet. I will now talk you through the operational and strategic highlights that have contributed to this position. Firstly, circulation sales continue to demonstrate resilience, thanks to the loyalty of our readers. Across the board in our national and regional titles, we have seen a steady and continued recovery in sales. And in September, circulation revenue is above 90% of the performance we anticipated at the start of the year. We saw changing consumer patterns during the pandemic with a greater proportion of sales from local retailers and a move away from major supermarkets. Home delivery also increased. And we are encouraged that the vast majority of readers continue their buying habits and as importantly, the frequency of purchase. Now advertising was severely impacted in Q2 at the outset of the crisis. And while we did see COVID-related advertising from government, financial services and supermarkets continue throughout, many advertisers withdrew from the market with the regional market particularly impacted. During Q3, we have seen some recovery in print advertising and though regional advertising remains challenging, we are seeing a gradual improvement. Digital advertising has, however, recovered strongly, and we are seeing double-digit revenue growth as advertisers return to the marketplace. We are also seeing the early benefits from the increased engagement of our customers, something we will return to later. Turning to transformation. I am delighted at the performance of the Reach executive management and colleagues who have come together during a uniquely difficult time to deliver a transformation program for the group. In 12 weeks, we identified a new and modern way of working, and made the difficult decision to remove costs and become more efficient to ensure we are fit for the future. This means we can continue to invest and deliver returns to stakeholders. Regretfully, this did mean a number of our colleagues leaving the business, but we truly believe, and I have no doubt, we are now much fitter than our competitors are well placed to deliver on our strategy. The annualized cost saving of at least GBP 35 million, our new agile and efficient structure, and a healthy net cash position all contribute to us being able to face into the future challenges and opportunities with renewed confidence. We have, therefore, continued to perform materially ahead of market expectations. With that said, however, we are fully aware of the ongoing uncertainties and potential macroeconomic impacts from COVID-19. So operationally, we have achieved a lot in 2020, but we have also made good progress against our strategic goals. The pandemic and the subsequent lockdown has accelerated digital adoption of our products. We have already reached 3.5 million registrations, well ahead of our original year-end target, with a quarter of the year still to go. As a result of this success, we have increased our 2022 targets from GBP 7 million to GBP 10 million. Page view numbers have surpassed all targets in our national, regional and live news and content sites. This includes our apps, InYourArea hyper local sites, e-mails and newsletters. Demand for trusted news and content has soared during the crisis, and this has helped drive engagement with our product to record levels. As we evolve from scale to a focus on engagement, we have seen registered users demonstrate 5x more paid view consumption compared to a nonregistered user, with sessions per user and time spent on site also well above that of nonregistered readers. The objective of increasing the frequency and [ recency ] of registered users is now coming through via our engagement KPIs. And while it's still early days in the strategy, we are seeing some incremental revenue as a result, which Simon will outline later in the presentation. The value element of the customer strategy won't be fully identified until we roll out the Reach ID, which is due to be launched in December. This will allow us to identify the full uplift in advertising revenue derived from registered customers. At the moment, we can only record the yield associated with the initial referral of a registered customer, but the Reach ID will soon allow us to track the yield associated with their entire activity across the Reach portfolio of news titles. This will allow us to better gauge the full incremental value we achieve through registering and engaging customers. We are delighted that we are already seeing better-than-expected results in terms of activity from registered customers and as we build our scale and develop deeper and more engaged relationship with our readers, we are confident of continued progress. I'll now hand you over to Simon to go through the financials.

