Reach plc (RCH) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Reach plc 2021 annual results presentation. I'm joined this morning by our CFO Simon Fuller and our Editor-in-Chief Lloyd Embley. I'm going to open with a few slides to outline what we've achieved this year so far, and Simon will then take you through the financial overview. I will then come back to share a little more detail on how our data led approach is supporting revenue growth. And Lloyd will then talk you through how the strategy is being applied day-to-day in our newsrooms. And I'll finish by summarizing before we go to Q&A. Firstly, I want to spend a short time to recognize what has been an outstanding year for our journalism. Our titles are proudly mainstream and continue to engage millions of people every day with the latest news, sports, and entertainment. 10 million of our customers now get stories that land in their inbox that are specifically relevant to them. Our engagement levels and ad yields have therefore increased accordingly. Coupled to this is the trust that communities throughout the U.K. and Ireland place in our news brands that drives our core purpose, that of champions, campaigners, and changemakers. 2021 was a vintage year for campaigning journalism. From the award winning environmental coverage in the resurgent Daily Express to the Daily Record's campaign for the decriminalization of drugs, and of course, the series of Downing Street exclusives from [indiscernible] that have repeatedly set the U.K. news agenda, leaving the broadsheets and the broadcaster's chilling in the rake. Journalism will always be at the heart of our business, and is ultimately what will ensure our success in delivering upon our digital potential. Now, our results now clearly show that the strategy is working and 2021 we delivered like-for-like revenue for the first time in over a decade. This has been driven by strong digital growth and the moderation in print decline. Digital revenue grew by 25% and is now close to a quarter of the business, having been only 5% just 6 years ago. Registration is the foundation of our strategy and we've made encouraging progress, hitting 10 million ahead of -- well ahead of our 2022 target. Our customers are now known and more importantly contactable, which is becoming increasingly relevant by the day as the privacy landscape continues to evolve. Earlier this year, we launched Neptune, our digital ad tech and data platform which drives our Plus products. This platform will support the next stage of our growth. As you can see, Plus has already made a significant contribution. Over 200 campaigns have run so far, with an average yield 8x higher than our open market rate. Our strong cash flow is continuing to support investment, enabling us to recruit over 400 new journalist positions in 2021 alone. We've made D&I a key focus, establishing key benchmarks to gauge a future progress. We have delivered a huge amount and I want to thank on behalf of the board and my executive team, all colleagues across the business for the hard work that has contributed to such a successful year for our company. And I know that all stakeholders will recognize these efforts. So the first phase of the customer value strategy has been delivered. We are now in the next stage of our transition to become a data led business with an increased mix of higher quality digital earnings. We are investing to secure this opportunity and they're on track to double digital revenue by the end of 2024 from a 2020 position. Strong and sustainable cash flows give us options to take advantage of inorganic investment should the right opportunity present itself and of course at the right price. We've made a great start. The strategy is working. But there's much more to come. I'll now hand you over to Simon who'll take you through the details and the numbers. Simon.

