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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning everyone and welcome to the Reach plc 2022 Interim Results presentation As usual, I'm joined this morning by our CFO, Simon Fuller; and our Editor-in-Chief, Lloyd Embley. I'm going to get straight into the strategy this morning, before we get to the numbers, Simon will then take you through the financial overview, before Lloyd's editorial update. I'll then talk briefly on sustainability and culture, before wrapping up, so we can take your questions. Our Customer Value Strategy is emphatically delivering and in-line with our plans. Our strategic shift towards a data-led approach, and investment in digital capabilities is bringing us closer every day to our 40 million customers, regularly giving us a fifth biggest digital audience in the U.K. An audience we're continuing to grow, thanks to the dedication, commitment, and creativity of our newsrooms. They have continued to keep our readers entertained, informed and engaged every day, often setting a news agenda, which contributes to real world change. By focusing on data, as you'll see shortly in our numbers, the audience is receiving more relevant content and a better user experience, more often. Our performance also clearly shows, that increased customer engagement is supporting the growth of advertising products, which are both more effective for brands and higher yielding for us. It's clear that today's political and economic backdrop is more uncertain than when we last spoke to the market at our AGM in May, with a significant impact on the consumer, which is clearly visible, when we look at digital growth in the second quarter versus the first. However, what is also clear is that our investment is enhancing the quality of our digital revenues, and that has shown consistent improvement since the launch of our strategy. We're a financially, operationally, and culturally stronger business than we were 3 years ago. To ensure this progress continues, we've taken decisive action to get ahead of changing economic conditions, and remain competitive in the current environment. We will continue with our investment program, which is delivering higher quality digital revenues and strengthening our ability to maximize data led opportunities, when the macro environment improves. The resilience of our print cash flows, and the strength of our balance sheet will continue to provide a reliable underpin, ensuring we can continue to build our digital capabilities, as well as investing in value enhancing assets, when the time and the price is right. It also means that we can support all of our ongoing commitments, to both pension holders and to a growing dividend, which is important to our shareholders. Our transformation and continued investment are yielding significant and measurable change. We are growing the proportion of our digital revenues that are driven by data. To put that another way, we are reducing the proportion of our digital revenues, that are dependent on the open market. We are therefore growing the part of the digital business that we can control, and is higher yielding, compared to the part that is influenced, to a much larger extent, by external market forces. That's important, because although the scale of our business will always require us to sell some of our ad space programmatically in the open market, the more we sell directly, the more value we create. Our PLUS products, a key part of data-driven revenue, currently have a yield around 10 times greater than advertising sold in the open market. Growing PLUS and other more strategically led revenues, is improving our revenue mix and creating a more sustainable and higher returning business for the future. We're not only continuing to grow the number of registered customers, but critically, are also driving an increase in the number who interact with us on a regular basis. With around 5 million of those registered, active in the past 4 weeks, a clear demonstration of growing engagement. Over the past 6 months, we've consistently seen page views up by around 8%, which data from Ipsos shows, is well ahead of the rest of our publishing peers. Much of this has been driven by the latest addition to our digital IP in the form of Neptune Recommender, a next action tool, powered by Mantis. which encourages dwell time and customer engagement, and we will have more on this shortly. The shape of Reach continues to evolve, reflected in the breakdown of heads across the business. Teams focused on the likes of data strategy, engineering, customer experience, digital production and data analytics, to name just a few, meaning around 40% of people now wear a digital hat, compared with only 12% at the start of 2019. Our business is delivering on its data and digital evolutionary objectives, and the output is clear. In addition to our portfolio of leading national and regional print titles and their digital counterparts, we have launched 49 digital only brands, that contribute significantly to our overall traffic. As does our portfolio of around 600 newsletters, which in driving 60-million-page views, is playing a key part in developing a closer, more relevant and more frequent relationship with an increasingly loyal audience. Digital data enables that closer relationship, but its print which makes the investment in data possible. The habitual nature of newspaper consumption and our expertise of evolving the production process to ensure editorial integrity at lowest cost, means print remains a reliable business, with multiple years of cash generation to come. We have a long history of actively managing volume decline, through both large-scale transformations and through the process of continuous improvement, as we optimize press utilization, review distribution routes, or source energy more efficiently. All of which enabled us, between 2019 and 2021 to reduce print costs by almost 30%. But there's always more we can do. In response to the significant inflationary pressures currently impacting the business, we've made changes to both supply and print pagination. The chart on the left, showing the average daily print supply for The Mirror, shows a reduction in printed volumes by around 5% to 6% from late March, which as you can see, has had limited impact on sales, with availability continuing to run at around 90%, in line with our target level. Pagination or the average number of pages, is another way in which we're able to manage the print cost base, with an average 4-page reduction now in place versus the earlier part of the year, though with our average book size still in line with where it was in 2019. We've also made additional cover price increases, which are strengthening circulation revenues, something that Simon will return to shortly. We remain fine-tuned to reader feedback on this and continue to monitor volume trends closely. These changes weren't part of our original plans for this year and reflect the more challenging trading conditions now faced by all businesses, and I'd like to thank everyone across the organization who worked so hard to put them in place. The body blow of the pandemic, followed by a flurry of punches from the current economic situation and war in Ukraine, has presented successive impacts to consumer facing businesses But we are a resilient and flexible organization, and our continued ability to drive efficiencies, is helping mitigate headwinds and protect our ability to invest in digital. As you will be aware by now, data is central to our strategy and as the U.K.'s largest commercial news publisher we gather quite a lot of it. Around 3 quarters of our total U.K. audience visit our sites monthly and have consented to data collection. The Reach ID provides the foundation for a profile, with Mantis content level targeting, generating both behavioral and contextual insights, meaning we gather a high volume of quality data on most of our customers, even if they aren't registered. This