Thank you, Jim. Good morning, everyone. Unquestionably, the past 6 months have tested both the financial and operational resilience of the Reach business and they required early and decisive action to protect revenues and to manage costs. However, as my section of this presentation will demonstrate, these measures have ensured a profitable, cash-generative and strategy-focused business in half 1. And even more importantly, a business that has the necessary foundations in place to deliver value for all of our stakeholders in half 2 and beyond. Now I've been pleased to announce today an ahead-of-expectations performance despite the impact of the COVID-19 pandemic. As the well-known business mantra goes, cash is king, and Reach's operating cash flow performance has once again been what we believe to be sector-leading, with net cash doubling compared to the previous year-end. Whilst operating margin was down year-on-year, this was contained to a reduction of 1.3 percentage points through proactive management intervention. We currently expect this margin to further strengthen in half 2, subject to macro factors, helped by both revenue recovery as we will demonstrate when looking at the latest Q3 trends as well as the embedded savings from flowing our transformation program. Having actively listened to our shareholders, we are pleased to propose a bonus issue of 2.63p per share, subject only to shareholder approval at our planned general meeting in late October. And finally, on this slide, we are pleased to confirm a reduction in our accounting net and gross pension deficit, but more on this a little bit later. Now after a strong January and February, with combined group like-for-like across those months, slightly better than minus 5%, from March onwards, revenues were clearly impacted by the COVID-19 pandemic. But importantly, they are recovering. The bar chart on the left describes a half 1 performance of minus 17.5% like-for-like. But as you'll see, Q3 is better than this at minus at 15% like-for-like. Most importantly, however, this is a 12.5% step forward from where we were in Q2. With the majority of our revenue lines, particularly digital advertising and print circulation, showing encouraging improvements. Also, as we drive increasing engagement and loyalty, digital revenue mix has moved to be 1/6 of revenue in half 1. And by comparison, in full year 2015, it was about 1/20, noting that this was on a broadly similar total absolute revenue. Whilst in the first half, digital revenue was broadly flat year-on-year in total, this somewhat simplifies a rather more complicated picture. At the start of the year, January and February delivered almost 20% average growth, continuing the very positive trend from half 2 2019. From mid-March, however, digital yields were impacted by reduced advertising demand, both nationally and also locally. Encouragingly though, national yields have now moved back to pre-COVID levels. In fact, in August, we hit record performance in our programmatic open marketplace, which alone now regularly generates over GBP 100,000 per day. This all contributed to us achieving a 12.9% digital growth in Q3, broadly equal to our strong 2019 full year performance. As a reference point, for Q3, the Advertising Association, [ through ] WARC have forecast for news brands overall to decline in digital by at least a high teens percentage. We've grown by almost 13%. So how have we significantly outperformed that expectation? Well, the next slide tells us about that. Whilst yields have been disrupted, and it's still more work to do on locally sold digital advertising, nevertheless, across all key metrics -- digital operating metrics that is, we have shown significant and measurable progress. To put it simply, more page views are being consumed by more unique visitors, more of whom, and Jim will come on to describe, are registered. This is the heart of our customer value strategy. Based on early analysis, already approaching 100 million of our paid views are consumed by registered customers. And indicatively, they are worth hundreds of thousands of pounds of revenue and profit per month. Whilst we've openly described the need to control costs and conserve cash in the first half, importantly, this has not been at the expense of progressing our strategy. Our internal investment committee has continued to meet on a monthly basis, and we've already signed off a dozen or so strategic business cases in 2020, totaling approximately GBP 4 million of annualized investment, all expensed through our P&L. Most significantly, given the ambitions we set out at our capital markets event on the 24th of February, we've been investing in our customer capability. Whether this be customer relationship management, focusing on our 2 million-or-so newsletter subscribers and retention and churn, or the development of Reach ID, which will go live in Q4, and as Jim's already described, provides a unique and combined view of our customers. Or in product development across InYourArea and our apps, with new lounges such as the Express app alongside additional functionality. Looking ahead, it will continue to be key for us to allocate capital to organically developing our business. Whilst our print business overall has not recovered to the same extent as our digital business, it has, nevertheless, demonstrated remarkable