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Ladies and gentlemen, thank you for standing by, and welcome to the Reach plc analyst call. [Operator Instructions] And I must advise you the conference is being recorded. I would now like to hand you to your first speaker today, Jim Mullen. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us this morning for this short update. Now while today's statement is not a full trading update, we thought it worth having a short call just to give a quick summary of the pre-close statement and to offer you the opportunity to ask any questions that you may have.Now I am pleased to report that Reach has continued to perform well since we last updated the market in September, and we have continued to perform ahead of current market expectations. Our digital revenue growth remains strong, and it's assisted by increased levels of customer engagement.Now despite recent lockdowns, circulation sales have remained resilient. We expect these trends of strong digital growth and resilient circulation levels to continue into December, assisted by the move back to a [indiscernible] approach to COVID-19 restrictions in England from next week.We do note, however, that macroeconomic uncertainty continues to make forecasting more challenging. Group costs are significantly down following the transformation program in the summer, and we continue to see a strong and improved operating margin. We continue to grow customer registrations, which have now exceeded 4.25 million, and audience levels remain high at over 42 million during October.Work continues on development of the Reach ID, which is on track to the launch this year and which will enable enhanced insights, which we can offer to advertisers during 2021 and beyond. And we are also pleased to confirm our completion of the acquisition of the Irish Daily Star to the Reach team. The title is a strong addition to our portfolio.The group has continued to generate healthy levels of cash during the period. And while we have a number of one-off cash costs, including those associated with the transition, we expect to retain a positive position at year-end.The passion and talent of our people has been key to this performance during what has been a pivotal year for Reach and one which we have accelerated our strategy. We look forward to 2021 with confidence in the long-term value of our loyal audience and with strong momentum in the revolving digital offering.I'll now hand over to take some questions. Thank you.
[Operator Instructions] Your first question comes from Gareth Davies from Numis.
Maybe kick off with 2 for me. Really encouraging to see the acceleration in digital growth into October, November from the sort of 13% in Q3. I'm just wondering if you could expand a little bit on the sort of shape of that 20% growth. Was it sort of relatively even across October, November? Or have we seen a big spike sort of through November as we build to Black Friday? And also, kind of what kind of categories are performing there?And then the second one was really around circulation revenue. You note that kind of it's been resilient, it's not dipped. I wonder if you can talk about the sort of initiatives you've done there to help things along, which you alluded to in the statement. And then also sort of confidence as we move into easier comps sort of April onwards next year, and we can get back to the sort of mid-single-digit rate ex kind of COVID impact that we've seen historically.
Thanks, Gareth. I mean, I'll take it in reverse order, with circulation first because we've been very happy with the performance. The concern was always in the first lockdown, that you would see a significant slump in our circulation. That didn't happen. And it's not really with the circulation, it's more about the frequency of purchase. So we came out of lockdown 1 essentially with 94%, 95% of pre-COVID levels. We then, obviously, the second lockdown, we're expecting it will [ get worse ], then a little bit better. Confidence has remained high. Second lockdown is not as threatening to the newspaper-buying public. So therefore, we see those trends continue up to present point, Gareth. So the circulation has been very encouraging so far, and there is no change then going into the end of the year into 2021.But what we did do is that we launched some vouchering activity, which allows obviously to additional frequency of purchase. If you purchase one of our titles, then you could obviously purchase another at a discounted price. That has helped the purchase frequency and obviously helped maintain that 90% to 94% pre-COVID levels. Simon, do you want to talk about the digital growth over the last 2 months?
Yes, of course. So in terms of the shape of the digital growth, as you know, there's a natural shape where October tends to be a quieter month than November, but that's reflected also in the year-on-year comparative. We have certainly seen a really encouraging step-up in November in terms of absolute pound notes. And if you look at sort of Black Friday as a phenomenon, year-on-year, it has become stronger and stronger for us. And we would say that Black Friday, whereas if you went back maybe 5, 7 years, was a day, it's now a few weeks because it really does have a buildup to it. And that's certainly what we've seen in terms of our digital momentum. It's not just about a small handful of days now. We see multi-weeks of progression in the buildup to Black Friday. So it's fair to say that the percentage year-on-year across October and November was broadly consistent. I mean, it wasn't identical, but it was broadly consistent. But particularly, encouraging thing would be in terms of November is that the momentum of Black Friday year-on-year continues to strengthen. And clearly, as nonessential retail has been closed, that has meant that the shop window is effectively our digital impressions. And that has definitely driven some momentum into that part of the business.And then in terms of what categories are performing, it is improvement across the board. So I mean, all of the different ways we activate digital revenue have seen improvement. So it really is in every category and in every area that, that progression has been seen.