is improving our ability to sell digital advertising directly, with data driving more effective advertising for brands and the insights which shape our content and drive customer engagement. Engaged customers are more loyal, consume more and are more valuable, particularly if they are registered and therefore contactable. We're now segmenting registered customers according to the frequency and recency of their interactions, which means we can actively manage reengagement campaigns and reduce churn. Our registered audience continues to grow, with a high proportion of them, around 5 million, active within the past 28 days. We're getting to know more, about a growing proportion of our audience, increasing the breadth and depth of our customer profiles. With the phasing out of third-party cookies and growth in performance led advertising, this creates a huge opportunity for Reach, and a clear competitive advantage, particularly within our traditional competitive set. Proof of that, is the growth of PLUS. PLUS revenue in half one was almost as much as the whole of last year. PLUS products are more effective and more valuable, with a yield 10 times greater than the open market. During H1, data-led revenue, which includes PLUS, grew to become almost a third of our digital revenue, up from less than 20% last year. With a higher mix of data-driven revenues, we're selling less advertising space programmatically, where we have less control over price. In a cookie free world and where platforms have the ability to reindex our content, PLUS, as part of our Customer Value Strategy, allows us to take back control. We therefore expect this trend to continue, with data-led revenues outperforming as we continue to learn more about our customers. One of the ways we're doing that is through widgets and surveys. These help us gather more signals and insights, through both inferred and declared behaviors, which enrich customer profiles and grow the understanding of our audience. Over 140,000 readers recently took part in our Footballer Of The Year survey, with over 30,000 registering to wish Liverpool good luck in May's Champions League final. 14,000 more have signed up to our Strictly newsletter, and have been able to score performances on a Saturday night, while a recent survey helped us find out more about how over 2,000 Londoners were looking to celebrate the Queens Jubilee. The number one challenge for many businesses, is how to get customers to respond to their brands, products and services, and as you can see, we do not have that problem. This slide shows the value of those customer insights with growth coming increasingly from our most engaged customers. Growth in traffic was suppressed in 2021, compared to a year inflated by COVID related stories. As you can see however, we have now returned to strong page view growth of 8% for the period. This is positive for headline revenue growth, when yields on the open market eventually recover. Page views from registered customers were up over 100% in the half, with loyal user growth, showing that we're continuing to increase the proportion of our customer base, who have the strongest affinity with our brands and visit our sites most frequently. This is where the real seam of value is, with our data insight helping us to mine and extract it. The growth in page views from those who are both loyal and registered, is further validation of our success in building deeper relationships, with our customer engagement team, specifically targeting conversion of loyal, but anonymous users. The insights needed to build engagement through deeper relationships with our customers are driven by Neptune. As we showed in our prelims presentation in March, Neptune is a digital architecture, which houses our customer data platform, data matching software and custom-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 our data-led campaigns. Investment in technology has been fundamental to data generation, with Mantis, shown here on the left of the chart, playing a key role. Mantis has been a significant driver of our strong growth in page views over the past 6 months. We have successfully developed the Mantis technology beyond its original purpose, as a brand safety tool and Mantis goes further than basic behavioral data by identifying the sentiment and emotion in content. This enables both powerful contextual targeting for advertisers, but also generates insights for our editorial teams, and provides advanced content tagging. Folk are often surprised, that an historical newspaper group is developing AI software and technologies. Well we're doing it and are doing it rather well. Our success in evolving Mantis, demonstrates our strength in building and evolving our own IP, which also offers licensing opportunities. The latest of these innovations is the Neptune Recommender, which is powered by Mantis. So let me tell you a wee bit about the product. The Recommender is a 'next action' tool that serves users with content increasingly tailored to their interests. It's designed to increase dwell time and engagement, having driven around 50 million-page views a month, which is equivalent to 40% of our page view growth. Using machine learning and increased data points like category, concept, comment engagement and sentiment, it ensures a higher degree of accuracy than just keywords alone. By looking at previous browsing, it can identify what content an individual would find appealing, with suggestions based on positive sentiment served up in a personalized widget When a user browses an article on how to minimize food bills for example, the tool doesn't only recognize the category of the article i.e. cost of living, but also the concept of the article, in this case the entitlement to energy rebates. The widget can then serve up genuinely helpful and relevant content, like features on how to access cost of living payments or feed a family for GBP 5. With a much more closely aligned sentiment than just generic finance content. The tool updates each time the user visits a page to keep topics current, and as you can see here, has the capability to be customized and adapted to advertising, with the team now working on several commercial opportunities. Content recommendation and contextual targeting has never been more relevant, with our ad tech team focused on developing more tools, like the Recommender, which mean we can create a more personalized experience for our readers. A key part of that of course is the overall customer experience. We need not only to provide customers with great content, but also need to do it in a format or on a platform, which makes them want to stay and to come back. Our product and engineering teams are currently working on projects, which will see a significant improvement in site speeds and modified page layouts, which optimize time on site with ad space. We're also reviewing our systems architecture, to ensure we can continue to innovate and create differentiated content for our audiences. A key part of that, has been our increased focus on the use of social media and video. The evidence is clear, that today's youngest audiences favor a different approach to news, and we're stepping up our investment in the content, formats and platforms that appeal to a digitally native population. The social video team is building our understanding of how we best leverage our scale and trusted brands across Facebook Live, Twitter, YouTube, Instagram and Tik Tok. Only established last year, they've already achieved notable success, as you can see from the chart, with monetized social media views up over 300% since Q4, and the team being highly commended in the best use of video category, at the online media awards. Growth has been impressive but we're just getting started, with our recently appointed Chief Digital Publisher, specifically focusing on acceleration in these areas. I'm sure Lloyd will add more to this, but for now, let me hand you over to Simon to take you through the financials. Simon?