resilience. Circulation, which in half 1 was over 2/3 of our print revenue, has the most favorable year-on-year trend of all of our print lines. In fact, Q3 performance is now back to early to mid-90% of the expected norm for our national titles and regional dailies. What's more, we've pushed ahead with subscription and home delivery services, which have provided valuable earnings as well as more secure revenue for the longer term. This, alongside an increasingly databased approach, utilizing new strategic partnerships, such as with dunnhumby, will ensure that we test, we learn and we progress even in the more traditional areas of our business. Print advertising has been more challenging with a decline rate that's still about twice that as full year 2019. As most would anticipate, hardest hit have been areas such as travel, leisure and hospitality, which we anticipate will take time to recover and have greater uncertainty. However, by way of contrast, some sectors, such as grocery retail, sports betting and telecoms are beginning to build back momentum. Those familiar with the Reach business will remember the great progress that has been made with operating margin over recent years, delivered both through ongoing optimization and acquisition synergies. In the short term, this operating margin position has been protected through the range of management actions announced back on the 6th of April, including pay reductions, bonus suspensions, furloughing and discretionary cost review. The transformation described on the 7th of July, however, sustainably steps us forward. This enables us, again, subject to macroeconomic factors and COVID uncertainties, to currently anticipate a strengthening of our operating margin from half 1 to half 2. We expect operating margin to further improve from 2020 into 2021. All of this helped by our strategic focus and our transformation plans. Let's just share a little more about the latter of these on this next slide. In order to better align our organization to the customer value strategy, we've now completed a restructure across editorial, commercial and central function. I'll not steal Jim's thunder, but at the heart of these changes is the Reach Wire to better align and share content across our national and regional portfolio, both digital and print. Reshaping the business like this has helped to drive efficiency as well as effectiveness with a GBP 35 million annualized saving delivered from Q4 2020 and a cost of change of just under GBP 20 million. We've also announced today a review of our printing network of 6 sites, more details of which will follow in due course. Critically, none of these changes is at the expense of the editorial quality, breadth and local relevance that our brands have built up over countless decades. Rather, this is about removing duplication and inefficiency and delivering an operating model that fully benefits from our scale. I remarked at our outset that Reach's operating cash flow performance has, we believe, once again, been sector-leading. Indeed, it's been important to strengthen the balance sheet given the wider uncertainties. This meant that in half 1, GBP 22 million of net cash was retained by the business. Providing over GBP 100 million of readily available funds when we combine total cash in hand with our GBP 65 million of revolving bank facilities. The conversion of profit into cash was well over 90% in half 1 and well up year-on-year. Longer-term capital allocation priorities are unchanged, and we will work hard to strike the right balance between income for shareholders, meeting our historical pension obligations and investing for the future, whether organically or through acquisition. We also note that whilst in the very near term, our focus will continue to be on the resilience of the business and a suitable level of cash retention, hence the proposed bonus issue of shares. Nevertheless, for the record, we intend to return to paying a cash dividend as soon as it is appropriate to do so. Having already covered cash in some detail. I'll also just reinforce from this slide that we currently anticipate a year-end net positive balance that will be up year-on-year. What's more, this is despite half 2 outflows of approximately GBP 35 million, for the cost of transformation and to fully settle the funding of a historical property development in Liverpool, which build has been severely impacted by the pandemic. Finally, on this slide, I refer to the reduced net pension deficit, which is down about 14% compared to 6 months ago, and 26% compared to 12 months ago. This improvement reflects, amongst other things, a strong asset performance and almost GBP 50 million of repair contributions made in the past year. And so to conclude my review. Seven months ago, when we launched our customer value strategy, I described the business as being well positioned to deliver. Well, true enough, since then, many things have changed, both nationally and globally. However, our confidence in our overall business direction has increased, not diminished as we accelerate our plans, enabled through transformation, to be a business fit for a post-COVID world. And all of this is underpinned by financial and operational resilience, which is unquestionably being demonstrated by the biggest of all tests in half 1. Let me now hand back over to Jim to share our strategic priorities.

