Stv Group Plc · LSE:STVG
Stv — H1 2023 Earnings Presentation
36 slides from Stv's earnings presentation, Sep 5, 2023
Slide 1: Diversification plan accelerates
Diversification plan accelerates STV Interim Results – 5th September 2023 Screw series 2, STV Studios for C4 1
Slide 2: Agenda
Agenda Introduction Paul Reynolds Overview Simon Pitts Finance review Lindsay Dixon Strategic update & outlook Simon Pitts Q&A 2
Slide 3: Diversification plan accelerates
Diversification plan accelerates Excellent revenue growth; profit impacted by weak linear advertising, as expected • Total revenue +21% with adjusted operating profit -33% • Growth areas more than offset expected linear advertising revenue decline • Studios revenue almost quadruples even before posi
Slide 4: Finance Review
Finance Review Lindsay Dixon 4
Slide 5: H1 2023 key financials
H1 2023 key financials Total Regional Total Digital Studios Advertising Advertising Revenue Revenue Revenue Revenue Revenue £75.3m £45.8m £7.3m £10.1m £27.2m 2022 +21% 2022 -14% 2022 -14% 2022 +9% 2022 +294% Adjusted Adjusted Adjusted Net Net Debt/ Operating Operating Basic Debt EBITDA Profit Margin
Slide 6: Group Results
Group Results Excellent revenue performance; profit impacted by ad market and cost inflation as expected H1 2023 H1 2022 £m £m Change Broadcast 38.0 46.0 -17% Digital 10.1 9.2 +9% • Revenue growth from Digital and Studios far Studios 27.2 6.9 +294% exceeds linear advertising revenue decline Total re
Slide 7: Exceptional costs
Exceptional costs H1 2023 £m ITV • H1 costs relate to new agreement with ITV Commencement & tech fees 2.6 • Expect balance of legal costs in H2 re finalisation of Long Form Agreement Restructuring costs 0.2 2.8 • One-off costs in H2 re acquisition of Greenbird on 6 July • Legal and financial diligen
Slide 8: Total Advertising Revenue (TAR)
Total Advertising Revenue (TAR) Looking through the volatility of recent years, traditional linear advertising remains resilient with VOD advertising on a steady growth trajectory Linear advertising revenues Digital advertising National Advertising Revenue Regional Advertising Revenue VOD Advertisin
Slide 9: Growth and cost savings mitigated impact of linear ad market on H1 profit
A combination of growth and cost savings have meaningfully mitigated the impact of the linear ad market on H1 adjusted operating profit 14 Macro impact on Growth from Cost inflation and linear ad market diversification mitigation 12 Discretionary spend, 10 marketing, advisory, vacancies etc. 8 £'m 6
Slide 10: Broadcast
Broadcast H1 result impacted by linear advertising decline and cost inflation H1 2023 H1 2022 £m £m Change Revenue • Majority of decline in regional advertising relates - National advertising 29.5 36.3 -19% to Scottish Government, down c.55% in H1 - Regional advertising 7.3 8.5 -14% • Underlying cor
Slide 11: Digital
Digital Strong delivery of revenue growth and cost savings driving margin up to 50% H1 2023 H1 2022 £m £m Change Revenue 10.1 9.2 +9% • VOD revenue up 14% year on year Operating costs (5.1) (5.2) +2% • Continued investment in new content, Operating profit 5.0 4.0 +26% including first payments to ITV
Slide 12: Studios
Studios Drama rich programme delivery driving c.300% growth in revenue and first time H1 adjusted operating profit, albeit full year profit still heavily H2 weighted • H1 programme deliveries include: H1 2023 H1 2022 • 5/8 eps Criminal Record (AppleTV+) £m £m Change • 5/6 eps Screw S2 (C4) • 3/6 eps
Slide 13: Working capital cash flows unwind; net debt within facility
Working capital cash flows unwind; net H1 2023 H1 2022 £m £m debt remains well within facility and Adjusted operating profit 2.8 11.9 with significant leverage headroom Exceptional items (2.8) - Depreciation and amortisation 2.2 2.5 EBITDA 2.2 14.4 • Operating cash conversion above 100% as Share bas
Slide 14: Pensions