Thank you Jim and good morning everyone. We appreciate you joining us today for our interim results. When we updated the market with our full year 2021 results, almost 5 months ago, we noted the materially better business that had emerged from a record-breaking year. We also referenced the evolving macroeconomic backdrop, which would likely require us to proactively further respond, should conditions change. Well, as Jim has already evidenced, in H1 we have, as with 2020, demonstrated a strong management of the business and its fundamentals; developing new plans to underpin performance and maintaining our strategic investments; with significant mitigation through cost efficiencies, cover price inflation and strategy acceleration. All of this, set alongside the strengthened balance sheet, with which we exited 2021, underpins our confidence in the future of Reach and driving greater Customer Value. This half one summary table demonstrates a robust performance in challenging market conditions. Revenue, at GBP 297.4 million, was 1.6% lower year-on-year, with slower market-driven digital growth; but we also note that this total like-for-like was still significantly stronger than the pre-COVID, 2017 to 2019 average which was minus 6.9%. Costs were up by 7.1% versus the prior year, increasing to GBP 251.6 million, driven by half one inflation of approximately GBP 18 million. Importantly, however, we note that even with the unprecedented recent inflationary rise in input costs, the H1 2022 cost base was GBP 30 million lower than that in 2019, again pre-COVID. Having worked hard to protect investments across editorial, customer and product, adjusted operating profit in half one reduced to GBP 47.2 million, and a 15.9% operating margin. Cash conversion was still strong at 69% of EBITDA, albeit not benefiting from the prior year's working capital one-off inflow. The pension deficit further reduced, to double digit millions, at GBP 69.1 million net of deferred tax, down by 41.8%. Finally, a resilient overall performance supported the Board's decision to maintain a growing dividend, up 4.7% to GBP 0.0288 per share. Reported, or statutory, profit was up 21% in half one, or GBP 5.9 million, with adjusting items less than 1/3 of the size of half one 2021. Approximately 70% of the adjusting items relate to long-standing commitments around pensions and historical legal matters, with the HLI charge significantly lower than that in the prior year. Outside of these 2 items, the main adjustment relates to the costs associated with business model restructuring, to mitigate inflation. In half 2, we currently anticipate a similarly favorable year- on-year trend in adjusting items, with the more material transformation charges of 2020 and 2021 now complete. For an end-to-end change of GBP 5 million or 1.6%, there are some significant moving parts in revenue, but let me just pull out a few key highlights. Print has once again demonstrated robustness, down 3.9%, being stronger than 2021's performance of minus 4.7%, and the pre-COVID 2017 to 2019 average of around minus 9%. Circulation, which is now almost 70% of total print, has continued to perform strongly and the half one trend remains consistent with our Q4 exit rate. Outside of circulation, print advertising at minus 9.9% performed slightly better than newspaper volumes, which is an important driver, and there was also a rebound in Printing and Print Other, the latter of which saw a boost in our Reach Sport division and events, with the easing of COVID restrictions. Finally, digital grew at a more subdued 5.4% for the half, or GBP 4 million, which I will cover in more detail shortly. As already headlined, operating profit in the half was down approximately GBP 22 million, most significantly driven by input cost inflation and annualizing investments. Efficiencies in half one were significant, equivalent to half of the inflation, with non-repeating 2021 costs also helping the year-on-year position. Looking forward, due to the timing of cost efficiency programs, we expect these to provide a larger inflation offset in half tow than in half one. What's critical to note, though, is the preservation of annualized investments, the GBP 14 million, called out on the chart. If these investments had been sacrificed, the year- on-year half one profit reduction would have been substantially smaller. Of course, we could have taken the short term view, to maintain profits in 2022, but this investment supports our long term, increasingly data-driven strategic ambition. So it has been critical to ringfence this and our greater capabilities across customer, product, and digital editorial. What Jim has demonstrated, through clear and compelling evidence, is that CVS, our Customer Value Strategy, is working, and the near-term headwinds must not be allowed to blow us off course. Given the magnitude of cost inflation our full year estimate being GBP 35 million to GBP 40 million, which is about 4x the recent norm, accordingly I've included a couple of slides to help to further peel the onion. As we've described, as far back as November last year, newsprint has been our largest driver of inflation, at least 3/4 of the full year inflation figure. We've broken out the volume versus rate drivers of this on the right hand of the slide. Naturally each year, we see a drop in volume, as physical circulation reduces. In half one 2022, this volume reduction has been a little higher than normal, with newspaper supply and pagination changes, alongside reduced copy sales. However, what is starkly illustrated, is just how much the rate has moved, up around 65%. This puts current newsprint prices at their highest ever level, a pressure that naturally dilutes with volume over time, even if high prices are maintained, but which has created significant near-term effects. As this next slide illustrates, firstly, the market has been grappling with supply-demand dynamics post COVID, which has put near term pressure on production and volume allocation. Secondly, as the indexed chart of the past 9.5 years shows, newsprint price has shifted dramatically since mid-2021, a low point. This inflation has been driven by a number of factors; including energy, with paper and pulp production consuming about 6% of global usage, supply chain and logistics, which are still recovering from COVID, and other raw materials, e.g. recycled fiber supply chains, again being COVID impacted. We've been