Thank you, Simon. February seems like a long time ago, but I make no apology for reminding you of the key pillars of our customer value strategy. Despite the unique challenges of 2020, Reach has remained focused on delivery of this strategy, and we have made strong progress this year. We have a market-leading audience, and we are making excellent progress in registering them. We are, as importantly, also engaging them as they adopt our apps, sign up for our newsletters or sign up for our hyper local service, InYourArea. With 8% of our audience now registered, we can begin to use these insights from the activity on our sites and apps to tailor our content and develop new products. We have begun to build our insight team with a number of key appointments in Q2, and a key focus for them will be to build the single Reach view of the customer. Moving forward, this will provide insights that will increase our appeal to advertisers by enabling more targeted campaigns via the aforementioned Reach ID. The effectiveness of these campaigns and the additional revenue they attract can then be tracked, enabling us to further demonstrate the revenue uplift of our customer value strategy. In terms of revenue diversification and growth, our newly established innovation team will continue to enhance our websites and improve our apps, but increasingly will explore new business opportunities. In terms of harnessing talent and teams, our people have delivered magnificently this year and have enabled us to develop a new structure for the business which allows us to be more agile as well as more efficient, and we are very excited by its potential. We have also completed the creation of our new executive team, a team that was built to enable the execution of our strategy. So we have made good progress so far, and the pillars remain a key focus for the business. So let me tell you a bit more of the detail about these pillars and the progress that we've made. We continue to see strong momentum on engagement. Our scale audience continues to grow as we saw an 11% increase in our total audience year-on-year in August. Visitors spent 44% more time on our sites, viewing 32% more pages, coupled with a 39% uplift in app users. So let's take a closer look at what's driving this engagement and how we'll be able to take our strategy to the next level with our Reach ID. A key way in which we have driven engagement is through newsletters. These are our largest source of registrations and are helping to drive more traffic as readers link back to our sites for more detail on the story. Registered newsletters readers are now the fifth-biggest source of paid views for reach, and that number is growing. These readers visit the site 4x as often as a nonregistered reader and view 5x as many pages. We are continually adding more features, such as the follow this writer or in the case of the InYourArea, new widgets, a recent example being the Eat Out to Help Out widget to show which restaurants offer the promotion in your locality. We are also cross-promoting content. Some national titles can direct readers to the InYourArea app, so they can find out the latest number of COVID cases in their postcodes. Now whether it be campaigns, new stories or comment, when we know what interests our customers, we can direct them to other sites in our network and generate, importantly, additional page views as a result. We have also used print to promote digital registrations by advertising our newsletters and our own publication using QR codes to enable swift registration. While it is early days, we are only 8 months into our customer strategy, but there are already some early encouraging metrics and positive progress to report on these customer targets. We originally targeted 2 million registrations by the end of 2020. This target was surpassed by early July when we posted 2.5 million registrations, and we now have continued to grow at a healthy rate with that number now over 3.5 million. A key milestone in the delivery of the strategy will be the establishment of a single reach view of our customer via the Reach ID. This will be a major step forward in enabling us to monetize the significant registered customer base that we are building. To date, our data team has been focused on gathering the different sources of data that existed, cleaning it, de-dipping it and on driving registrations. Our aim was to first register 10% of the customer base, something we are approaching far quicker than we had planned. With this goal fast approaching, our insight team will now focus on developing a single reach customer view, so that we can build the profile of our customer base and how they use our apps, sites and services. This not only further informs us what content and innovations are having the most impact and what new content may be most effective, but it increases our appeal to advertisers as we are able to offer more detailed targeted campaigns that attract a higher value to Reach, our agency partners and clients. Of course, enhanced revenue is the endgame, and while we have some encouraging early indications, we will wait until the full year to detail the early impacts of this increased engagement. As mentioned and within our plan guidelines, we can only measure the single preferred customer visit, which is currently showing revenue uplift. Once we track each visit via our Reach ID, we'll be able to measure revenue uplift of all visits. This is a key deliverable for us in Q4. We have already seen our digital revenue grow in Q3. This is, of course, due to remain in traditional reach and scale with clients recognizing the unique and leading distribution we have in the U.K. However, our ability to increase engagement means that the effectiveness of client advertising is much stronger as registered users who still access free content can be served advertising that is more targeted and, therefore, more effective. It also allows the Reach network to individually identify who those readers and customers are. And with the implementation of the Reach ID, report on the additional value that we generate. As you can see from the table presented, on every KPI, a registered user who engages with our content will consume more, visit more often. And through that increased frequency, will be more recent than a nonregistered customer. Now this is encouraging as we couple it to increase registration rates. This uplift in yield through driving frequency and engagement is the first aspect of growing our digital revenue, and we will continue to grow our registered user base during the final quarter. The second aspect of our revenue diversification and growth is the targeting of individual customer interest groups via their Reach ID. Knowing their interests, meaning