Reach plc (RCH) Earnings Call Transcript & Summary

Hello, everyone, and thank you for making it here today. It's good to see you face to face again, and welcome to those joining us on the webcast. We're looking forward to taking you through the Reach plc 2023 Full Year Results Presentation. I'm joined by our CFO, Darren Fisher, who will guide you through the financials and then I will give you a strategic update and take you through the progress we have made in 2023. I will assume that you've already read our disclaimer. 2023 was a big year for Reach. Our financial performance has been very resilient in an uncertain macroeconomic environment. And while we have not been immune to the slowdown, this has been affecting publishers across the sectors. We can see that the benefits of our focus on our Customer Value Strategy, cost management and our renovation have been beneficial. So while our digital business has, as expected, been impacted by the page view decline seen across the wider market, the higher quality revenues delivered through our customer value strategy have helped underpin our digital revenue performance. We have traded our digital assets hard, with the average revenue per 1,000 pages up over 10%. But within this, there are 2 very important trends. When we look at open market revenues, which are under strain, versus data-led revenues, which were resilient, this is important and more on this later. Print has continued to perform well, driven by strong circulation, which in itself emphasizes our insight and knowledge when it comes to price elasticity. We, of course, have to be careful to consider price increases with the needs of a loyal readership, but I believe we have demonstrated in the last few years that we are prudent and considerate when managing this issue. We have continued to carefully manage costs, ensuring that our operating costs reflect our position as a leading digital publisher and mitigate against the backdrop of declining print volumes. This means that we have the capital to continue to deliver returns for our shareholders, but also meet our ongoing financial obligations. This year we have reached important milestones in this which reinforce our confidence in the balance sheet. The resolution of these uncertainties, historical legal issues, which you will know as HLI, and the MGN pension scheme, has been a long term project. Both have been significant obstacles to our business and both financially and reputationally, there is no hiding from the impact it has had on the morale within the organization. When we reported on our interim results 7 months ago, our HLI liabilities were still unknown and therefore classed as a contingent liability. We could not quantify how big the number could be, and we were unsure as to how many more claimants might come forward. Now, following December's High Court judgment on time limitation, this is no longer the case. Of course, appeals will be made, but the time limitation means that barring very few exceptional circumstances, no further claims can be made. We have a much clearer view on what this will cost the business to settle and we believe it to be around GBP 18 million, which is significantly lower than previously estimated. We expect to have settled all claims by 2025, offering a clear point for the business in financial terms, where we can finally draw a line under this and move forward. While I don't underestimate the long term impact on the business' reputation, we have sincerely apologized. And while the issues are in the past, they still serve as a reminder that if our journalism is to have an impact, it has to be above rebuke. Our pension issue, our discussions with the MGN Pension Trustees, which is our largest scheme, have been ongoing since 2019 and we have now reached agreement on both the 2019 and 2022 triennial review. When I last presented, we simply did not know exactly what we might need to pay to fund this deficit. But today, we are clear on the site of payments. And whilst, valuations can move, we have agreed a pathway to a fully funded scheme which unwinds in 2028. And at that point, reduces our commitments by circa GBP 40 million per annum. The resolution of these 2 issues puts us in a much stronger position with more certainty and this is integral to the confidence we have in the financial stability of the business. With these out of the way, our thinking and actions can now fully focus on the continued delivery of the Customer Value Strategy and the year ahead. We are confident that our strategy is the right one, so we will continue to drive data-driven revenues as part of the customer value work supported by a robust print business. As announced last November, we have already committed to reducing operating costs by 5% to 6% and started the restructure at the end of 2023, so that we can continue to position the business as a leading digital publisher and sustain a strong operating margin. I'll now pass you over to Darren for the financials.