working hard with our North American, Scandinavian and other U.K. & European suppliers to strengthen sustainability within this part of our business, through longer term contracting and shared risk partnerships. Next, I wanted to delve a little deeper into our digital strategy, building on some of what Jim's already shared. Firstly, we have seen very strong percentage growth in data-driven products. For example PLUS, is up over 200% year-on-year. With these strategic products now becoming a more significant share of overall digital revenue, moving from about 1/5th to almost a 1/3d in just 12 months. Also, after 2021 page views being slightly down, reducing by about 3% full year, 2022 half one stepped up by 8% or about 120 million page views per month. This was supported by the considerable investment in digital editorial, as outlined in our 2021 pre-close and full year results, alongside benefiting from our Mantis AI product, as Jim mentioned earlier. Audience scale also moved forward, despite the fact that we already reached around 80% of the U.K. internet population. Finally, in terms of revenue per page view, which was strongly up in financial year 2021, this has slightly reduced in half one 2022. To be clear, this is completely explained by market yield pressures, without which we would have continued to show strong progress. The next slide provides the trend data around digital yields, using the Open Marketplace, which affects around 50% of our total advertising volume, and is therefore a very useful barometer for our programmatic business. Whilst there is natural seasonality, with Q4 always higher than Q1, the past 6 months drop off is clearly evident, driven by demand softening. Q2 yield down 40% compared to the same period in 2021; and, we note hitting levels which are equivalent to early summer 2020, at the height of the pandemic. Part of this, as updated in May, relates to brand safety, with lower advertising yields on a higher percentage of pages, deemed unsafe by certain advertisers, due to their imposed restrictions. This was toughest in March, shortly after the outbreak of the war, and has progressively improved since this point, with total brand unsafe pages in June, only marginally worse than January. Coming back to print, which provides the funding fuel for our digital transformation, volume trends overall have normalized at pre-COVID levels. To protect print margins, given the scale of print production cost inflation, already noted, we have accelerated cover price increases, in terms of sequencing and quantum; the benefits of which, due to their timing, will particularly be felt in half 2. These changes have been supported by significant data, including our own, the market for example, ABCs, and built on with Dunhumby insight, drawing from Tesco Electronic Point of Sale or EPOS data. These checks and balances ensure that each cover price initiative is well managed and understood, with volume impacts averaging at around 1% to 3%. Important in any cover price plan is ensuring the continuation of Editorial quality and value-add, such as supplements, puzzles or reader offers and promotions. We have a clear and well-orchestrated plan on these, the effectiveness of which we've demonstrated time and again, including recently with the Platinum Jubilee, Ascot and the Women's Euros. Moving on to cash, and a familiar waterfall chart for many, this time showing the key moving parts in the first 6 months of 2022. EBITDA to operating cash flow conversion in half one was 69%, having covered both the cash costs of restructuring and increased capital investment in the business. For example, to support product development and customer data management. The resultant GBP 39 million operating cash inflow covered the majority of historical commitments, legal and pensions, as well as dividends. The penultimate deferred payment for the Express & Star acquisition in 2018 was also paid, leaving just GBP 7 million outstanding as at today. Taking all of these movements into account, alongside half one being the lower half of profit generation, we nevertheless maintained a healthy net cash position of GBP 44 million. Importantly the fundamental principles underpinning our capital allocation methodology remain true. At the heart of this, is a strong and sustainable cash generation, powered by our print business, with high profit conversion, alongside a strengthening balance sheet, with considerable net cash and a decreasing accounting pension deficit. This gives us the confidence to continue to allocate capital to investment, in our organic digital strategy, the incremental GBP 14 million in H1, that we covered earlier, alongside CapEx, whilst growing dividends for shareholders (our interim payment being up 4.7% and meeting our pension obligations, with annual payments of around GBP 55 million ongoing, while we continue to work on our latest triennial valuation. So in conclusion, the first 6 months of this year, and particularly the last 4, have been another testing period for the business. A huge amount has happened, with pressures on digital advertising, due to the war in Ukraine, unprecedented inflation, especially in print production and newsprint, and a backdrop of macro uncertainty, that complicates forecasting and business decision making, which has to work off current trend data and what we know now. In spite of all of this and the resulting uncertainty, the Customer Value Strategy has remained our focus and driving force. We've taken early and decisive action to manage cover prices, drive cost efficiency and effectively compete in a tighter advertising market. This puts us in exactly the right place, as we move on to face the known and unknown challenges of half 2, which we do with both optimism, but also realism. It is clear to all that macro pressures will remain, and therefore we have planned with the expectation of a more subdued digital advertising environment, and also sustained inflation, albeit not factoring in a further deterioration. Similarly, we have forecast our print business, using current trending, which has not seen a material impact of the cost of living crisis. Stepping back, what's most important is that, as we weather the storm, the quality and effectiveness of the business grows month-by-month, better equipping us to drive value in the medium and long term and supported by robust print cash generation and continuous improvements in overall business effectiveness. Thanks for listening. Let me now hand over to Lloyd to bring this further to life, through the prism of the newsroom.