we can drive additional engagement, and the propensity to respond to more targeted offers, therefore, increases. This will be the next step as we are selecting strategic commercial partners. Discussions are currently ongoing with brands to launch when we roll out the unique Reach ID identifier, which will be ready in Q4. Again, this is not only a strategic change to our business, but also a cultural change and I can update that both editorial and commercial have woven in the customer value strategic targets and how they operate their divisions and measure their businesses. In order to respond to the challenge of COVID in the most comprehensive manner possible and to maximize the potential of our business model, we have undertaken a radical reorganization of our business. The transformation we announced in July will deliver considerable efficiencies, but even more important, will enable us to deliver the strategy much more effectively. At Reach, we are developing an entrepreneurial culture. And through the transformation, we have accelerated this process of change. Core to this is the fundamental reorganization of the editorial structure. This has introduced a highly efficient and agile operation that will continue to deliver great newspapers and content as well as drive registrations and engagement through new products and services. The Reach Wire is a central hub that serves news titles with content and copy for repurposing and adapting by each title or website, in line with our editorial policy and style. This not only means we can reduce spend on external news agencies. But increasingly, we will be able to syndicate our own photography and content, where appropriate. Key to this is an emphasis on data and analytics. Our audience directors continually monitor which stories are generating interest and learning what drives engagement. And this doesn't just extend to the digital world. Increasingly, our print titles too are starting to use the learnings from customer behavior and the online world to inform decisions on print, and we are developing more sophisticated approaches to how we manage circulation sales. We are moving away from a siloed culture of regionals versus nationals or print versus digital to a One Reach way of working with the strategy at its core. This change is a testament to the resilience and passion of our people on who the future of this group depends. While editorial change is the most radical of the transformation, we have also refreshed the management team to reflect our strategic priorities. Additionally, our advertising and commercial operations have been reorganizing and under new leadership as we focus on the key sectors that are driving our recovery at a national and regional level. We are also building out our customer and insight teams to ensure we have the capabilities to deliver on the revenue and diversification opportunities ahead of us. Finally, to ensure we get the most from the depth of talent and people and the resource within our organization, we are appointing a new head of diversity and inclusion. These changes emphasize how the transformation is just that, much more than just a cost-cutting exercise but a complete change in our approach to harnessing the people and talent that will deliver on our strategy. Now we have taken significant steps forward in 2020, but we have clear priorities for further enhancing the product in Q4 and Q1 of next year. This includes extending the reach of our hugely successful live sites. Following the huge success of Yorkshire Live, which has seen rapid growth, we will launch even more live sites in January and more community sites within our live offerings, further extending our geographic footprint. There will be continued improvements of our websites and apps and a range of newsletters, which continues to attract new registrations at a rapid rate will continue to evolve, providing more reasons for our customers to engage with our sites. We will continue to launch new innovations in response to new stories like our InYourArea COVID widget, which shows a number of cases in your area or show your support sites, like the ones we did for the National Health Service, or for Liverpool supporters to celebrate Liverpool's league title win. And going beyond this, we will begin to use our resources more effectively. Our group has significant assets from local newspaper records going back generations are one of the most extensive photographic archives in the world. Many of these are lying dormant. And we are finding new ways to use them to attract registrations and engagement. As an example, last week, we soft launched free access to our photographic archive to enable people to take a trip down memory lane, the name of this new service. This is currently available in the InYourArea app, but soon, it will be a stand-alone service, one we are describing as the U.K.'s biggest nostalgia archive. Now excuse the sales pitch, but log on to it after this presentation, and you can instantly access historic images freely from your postcode as we are already seeing it be shared by friends and families throughout the U.K. It has already contributed to our registration numbers. Thousands have used this service already just after a few days, and we believe this will be a major source of more registrations in the coming months. And of course, the access to service, they will be served with advertising and generate revenues through increased page views and session time, as I presented earlier. Now this is just one example. We're at very little capital outlay. We can generate revenue from an existing asset. We will update more on Memory Lane and its progress at the full year. While we continue to focus on our strategic objectives, we can also continue to improve those things which this group has historically been good at. Circulation continues to make a good recovery, and we are supporting sales with targeted marketing activity, including vouchering and cross promotion. During 2020, we have run a number of offers to promote national titles and regional titles, and we have run free magazine giveaways in the nationals to support the sales and cross-promote our magazine portfolio. We are also adopting new data sources, for example, through our partnership with dunnhumby to help inform new and creative approaches to promoting sales. Now Simon covered operating margin earlier, but to reiterate, we have a great track record in this area. And with the transformation, there is potential for more further progress. Of course, a mention of what we're good at would not be complete without a reference to our award-winning content, journalism and editorial. And I will hand over to Lloyd, our Group Editor-In-Chief, to give a quick update. Lloyd?