Well, thank you, Jim. Good morning, everyone. It's great to be able to give an update without the background of my home office bookshelf for months. So a year ago when updating of what have been an extremely demanding year for the business, I described that we had proactively responded to a changed environment. Now put it another way, it sharpened our operational focus and it had accelerated our strategic plans. And actually the driving force behind our strategies is straightforward. It's to build a robust and sustainable business model that supports the continued delivery of our core purpose in the long term. And that's given the demonstrable need for our product which is high quality, trusted news and content. Now Jim has already touched on 2021 which whilst it was characterized by some significant macro challenges, built upon the strong groundwork of 2020. And it was a year of real progress for the business and our customer value strategy. Now of course proof of this needs to be provided by the numbers we've delivered and that's what this next slide demonstrates. Group revenue of GBP 615.8 million is up by 2.6% or 1.3% on a like-for-like basis. This is our first organic growth since 2007 and stands in stark contrast to the pre-COVID 2019 like-for-like, which was a decline of 5.3% and that itself was an improvement on 2018, 6.6% like-for-like decline. Now that shift in top line momentum recovering from the toughest point of COVID provides clear evidence and this links with what Jim said at the end, clear evidence that our strategy is working. We have, as a consequence, materially increased investment, whilst at the same time advancing operating profit, which was up by GBP 12.3 million to GBP 146.1 million, a record margin of 23.7%. Now operating cash generation has once again been strong in the year at GBP 141.3 million and that increased our net cash to GBP 65.7 million. This cash balance alongside our newly expanded credit facility of GBP 120 million provides the business with both the resilience and also the flexibility to drive further acceleration in our strategy. Furthermore, this strong performance supported the Board's decision to announce a 4.46p final dividend in line with our policy to grow shareholder returns. Finally, as we also noted at our interims, our accounting pension deficit has reduced year-on-year by more than 50% to GBP 117.2 million net of tax which is broadly stable versus the half year. Now here we have a waterfall chart of the principal moving parts in revenue. Circulation revenue, which still comprises almost 51% of our mix, stabilized at mid-single digit percentage decline rate and that aligned with the pre-COVID 2019. Print advertising which is still a valued revenue line saw strong recovery nationally and regionally. Printing is minus 19% like-for-like is explained by the closure of 2 of our print sites at Luton and Birmingham, reducing revenue from external contracts, but actually increasing profit to the group. And finally within print other, we have reached sport and events which saw a good year-on-year recovery. And the Mirror Pride of Britain's 22nd year was definitely one to remember. So print overall remains a critical part of our business, but the most important call out is that its aggregate decline of 4.7% was more than offset in 2021 by GBP 30 million of additional digital revenue, a growth rate, as Jim has mentioned, of over 25%. In fact, in 2021, we grew digital in absolute terms by an amount equivalent to our entire digital business in 2015. The combination of greater digital scale and a higher growth rate puts the business on a very different footing going forwards with total group revenue up by GBP 16 million year-on-year. Now in headline terms, adjusted operating profit benefited from a flow-through equivalent to more than 3/4 of that year-on-year revenue growth. But what this next chart illustrates is that beneath the headline, there are some key moving parts. In 2021, we saw a GBP 23 million year-on-year drag from 2020 one-off reversals such as furlough and pay reductions. However, this drag was more than offset by the material upside of GBP 46 million from the transformation of our end-to-end business model. This increased efficiency and effectiveness, and this will necessarily continue to evolve. Now next in the sequence, we have the direct costs associated with our revenue growth and being a bigger business alongside inflation, mainly in print production, which factors combined in 2021, net costs at GBP 11 million. However it's perhaps the final 2 steps in the waterfall that most demonstrate our strategic confidence. Because as you will see, we flowed revenue and mix benefits fully into investment, principally across our editorial and customer divisions. This supported the recruitment of 400 journalists, the development of our data capabilities and the evolution of critical customer functions such as CRM and insight and analysis. Now all of this was achieved whilst at the same time delivering material profit growth year-on-year, up by 9.2% and with significant margin expansion. Now when we spoke at our prelims a year ago, we forecast a material reduction in the quantum of future adjustments to profit, and that's exactly what we have seen with them almost halving comparing 2021 to the prior year. Most significantly, we have the home and hub hybrid working one-off impacts, which supported us moving from more than 50 offices to 14 hubs alongside some additional meeting spaces, all of these being geographically spread across the U.K. and the Republic of Ireland. Now in terms of charges relating to historical items, in the year, we increased our historical legal provision by GBP 29 million, with the total provision now standing at GBP 41 million. This additional charge reflects our latest view of the cost of known claims, potential future claims and common court costs, noting that this assessment does involve significant judgment. Finally, we have the smaller adjustments relating to pensions and some other miscellaneous non-repeating one-offs, and we expect a further reduction in adjustments in 2022 as the business moves into its next phase with ongoing cost efficiency programs of a completely different character to when our revenues were declining by 5% or 6% per annum as they were pre-COVID. Now as I referred to a couple of slides ago, margin year-on-year has grown substantially, up 140 basis points to a record 23.7%. Now as we deliver our stated objective to double digital revenue by the end of 2024, and just to remind you, 2020 is the base reference year for that. The corresponding change of revenue mix will continue to evolve and reshape our cost base, and it will support further margin expansion over the longer term. Looking at the stacked chart of our cost base, I'd draw out a couple of key observations. Firstly, even though our total cost base only increased by 0.8% or GBP 4 million year-on-year, labor was substantially invested in, growing by around 7%, up GBP 15 million. Now that increase reflects the investment in our capabilities across editorial, customer and product. And secondly, in 2021, we did see an upwards movement in newsprint cost. It's reflected in the chart. That is paper for our printed products. This cost increased by GBP 7 million year-on-year with inflation from a 2020 low. However, in 2021, the increase was more than offset with in print production by reduced fixed costs, including depreciation following the closure of 2 of our print sites. Now to step back for a moment, in light of the 2022 guidance, we're now giving the market, 2021 could be described as a moderate year of inflation with the more severe upwards movement in newsprint, energy and consumables only beginning to take effect in Q4. 