Stv Group Plc · LSE:STVG
Stv — H1 2019 Earnings Presentation
34 slides from Stv's earnings presentation, Sep 3, 2019
Slide 1: STV Strategic Plan delivers profitable growth
STV Strategic Plan delivers profitable growth 2019 Interim Results - 3 September 2019
Slide 2: Agenda
Agenda Introduction Simon Pitts Financial Results Lindsay Dixon Strategic Update & Outlook Simon Pitts Q&A 2
Slide 3: Key Messages
Key Messages • Delivered double digit operating profit growth despite national advertising weakness • New team executing well on the strategy • Excellent viewing performance maintained on TV and online • Uniquely strong position in Scotland, outperforming wider UK advertising market • Increasingly h
Slide 4: 2019 H1 Highlights
2019 H1 Highlights Total Total Regional Digital Production Advertising Revenue Revenue Revenue Revenue Revenue £54.9m £48.8m £7.3m £5.6m £2.0m -5% -0.6% +19% +19% -46% Operating Operating Interim EPS Exceptionals Profit Margin Dividend £11.0m 20% 21.8p 6.3p Nil +10% +270 bps +9% +5% 4
Slide 5: Financial Review
Financial Review Lindsay Dixon
Slide 6: Group Results
Group Results Strong performance in an uncertain advertising market H1 2019 H1 2018 £m £m Change Revenue 54.9 57.7 (5%) • Revenue down 5% reflecting national advertising market and phasing of deliveries in Operating profit pre Productions exceptionals 11.0 10.0 +10% • Strong growth in adjusted opera
Slide 7: Broadcast
Broadcast Good growth in regional, benefit of news restructure & closure of STV2 H1 2019 H1 2018 £m £m Change Revenue • National advertising decline includes impact of - National airtime 34.4 36.6 (6%) FIFA World Cup in comparator - Regional airtime 7.3 6.1 +19% • Strong growth in regional advertisi
Slide 8: Digital
Digital Revenue growth delivers increased profitability H1 2019 H1 2018 £m £m Change Revenue 5.6 4.7 +19% • Strong revenue growth driven by - increased distribution, new features and Operating costs (2.6) (2.6) - improved reliability of STV Player - enhanced content offer Operating profit 3.0 2.1 +4
Slide 9: Productions
Productions Impacted by programme deliveries strongly weighted to second half H1 2019 H1 2018 £m £m Change Revenue 2.0 3.7 (46%) • Significant revenue and profit impact from phasing of deliveries Operating costs (3.7) (4.9) +24% • Total revenue of £13m secured for 2019 as at end July, similar to las
Slide 10: Group Revenue
Group Revenue Strong total advertising revenue performance down only 0.6% H1 2019 H1 2018 £m £m Change Broadcast 45.0 46.5 (3%) Digital 5.6 4.7 +19% • Digital and regional revenues now 27% of total Productions 2.0 3.7 (46%) advertising revenue, up from 21% in FY 2017: ELM 2.3 2.8 - Regional airtime
Slide 11: Group Operating Profit
Group Operating Profit Strategic growth drivers more than offset national advertising weakness Operating profit pre exceptionals 12.0 10.0 8.0 6.0 4.0 2.0 0.0 H1 2018 National airtime Regional Digital revenue News STV2 closure STV Other H1 2019 airtime flow through restructure Productions • Addition
Slide 12: Cash Flow
Cash Flow H1 2019 H1 2018 £m £m Operating profit 11.0 10.0 • £0.9m additional depreciation due to new lease Depreciation/amortisation 2.3 1.2 standard Share based payments 0.1 0.2 EBITDA 13.4 11.4 • Working capital driven by Productions Working capital movements (2.9) 0.3 - increase in stock - EIM/A
Slide 13: Pensions
Pensions Triennial valuation concluded on same terms, providing certainty Accounting valuation H1 2019 H1 2018 FY 2018 Assets (£m) 375.9 358.1 343.4 • Triennial valuation process (as at 1 January Liabilities (£m) (450.3) (417.4) (421.9) 2018) completed in April 2019 Deficit (£m) (74.4) (59.3) (78.5)
Slide 14: ELM
ELM Progress impacted by slower retail roll-out & platform challenges • Operational cashflow breakeven met briefly in January 2019; subsequent months impacted by slower than planned retail roll-out and platform issues impacting subscriber retention • As a result net debtor increased to £7.0m at the
Slide 15: Corporate items
Corporate items Interest, tax, dividends and covenants Interest Tax • Cash interest up £0.1m to £0.7m • Effective tax rate for 2019 of 18% - higher average borrowings and LIBOR rates - lower than standard rate of 19% • No change to margin payable under facility - pension contributions and utilisatio
Slide 16: Strategic Update & Outlook
Strategic Update & Outlook Simon Pitts
Slide 17: Our strategic objectives remain unchanged
Our 3 strategic objectives remain unchanged 1. Maximise the value of our broadcast business 2. Drive digital growth by creating an STV for everyone 3. Build a world class production business 17
Slide 18: STV's broadcast position remains uniquely strong
BROADCAST STV’s broadcast position remains uniquely strong Broadcast STV’s best all 99.7% of all Biggest TV Most popular Continuing to content still time viewing large channel for source of outperform 70% of all share since audiences on 16-34s, Scottish rest of UK and video viewing 2009 STV 75% watc
Slide 19: BGT's performance bodes well for our autumn schedule
BGT’s performance bodes well for our autumn schedule 659K 39% Won its slot 614k 101k Live Audience Viewing share, +2 18 out of Catch-up streams streams +2% YoY share points 19 times +58% YoY +31% YoY YoY 19