Thank you, Jim, and Simon. And Good morning, everyone. Firstly, may I thank all of you for joining us today. I'd like to take this opportunity to update you on what has been happening in our newsrooms throughout 2020. The 2 main areas I will touch on are how we've transformed our editorial structure and the excellent progress we have made on embedding the customer value strategy across all editorial departments. Now you don't need me to tell you that there has only been one story in town in 2020. The impacts of COVID are being felt across the globe, and that, of course, includes newsrooms. As you've already heard from Jim and Simon, our business was not immune and while we are both delighted and proud of the resilience we have shown, it was clear from the beginning of the pandemic that we would need to transform our structure and ways of working. So what have we done? Working together with our new Chief Operating Officer, Alan Edmunds, it was clear to us from the start that our old structure of separate national and regional editorial editions was no longer fit for purpose. Creating a single division has allowed us to drive multiple efficiencies, including many back office and support functions. Eliminating unnecessary duplication and creating internal wire services for news, sport and pictures, gives us the best of both worlds, an ability to drive audience scale and ensure that we have the right amount of dedicated resource to create the individual content that is key to our brands and our customer value strategy. While we no longer have separate national and regional divisions, we absolutely do have national and regional newspapers and websites, and empowering and strengthening both was at the heart of our transformation project. Our ability to engage at scale with national and local audiences sets us apart from other commercial news organizations. And this has never been more obvious than since the arrival of COVID. Our titles have been at the forefront of coronavirus coverage, whether that has been helping our readers and users to understand the rules and risks, providing vital information and support or holding national and local authorities and agencies to account. Our InYourArea site gives up-to-date information on cases and support services at a hyper local level. We launched a parenting support newsletter called Lemonade to help moms and dads deal with the multiple challenges of lockdown and home schooling. And weeks before the clapping phenomenon even started, we conceived and built our NHS Heroes website, which allowed the public to send messages of support to our health care workers. The Daily Mirror has probed and questioned government policy and communication with typical tenacity and, of course, broke the story of Dominic Cummings' flagrant discard for his government's own rules. The Daily Express refused to be taken in by the COVID deniers who have managed to find an audience in some of the right-of-center press. And who would have thought that the Daily Star front page would be the first one looked at by #10 every morning. And I have that from the Prime Minister himself. Talking of rules and guidelines. It's worth pointing out that unlike some organizations, we have done all of this by working from home wherever possible, a credit to the professionalism of all our journalists. When I spoke to you in February, I stressed that our customer value strategy wasn't just something our newsrooms would accept, they would embrace it. Building deeper, more engaged relationships with an increasingly loyal audience is what makes all of our journalists tick. And as you have heard, our progress in 2020 has been beyond expectations. We already have 3.5 million registered customers, many of whom signed up through one of our new editorial newsletters. Visitors are spending 44% more time on our sites and reading 32% more pages, and we are only at the start of this journey. Further investment in existing and new sites and products is happening. We are undergoing a fundamental redesign of our website, ensuring the look, feel and experience of each one is fully aligned with its content, brand positioning and identity. Loyalty and engagement metrics are now at the heart of all our newsrooms and are already embraced as part of the daily routine. And speaking of loyalty, let's remind ourselves of the outstanding performance of our print titles throughout lockdown, too. Back in April, Enders predicted newspapers would suffer a 50% drop in circulation. Incredibly, we sit here today with our national titles running at 93% to 94% of their expected sale. I make no excuses if that sounds slightly boastful because I am fiercely proud of how our journalists have performed and proud that their work means so much to so many readers. We value our customers, and they certainly value us. Thank you.