Thank you, Simon, and good morning, everyone. I'd like to update you today on the continuing and award-winning evolution of our newsrooms, as we maintain our position as Britain's largest and most effectively and efficiently structured commercial news organization. Now of course the macro environment has produced numerous headwinds, but our mix of national and regional journalists, simplified management structures and workflows, and our ability to be agile has, once again, meant that we are better placed than others to cope, to adapt and to grow. And despite the tough environment, there has been some pretty stellar journalism along the way too. In recent updates I have talked about how giving our newsrooms detailed, real-time data has underpinned our journalism and our strong digital performance. Learning more about our readers in order to give them more of the content they want, is a key plank of our Customer Value Strategy. It has helped to deliver 8% page view growth so far this year and that trend is improving, with us on course to hit 10% growth this month. It has also helped to drive our significant and continuing registration and newsletters successes. But don't just take my word for it. At this year's International News Media Association's Global Media Awards, Reach was crowned winner in the Best Newsroom Transformation category, in recognition of the way we have used data points and Reach ID to serve more relevant content to our users. As part of our transformation project in the early days of the pandemic we launched the Reach Wire; an internal service which allows us to flag and amplify relevant content to other sites around our network. This might be a great local story which our Wire editors know will work well on one of the nationals, or a national story with a strong local angle. On the back of the success of the Wire, we have this year launched our Network Newsrooms. The Network adds a new level of flexibility to our operation, giving our audience and content directors the chance to move resources around to meet spikes in demand. Recent examples where this has worked particularly well, include the Jubilee, Glastonbury and the heatwave. Well-informed, data driven agility has never been more important for our editorial teams. At our prelims in March, I explained how real-time headline and image testing are just 2 of the ways we maximize the impact of stories. Building on this, as Jim mentioned earlier, we have now created a social video project, backed by significant resource, to ensure we tell stories to younger audiences in the way they want them, but also in a way which works for us. We've also created a string of Cost of Living editors around the network, as we continue to inform, help and advice our readers. And at the start of 2022, we launched the Belonging Project. Each newsroom developed plans to work with communities, who said they felt underrepresented by our work. So far this year almost 500 stories have been written. Now 1AS I've said many times, at Reach we are proudly mainstream. Yes, we hold those in power to account, but we also reflect and embrace the diverse range of interests and passions of our readers and users. Journalism is our core purpose, and content is king. Whether it's agenda-setting or entertaining or helpful or just a happy diversion, it has to be engaging. Nowhere has this been more evident than in sport. As Britain's leading sports publisher we know the enormous power of football and we continue to dominate, but it is in other sports where we are driving huge new growth online. Formula One has been a massive success, with page views up by more than 450% year on year. Boxing, UFC, tennis and golf have seen similar or even greater growth. In total this year, our non-football sports traffic has tripled, and year to date it has driven more than 350 million page views. Breaking exclusives and covering live news events are our beating heart, which is exactly why we have created the network newsroom. But we also champion causes, embrace obsessions and stand up for communities. Newsletters now drive more than 2 million page views a day, covering subjects as varied as Bridgerton, Marvel, Man United and the political machinations of the North/South divide. Our environment editors continue to pick up accolades, and we're seeing huge growth on Snapchat and TikTok too. Our Royal coverage, especially on OK magazine and the Daily Express, boosted print sales, while analysis of online audiences over the Jubilee weekend, showed that while nationally sites saw an average 11% increase in traffic, Reach drove a 23% lift. And then there was Partygate, and the eventual demise of the Prime Minister. I'm sure you don't need reminding, that it was the Daily Mirror which broke this story and, in the end, the Prime Minster fell for his lack of truth, rather than slices of cake. And that is exactly what holding power to account is all about, the truth. To finish, I'd like to share with you some words more powerful than anything I could muster. Earlier this month the results of an independent inquiry into grooming gangs in Telford was released. The inquiry was launched after an 18-month investigation by the Sunday Mirror, revealed that up to 1,000 children had been abused in the town since the 1980s. Chair of the inquiry, Tom Crowther QC, heavily criticized the police and council officials. But it is the words of an abuse survivor I would like to share with you now, I have removed some of the most harrowing details; 'my abuse began at the age of 14 when I was introduced to perpetrators by boys of my own age. Over the next 4 years I was abused on a daily basis. I had 2 abortions and attempted suicide. In 2016, I resolved to fight for an independent inquiry. The Mirror was with me every step of the way. They were dismissed as sensationalists, but those of us who'd been there knew just how widespread the abuse was. Now I feel vindicated by the findings of this report and I'd do it all again in a heartbeat, because no child deserves to suffer what I did.' Now it is stories like this which remind us that behind all the headlines, behind the circulation performance, behind the huge audience numbers, are often individuals who need a voice. I am proud that our teams are there to help them find one. Thank you.