Thank you, Jim. Good morning, and thank you all for joining us. Jim has set out very clearly the context in which our business operated in 2023. It has indeed been a big year for Reach. However, we have delivered our committed financial results, resolved some longstanding uncertainties and reset the business for 2024. I'm going to take you through the financial results for 2023 and then share my thoughts on 2024. In summary, I'm very pleased with the results we're presenting to you today. We have proven resilient in a tough trading environment. I will cover many of the performance metrics on this slide, throughout the presentation. However, there are a few that I'd like to highlight from this slide. Firstly, the percentage of our digital revenue that is data-driven has increased to 43% in 2023, up from 38% in 2022. This is where we use data to drive more value for both our partners and our audience. We've made our cost commitment to reduce costs by 5% to 6% as we drive a more efficient business. Cash generation was robust, with 95% of our profits converting to cash, underpinned by strong working capital. Before I present the financial results, though, let me remind everyone that we currently report our print business on a 4-4-5 fiscal calendar basis. Please note, the 2023 results are based on a 53 week period, while the comparative 2022 period was 52 weeks. There is a like-for-like analysis in the appendix. Going forward, we will be reporting the business on a calendar basis. Okay. To summarize the 2023 results. From a revenue perspective, the overall decline in the period was GBP 33 million or 5.4%. 2/3 of this movement was driven by sector wide pressures in digital. The balance is mainly due to lower print advertising, which typically trends with print circulation volume. Our adjusted operating profit of GBP 96.5 million, down 9%, was slightly above consensus, while operating profit margin remained strong at 17%. Earnings per share came in at 21.8p, and the full year dividend has been maintained at 7.34p, which reconfirms the Board's continued confidence in the resilience in our business model and the importance of the dividend to our investors. Critically, we have completed a GBP 605 million capital reduction, converting the entirety of the share premium into distributable reserves. As many of you will know, this provides long term support for the dividend. Adjusted operating cash flow for the period was GBP 92 million, in line with the prior year. We ended the period with a GBP 10 million net debt balance, which is after payments to our pension schemes, HLI payments, the payment of last year's dividends and the last remaining payment for the Express & Star acquisition. Now to revenue. In terms of headlines, we delivered GBP 569 million of revenue, 22% of which was digital. Digital declined 15%, the single biggest factor being the loss of page view traffic from the platforms. The print business has performed really well. Circulation revenue rose 1.6% and while volumes dropped 17%, print advertising only came down 11.9%, which is a solid performance. Now let's look at print in more detail. Print revenue, comprising circulation, print advertising and other print revenues, accounts for the majority of the group's profit and cash generation. Circulation is now around 70% of total print revenues and grew by GBP 5 million. This has, clearly, benefited from cover price increases, which over the past year have been greater than any they've been in recent years. In spite of that, with our production expertise, the use of data to determine price increases and levels of availability, and the habitual nature of newspaper consumption, we continue to sell 750,000 copies a day. Print advertising revenue was robust, outperforming circulation volume decline due to resilience in regional and larger campaign advertising. You can see how loyal our customer base, demographic profile and reach remain attractive to advertisers. Elsewhere within print business, third party printing revenues were slightly lower, reflecting the reduction in demand for print. Now turning to digital. It's important to think about digital revenue in 2 component parts, the 2 very different characteristics. The strategic revenues or data-driven versus other revenues. The strategic revenues are at the heart of how we choose to operate our business and form our Customer Value Strategy. The graph on this slide bridges the digital revenue performance. The data-driven revenues, which are the turquoise blue, have proven far more resilient, declining only 4%, being partly affected by the tough trading environment and the macroeconomic headwinds. As we continue to differentiate the value of our ad supply through access to data and further growth sales from other areas such as affiliates, partnerships and ecommerce, we are bringing more of our digital revenue under our control. These revenues are more resilient to external headwinds and create a sustainable basis for longer term growth. Other revenues, which include our audience variable elements, include open market programmatic advertising, which declined 22%. This segment is vulnerable to both volume and the macroeconomic environment, which both adversely impacted performance. Major platforms have deprioritized news, which has impacted volume. And using open market yield as a proxy for advertising demand in general, it is clear that we are still seeing the effect of weak macro conditions on advertising budgets. The difference between these 2 growth rates really demonstrates the value that our Customer Value Strategy creates. This slide highlights the opportunity our CVS strategy presents. Over the last 3 years, we have grown our data driven CVS revenues from just 25% of our business in 2021 to 43% in 2023. This is built on our well recognized and established brands. We know, we're experiencing a challenging ad market. Referral volumes are down 24% across the sector and there is currently a lower demand for news, with the average time spent reading news across the U.K. down 4%. Advertising has declined, driving down open market yield. Consequently, programmatic RPMs, that's revenue per 1,000 