Thank you for that passionate presentation, Lloyd. So a reminder of our key priorities for the coming months, we expect further progress towards our 10 million goal of customer registrations. A key landmark on our journey will be establishment of a single reach customer view, which our strengthened customer insight team are working on now and will deliver by the end of the year. We're already progressing a number of commercial discussions, and will update progress also at the full year. And finally, we have a number of site launches and further product enhancements set to launch over the coming months to continue to drive engagement and loyalty. In summary, Reach continues to perform materially ahead of expectations. We are a profitable and highly cash generative business with a strong balance sheet. We have remained focused on delivering our strategy and have made good progress investing in the key areas of our customer value strategy. And we remain confident of further progress towards our strategic goals in Q4 and Q1 2021, when we will update again on our full year performance. Now we'll take some questions. Thank you.

[Operator Instructions] Our first phone question comes from the line of Nick Dempsey from Barclays.

Yes. Can you hear me?

Yes. Hi, Nick.

Okay. First question, once the Reach ID is up and running, I think December, you said, how will you be able to show us in terms of reporting how the customer value strategy is supporting digital? So like, will you be able to talk about digital ads yields and the impact of the strategy on those in terms of percentages? Second question, to what extent is a threat to your digital strategy, the -- Google Chrome will not be supporting third-party cookies at some point in 2021. And what's your kind of plan for making this whole ecosystem work without those? Third question, when we're thinking about the bridge between 2020 and 2021 operating profit, I believe that of your GBP 35 million of structural savings, you'll feel the benefit of GBP 9 million in 2020, leaving a GBP 26 million benefit in '21 versus '20. Then we need to understand what the top line growth is against easy comps. And you're not going to tell us that. But the last piece is how much cost was saved in 2020 that has to go back in for 2021, so furloughs and other measures. So can you give us some kind of indicator or range on that last point to help us build up our '21 profits?

Thanks very much, Nick. It's Simon here. Let me take 1 and 3, and then I'll let Jim take number 2. So on reach ID and showing the value of our customer strategy, as we described on our capital markets event on the 24th of February, we had a clear plan at the half year, which is now to talk about the developing themes around engagement, to give an update on progress with registrations and to talk about the plan for half 2. So that's what we've just done. At year-end, we anticipate being able to show you much more detail around individual customer revenue. We'll be able to talk about ARPUs. We'll be able to compare what a registered customer is worth compared to a nonregistered customer, and we'll be able to use that with the benefits of our plans around increasing registration to give indications to the market about future digital opportunities and growth. But we will go into much more detail. We will also, as Jim described in his summary, be able to give some tangible commercial examples when we update in February, about here is where we're seeing that Reach ID turn into pound nodes, whether that be large deals with blue chip companies, whether that be changing the discussions we're having with agencies and so on. So that is to come, but we will be very granular by customer, and we'll show commercial examples. Just in terms of the last one, and then I'll hand over to Jim on the middle. So the bridge between 2020 and 2021, for us and many companies will be complicated. There can be no doubt about that. In 2020, we had a number of short-term measures we took whether that be pay cuts, whether that be the suspension of bonuses, whether it be the government furlough scheme or other discretionary cost review. But even with those coming back in, effectively for the 2021 year, the net impact of transformation netted up against those short-term measures will be a benefit, and it will be a multi-million pound benefit. Single-digit millions, but multi-million pound benefit.

Thanks, Simon. Just on your second question, Nick, it's the key strategic question, actually. We run a formal strategic process just over a year ago and as well as identifying opportunities. We also identify the threats. And the threats to any freemium model is the fact that you lose the connection between your customers and that will be by the dilution or the taking away the cookies or the ability to understand who your customers are through Google Chrome. And that's one of the key reasons why we launched the customer value strategy and the Reach ID. The Reach ID is the chain that connects us to our 42 million customers. And Reach wasn't prepared, because we are philosophically supportive of free news and content, as Lloyd will be very, very passionate about, but we're philosophically supportive of that. So in order to monetize it, we need to be able to recognize them and keep that connection going. So the Reach ID is the basis of that. We believe that the reduction in dilution of cookies or the ability to determine who your customers are, are a significant threat to the free model. So registrations will make us more resilient to these kind of changes in the future. That's why it's a pillar of strategy, Nick.

Our next question comes from the line of Gareth Davies from Numis.

The first one for me is really on investment levels. Given the strength of cash flows, given the strength of the balance sheet, I mean playing devil's advocate, the GBP 4 million you've sort of alluded to in the presentation feels quite low. Can you talk a little bit around kind of how you determine the level of organic investment you're putting back into the business? I know you're not tempted to sort of step that up for specific projects near term given opportunity? And then the second one for me is really can you dig into sort of digital yield recovery a little bit more into Q3? And I suppose I'm thinking of it in the context of the more cautious AA walk kind of data for the market as a whole. You've clearly materially outperformed that. Can you maybe -- what have your yields done versus the market? And what other factors we're thinking about there to give that outperformance?

Thanks very much, Gareth. Let me take those questions. So firstly, on investment levels. I mean, I think the thing to stress is that, that GBP 4 million I quoted in my section of the presentation is incremental investment over and above the existing engineering and product development capability that we already have. So we already have a team of approaching 100 people across the business on product engineering who are continually developing our apps, improving our sites, developing our capability. So this was incremental. Can we further step-up that investment? Well, absolutely, we have an investment committee to look at just that. So we -- as I mentioned, our meeting on a monthly basis, Jim and I are actively encouraging people to come along to that investment committee and pitch opportunities. I think Jim just wanted to say something about that.