Slide 20: STV's Growth Fund goes from strength to strength
STV’s Growth Fund goes from strength to strength BROADCAST Over 100 new TV advertisers since launch 20
Slide 21: Broad range of sectors underpinning 19% regional ad growth
BROADCAST Broad range of sectors underpinning 19% regional ad growth Growth Fund deals by sector since launch in 2018 £5m+ allocated so far, vast majority “matched-funded” 200+ deals right across Scotland Success of Growth Fund accelerating, 135 deals done this year alone 21
Slide 22: Progress towards vision to become Scotland's digital destination
We continue to make good progress with our DIGITAL vision to become Scotland’s digital destination Watching more More people content For longer Monthly active VOD stream VOD VOD users starts consumption +13% +36% +20% 22
Slide 23: Big screen is where the digital growth is
DIGITAL Big screen is where the digital growth is o n n g So mi Co • Already our 2nd biggest • STV’s fastest growing • UK’s largest VOD platform platform platform • Typically 50% of ads fast • 4 out of 5 Virgin customers • Usage doubled year on year forwarded have used STV Player since • Addressable
Slide 24: Ofcom's position on PSB prominence will support digital ambition
DIGITAL Ofcom’s stated position on PSB prominence will support our digital ambition “New legislation is required to keep public service broadcasting 54% prominent and ensure that viewers can continue to find and 49% access 45% the PSBs’ linear and on-demand services across a range of connected devic
Slide 25: New product features are extending Player dwell time
DIGITAL New product features are extending Player dwell time, as expected FEATURE INTRODUCED IMPACT LIVE RESTART Q1 2019 Already used on 18% of live streams END OF PLAY Q2 2019 1 in 3 stream starts watch next episode RECOMMENDATIONS IOS streams up 33% since launch, ads per PICTURE IN PICTURE Q2 2019
Slide 26: Exclusive content complemented by 500+ hours of 3rd party rights
DIGITAL The best exclusive content now complemented by 500+ hours of 3rd party rights STV EXCLUSIVE 1000+ HOURS 3RD PARTY NOW 500+ HOURS SPORT ENTERTAINMENT DRAMA ACROSS 11 DEALS COMING UP IN H2 Doc Martin 6 hours 8 hours BGT The Champions Deep Water 12 hours 6 hours X Factor Celebrity A confession
Slide 27: Premier Sports deal enhances digital advertising and sports proposition
DIGITAL Premier Sports deal enhances our digital advertising sell and sports proposition • 3 year deal for STV to be exclusive advertising partner for Premier Sports 1 & 2, home of Pro14 rugby, Scottish Cup football and Serie A • Covering all advertising and sponsorship revenues across all broadcast
Slide 28: There is a clear timetable for future digital enhancements
DIGITAL There is a clear timetable for future digital enhancements Q2 2019 Q3 2019 Q4 2019 Q1 2020 New drama launches New features Player marketing Freesports Player+ launched push begins launch roll-out STV Player Start of RWC Sky Start of I’m a Live brand refresh launch Celebrity restart on TVs 28
Slide 29: Digital is increasingly high margin with significant growth potential
DIGITAL As we said at the CMD, Digital is increasingly high margin with significant growth potential Growing Margins Big Growth Opportunity Currently only 54% 2.5% digital 49% 45% STV Advertising Impressions, c.18 billion p.a 97.5% FY 2017 FY 2018 H1 2019 Digital Linear 29
Slide 30: 2019 has seen a good mix of new and returning series
2019 has seen a good mix of new and returning PRODUCTION series, but we need more The Victim on BBC1 Elizabeth is Missing on BBC1 Sex Tape on Channel 4 NEW • 6.5m viewing average • In production now • 1m viewers in C4 peaktime • Sold to 30+ countries • Starring 2-time Oscar winner Glenda Jackson Ant
Slide 31: Investing in our creative pipeline to develop valuable IP
PRODUCTION We are investing in our creative pipeline to develop valuable IP DRAMA ENTERTAINMENT FACTUAL New Creative Director 30+ projects in active Craig Hunter started development July 2019 3 shows already commissioned for BBC and C4 Priority is more long- 10+ commissioned scripts Strong pipeline
Slide 32: Our first STV format is on air now
Our first STV format is on air now • Returnable daily quiz is a key business target • Route to market is challenging unless you have access to a broadcast network • Launched on 1st September with 19% share, +3 on network and +30% on slot average 32
Slide 33: Coming up at STV in H2 2019
Coming up at STV in H2 2019 BROADCAST • Maximise value of strong autumn schedule • Ongoing digital news transformation • STV Growth Fund next phase DIGITAL • Big marketing push • New features, personalisation and Sky launch • More content, including Freesports launch PRODUCTION • Continued focus on
Slide 34: Outlook
Outlook Good momentum going into H2 despite Brexit uncertainty • National advertising will continue to be impacted by Brexit, with the 9 months until the end of September expected to be 6% to 7% down • Regional advertising expected to be 10% to 15% up until the end of September • Digital advertising