Next question comes from Nick Dempsey from Barclays.
Can you hear me okay?
Yes. Yes, we can, Nick.
Brilliant. I've got 3 questions. So first one, very healthy cash generation this year leaves you with perhaps a bit more optionality than we would have thought a few months ago. Are there businesses out there that are cheap as a result of what's going on in the world where you think you could add lots of value? Or is that something that you're starting to focus on given that situation?Second one, given that lots of consumers are still going to be struggling into next year, do you think you'll be able to take your usual approach to cover price increases in 2021 across your portfolio?And third question, just a little add-on, I guess, to Gareth's question about digital. Last year, December was pretty strong for you. This year, as lockdown ends, and perhaps there will be more physical store activity in December, do you think we should be cautious about the digital number in December because of those 2 factors?
Thanks, Nick. I'll handle -- I'll keep the digital questions to Simon because he's on a roll with those ones. But just on the cash generation, we're encouraged by it. We deliver strong cash. We are managing our costs appropriately and actually delivering through the transformation that's helped that position.With regard to value of other assets, we are always in the market and keeping our eyes on the horizon, but we'll only put it a price which we think is a good value. And there obviously have been some conversations about whether or not we've been interested in other assets. We are interested if the price is right. And if they're not, then we have the means to go into those markets in those regions. And if you look at what we've done over the last 12 months, we've actually moved into regions which were not our normal home territory. And according to comScore, we're now the biggest site in those regions. So we're always on the lookout, but only if the price is right. And we'll not basically spend the shareholders' cash unless we think we're getting value.On consumer confidence. I mean, Simon touched on it. There are a number of verticals, quite a few, which are returning post pandemic. I mean, food retail, tech and ents. People are at home with different buying habits, and we're actually seeing people are much more online. And obviously, with the promotions on food -- even non-food retail were pretty strong. I mean, those of you -- I know you all buy our newspapers, but those of you who buy our newspapers, you'll see the [indiscernible] and that's obviously coming through today's update. So there is a confidence there because consumers are buying.However, we're conscious of 2021 and the macro environment, so we are being considerate in obviously how we actually allocate our cash, just to make sure that we are spending it wisely moving forward. Simon, do you want to just again, continue on the digital analysis?
Of course. Yes. I mean, just one other point on the cover price specific, Nick. I mean, we still believe that product represents very good value for money. I mean, to have a 56-page or 64-page Mirror for less than GBP 1, we still think represents really good value for money.And then in terms of digital strength, you're right. December last year was an incredibly strong comparative. And therefore, what we're expecting from a full year perspective -- and if you look at the sort of second half is the sort of digital number that we've described for the 5 months, which is just over 16%, that, that is likely to be the sort of rate for the 6 months, too. So we're not saying that it will see necessarily further acceleration in December, but we are saying that the trend will continue.And actually, if you look at what our growth rates were at the back end of 2019, that's showing about a 2-year like-for-like of about 40% across each of the months of October, November and December, which we think is a strong performance. 40%, 2-year like-for-like across the last quarter is strong.
Your next question comes from Natasha Brilliant from Citi Group.
I've got 3 questions on -- really on the customer registrations. So you've got to the 4.25 million number. You're still targeting 10 million by the end of 2022. So do you expect the run rate to continue? Would you still think that's a reasonable target that you'll get to 10 million in that time frame? Or do you think you'll exceed the 10 million? Just if you could just share your thoughts on that. Secondly, do you have any data on the engagement levels of those registrations so far? So did they register once and then come back once a week? Do they come back every day? Anything you can share on that, based about how engaged those registered users are.And then finally, just if we can talk about monetization opportunities. You clearly demonstrated that people are interested in wanting to register. So how should we think about that translating into revenues, I guess, in the medium term?