Powerful stuff Thank you, Lloyd. We've spoken about the strategic change happening in the business right now, across our ad teams, our newsrooms, our tech capabilities and in how we reach our audience. None of this change would be possible, if we weren't also changing our culture. This year we've continued to make great strides in our Diversity and Inclusion work, and were recently recognized as a Top Performer in the well-regarded McKenzie-Delis review. As Lloyd just explained, we're also beginning to see the results of this work surface in exciting ways. To give you another example, Wales Online held their first ever Diversity & Inclusion Awards this summer, celebrating local campaigners and organizations who are working to make their communities more inclusive. We've long been a supportive and flexible business, but this year challenged ourselves to formalize that and ensure that everyone across our teams gets the support they need, to take care of their families. This month we introduced a brand-new leave policy for people with caring responsibilities, a growing concern for many people. We also added more support for parents, expanding policies to include partners, and adding more provisions around IVF, neonatal care and pregnancy loss. Our next big focus will be to launch a formal sustainability strategy in early 2023, which will include a net zero commitment. Reach is a different business to the one I joined in 2019. We are more efficient, more data-savvy, more digitally driven and more focused on growth. The way in which our digital mix is evolving, with a growing proportion of higher yielding, data-led revenues, is proof of this, and that will continue as market demand grows for first party, consented and contextual data. So while the economic climate is creating a more challenging trading environment, in the medium term, we remain undeterred and will continue to invest in the digital capabilities, that support a more predictable, more sustainable and ultimately higher rate of profit growth. The resilience of our cashflow and strength of the balance sheet support an investment led approach, and one of growing returns to shareholders. I said in March that we are still in the foothills, and we still are, but our results demonstrate that we're unquestionably on the right track, and with a huge opportunity ahead of us. So thank you all for listening and your continued interest in our business. We don't take it for granted. I'd now like to hand over to our operator, who will co-ordinate this morning's Q&A.
And the first question comes from the line of Gareth Davies from Numis.
3 questions for me to kick off, please. The first one, in terms of the minus 40% programmatic yield decline, you called out advertiser demand and sort of increased unsafe content. You don't mention specifically supply. I just wondered if you can make any comments around with privacy changes, etcetera, is there also a material supply impact there, in terms of a lot more kind of supply in the market? Or is that something we need to be mindful of as we look forward? Secondly, again, on yield, can you talk a little bit around the 30% sort of data yields, what are you seeing there? You've called out the 40% decline in programmatic, have you seen a decline in the market yield for the data specific projects, or has that held relatively steady? And then the final point; in Simon's comments, he mentioned longer-term contracting and shared risk contracts on newsprint. I just wondered if you could expand a little on that, Simon, maybe particularly in the context of sort of certainty on cost base, as we look over the next 12 to 18 months.
Okay. Thanks very much, Gareth. Perhaps I'll take 1 and 3, and then Jim might cover number 2. So just on the 40% programmatic yield decline, first of all, I mean that is principally about demand, it's not principally about supply. I mean we haven't seen any significant shift, and you used the word material, but we -- I mean I probably used the word significant to sort of say that. We haven't seen any significant shift in supply. We have seen an improvement in the proportion of our inventory that is deemed brand unsafe. It was on one of the charts and actually, that improvement has continued into July as well. So we've seen further reduction in the proportion of deemed unsafe content. So really, it's much more about the numbers of advertisers in the market and the competitiveness in the digital auction. That's a principal thing that's driving that yield decline. [ Perhaps you ] go to Jim for the next one, and then I'll come back on the final question around newsprint.