2022 by way of contrast, is currently a more significant full year increase, again, particularly in print production. I'll cover this in more detail when I move on to the outlook slide at the end of my section. Let's move on to the detail of our digital performance. This first slide focuses on some of the key operational metrics that demonstrate our strategic progress. Digital revenue is up by almost 40% in 2 years even with the market volatility driven by COVID. And page views in the same period are up by almost 30%. And we noticed part of this that 2020's COVID-driven page view step-up was substantially maintained in 2021. Now the combination of those metrics put revenue per page and ARPU on a maturing U.K. audience profile, both well up year-on-year. As this next slide shows, the quarterly profile in the year had a marked COVID driven shape with soft comparatives in Q2 and the opposite being the case in Q4. Most importantly, though, the compound annual growth was maintained at around double the digital growth rate compared to the 3 to 4 years prior to our current strategy. Now we in the overall market did experience some softness in the final few weeks of the year, which carried over into January, which is always a seasonally lower month for us. In part, this slowdown appears to be a reaction to the mid-December government announcements, which did dampen advertiser demand. However, this does not change the expectation for 2022 nor does it detract from the longer-term progressive trend on our top line. As someone recently reminded me, when you're climbing up a mountain, you sometimes need to look back down to see how you're progressing. And this slide does exactly that. With a doubling of digital mix comparing the charts very first bar with its last one. Now of course, we must also bear in mind the seasonal shape with Q4, our strongest trading quarter, benefiting from Black Friday and Christmas. Also in 2020 we had Q2 dip down when advertising demand faltered. This all said, the trend line says it all, quantum growth and significant mix improvement. In fact, digital revenue in Q4 2021 was almost GBP 470,000 a day business. Now moving on to print circulation. It's important to remind ourselves that we sell on average over 1 million newspapers a day, evidencing the continued relevance of this product. True enough, printed volumes have consistently declined over a long period of time as competition has increased from other formats. However, as this chart confirms, cover price increases, have protected revenue and the pre-pandemic rate of a mid-single-digit percentage revenue decline has now resumed. Circulation is just over 2/3 of our total print revenue, and this mix will continue to strengthen, helping to moderate the total print decline. Or to put this another way, the print decline rate will benefit from print advertising becoming an ever smaller proportion. Let's move on to cash and the balance sheet. As we noted earlier, 2021 was once again a strong operating cash flow year with a more than 85% conversion from EBITDA. This high conversion percentage was maintained even with an increased CapEx associated with the further digital development of our business, which our updated policy recognizes as ongoing valuation -- ongoing value in future years. We also note a sizable working capital inflow in year, partly as a result of a one-off commercial timing benefit in our digital business, which won't reverse in 2022. We call out a few of the other bars where they've not been mentioned already. In 2021, we resumed a cash dividend, and we also paid the next GBP 17 million installment from the Express & Star acquisition with GBP 24 million outstanding at the balance sheet date or GBP 7 million as at today. The net of all of these factors was a GBP 24 million cash accretion, increasing our balances by more than 50% to GBP 66 million. The pension's triennial valuation for 2019 remains in progress, having initially been delayed by COVID and now the subject of ongoing discussions with a number of our schemes and interaction with the pension's regulator. Whilst this dialogue continues, we continue to meet our schedule of contributions as agreed with the trustees in the 2016 valuation. Penultimately in my section, we remind shareholders of the balanced scorecard of capital allocation priorities. As has been a consistent mantra of the past 3 years, the strong cash generation and balance sheet of the group enables us to invest in our strategy, that incremental GBP 14 million revenue investment we referenced earlier, alongside higher CapEx, whilst also growing our dividend to recognize shareholder support, and at the same time, committing substantial resources into our pension schemes as we drive to self-sufficiency by on or around 2027. As we've moved into 2022, it's evident that Reach will be subject to the same macroeconomic factors and in particular, inflation that many other U.K. businesses are also facing. Nevertheless, we expect continued strong digital growth to balance off print decline, with overall revenues flat again in 2022. Alongside this, we will look to drive the right balance between investment and efficiency, all set within the current macroeconomic backdrop that we have been describing. Of course, one possible response to the significant current inflation across newsprint, energy, wages and consumables would have been for us to have scaled back investment. Now that would be a short-term response and not aligned with our clear aspirations as a business. As such, we will see a modest inflationary driven reduction in profit in 2022. In particular, we note that about 3/4 of this relative cost increase relates to newsprint impacted by energy prices, transportation costs and supply-demand dynamics. And so 8 weeks into 2022, with group revenue year-to-date approaching flat, and as I said earlier, digital growth of just over 10%, not unexpected, given seasonal and other year-on-year factors, we remain confident about the business' prospects and full year expectations alongside our ability to proactively further respond should conditions change. What's abundantly clear is that the Reach of 2022 is not the same as that in 2019 before the pandemic started. Our digital business is now 39% bigger. Total revenue has stabilized. Cash balances have tripled. Our credit facilities have broadly doubled and our accounting pension deficit has more than halved. And it's for that reason, we intend to continue to invest in and develop our capabilities to drive long-term value for all of our stakeholders. Let me now hand back over to Jim to describe more about how we will do this.