pages, is down 35% year-on-year. Conversely, our data driven strategic RPM is up 23% year-on-year. That is a stark contrast, which has been achieved by using data to add value, securing our audience and diversifying our revenues. We are driving yield to protect against volume decline by trading our digital assets harder. Jim will talk about that in his section. I'll now turn to look at the movements in our operating costs. In terms of cost, we took decisive and difficult action last year. But as you can see, that has enabled a reduction in operating cost to GBP 475 million, that's down 5.7% on a like-for-like basis on 2022. And absolutely in line with the 5% to 6% commitment we've made at the start of last year. Labor costs reduced 5%, reflecting the cost reduction and restructuring programs we have delivered, with headcount reducing 14% year-on-year. Newsprint costs reduced 21%. This is due to reducing volumes and inflation, which moderated through the year. As a reminder, newsprint cost inflation was just under GBP 40 million in 2022. We are continually looking for ways to hedge and reduce these costs. I've already covered the revenue movements on this slide, so the first thing to note is we continue to invest in our digital proposition, expanding our footprint in the U.S., reaching new audiences through our youth brand, Curiously, and continuing to invest in products such as Mantis and our curated marketplace. We have delivered GBP 30 million of efficiency savings, half of which is attributable to labor savings, and we've made good progress reducing the number of third-party contracts, limiting discretionary spend and continuing to rationalize our property portfolio. The focus continues to be on profitability and cash. This slide illustrates the cash generated from operations and where it has been allocated. From a cash perspective, we've seen an overall outflow of GBP 35 million over the period. Stepping to the chart, adjusted cash from operations was GBP 113 million We made pension payments of GBP 60 million last year. We have achieved a significant milestone by reaching agreement with trustees for both the 2019 and 2020 valuations for the MGN pension scheme. We've also agreed in principle for all the remaining schemes, which will be formally in place by the end of the month. This is a big step forward for the business as it means we have visibility of our future pension commitments as well as avoiding costs of any regulatory intervention. The majority of these pension commitments stepped down in 2028. We paid GBP 5 million on historical legal issues. The recent court's judgment on time limitation has led to a material reduction in the cost of settling claims and should largely bring to an end future claims. This meant we are able to materially reduce our HLI provision by GBP 20 million. Our best estimate today is that HLI will cost the group a further GBP 18 million in cash, and we expect claims to be resolved during 2024 and 2025. This is a much shorter time frame than previously anticipated. Resolution of both these matters gives us a clear line of sight of our cash obligations going forward. We can see that the free cash flow profile for the group will improve markedly in 2028 as the pension scheme contributions are due to reduce. Restructuring charges of GBP 19 million relate to the cost reduction measures we have taken in 2023. CapEx of GBP 15 million is in line with our normal level of spend and we made the final GBP 7 million payment in respect of the Express & Star acquisition. The other GBP 19 million of payments relate to GBP 5 million net lease payments, GBP 7 million professional and legal fees and GBP 3 million in interest. We closed the year with a cash balance of GBP 19.9 million and net debt of GBP 10.1 million. The revolving credit facility was drawn at GBP 30 million at the year-end. As a reminder, the RCF facility is GBP 120 million and is in place until November 2026. Cash generation overall in 2023 was robust, with 95% of our profits converting to cash, underpinned by strong working capital. The calculation for the profit to cash measure is included in the appendix. In regards to capital allocation, this slide should be familiar to you all. Our performance last year and our Customer Value Strategy, gives us the confidence to invest in our digital proposition, including into new markets and developing our Mantis ad tech. As I've already mentioned, we have pension funding obligations, which are around GBP 60 million a year in the near term. We continue to recognize the importance of dividends for shareholders. And it seemed appropriate to include M&A in the framework, having just made the final payment for the Express & Star acquisition. Before handing back to Jim, let's look at the year ahead. In print, we will continue to carefully manage cover price increases and availability. We expect a similar trend in circulation volumes and print advertising revenues. This will continue to underpin cash generation and profitability of the group, which means we can continue to invest in new products and new markets. In digital, Q1 faces strong comparatives, having been adversely impacted by the well-documented impact on page views. This was increasingly evident from Q2 last year. However, we expect positive momentum in digital revenue thereafter. As communicated at the end of last year, we've already actioned a further cost reduction program, which I'm confident will reduce 2024 operating costs by 5% to 6%. From a cash perspective, I expect operating working capital to be broadly neutral. I've already mentioned that I expect there to be an acceleration in resolution of historical legal claims, and the recent restructuring program is expected to cost in the region of GBP 13 million in severance payments. Capital expenditure and pension contributions will broadly be in line with 2023, and we have started a program of property disposals which is expected to generate around GBP 10 million in sale proceeds. We remain confident in the group's outlook for 2024. Thank you very much for listening. I'll pass you back to Jim for the strategic update before we go into your questions. Thank you.