Pensions Accounting deficit reduces on year end as a result of increased discount rate H1 2023 FY 2022 H1 2022 £m £m £m Assets (£m) 276.3 289.8 350.8 Liabilities (£m) (331.3) (352.9) (393.1) • Increasing corporate bond yields over H1 result in higher discount rate, driving down the value of Deficit
Slide 15: Strategic Update & Outlook
Strategic Update & Outlook Simon Pitts 15
Slide 16: We are on track to deliver our 2023 diversification targets
We are on track to deliver our 2023 diversification targets STRATEGY 2023 TARGETS ON TRACK? BUILD WORLD Quadruple Studios revenue to £40m CLASS STUDIOS WILL EXCEED DRIVE Double digital revenues to £20m and DIGITAL registered users to 5m WILL EXCEED Grow STV-controlled broadcast revenues to MAXIMISE
Slide 17: The enlarged STV Group is a more diversified, balanced business
The enlarged STV Group is a more diversified, balanced business STV Group Forecast Revenue FY23 STVSTV Group Revenue–FY18 revenue Group FY18 50% revenue growth in 5 14% years 8% 42% 47% Studios 78% Digital Broadcast 11% • Studios now similar in scale to Broadcast in terms of revenue • Broadcast, Dig
Slide 18: KPIs demonstrate continued strong momentum in 2023
KPIs demonstrate continued strong momentum in 2023 H1 2023 New commissions New, returnable series Returning series STUDIOS (incl. Greenbird) 29 4 39 2022: 25 2022: 9 2022: 9 Online Player-exclusive Monthly streams streams active users DIGITAL +25% +46% +5% 2022: -13% 2022: -20% 2022:+7% Viewing ITV
Slide 19: STV Studios: Transformed scale, profitability and creative firepower
STUDIOS STV Studios: Transformed scale, profitability and creative firepower 19
Slide 20: The enlarged STV Studios will be a £70m+ revenue business in 2023
STUDIOS The enlarged STV Studios will be a £70m+ revenue business in 2023 Now 24 creative labels across scripted and unscripted, 9 of which are majority-owned MAJORITY-OWNED BROADLY EVENLY SPLIT ACROSS RETURNING SERIES PROVIDING £70M+ REVENUE IN 2023 SCRIPTED AND UNSCRIPTED A STRONG FOUNDATION ` For
Slide 21: We also have minority investments bringing scope for consolidation and growth
STUDIOS We also have 15 minority investments bringing significant scope for further consolidation and growth LARGE MINORITIES SMALL MINORITIES £30M+ REVENUE IN 2023 SUB £5M REVENUE IN 2023 (25%) (25%) (40%) (5%) (5%) (5%) (40%) (30%) (40%) (3.2%) (5%) (5%) (40%) (25%) (37.5%) • Prescribed routes to
Slide 22: Two Cities Television likely first minority to consolidate
STUDIOS Two Cities Television is likely to be the first minority to consolidate given stellar success 5.7m average audience for 77% up on • Blue Lights series 2 now filming in Belfast Blue Lights series 1 timeslot • Nominated for best new drama at 2023 average for National TV Awards 16-34s • Two Cit
Slide 23: Greenbird acquisition has given STV Studios further creative momentum
STUDIOS The recent Greenbird acquisition has given STV Studios further creative momentum 7 new commissions announced since the acquisition in July 4x new commissions for 3x new entertainment commissions for Rumpus Media Tuesday’s Child & Interstellar • New Late Night Lycett (C4) • New large-scale re
Slide 24: International growth is a key focus for our expanded Studios division
STUDIOS International growth is a key focus for our expanded Studios division Lego Masters is an established Bridge of Lies also selling international hit internationally • Sold to 20+ territories worldwide • Already sold to 15+ territories worldwide • Series 4 of the US version will run on Fox • Ne
Slide 25: Good progress with the Greenbird integration
STUDIOS We are making good progress with the Greenbird integration Workstreams focused on growth, integration & synergies Operational Culture & Cost synergies integration Governance International UK growth Commercial IP development strategy strategy strategy We expect significant progress on integra