Thanks, Simon. Look, these are the 4 key pillars of our strategy. And you've obviously all seen them before. And I spoke earlier about these when we're touching on our purpose. Lloyd will pick up in that later in his presentation. So let me focus for the moment on data, specifically, how we use it, how it's evolving and how the change creates an opportunity for Reach. As publishers, we have some of the highest digital audiences after the global tech platforms with a product that is consumed daily. As regulators reset the rules to meet increased concerns around privacy, platforms are having to evolve their approach, and this presents an opportunity for us to secure higher value from our first-party customer data. Our registered customer base of 10 million provides the foundation for data gathering from a scaled U.K. audience, which generates around 1.5 billion first-party data events every month. And to try and state that as simple as we can, it's 1.5 billion ways to get to know our customers better. Importantly our approach is based on active customer consent. Advertisers are recognizing the importance of first party data and importantly, are also seeing the improved results that it delivers. Our data-led campaigns perform at the moment as much as 3x better than those which are based on basic customer signals from third-party cookies, which will ultimately be phased out. It's the marriage of this and the reliability and resilience of print, which underpins our continued investment in our strategy. Print remains a critical part of this business. Our title still reach around 13 million people a month, which is around 1/4 of all adults in the U.K. and you need to take a moment to think about that. Newspapers are habitual purchases for many, which is demonstrated by the strong recovery in circulation trends from the impacts of the pandemic. It remains a large-scale, resilient business and newspaper cover prices are still relatively low, and our readers are proven to be loyal. Their average age supports multiple years of cash flows to come, and this will support our transition towards a more digitally driven data-led business. The cornerstone of this transition is our newly launched advertising and data platform, Neptune. Neptune is the digital architecture, which houses our customer data platform, data matching software and in-house built AI tools. It supports the collection and enrichment of data from multiple sources. We are then able to model customer behavior and create user segments, which underpin all of our data-led campaigns. Most of our ad space at the moment is sold in the open market where advertisers look for scale, rather than refined targeting and inventory is sold on an automated one-to-many basis, but therein lies our opportunity. Because at the other end of the scale, Plus provides highly relevant and targeted datasets to advertisers and agencies based on declared clear behaviors and contextual signals from Mantis. Campaigns based on this level of data of the highest yielding, though to date have largely been sold direct to early adopters of our data-led products. But with the market changing, brands are seeking a more targeted approach with agencies launching curated marketplaces, which will enable us to scale as we move forward as well as underpinning more sophisticated advertising products, Neptune also supports the insights that will help us grow through audience engagement. We are evolving a more data-led approach so that the entire business can progress from collection and interpretation to insight and action. We're now working to enrich customer profiles, adding more signals through both declared and inferred behavior to grow the understanding of our audience. Having reached our registration target, we're now focused on driving customer engagement. We're starting to use more sophisticated CRM than we have in the past and more relevant and personalized content to engage with customers more directly, extending the lifetime value. In an organization where language is important, our language is changing, LTV, average LTV, ARPU and churn. This demonstrates the ongoing evolution from an above-the-line mass media only business to a data and insights-driven culture, and we now have both. Our ad tech teams and our data teams have already put in place several best action tools, which recommend articles that customers should read. It also flags high impact and trending topics to our editorial teams, which informs future content development. Our success in developing Mantis, remember from a brand only safety tool to venture data and enable contextual flagging and recommended next actions demonstrates our strength in developing tools for advertisers, agencies and publishers. The team is focused on further innovation to support additional revenue growth. The insights from Neptune will also drive a new suite of business reporting tools to inform our strategy development. The next slide shows how data insights are driving the growth we've seen in our digital revenues to date. We've just touched on the improved effectiveness of Plus business-to-business products and other data-led campaigns, but equally important is the volume-led B2C opportunities from growing page views and increase in customer engagement, which we've already started to drive. Here, you can see how we've retained audience and engagement levels despite a tough comparator in 2020 when a significant volume of traffic was driven by COVID-related content during the early months of the pandemic. On a 2-year view, the growth rates we believe are impressive. The investments we made during 2021 are also beginning to drive results, with page views in the year so far up by around 8% to 9%. As you can see from the growth in loyal users, this strategy is now working. If we just take registered customers alone, you can see the rapid increase in volume from our newsletter and logged in readers. These page views are -- we simply would not have without our registered customer base. A specialist team within our newsletter ops team have been recruited to focus on reader obsessions and they are tapping into the interest of our most loyal customers around topics from the Marvel Cinematic Universe to baking to American Football. We now have over 1 million active subscribers to a selection of only 36 obsessions. The number of logged in users has grown rapidly since the addition of one tap sign-in in July, enabling readers to comment and interact with our content with reader comments now up to 1.5 million a month. [indiscernible] has now grown to be the equivalent of a major regional title, the country's third largest local news brand with over 6,000 advertisers. Ad revenue has grown by 2.5x year-on-year. Earlier, I mentioned our growth in loyal users, which is important because they generate around 1/4 of our total page views. By increasing the number of loyal users, we increased the number of potential customers to convert, ensuring we're building a sustainable, engaged customer base. By segmenting our audience, we're now starting to target specific groups by title, looking at where they arrive from, the times they visit and the sites they access across the month. Our editorial teams are using this type of data to target the most active and loyal users with engagement campaigns. As an example, if your football club reverses a losing run or signs a new player, we know your engagement history. We know when we can send you the e-mails, so you can see relevant content at the right time. This is the basis of reactivation. We're focusing much more on churn rates and reactivation models in addition to registrations, and we utilize surveys, polls and widgets, directing them to our newsletter preference center where appropriate. Customer relationship management was almost nonexistent in the business 18 months ago. Our customer data platform is now enabling us to model customer lifecycles and develop campaigns to reduce churn and increase customer lifetime value. It also highlights the areas for us to focus on. For example, we are encouraging registered customers to sign up to more than one product. This is an efficient way to increase their lifetime value to us and to advertisers. Turning to B2B. We launched Plus during Q2 and its now generating a significant percentage of our digital revenue growth. We now have datasets supporting over 100 different customer segments and have supported well over 200 campaigns, importantly, with 80% of brands booking more than one, a pleasing level of repeat business. Plus data is now supporting regional and local clients as well as larger ones with an average click-through rate 3x higher than a typical standard open market campaign. As Simon mentioned earlier, the increase we've seen in overall revenue per page. This has been supported by the growth of Plus, which generates yields that are around 30% higher than average across our direct and private marketplace business. That's 8x higher than the yield than the open market alone. Plus revenue has been ahead of our expectations for 2021, just to make sure you've heard that, it has been ahead of our expectations in 2021, and we are expecting more to come in 2022 as we enrich our datasets, expand the number of customer segments and increase distribution through created marketplaces. We would like to thank our clients and agencies who share our view on the value of data and look forward to working with them again in 2022. Before I hand you over to Lloyd, I'd like to touch on the great progress we've made this year around ESG, starting with our people. The pandemic highlighted the importance of well-being, and we have significantly stepped up our colleague support framework. We've implemented a new hybrid working policy to provide flexibility and enable us to attract new talent. We've stepped up our online safety approach with the appointment of a full-time online safety editor. We are the first major publisher to do so. Our focus on D&I has seen the launch of a group of colleague inclusion networks who have raised awareness of key issues and provided an important forum for education and social interaction. This is just one of the reasons why Reach plc has been recognized now as one of Britain's top 50 inclusive employers. We're evolving our approach to sustainability and more in-depth reporting, and we've committed to a more formalized sustainability strategy. We've already begun the work to enable us to ensure that our net zero target will be met, which we'll announce later this year. This area will be overseen by a new Sustainability Committee, which was established by the Board earlier in the year. Now to talk a little more about our editorial team and how we channel our voice and to touch on how data is becoming more instrumental, I'll hand you over to our Editor-in-Chief, Lloyd Embley.