Right. Thank you, Darren. I mentioned these uncertainties at the beginning, but I really want to emphasize the importance of bringing clarity to their outcome and how pivotal it is for the future planning, operations and financing of this business for shareholders and employees. I joined back in August 2019 and both HLI and pensions in that time have required over GBP 300 million of capital. And it's absolutely the right thing to honor these financial obligations, but today for the first time, we have resulted -- we have a results presentation where we can give shareholders a clear sight of our future obligations. On HLI, the relatively recent judgment is a big step forward for our business. The time limitation not only reduces claims in progress, it prevents future claims, bar a few exceptional circumstances. It's the end of this uncertainty which allows the business to move forward and move forward more quickly. On pensions, we have been unable to agree on a 2019 scheme with the MGN Pension Trustees, which should have been completed actually back in March 2021, over 3 years ago. This is our largest scheme by some way and so it's a huge step forward to reach an agreement on achieving fully funded position, agreeing both the 2019 and the 2022 triennial review. Of course, this agreement has not come cost free. Based on the current agreements in place, we have another GBP 275 million to pay, subject to future valuations. But what they did do is allowed me and the Board to plan for the business with certainty, and particularly around capital allocation decisions with regard to all of our stakeholders, especially our shareholders. The resolution of these issues not only took up a lot of energy from the management team, but also meant that a lot of the group's capital was tied up in dealing with them. Thankfully, our actions in the year mean that our historical legal issues should unwind by 2025. And the pension commitment should, in the majority, unwind by 2028. By that time, and based on this year's outflows, that would add about GBP 45 million more free cash flow. Now, to move from the past into the opportunities for our future. The data remains at the heart of our performance and the resilience we have been able to demonstrate in these results. We have successfully managed the structural decline of the print business using data, and more on that shortly, protecting the cash generative nature of the printed product and using it to invest in our digital products, which we all know is a long-term revenue stream for this business. Since 2019, we have built a sizable digital asset and built out substantial direct audiences. The drop in referral traffic has reiterated the importance of these direct audiences. And we can see their value in these results as they have made us more resilient. But they also make us more robust for any future market shocks. This places us in a good position for the cookieless world that we've already seen developing this year, where advertisers will look for alternatives and want to partner with media businesses who can offer a direct contact with a bespoke audience. We know that our 49 million active unique profiles are more valuable today than they were this time last year, but we can't stand still. We are constantly looking to build our audience and broaden our demographic appeal. This won't surprise you and nor will the fact that, as we can see how our digital business is increasingly benefiting from areas that are less volume dependent, we will continue to diversify our revenues and focus on connecting directly with our audience to drive up advertising yields. But before I look at the opportunity offered in digital, I would like to take a few minutes to discuss the current cash engine that is our printed product. As I've said before, the print product has allowed us to invest for the digital future, while we effectively manage its structural decline. But I want to be clear that we want to maintain this considerable revenue stream and profit generator for as long as possible. There will be no surprise that we are using to help -- using data to help us do that. We habitual nature of newspaper consumption allied to our data and expertise in these areas such as distribution, production and procurement, price elasticity and promotional activity. And gives us the confidence in its resilience and capability to generate significant cash flows going forward. A large part of the opportunity that we see lies in the fact that we have enormous digital scale. Just to remind you, we are the U.K. and Ireland's largest commercial news publisher. We're the U.K.'s sixth largest digital asset by audience and customer base. And it means we're plugged into over 70% of the U.K.'s online population with 1/3 of them registered with one of our digital products. We now have over 12 million registered customers, of which 4 million are 28-day active users and we have built 3 million app users. As we highlighted earlier, our focus on direct customer relationships and more diversified revenues is supporting higher quality digital earnings. This gives us more control and makes us more adaptable to change and offers us a proven model to build a more valuable audience. With our brands already reaching a large majority of the U.K. digital audience, encouraging existing customers to consume more represents our biggest opportunity to grow. Increasing engagement has, therefore, always been central to our strategy. We continually explore new ways to build stronger relationships in addition to growing new ones. Being a regular part of our customers' lives means that the interactions and insights that they generate are more recent, more relevant and more valuable to our advertisers. And our focus remains on acquiring quality, engage customers that keep coming back to our brands. Then, as we learn more about them, we can improve their experience as well as work with advertisers to target the most relevant advertising for them. We're also broadening the touch points we have, providing more ways to customers to access of content. Our newsletter portfolio continues to go from strength to strength with over 1.2 million customers now opening some of 600 titles every single day. As well as contacting our registered audience via e-mail, we've also begun building relationship via WhatsApp. WhatsApp is growing extremely fast with 1.5 million customers receiving our content via this medium. And as a working example of its popularity, we now have the biggest Arsenal WhatsApp channel in the world with over 600,000 users, having only launched in October. It's an exciting growth opportunity, which, in addition to the development of direct web push, gives us more ways to interact. The generational change in how our readers engage with our content has been profound. Whereas, I would read the daily record from back to front page, our under 35s engage in a more content-focused basis. And they're led by their specific interests. Our web push and WhatsApp communities cater for this new demand. We continue to develop our use of recommender tools to encourage greater dwell team. We're using machine learning tools to make personalized article suggestions based on reader historical data. These recommenders are now driving over 10% of our total page views by recirculating the users on our sites. And this slide demonstrates why it's so important for us. This slide shows our mix of digital revenues over the last 3 years with a consistently growing percentage generated by data-driven, higher-value, better-performing advertising. During 2023, we traded our digital assets really hard, growing RPM, that's the revenue per 1,000 pages by 11%, but this hides to opposing dynamics. In the chart, we show a breakdown of our revenue per 1,000 pages and split our digital revenues into key components. The dark blue block is our audience variable revenues. The majority is programmatic advertising. In other words, mass scale advertising where the market determines the price. This form of advertising is a very good barometer for the health of the advertising market in general. And as you can see, RPMs for this segment declined roughly 35% over the period in the chart and therefore has become less relevant. Whereas the yellow block represents our customer value strategy and the creation of higher-quality, data-driven revenue streams. As you can see, this block has grown impressively over this period and has become increasingly relevant with RPMs up 23%. This data playbook, where we take data and improve the advertising can be applied across all of our non-advertising revenues and our advertising