Thank you, Natasha. I'll hand -- I'll leave the monetization for one for our CFO, I'll take the first 2. On registrations, what I can say emphatically is that we will make the 10 million. So I wouldn't answer your question directly about whether we'd exceed it, but I will -- in fact, I will say we will make the 10 million. And so it's a good sign. We've increased our targets to -- this year. We're hitting 4.25 million and progressing well. So registrations are not a concern for us. But those who are on the call will understand digital business. As you know, it's not just about volume, but it's about quality and retention, which takes us onto the engagement levels.The key hypothesis of the customer value strategy is if we increase frequency, i.e., how many times people come back on our online business and recency, then obviously, the value will come through. That's -- so recency frequency value. Simon will speak about that value monetization. Currently, after about 6, 7 months of actually doing in the strategy, we're seeing on average, Natasha, that levels of engagement, they're up 5x. So you have certain segments, usually football, entertainment, basic news, we are -- because newsletters are getting sent, you're seeing 12x better engagement. And then other times, obviously, it's slightly lower. But on average, we are seeing 5x more engagement. If you register, sign up for a newsletter or comments, then you're 5x more likely to come back and engage. And obviously, what does that mean? It means we're sending you 5x more ads for your time on site, which is where I'll hand over to Simon on some of the details around the monetization.
Yes. So I mean, thanks for the questions, Natasha. I mean, on monetization, it is a journey. I mean, it starts with the increased engagement that Jim has mentioned. So we are already monetizing our registered customers in the sense that we are seeing much better engagement levels, as Jim has just described. People-return visits, more click-throughs from a newsletter, more click-throughs as a result of commenting or going onto an InYourArea platform, which are the 3 principal ways that we're getting registrations. So we are already seeing that come through and start to sort of feed into our digital revenue progress.The exciting opportunity is with the launch of Reach ID, which we're on track to launching in December, where we will actually be able to see an individual profile of a customer. And we will be able to -- as a result of that, package up a number for the commercial offerings, from an advertising and non-advertising point of view that allows us to start to improve the yields per page. And so that's the next stage of the journey. We start with increased engagement, then we start to move the yield journey. And then it will also, in the third stage, give us opportunities potentially around affiliates or e-commerce or other partnerships. So it's a journey. We're on stage 1 of the journey, but early signs are encouraging.
Your next question comes from Caspar Erskine from Nplus 1 Singer.
Just a couple of quick questions from me. One is on the vouching promotional -- cross-promotional activity that was going ahead in the last couple of months. So I was just wondering what the impact of cover prices on circulation was. And also, you plan to take these initiatives forward. I mean it, looks clear that these initiatives have been successful in stabilizing circulation despite lockdown. And is there some scope to be pushed forward into normal times? And could it be helpful to print circulation going forward?And then just a second one on the Reach ID launch. You mentioned the affiliates of circulation. I was just wondering -- sorry, affiliates in e-commerce angle. Do you -- what's the time frame do you see that sort of coming into? Is that a 1-year, 2-year view?
Thanks, Caspar. I'll take the last one and Reach ID, e-commerce. And, Simon, I'll hand over to you on the previous two on vouchering, et cetera.Just on -- firstly, just on e-commerce and examples of it, we will be bringing case studies of e-commerce partnerships to the market early next year, in the full year results, to show you some of the work that we're doing with our partners to demonstrate the increased response rates and engagement you get through engaging with us on registered users. And the reason how that works is we have to be able to identify that engaged users. So I told you previously that, on average, they're 5x more engaged, and that would seem logical, but Simon and I have to prove it. So the Reach ID will prove by auditing an individual customer, how many times they engaged. And we're expecting to bring that to market at our full year results in February, Caspar. So you'll have some examples of that to highlight the strategy that we're talking about. Simon, do you want to talk about the promotional activity and ongoing plans?
Yes. So when we updated you in September, the end of September, we talked about taking a much more scientific approach to managing our circulation revenue. We talked about we've started to work with dunnhumby, for example, who provides all of the data behind -- and the processing of data behind the Tesco Clubcard and many other -- they work with many other large global companies.And really, cross-promotions is one element, but there's a lot of different things we're doing around our circulation revenue. It remains a very significant line for us in terms of cash generation and as a proportion of our overall company revenue. And definitely, the initiatives that we have experimented with during the course of lockdown and this pandemic year has given us some really valuable learnings for the future. But it's not just cross-promotions, it's deliver to home, it's supplements, it's added value, it's availability. So investing in availability of our products so that more product is available in more stores across the land. I mean, all of those, we've learned some really valuable lessons, and they definitely will form part of our forward plan, which will help to manage that line as professional as you'd expect us to.
[Operator Instructions] But there are no more questions at the moment.
Okay, folks, thank you very much for joining us this morning. We look forward to speaking to you in the early new year. Thank you.
Thank you, everyone.
Thank you. That does conclude today's conference. Thank you all for joining. You may now disconnect.