Thank you, Jim. Good morning, everyone. Journalism in all its shapes and sizes is our reason for being. It's our core purpose. Right now, of course, Russia's invasion of Ukraine is dominating the news agenda. We have staff both in Ukraine and across the border in neighboring Poland. Their main focus is to shine a light on the human cost and impact of Putin's atrocious land grab. On Saturday, Ukraine's extraordinary President Volodymyr Zelenskyy, posted the Daily Mirror's front page, which carried the headline, "We are not afraid," on his Instagram feed. Today's news is tomorrow's history, and we are proud to play our part. Exposes, investigations, campaigns, holding those in power to account; these things really matter too both at national and at regional level, and we have done much to be proud of. The Daily Mirror led the way on the Partygate Saga right from the day it first broke the exclusive. It set the agenda for every news organization across the country regardless of political persuasion. Because this was not about playing politics, it was and still is about trust and helping the public to judge whether they can trust our politicians or not is an essential role of a strong free press. It's why we are referred to as the fourth estate. Now how we break and cover stories like this is ever evolving. Of course, a good story is a good story, but we are continually making publishing decisions around timings, platforms and formats in order to drive the greatest benefit to the particular brand. Now our regional titles play a huge role in holding power to account too. Only a couple of weeks ago, all of our Northern and Midlands titles across print and online, joined forces in a powerful piece of coordinated journalism around the government's leveling up agenda. Don't leave us behind with the headline and message used across all our relevant news brands, a single message given the authority and amplification of the nation's largest publisher of local news. The resurgent Daily Express has hold multiple campaigns since we acquired the title, including winning approval for the use of life-saving and changing cystic fibrosis drugs in the NHS. In 2021, it saw 2 victories in important campaigns. The first is introduced vital protections for victims of domestic violence in family courts. And its successful compassion for the dying campaign will result in terminally ill people being given faster access to financial support under reforms to the benefit system. Both the Mirror and the Express have also won awards for their environmental coverage. In Scotland, the nation's drug problem, which has seen deaths rise every year since 2013, prompted a brave campaign by the Daily Record, which resulted in the effective decriminalization of possession of Class A drugs. The old system of offend, convict, repeat was doing nothing to stem the growing number of deaths. With the support of many politicians, experts, officials, ex-offenders and charities, the paper successfully argued to breaking this cycle and replacing it with a treatment program was urgently needed. Another example of real social change. Now I am fiercely proud of all of these achievements. As I said earlier, these things really do matter. But I also know that for many people and for much of their time, other things matter too, and that could be football or fashion, boxing or beauty or maybe the Brits. It might be finding out about a new local restaurant or to screening the [indiscernible] or line of duty or F1 because popular culture matters too, and we don't just cover it, we're actually part of it. Our performance at the most recent Irish press awards perfectly sums up our strength in the field of mass market journalism. We won Showbiz Journalist of the Year, Crime Journalist of the Year, Sports Reporter of the Year and Headline of the Year. We continue to improve our knowledge of our readers and the content they thirst for with live, historic and contextual data from across our entire network at their fingertips. Our journalists, editors and audience and content directors have never been better equipped. As we learn more about the consumption habits of our users, we are becoming increasingly expert at serving them not just what they want to read that moment, but also the story they would like to open next. In 2021, we introduced real-time headline and image testing across the Reach network. This is an excellent example of using data to inform and empower our editorial teams. The most prominent stories are given different headlines. In some cases, that could be 4 or 5 alternative versions. We then measure the best performing by looking at click-through rates and crucially how long users stay on the page. This ensures that the headline selected will deliver a strong page view return while avoiding the pitfalls of overselling something which just annoys people. We do the same thing also in real time with image testing. In an increasingly visual world, the selection, prominence and cropping of images and video to make a huge difference to the size of audience a story delivers. We continue to invest in journalism too. Jim mentioned the importance of print earlier, and we have strengthened our performance not only by breaking brilliant stories and maintaining our journalistic standards, but by continuing to invest heavily in increased availability rates as well as further pagination investment to allow our editorial teams scope for special pullouts or even stand-alone products, which have seen multiple successes, especially under the OK brand. In the digital space, the last 12 months have seen us on the biggest recruitment drive in my 28 years at the company. We've launched new sites including Aberdeen, Galway, Norfolk, Suffolk, Oxfordshire, Dorset, to name a few. We've invested in existing sites as we become increasingly confident about our ability to grow our audience. Of course, this has meant adding reporters, but also pumping significant resources into social teams, video and our CRM operation. Our recruitment drive, as you've heard, has seen us add more than 400 editorial staff in the past 12 months. And we're seeing some pretty stunning results. We continue to accelerate our newsletter strategy, giving readers curated, crafted, easily digestible news in content areas of their choice. In 2021, we sent 2.6 billion newsletters to inboxes across 400 different topics. We've continued to grow our Yorkshire Live team, for example, and we are now delivering 37 million page views a month. That's 2.5x as many as our nearest rival. More than 7 million people a month now get Yorkshire News from Yorkshire Live, and this from a brand which we only fully launched a month before the pandemic. In 2 years and using data to support our editorial teams, we've grown the size of our Daily Star website by 80% and ok.co.uk by 88%. And in August last year Reach's My London news website overtook the Evening Standard for page views. Over the past 2 years, we have quadrupled its audience, and we're still growing. This achievement is even more impressive when you consider the My London page [indiscernible] doesn't include sport, whereas the Standard's does. This is because we already have our stand-alone football London sites. So if you allow me, My London and Football London combined drove 50 million page views last month compared to 24 million by the Standard. Just think about that for a second, from a standing start to twice the size of the Capital's most famous news brand in the space of just a few years. As our knowledge, understanding and operating model further evolves, we will continue to invest, and I'm delighted to have the backing of James and Simon in the Board to look at some exploratory and innovative editorial investment as well. I said last year that I firmly believed we were the best equipped and structured commercial news organization in the U.K. I now know that we are. Thanks. I'll hand you back to Jim.