technology. Here, we effectively licensed our data in the market and offer contextual advertising to third parties. The growing small light gray bar, that's to be skinny one at the top there -- the growing small light gray bar, represents our nascent e-comm and affiliate business, an area we are focused on developing. I'm sometimes asked about subscription models. And we're continuing to trial this across more of our publications as well as continue to provide free options. This is useful on an experimental basis, albeit the revenue remains small. But we still have a commitment to news that should be free to those communities that need it. This graph shows that the advertising market is tough. But the good news is that, our digital assets is made up of higher-quality revenues, which we know to be more resilient to future shocks in the market like those we experienced in 2023. Now, this is such an important point and I wanted to share it with you. The trends looking even further back to when we initiated our customer value strategy. You can clearly see the diversion between what we refer to internally as audience variable, roughly open market, and non-audience variable or our customer value strategy and these revenues and the resilience that it offers. Since 2020, our non-audience variable revenue share of RPM has increased from 47% to 75%. Now, our advertisers benefit from both our digital and print platforms. And one of the big direct advertising successes of this year is food retail. As you would expect our massive mainstream audience reached appeals to this sector. And we have worked really hard with nearly all of the major food retailers. In 2023, revenue from this category grew. And you don't hear that these days that often, but grew by 23%. Unsurprisingly, within that, digital revenues more than doubled. Advertising is increasingly going digital, even in the more traditional markets such as food. This is why our work growing direct audiences and developing our targeting capabilities with our Mantis ad tech is really so important. The development of ecommerce and affiliates is supporting the performance of data-driven revenues. And we're excited by these growing opportunities in data partnerships and customer revenues. Although, coming from a relatively low base, our affiliates business is also expanding at pace. The introduction of a clever piece of auto linking tech is allowing more of our journalists to write affiliate content, and we're expanding this team. We have done some great work with some high profile partners including Marks & Spencer's, Boots, Oodie, New Look and DAZN. Our customer value, the content with high click-through rates driving around 200,000 sales. And over the recent Amazon Prime Day, we increased affiliate revenue by 90%. Our OK! Beauty Box subscription business has grown significantly with over 11,000 active subscribers and a database of 80,000 with a really small below market average churn rate. So as well as using data to grow engagement and differentiate our ad supply, we'll continue to focus on revenues that are less dependent on direct customer volumes. These developments in ecommerce, partnerships and affiliates are areas that we will continue to look at and to grow. Our commitment to positioning the business for a successful digital future means that we're always looking for new avenues to build audience and engagement as well as new ways to do so more effectively. For example, we'll be taking our focus on superfans and communities to a step further by really catering to the topics that people love. We can see the promise in this area with the WhatsApp Arsenal group I mentioned earlier, or for example, with a Strictly Come Dancing newsletter. The success of Beauty Box has encouraged us to look at other ways to build out our marketplace capabilities and make more of this potential, and I hope to update you more on this at the half year. Our results last year, we talked about our plans for the U.S., and we now have U.S. based journalists writing U.S. content for U.S. customers, with a sizable editorial team now up and running in our New York office with 3 U.S. publications now offering live content to a massive and largely untapped audience. As we develop our audiences, we know that the real value is being able to offer advertisers an engaged audience interested in their product, which is why Mantis continues to offer opportunities for us and other publishers as a tool for hire. As we move forward, we continue to optimize our ways of working and these days AI has to be part of that discussion. AI is an undeniably complex area with both opportunities and risks and we remain clear about what we want from this emerging technology. For us, generative AI is about helping journalists in their everyday jobs and allowing them to focus on parts of the job where they add most value to our readers. Video is a key development area and a big growth opportunity for us, and we have pulled our resources across the business into a core video studio. This will allow us to increase our content offering. We have organized the business' digital first across all of our editorial teams. And this means that every piece of content that we create has to add value to the digital audience. This would include shorter stories focusing on the under 35s, with popular areas including sport and personal finance. Now when we undertook a restructure at the end of last year as part of our need to reduce costs, we had to ensure that the changes helped us to cement our position as a leading digital publisher. As we report here today, I can say with confidence that we have made a meaningful shift in this direction with the structures in place to support a digital first approach to building audience and engagement. And with these achievements to our credit in 2023, I'm excited by the opportunity to invest further in these areas in 2024. To do that, we need to do what we're best at, which is making sure our great brands deliver brilliant journalism designed to be read by as many people as possible. Now, I can't get into all the details today, because there's just too much of it, but here's just a few examples. For 16 months, the Liverpool Echo, Political Editor Liam Thorp pursued an investigation, which ultimately revealed that a staggering 14 local politicians had more than 50 parking notices canceled via backdoor channels. Meanwhile, The Sunday Mail in Scotland exclusive on SNP's membership and finances triggered an extensive investigation into the party that has held power in Scotland for 17 years. And both The Mirror and The Express have seen their campaigning journalism make an impact with Express' successful campaign to protect the pension triple lock, and The Mirror's campaign for free school meals and prep for primary school children something we have now seen becoming a reality in London. 2024 will be a major year for our journalism with elections around the world and both the Paris Olympics and the European Championships, as well as the usual packed entertainment calendar that will get people talking. So there is plenty of debate and news to cover between the U.K. and the U.S. elections. And obviously, this year, strong home representation in the European championships. As a Scot, I'll say, come on, Scotland. But England are really good for business. So come on, England too. And I do really think you can win it. There you go. It's in writing. In conclusion, our results tell a story of a market that is challenging, but also of a strategy that has demonstrated its value. So you will not be surprised to know that this year and the years ahead, it remains unchanged. The customer value strategy and the focus on direct customer appeal with the resilience and value those customers gives, leaves us well placed for an advertising market as it loses its reliance on third-party cookies. This helps underpin Darren's comments that we expect momentum to return to our digital business and for better than increased mix of data driven revenues. And just as our Customer Value Strategy is unchanged, so is our belief in managing our cost base. And with the changes made in Q4, we entered this year confident in our ability to deliver efficiencies that underpin the outlook for the full financial year. And as we look further ahead, the resolution of the HLI and the pension issues mean that we now have certainty in our financial planning and our ability to generate free cash flow for the business and to cover our obligations to all stakeholders. We'll now take your questions, starting with the room and then the operator will go onto questions on call. Thank you very much.