Gareth, just on your question on the 30% of the data market yield there. No, we're not seeing a decline in that. But actually, what we've actually done there Gareth is, created the market. So the data-led market that we've built, started back in Q1 '20, which was zero. At the end of last year, it was roughly 12%. We've grown that to 30%. We always knew that market existed, because it was actually owned by the platforms, and principally probably entirely of our platforms, and we are still in some of that data led insight. So we're delighted by the growth that we are seeing here in line with our strategic plans, and we'll be looking to expand on that in the coming year.
Okay. I mean just one other data point on that second question as well, Gareth, which is -- we've shared, if you remember, the multiplier between open marketplace and data-driven revenues previously, where we said that it was 8x. You'll see that Jim included that now that's 10x, so we're getting effectively 10x the yield compared to open marketplace when we have data-driven revenue. And that shows you that in relative terms, that part of the portfolio is holding up its pricing. Just in terms of the longer-term contracting on newsprint, traditionally, just to remind everyone, that's worked in 6-month cycles. In fact, at the tougher point of COVID, a proportion of the volume was actually on 3-month cycles. We've actually now got some of our volume on an 18-month purchasing cycle, only a proportion. So effectively, it's a little bit like energy purchasing, where we can sort of forward hedge based on sort of forward purchasing. We're doing something not dissimilar on newsprint. It's a bit tougher to do in newsprint, because of not being as liquid a market as energy, but we're certainly looking at how we spread supply differently across the globe, and taking on longer-term contracts to give us more sort of future certainty. And that's built into sort of our predictions around the future cost base.
And the next question comes from the line of Caspar Erskine from Singer Capital Markets.
Brilliant. Just 3 questions from me as well. First, on the digital side, I was just wondering if you could give us any sort of idea of quantum of inventory that's currently being allocated to data-driven campaigns? I believe this is -- I mean, just looking at the 10x yield you talk about, it suggests that currently, inventory is only around sort of where it's less than 10% being allocated to data-driven campaigns? And where do you see this getting to over time? The second bit is on the social media strategy. I mean, there are some pretty impressive engagement numbers coming from that. I was just wondering, what the economics looked like compared to the digital business, and what steps you're taking to sort of optimize monetization of that piece? And finally, just on the pension. Obviously, the deficit has almost halved again. I mean, on a net basis, I think it's around GBP 60 million, and should theoretically close within sort of 12 to 18 months, all else being equal. I mean do you see that freeing up additional capital? And sort of what would you be looking to do, in terms of allocation going forward?
Caspar thanks. It's Jim, Caspar. I'll take the first one, and Simon will take the second, economic side, the pension question, that one as well. Yes, you're right, the inventory for the data led is smaller, but we'd expect it to be anyway because, obviously, with a 8x to 10x a yield that it will deliver. It will grow, but there's still obviously massive scale on open market. So even though it's small, you're not really looking for scale, you're looking from depth. So the more understanding of our customers, then even if the inventory is relatively small compared to the open market, it doesn't really matter, because we've got more value. But we expect both inventory and the yield to grow over time, with the yield ahead of the scale of inventory.
Okay. So I take numbers 2 and 3. So firstly, on the social media strategy, and there is some dedicated investment going into that, but also it's becoming a more integrated part of how our newsrooms work more generally. So clearly, we need to continue to evolve our newsrooms over time, to make sure that we're sort of taking into account latest trends and that is the written word. It's still critically important, but so video, so our other channels, audio channels and so on. So we continue to evolve there. We've got some plans to invest more over time in that area of the business, and those plans will move forward in the second half. That's really what Jim was sort of touching on, when he concluded his section. But I mean, at the moment, the economics of that are very much built into the sort of multidisciplinary newsroom that we're building, which is let's say, is across video, audio written word. In terms of the pension deficit, -- and clearly, this is the accounting pension deficit that you've referred to. And therefore, it's not the same as the technical deficit, from which sort of annual contributions are based. But evidently, over time, as the accounting deficit drops, you'd expect some of those same factors to apply to the technical deficit. And I'll just remind you and everyone on the call, we have a plan to meet our pension obligations, within our long-term funding target by 2027, and get to self-sufficiency on our pension schemes. And clearly, if that date comes closer, then that's important and positive from a capital allocation point of view. What does that allow us to do potentially in the future, clearly invest more in our organic strategy, clearly consider M&A, but for the time being, we've got an agreed schedule. We continue to meet our obligation to our pension, and we will make sure we do that each year.
[Operator Instructions] And the next question comes from the line of Ross Broadfoot from Investec.
Ross here. A couple for me, please. Just on the PLUS product growth, is that more clients adopting the products or deepening relationship with existing clients? So a bit more color there would be great. And the second question, there have been some press stories around voluntary redundancies within editorial. So just keen to know if you can give any more detail there? And if that's correct, how that might affect content generation looking forward.
Yes. Thanks, Ross. Good questions. On the PLUS products, it's both fronts. So we have some clients who have worked with us for some time, sort of on the cutting edge, who have been impressed by the results and they continue to invest, which is very encouraging. And then obviously, that market builds up itself. And we have new clients coming in every month and every quarter. We are seeing the benefits of getting to know the customer, [indiscernible] higher yields. And I wouldn't balance it by giving it a name. If you go on to our site, you'll see obviously those clients who are using those type of products. So it's a mixture of both. And actually, frankly, it has to be both because obviously, we have to keep the pipeline working. So it's on both levels. And just on the voluntary redundancy, there's no targets to the voluntary redundancy. It obviously helps us transform the business, but we haven't put any numbers to it. It was a request from a number of parties internally, particularly for those who may be at retirement age, who will be looking to move on and to offer that, which we have done. But there's no explicit targets and it's not part of a play to restructure our business, Ross.