Thank you, Lloyd. That was a hard act to follow. So in summary, we have now registered over 10 million customers, which gives us real competitive advantage in a changing market where advertisers are increasingly looking for first-party customer data. We've built Neptune, our ad tech platform, which is now enabling a more data-driven approach across the whole company. We're expanding our higher yield Plus portfolio of data-led products, extending distribution to more clients and agencies. We're developing new data-rich products and tools to support our editorial teams, some of them you've just seen to grow engagement and loyalty. We're successfully developing a more innovative and inclusive and growth-orientated culture to support our ambitions and our investment to date that Simon has taken you through, is working with resilient cash flows from print, fueling a growing mix of higher quality digital earnings. So while conscious of the near-term inflation headwind, we're going to keep investing, transitioning the business to a digitally driven future, which will support profitable growth for the long term for all of our stakeholders. We've achieved a great deal, but we believe there's so much more to come. As I said before, we are still in the foothills, but we remain firmly on track to double digital revenue by the end of 2024 from our 2020 basis. Thank you for listening, for your interest. We never take it for granted. We'll now take questions here in the auditorium before we move on to the phone.

Gareth Davies from Numis. Kick off with 3 quick ones for me. The first, digital advertising, 10% in the first 8 weeks. Can you just talk a little bit around the specific moving parts that get you to the 10% and the trajectory as we move through the year? I mean at face value, you got a pretty tough comp in Q2. I'm just -- can you talk sort of H1 versus H2 and your expectation therefore for the year? Then secondly, on your cost guidance and the marginally lower profit in the current year, just to be clear, can you -- what are your energy sort of you assuming spot newsprint and energy as we are today for the second half of the year? Or just any color you can give there around how cautious you'll be in? And relating to that guidance point, just if you could expand a little bit on the investment comment. What are the bigger pockets of investment that you still kind of got to go around the new strategy and that you're sort of investing into this year?

Gareth, Simon will take the first 2, and I'll take the investment one.

Okay. So if I start with overall where we are in terms of our digital business. As I said, we do experience in January and February generally a seasonally weaker start to the year. And we did see some overhang coming out of December from last year with the government announcements in the middle of the month. What I would say is that as we've looked at the progression we expect through the year, we're very confident that the investments we've made, the growth of Plus, Jim mentioned it, we're getting more and more first-party data. We've got a larger and larger registrations pool from which to draw that registered data. We're very confident that the full year expectations will be a sustained and growing growth rate through the course of the year. I mean if you look at the half 1, half 2, and I understand the point that there was a fair amount of volatility in 2021 quarter-by-quarter because of some of the lapping of the 2020 comparatives. Actually, if you look at the absolute numbers, that helps you, obviously, to tell a slightly different story. And therefore when we look at Q2 and we look at the numbers as they will evolve through the year, that's what gives us the confidence around that meaningful percentage increase. I mean something that we wouldn't want to lose in terms of the guidance we're now giving is we're guiding to flat overall revenue. That is a very, very different place to where we were pre the pandemic, where we were guiding at 5% or 6% declines. We are guiding to flat revenue on the back of that bigger digital business, on the back of that continuing growth engine of Plus and all of the other things that Jim's mentioned around Neptune, and therefore, we expect that to sort of evolve through the year, and we're confident about that. In terms of cost guidance, giving you a bit more color, as I described, is particularly in the world of print production. And within that, you have newsprint, so the paper that we print our products on. You also have ink and plates. So the consumables that are associated with the production of our newspapers. We have seen a significant step-up and really effectively what the guidance assumes is that that will be sustained through the course of the year. Clearly, we live in a volatile world. And in terms of being able to predict what's going to happen every single month of the year on energy or on other items, that's quite difficult for any business to do. But we're comfortable with the guidance that we're providing in terms of where we expect that to be. And we will continue to sort of monitor that as we go through the year. And clearly, if you think about print production costs, those -- that the drag of print production inflation will dissipate as our volumes go down over time. This is not about inflation in our digital business, inflation of our cost in our digital business. And so as our mix continues to drive to a more digital proportion, clearly, that some of that drag gets dissipated as well, that's an important point.

Thanks, Simon. Gareth, just on investment, probably 3 areas. The first one, which is not explicitly seen in the P&L of the balance sheet is that we invest in our culture. So making sure that Reach is a place where people can come and feel that they can basically challenge and be open and deal with the challenges of the pandemic. We also are investing further in our journalism and editorial. Lloyd now has his investment fund. We think that's important, and that's a big change for the company. And that comes through in the numbers that you see here, but it's quite [indiscernible] audit, but that cultural investment is really, really important. The other 2 things that are more clear is the investment in journalism. Without that, we don't have any content. We don't have anything to satisfy the demand. That will continue to be the primary investment for us. As long as we have that content, and I keep saying to Lloyd, to keep making it as simple as possible. If you can deliver those great content, we can monetize it within your guidance as the editor and that's what we do. And then the third thing, which is new for the organization, we are now becoming a data-led company. Arguably, it was relatively easy to register customers. If you're a Liverpool fan or you're interested in the war in Europe or the economy of the pandemic, you will sign up to a newsletter if the content is good enough. Then it becomes more sophisticated, the retention, the engagement, the data tools. And last year, Simon and I started to breadcrumb the investment in BlueVenn and the data platform so that we could go to advertisers, improve the understanding customer profiling was delivering, which is why Plus is really important. So the final part of the investment, which has started, Gareth, will be data capability, data platform, data analytics and data engineers. And we're building a culture to attract those individuals.

It's Nick Dempsey from Barclays. I've got 3. Just first of all, on the cover price, Daily Mirror's got to 95p in England and GBP 1 in Scotland, [ Sums ] at 70p, Express ATP versus, I think, mail is the same. Does it start to become harder to put up cover prices in the same percentage amounts from here? And is GBP 1 a bit of a psychological barrier for the Mirror when you have to move above that to 2 coins. Is that going to hold you back a bit on an important driver of your print numbers? Second question, what proportion of your digital advertising now is sold through programmatic channels versus directly through a relationship with advertisers and their agency? And kind of a follow-on to that, how much of a risk is the Belgian DPA's ruling that the transparency and consent framework that TCF is not compliant with GDPR? Is there a risk that you could see an impact to programmatic yields this year from that? And then more for next year, do you worry about programmatic yields in relation to Google's third-party cookie removal from Chrome? So yes, sorry, I'm going to stop there.