It's Nick Dempsey from Barclays. So I've got 3. So first of all, I understand that maybe on a relative basis compared to some other publishers, your collection of data positions you quite well for the phasing out of third-party cookies on Chrome. But when I look at your programmatic advertising, could you not see an incremental negative effect of that? I think we're talking about them being phased out by Q3 of this year. So could that be a headwind in digital that we need to watch out for in the second half? Second question, is there a risk that as inflation starts to gradually reduce, it will become much harder to offset volume declines with price increases in print circulation. So should we watch for that line getting worse over the next couple of years? And third question, when I look at digital articles on many of Reach's sites, on a mobile, there's a lot of ad cluttering, I think it's fair to say. It can honestly be quite hard to read down to the bottom of the article sometimes. How do you think about the balancing act between ad revenues coming in and the usability of the product on mobile, especially?

Thanks, Nick. Yes, good questions actually. So on the first one, I'll probably agree to disagree with you on relative. I think relative is probably underplays our success. I don't know that many U.K. publishers who have got 4 million, 5 million active monthly readers who are coming in and it's free. You don't have to pay the 12 million registrations. We can now go to head with subscriber models. On programmatic, yes, I tend to agree with you, actually. The programmatic market is getting tougher. Bear in mind, all programmatic is not actually data free, because we've still got cookie and behavioral data. But I actually agree with you that programmatic is under strain. Now that will come back, but I am not the chancellor, and I'm not economist. I can't tell you when, but it will come back. But what we're seeing is, because we have nearly the lion's share of data-led revenue, then that makes up for that decline in programmatic. And what you have to remember practically is that our commercial teams are out there competing with other media owners. And what they have in their back pocket is basically quite deep data on customers. So we don't have to be the best. We only have to be better than our competitors, which is why I think we stand out. On inflation, I agree with you on this point as well. It puts more strain, particularly on our traditional print purchasers. But I am encouraged. And the reason why I'm encouraged is the biggest test of the loyalty and resilience of our print customer base was COVID. So the average age, roughly -- I'll probably get this wrong, but we'll check it from the notes, its roughly about 60. And during COVID, I don't know if anyone's remembered, even us relatively young people, might have thought that our mortality is staring us in the face. Even during that time, with a resilient and loyal population of 60 somethings, they found a way to buy our newspapers. So they are very, very resilient. However, it doesn't mean we take them for granted. Digital articles, we've increased it. I completely agree with you on this one, Nick. Some of our pages have got heavy ad loads. The reason why we do that is because, obviously, we're free. We have a lot of people coming in to see our content. Luckily, our content is so good that they will go through the ads to read about Arsenal's victory last night. I wish I could half it. At some point, we will. Maybe in '25 and '28, we can take those ad blocks down, but we need to, obviously, fund their obligations. And at the moment, we are still finding people willing to sign up. But I take your point that's something we do need to keep an eye on.