Yes. Just one of the things to add to that, that investment committee internally allows us to monetize the significant beach that we had. And we are very, very focused on returns of any investment, particularly at the moment where digital assets externally are arguably overvalued. And obviously, when you have an audience the size of ours, there is no need for us to buy additional audience because we can actually go and get it, and we're near enough saturation point. So most of the investment has higher returns because it's internal rather than paying a premium for an external overpriced asset.

But I think -- so looking forwards, Gareth, I think we will continue to invest organically. And our expectation is as we launch Reach ID and that helps to focus us around where the value opportunities are, there will be more to come, not less in terms of investment in our business. In terms of digital yield recovery, I mean, we've saw a significant step up, as you rightly referred to, in Q3. We are back to now pre-COVID levels in terms of national yields. We've seen advertisers return to the marketplace. And we think that the combination of the recovering yield plus the extremely positive volume move forward of the business, that's how we've been able to beat that peer group data that you referred to, the Advertising Association through WARC, because we've got a combination of both becoming more and more relevant as well as the market itself recovering. And clearly, how we will focus in the future is that relevant -- that engagement that Jim talked about in the strategic section, which will build further momentum into next year and beyond.

Our next question comes from the line of Alex DeGroote from Radnor.

Yes. Two questions, please. Question 1 relates to the cash dividend. You've generated a prodigious, awesome amount of cash flow in the first half of GBP 41 million. And yet I'm being told that the dividend policy, for the time being, is being framed around the bonus issue. So I just wondered if you could just elaborate on what conditions are in place. For cash dividend payout specifically, would that include any money or loans that you've taken from the government for any of these schemes? Could you just give us some specificity around the resumption rather than just choosing the term market conditions? First, question one. And then question 2, just note 15 to the statement today. Just on the provisions, can you give us just a rough steer for over how long this GBP 52 million will be utilized in terms of payment schedule, please? Because that number has gone up a bit since last fiscal year.

Thanks, Alex. It's Jim here. Just before I hand you over on the questions to Simon, particularly the cash one, you used the word awesome cash resources. Simon will explain the detail of the -- obviously, the bonus dividend, but I just want to say is that we are demonstrating really responsible management of our business. So it's quite a positive statement today, but there are uncertain times ahead of it. And it's important that we have the ability to use this cash to continue with our strategy. So even may -- I mean, I wouldn't describe it as awesome, but I would describe it as a sensible amount of cash that allows us to actually manage the future if, for example, a second wave of COVID did have a national or metropolitan lockdown. But the reason why it's not cash and it's bonus, Simon, will come onto.

Yes. So thanks for the couple of questions. So as Jim just said, we need to make sure that we continue to protect the business and its resilience we are absolutely committed to restarting cash dividends at the time it is appropriate to do so. But as I mentioned in my section of the presentation, we want to have an appropriate level of cash resources available to the business given that times are uncertain. There are a number of factors that we will consider when considering reinstatement of a cash dividend, and clearly, that's a matter reserved of the Board, and it will be subject to an extensive board discussion. But we will look at macro factors, such as what the environment is showing. We will clearly look at latest revenue trends and the recovery thereof. We will look at the available cash resources of the business and our ability to tap into other resources, such as our bank facilities. And also, critically, we want to give a level of certainty to shareholders. So we're not looking to take short-term reinstatements to then make another change only 6 months later. We want to be sustainable and we want to do something that is well flagged. Hence, why we started with the bonus issue today, which is still subject to shareholder approval, and we hope that's a stepping stone to a reinstatement of the cash dividend, at the right moment. In terms of provision utilization, and you're right, Note 15 describes an increase in the provision. And there are 2 principal areas within that historical legal issues, where we've been utilizing the provision for a number of years now, a relatively slow rate. So the half 1, we utilized just a little less than GBP 1 million on that provision. And then the other thing is the provision relating to that historical property matter that I mentioned in my update, a property development rating back to 2018, in Liverpool, where we have now full and final settled to exit from that, which is having severe overruns as a result of the COVID pandemic. That amount will be fully paid out in half 2. In fact, it's already been paid out. So that's about 1/3 of that total provision would have been utilized by the full year-end. Historical legal issues are our relatively slow utilization but are continuing. And then other areas, no significant change. So that balance will drop down again by year-end to something more like the previous year-end.