Okay. Shall I take the first couple, and then I'll hand over to Jim. So in terms of the cover price, we've already gone through GBP 1 psychologically at the weekend, I mean, to remember. So I mean we're talking about sort of Monday to Friday, but we've already gone through that point at the weekends. And we didn't see any noticeable change in behaviors. So I wouldn't want to overstate actually that. And actually one of the things that the pandemic has resulted in is a lot of people buying in a contactless way or buying without coins. So actually the sort of the psychology of multiple coins perhaps has been a bit diminished by COVID as well. I mean actually when you look at our cover price inflation, and we've had a very clear strategy which we've been following for a good number of years, Nick, as you know. We have seen no negative trend in terms of the impact of cover price inflation. If anything, we've seen the impacts of cover price inflation becoming more benign over time in terms of the volume impact because we're getting to our most loyal customers who are -- it's not about casual purchasing, it's about sort of their ongoing purchasing of our products. So we're not overly concerned about that, but obviously we continue to measure and monitor that as you'd expect. In terms of programmatic versus direct, I mean, programmatic in terms of volume is still by far and away our largest proportion and will continue to be so in the near and medium term. The key point though is even though it will be our biggest proportion in terms of numbers of ad slots, because of those ratios that Jim mentioned, the 8x, for example, comparing Plus to open marketplace, you don't actually have to move a very big part of your inventory to create a lot of extra value. And that is the focus of the strategy. So we're not suddenly suggesting that we will have -- that Plus will be bigger than programmatic in a year's time in terms of the overall ad slots. But what we are saying is we will see a shift across to high-yielding data-driven slots, which overall, as part of the mix, will accelerate our digital growth.

Thanks, Simon. Nick, I'm glad to asked the data questions. Just for those who may not be aware on the GDPR question, in Belgium, it was a ruling against the IAB, not publishers and media owners, but it was a ruling about the collection of data and whether or not there was explicit consent. We feel that those rulings are going to evolve over time. It doesn't affect us. Will it affect overall programmatic advertising. Well, it has on the margins. And I think what we're seeing now is an evolution of data protection and GDPR in EU and Britain and North America. And we expect that will continue to happen. However, at Reach, we actually welcome this development, a move away from third-party cookies. You're obviously seeing Google extract away from Chrome the cookie facility and are using more general anonymous collection of data. That's an opportunity for us because we only collect express consent from our readers. So unless you actually sign up for a newsletter and unless you actually sign up for Reach for your data to be used, then we can use that. That is actually where we would like the industry to go because it allows us a position to actually go to advertisers and says, we're not relying on anonymous data. We're not relying on cookie data. We're relying on express reader consent. So we are welcoming the development of Google and Apple and Meta's move from explicit to anonymous. We keep an eye on it. We have a big data team who look at it. We've updated the Board at the last Board meeting about the developments in this area, and it's on the Chairman's ask for an ongoing agenda item to look into that. But we see it as an opportunity, Nick.

So I then have one more to squeeze in, sorry. In the last week, if you've discussed with prices with newsprint suppliers, has there been any impact from the Ukraine situation on their energy inputs and therefore a further impact on newsprint costs?

I mean, it's too early to call out that. I mean we are -- we buy in cycles, generally 6-month cycles our newsprint and therefore it's -- there's not in the same way there is for oil, a spot market on newsprint, it's not quite -- this doesn't operate in quite the same way because of the purchasing cycles. But clearly, that all plays into a level of volatility. And we know our newsprint providers do forward purchase energy, and that obviously provides them some hedging protection. But we will work very closely with our newsprint providers to make sure that we get the right balance to make sure that clearly we're working in partnership for the sustainability for both of us. But too early to call out anything specific.

It's Johnathan Barrett from Panmure Gordon. I've got a few questions left after those previous ones. If I could just actually go back to Gareth's question just about investment. You talked about GBP 14 million of investment in 2021. Can you talk to us about how the lumps might get added into '22, '23, '24, just so we understand what the likely pattern could be there? Are we still down the barrel of the same number for the next 2, 3 years in terms of incremental increases? Or should we be thinking that you've now got a sufficiently large editorial base that you've got enough people in your data area, and you've put it up, running to your technology already, and we're actually already at that correct level? That's probably the first question. And if I come back on some smaller questions after.

Okay. Shall I give the overview, and then Jim will sort of step in with some of the other specifics? So in terms of our investment, as you rightly said, GBP 14 million, that's the revenue investment, and then we had a further GBP 6 million worth of capital investment relating to the development of our infrastructure. If you sort of split that up into its sort of piece parts, it was broadly 2/3 into the editorial areas and broadly 1/3 into sort of customer and data and product in terms of that split of that total pie. Looking forward, clearly, we have an active process, we call it Invesco, the investment committee. We meet every month. And the business brings forward new ideas, new thoughts in terms of other editorial areas we could go into, other product developments we could have, new thoughts and ideas around data and data investment. And therefore, could I tell you exactly what we're going to be investing in over the next 3 years right here, right now? No, because the world is going to evolve and change and so will we evolve and change with that. But what we would expect is to continue to invest more into data and analytics, as Jim said, to invest more in our product and our user experience. And as we continue to see the benefits of a bigger digital editorial, that will also be a focus. So I think the themes that you've seen in 2021 will continue. But in terms of how that will precisely split, that will sort of be quite an organic process as we spot opportunities.

Yes. I mean it's difficult to be organic, specific, Johnathan. One of the things I would say, we still invest in our news, in our traditional print base. I mean even last week, there were some significant investments in maintaining our news and Cheltenham ideas. So we still have a very creative organization. But what I would say is that the lion share of it is going to be data insight and analytics capability. And in order to maintain the rates that we have -- and people are urging us and always asking us about M&A, et cetera, and what you're going to do with your cash pile, et cetera, et cetera. This is basically about maintaining our current digital growth rates and making sure that Reach is one of the top percentile of data and analytical capability companies. And we are starting to attract some real talent now. That used to be our view of the company as an old mass media print only. We're now that with significant scale, but we're now actually seeing we've got some quite good customer and sophisticated CRM. So if you're looking where would we invest in the future, it's probably going to be erring on that data analytics and capabilities.