Gareth Davies from Numis. 3 from me as well. The first one, just going back to those programmatic yields, taking a slightly more positive view that -- I mean, Slide 24 is a really useful chart. If you strip out the benefit of Christmas, it kind of looks as sort of as we've gone February into March, you're at least sequentially stabilizing to where we were sort of Q3 into early December. I mean, is that fair, or am I misinterpreting the dark blue lines at the bottom? So we are at least seeing some stabilization in those yields at the moment?

Yes. I think stabilization has worked, I mean. And to be honest there, it's clearly down year-on-year, Gareth, but there is a stabilization there. We use the programmatic yield as literally a temperature check for the wider economy. So it gives you some good insight and some data. And if we could, if that stabilizes at that model where it is, that would probably be a positive for us.

And then in the presentation you mentioned sort of hedging on a newsprint side. Can you just remind us where we are in terms of forward visibility there at this point? What negotiations are ongoing and how much certainty you've got as we look into the next 12 months?

Yes. So we've contracted all of our Q1 volume, and we're looking at the moment as to what we do for the rest of the year. From a pricing perspective, we saw it come down a little bit in Q1 versus Q4, but I think it's probably flattening out. So we're just going to look at our options around whether we hedge further forward or not as we go through the Q2 negotiations, just to try and make sure that we are taking advantage of the pricing we have at the moment.

And final one was, I think I picked up correctly that you signed a deal with Amazon early this year. Sort of stamped credibility in terms of their belief in your data and knowledge of your audience. Just if you can expand a little bit on what you've signed there?

Well, I'll give you the story that our [ lead ] and [ Piers' ] commercial team says. If you are going to Glastonbury, I don't know if you go there, Gareth. But if you're going to Glastonbury, and you're reading about who the acts are going to be, and we have a large local content output there as well as national. It is likely that you will get an ad for camping gear, head torches, water bottles. That's that deal coming to light. So we share our data on content. We share our data on individuals, and Amazon then tie in their data, and you will get probably -- will probably try to sell you a tent. So that's how the Amazon deal works. I'm really proud of that one actually.

So if you get paid on a lead generation basis or perhaps you're getting paid explicitly for the data?

That's the data. Yes. And that's the key. The lead generation is great. But lead generation is hard work. Data is the core strategic value. We hope to do more of them, and we're very proud Amazon have chosen us as a partner.

It's Fiona Orford-Williams from Edison. You talked on one of the earlier slides about the need to broaden the demographics, but yet you're talking about your audience reach in the U.K. as being -- I think, it was -- 72% was the figure you gave. So can you talk about how those 2 conflict and resolve?

Yes. It's a really good question actually. Because the -- we have on our paper titles, obviously, an average age of about, say, late 50s. And even online, it's an over 35 demographic. But we do reach under 35s, but the level of engagement and the dwell time is lower. So if you want, I'll just show you it. I'm not an Arsenal fan, and I know there are some sports fans in the audience, but I'll use it from last night. So Arsenal's victory last night, because of the quality of our writing, will come up in search. So you will find a quite a younger demographic reading the article about Arsenal. But they don't see it as a destination, and that's what we need to change. So we get access to those individuals just through our content, through distribution, but actually they're over -- I'm 53, I will go directly to these brands. And -- but we're trying to encourage people to make it front of mind, so they go there directly, which essentially means it's a less cost to serve. So that's what I mean by it.

And can you give us a bit more of an update on where you are in the U.S., please?

Yes. We have a 100 full-time journalists now, majority of whom, I believe, are in New York -- half-and-half in New York. And the important thing is we've got Americans writing for American content. So they like soccer, and we like football. That's really important. You can tell -- if you read American content, you can realize -- you can tell right away if it's been written by an English, a Brit, or American. So we've got people out there. The office is a significant office, a significant presence, and it's performing against plans. So we're really proud of the team out there.

And can you tell us more about the potential for growing the affiliate in ecommerce revenues? And is the Amazon a model for going forward?

It's not. Amazon is not a model for it, but we obviously -- the Amazon deal that we spoke about is not a model for it. But Amazon Prime is really, really important. Affiliates is essentially an output of input, so it's a numbers game. So -- and then what we add to where we think we've got a competitive advantage is, we've got such good writers that if you can bring someone in on an article or a piece of content where they are completely emerged, you find that the propensity to then click on a link for that gardening tool or for that bike becomes even better. So if we can get, more good writers and more volume, then we know we'll get the output. I mean, it's a really small margin game affiliates, but we have -- we are accessing over 70% of the U.K. audience. That's why we're pretty confident about it.