And the next question comes from the line of Nick Dempsey from Barclays.
I've got a few. So just first of all, to get into the weaker growth in digital in May and June, which I'm estimating at minus 2%. You're flagging tough comps. I guess you had the Euros landing in June last year, a bit of a reopening factor. But then if we look at the shape of 2020, going back there, May and June were much weaker in digital than January to April and looking on a 2-year basis there for that comparator, doesn't really look that much different. So have there been extra factors going on in May and June, that could have driven that? Or am I just getting this wrong on how to think about the comps? Second question, been reading in the press, the NUJ members have reached -- could potentially strike in late August, early September. Obviously, not decided yet. There I think about 1,000 NUJ members have reached, which is somewhere around 1/4 of your staff. So to what extent could that impact second half financial progress? How should we think about that as a risk? Third question, you've pulled levers on cover price and pagination this year. Is there a risk that, that has an impact beyond 2022 on the rate of print revenue decline, and in effect, you've spent something already that might have been useful for preventing that decline being heavy in '23, '24? And the last question, squeezing a fourth, Publicis, talked about decent positive growth in its U.K. media business, the advertising part in Q2, didn't flag any softening advertiser demand in the U.K. So is it -- they just weren't that focused on that, and is across the total U.K. ad market weaker in those months? Or is it -- you're seeing a shift away from news perhaps, because of brand safety, etcetera?
[indiscernible] to hear from me. I'll take question 2 on the unions and on [indiscernible] market. And Simon will take questions 1 and 3. Look, just on the NUJ action. Last Friday, I believe the NUJ began balloting the members at reach, and we won't know the results likely to around August 12. So that's just on the timing of it. But look, we're hopeful that industrial action doesn't happen. We do have detailed contingency plans. Some people use the word strike as industrial action, we don't know what that will be. But look, in similar circumstances in previous times, these contingency plans have worked well. So we're hopeful that, that can be resolved, but we have contingency plans in place. And with regard to Publicis results, yes, encouraging. But you have to look back at our results as well. We're using more data-led products, and a lot of those Publicis results will be through platforms. We'll be able to use sophisticated data pieces as well. So even though, that our challenges to the wider open market with regard to media advertising, if you look at some of those markets where data and customer consent has been used, then it's obviously no surprise, that you're obviously seeing some good news and some green shoots, which is obviously what we are showing you with a 10x yield on 30% of our data-led product growth. So that's probably pretty aligned with some of our stuff as well, Nick.
Yes. And look, Nick, I know you know this, but obviously, others have called out weaker demand and weaker advertising conditions. Publicis you've mentioned, but others have spoken, whether it be LADbible or Trustpilot or justify or others, that describe weakening conditions. And just on your first and third question, so just in terms of the weaker growth in May and June, first of all, the points you called out were right. I mean there was an element of benefit in 2021 with the Euros, with the easing of lockdown restrictions, where we did see a bit of an advertising peak, as people were looking to sort of restart their businesses, both in terms of our regional portfolio as well as national businesses. We also, through the course of May and June, still had higher levels of brand unsafe content, which is now starting to drop. It dropped really consistently from May to April -- from March to April to May to June, and has further dropped into July. I mean I think the thing I would call out relative to the Q2 position is, what we've seen at the beginning of July, is a sort of 5% to 6% digital growth. So much more in line with the sort of half one average and stronger, therefore, than the Q2 position. So we are seeing a stronger trend into Q3 than in Q2. On cover prices, I mean look, I'll just draw you to the data on Slide 27, which shows that, yes, we have pushed forward on cover prices. But actually, the impact on volumes, if you look at sort of pre-COVID and post COVID, we've got very similar sort of volume trends. And actually, whilst we have to always be very thoughtful about cover price increases, and we never do those without a lot of consideration of the data, what it has done, is protected our print margins. So it's been necessary, and we will continue to monitor it and decide on what's the right answer for the future. But each step we take on that, it's a very well-considered and thought through decision. Thank you very much, Nick.
I would like to hand back over to Jim Mullen for final remarks.
Thank you very much. We are -- obviously, everyone is well aware of the macro conditions, but just to remind everyone, we are a very resilient business, proven in the past that we have mitigation levers, which we use sparingly and when appropriate and have a record of getting ahead of the challenges, which we are. But mainly, what I'd like to say is that our strategy is progressing as per the plan. We are delivering on the strategy as we said, back at the end of 2019 and 2020, and that has come through, which gives us a lot of cause for and -- or hope for our future. So thank you for your continued interest in the business. We don't take it for granted, and hopefully speak to you soon.
That conference for today. Thank you for participating. You may all disconnect. Speakers, please standby.