So just on the smaller questions. Are you going to adopt a new registered user target? Or is it just a question of finessing that as you go forward now? Could you talk a little bit about ARPU growth in 2022? Obviously, you're seeing 8% volume growth at the moment. But could you perhaps just sort of contextualize where you think the ARPU growth could get to? And then just one very small follow-up question on the newsprint cost issue. Could you just clarify how much you've already got fixed or hedged for 2022?

Yes. On the registered users, I mean, those who have met Simon and I individually, I said, look, we will get to a cadence of registered users where that will not be the focus of the business. So we'll continue to focus on the $10 million. I think there's more there to come, Johnathan. But I wouldn't focus on that like we have done in the last 3 years. We have proven that there is a demand for readers to register for our content. I think it will increase, but that's not the focus. The focus is now on engagement, time spent on page because essentially, if I have 4 -- if I have 2 loyal users, they're more valuable than 5 other registered users because the longer they stay on the page, the more ads we serve and the right content. So you'll hear from Simon and I know about engagement levels, time spent on page, ARPU rather than the registered user number. I think we'll -- we haven't got as far as we can go, but we've proven that people will register for content.

I mean in terms of ARPU growth, what I described on one of the slides on digital was we are seeing a maturing of the audience profile, and that's understandable because of the huge coverage that we have of the U.K. already. And therefore, really, that sort of fits in with why we're moving to the strategy we are, which is we've got that mass audience, but it's now about regular -- more regular interactions. It's more about more recency, more frequency that Jim has been mentioning through registrations, giving people more of what they want and helping to understand their behaviors. That will drive ARPU because if you think -- in its simplest sense, we've got a huge scale audience in the U.K., which will continue to grow, but it won't grow by double-digit percent, the audience. So really what we're talking about is actually each of those individuals, those users becoming more and more valuable to us. And that's exactly what we've seen in the course of 2021 when we move to sort of north of GBP 350 million in terms of our ARPU. And we've seen that big, big step up because of that increased frequency and the increased yield per person. In terms of newsprint, the majority of our half 1 volumes are effectively locked with suppliers. We've got ongoing relationships with a good number of suppliers across North America, Europe and within the U.K. We have regular discussions with them about not just sort of what's happening in the near term in terms of supply, but our long-term relationship, and we continue to be confident that we can manage those relationships with those suppliers.

Can you just give us more understanding of Plus, Simon, in particular, relative to the returns a direct ad campaign will give the buyer, demonstrate it may be? And how easy is it going forward to convert up to the 8x? And how are you pricing it?

Okay. Well, there's probably a few layers to that. I mean -- so we'll take it a piece at a time. I mean in terms of the returns on Plus, I mean, it depends whether you're looking from the company's perspective or from the advertisers' perspective. Yes. So from the company's perspective, we said it's a more -- it's a far greater yield for us. Clearly that has to be driven because we're adding more value to an advertiser. I mean that's why it commands a higher price in the market. And so what we've shared before is click-through rates, I mean, which is still a very important factor. And we've shared, for example, that across a number of different sectors, we've seen 30%, 40% increases in click-through rates. In fact in some campaigns, we've talked about more than 100% increases in click-through rates, which clearly is a big benefit for advertisers. I mean we expect Plus to continue to develop. I mean it would be wrong to suggest that we are there now. That is a set of products, as Jim mentioned, we only launched sort of 9, 10 months ago. It's definitely not matured. We are still having lots of conversations and bringing in new parties into the Plus family, if you like. And so we expect more and more over time that that will gather further momentum.

I mean Plus stretches as an umbrella for what a particular advertiser wants. So if you are in a highly competitive environment, for instance, Cheltenham, then a single-digit conversion click through against your competitor is significantly high. If you are in a client who is looking for data capture, for example, a state agent, then the click-throughs can be double digits, could be 15%, 25%, like we showed you last year. So 2% for a bookmaker against 10% for click-throughs for a bet to capture data. And it depends where you want to go or if you're a national food retailer that have stock or offers that you want to restrict only to the Northwest or the central belt of Scotland, and we use a Plus postcode data. So it's difficult to compare what every client wants because they all want different things. Another thing, to be fair, we gave the averages number there, your own numerical averages, behind averages there are peaks and troughs is what we're finding. But none of our competitors, and again, when I say competitors, I'm not talking about traditionally, I'm talking about anyone who's dealing with customer data for mass market has the Plus products that we have. We need to make the best of it quickly before advertisers and agencies demand the sort of service from their media owners.

I mean the market dynamics helped to set the pricing. So clearly, there is a larger market around digital advertising, and we have to prove based on some of the elements that Jim has just mentioned, like click-through rates and so on that have to prove the effectiveness of the advertising, which helps to set the price.

Yes. But [ Richard ], there's a different pricing model for each client. So if you're an acquisition client, if you're trying to get new betters or it's a CPA, if it's a retail client, it's CTR, click-through rates, okay, if it's an online media or entertainment, then it's really about cost per thousand what you can get. So depending upon the client, if I'm a bookmaker, I want to acquire a client as cheaply as possible, CPA. If I'm a food retail selling stock, then I want more people clicking through, I'm CTR. And then if I'm media, someone else's cost per thousand against the market. So it depends on the client vertical.

We'll try to take some questions over the phone line there, so let the operators know or #2 to ask a question.

[Operator Instructions]

Okay. Thank you very much for your interest. Okay. Thanks for your interest. Cheers.

Thank you very much.