Let's sneak in another one. On the Mantis, are you actively now marketing that to other people, and have you got deals -- licensing deals in place?

Yes. I've got a few. I mean, Mantis is B2B, this is -- so we're really excited about this. It's not B2C, which we traditionally are, but the commercial team under Piers as commercial director is out there selling to other publishers, other ad tech platforms, Amazons, other data led organizations. So that's a whole other B2B line.

Its Johnathan Barrett from Panmure. Just want to go back to Amazon, if I can, for a moment. In terms of protecting the data and stopping Amazon running off of it and then not coming back and paying any more money, how does that work practically? Can you just walk us through that, please?

Yes. We have very, very strict rules around the uses of data, because it's our readers. So some of that data, they'll be specifically allowed to share, which might be behavioral, might be content types, might be product. Other data, it wouldn't be, where we will take it and we will do the work to apply it to the right content. I don't think there's any fear that Amazon will run away with the data, because they've got far more than us. It's probably likely, although I don't know for sure, but we're all fairly data literate, that we have the same customer base. So I would assume that most people who read The Mirror online, I would say more than 9 out of 10 have bought something on Amazon. So it's really about trying to match them anonymously. So there's no real fear that they'll run away with it. They already have the data. Yes. Just on that as well, is the reason why we work well with the bookmakers because they already have the data as well, but they're just looking at it for different reasons.

And then just, I've got just 2 small questions left really. Just, if you could talk about video and what you're doing there, just give us some idea of how that might move forward and expand new product? And then just on the tech platforms, have you got everything in place now that you want? Are you happy with where you've got it to? You've, obviously, been pushing some investment in there. Is this the point at which you're kind of, like, happy now with that? Or should we expect to be ...

I want to do the second one last.

Innovating.

And I'm not happy. Right? So, I'm never happy. What -- the tech team have done really well to get 12 million registered users with a data lake and 4 million active users and growing by 4% or 3%. But there is much more the business can do and with more capital invested. And it's one of the reasons why we need to agree this HLI and these pensions. Because Darren and I need the certainty to make these decisions about whether or not we're going to put significant money further into data. I mean, it wouldn't be -- it would be bad stewardship if we made these decisions without knowing how much had to go out the door. So that's why the pensions and HLI, although they're really, really dry -- and not everyone will be happy about the amount we paid. I get that, and we're probably going to get an earful this week. But it basically means we have the planning to make those decisions to invest further in tech. So there are still opportunities for us in tech. We're not anywhere near optimum, so we're doing that. On video, what we did in video previously, we had video skills probably peppered throughout the organization around the network. So you'd have someone in the Glasgow office or in the Chronicle Newcastle, which seemed to work, but over a period of time it wasn't really efficient. So we've now pulled it into our own central studio, where it can be managed by one individual who sits on exec and basically can apply where that video content should go. Bear in mind that the yields we get from video content with personalized profile is really high, so we've brought it closer so we can keep an eye on it. I mean, arguably, as my sort of chairman boss says to me, should probably have done this quicker, but it takes time to the learning. So we just brought it into central store. Any more questions in the room? I think we're okay. I think -- one over from Nick. One more from Nick and then we'll go to calls.

Just one about, OpenAI and Google. I've seen some stories about those guys paying news providers, content providers in order to be allowed to crawl their content. Is that something that you can get meaningful money out of in the next couple of years? Or have you had discussions with them about that?

I'm not -- there's no active discussions, Nick. We would prefer that we don't get into a situation what where we did with the referrers 10 years ago and gave them access and we became hooked on this referral traffic. And we would like it to be more structured. We produce content, which is really valuable, and we would like to license or agree how they use our base intelligence to actually inform their AI and their open markets. The challenge we have as an industry is that we need to be unified. I used to be the chairman of the NMA. And if we stay together and work with it, then that's a really strong position that we have, particularly with government to help us get to there. So I'm using this as a bit of a campaign. Only takes one publisher to break away and start doing deals, and then it sort of disintegrates. So it's a really good strategic publishing question. To your point about us, we are not in discussions about with anyone at the moment and of using a platform to inform OpenAI, but it's a very fluid process. Okay, I think we're going to the calls now, if there's anyone on call?

[Operator Instructions] There are no questions. I would like to hand back over to Jim Mullen for closing remarks.

Okay. Thanks everyone for taking the time in our company. I mean, it's been a tough 2023, but we do appreciate the interest. I mean, we're very optimistic about our organization. I think the main thing I'd like to leave you with is that, in a world which is so fluid, you have to be really competitive and we really think that through the use of data that we are probably the most competitive of the publishers who publish our content for free. So thanks for the interest. We don't take it for granted and we'll keep in touch with you. Cheers. Thank you.