Slide 26: There is no ceiling for the growth of STV Studios
STUDIOS There is no ceiling for the growth of STV Studios A world class producer for the biggest networks and global streamers VISION The UK’s #1 nations and regions production company by turnover, profit and reputation 1 2 3 GROW EXISTING CONTINUE TO STRATEGIC ACCELERATE MAJORITY LABELS EXPAND CUST
Slide 27: Another excellent streaming performance in H1 2023
DIGITAL We have delivered another excellent streaming performance in H1 2023 More Watching For More people more longer success New Revenue 70.2m 32.8m £10.1m, registrations streams hours +65% +9% Active registered Profit users +38% +25% +25% £5.0m, VIP users +26% +24% 2023 targets 5m registered Doub
Slide 28: New STV Player Exclusive content is performing well
DIGITAL Our new STV Player Exclusive content is performing well and changing the way people watch Top 15 VOD titles on STV Player, Nearly a quarter of all drama viewing is H1 2023 Total now in the preview window streams Shape of 16-44s Drama consumption, 2023 vs 2019 Brookside 7.6m Emmerdale 5.8m Co
Slide 29: Our new digital advertising partnership with ITV is already paying off
DIGITAL Our new digital advertising partnership with ITV is already paying off Digital brand count up 50% in 2023 Digital yield up 250 55% increase in 200 STV’s VOD sales 2023 price (cost per 150 thousand) 2022 2021 100 2019 Addressable advertising up 2020 50 90%+ of STV Digital 0 campaigns now Jan
Slide 30: We continue to innovate the STV Player product
DIGITAL We continue to innovate the STV Player product to ensure prominence in every home New Sky Q app gives STV more control, data & prominence in 8m+ Sky homes The UK Government’s new Media Bill would guarantee that STV Player is prominent on all major platforms 30
Slide 31: Our H2 content line-up is helping stimulate an advertising recovery
DIGITAL Our H2 content line-up is already helping to stimulate an advertising recovery (Photo by Richard Callis/Eurasia Sport Images/Getty Images) The Winter King I’m a Celebrity FIFA Women’s World Cup (Photo by Ian MacNicol/Getty Images) Three Little Birds My Mum, Your Dad Men’s Rugby World Cup 31
Slide 32: STV's broadcast performance still way ahead of the competition
BROADCAST STV's broadcast performance still way ahead of the competition STV dominated drama launches in H1 across all commercial competitors Biggest drama launches by service, Scotland, H1 2023 3% 19% 515k 493k Broadcasters 397k delivered 98% of the top 500 programme 322k episodes in the first half
Slide 33: STV has an unrivalled commercial platform in Scotland
BROADCAST STV has an unrivalled commercial platform in Scotland STV was the most watched commercial channel in Scotland for 180 out of 181 days in H1 2023 STV the biggest peaktime channel in Scotland for 6th H1 in a row, ahead of BBC1 22nd 23rd 15th 10th 11th 12th 13th 14th 16th 17th 18th 19th 20th
Slide 34: Scottish advertising continues to track ahead of National
BROADCAST Scottish advertising continues to track ahead of National, with Q3 growth expected Regional advertising down 14% in H1, but underlying SME only -2% Regional brand count healthy through the cycle Return of SME spend is encouraging Average 2023 - 88 2022 - 88 2021 - 79 SME Scottish Governmen
Slide 35: Improving outlook
Improving outlook Greenbird acquisition helps accelerate diversification Revenue • Expecting at least 25% increase in total revenue for FY 2023 • Total advertising revenue expected to be up 3-5% in Q3 driven by strong sporting events • Q4 TAR impacted by tough comparators due to FIFA Men’s World Cup
Slide 36: Summary
Summary Accelerating STV’s diversification to boost resilience and growth • Excellent revenue growth shows diversification is working despite weak H1 advertising • Key strategic areas of Digital streaming and Studios continue to flourish • Transformative Greenbird acquisition turns STV Studios into