Stv Group Plc · LSE:STVG
Stv — FY2019 Earnings Presentation
38 slides from Stv's earnings presentation, Mar 10, 2020
Slide 1: STV strategic plan delivers further growth
STV strategic plan delivers further growth 2019 Full Year Results – 10 March 2020
Slide 2: Delivering on our strategy
Delivering on our strategy • Double digit operating profit growth in an uncertain market • Maintained excellent viewing performance on TV and online, including amongst 16-34s • High margin digital business growing well ahead of expectations • Significantly enhanced creative pipeline in productions s
Slide 3: Delivering strong financial performance
Delivering strong financial performance Total Total Regional Digital Production Advertising Revenue Revenue Revenue Revenue Revenue £123.8m £101.6m £14.9m £13.0m £13.7m -1.6% +2% +11% +37% -16% Operating Operating Non-broadcast Full Year EPS Profit* Margin Profit Growth Dividend £22.6m 18% 46.4p 21p
Slide 4: STV key performance metrics now at historic highs
STV key performance metrics now at historic highs Operating profit EPS Growth 50.0p new strategic plan £25.0m new strategic plan 46.4 22.6 40.0p £20.0m 41.1 20.3 20.1 39.9 39.7 39.6 19.5 19.7 19.0 36.3 30.0p £15.0m £10.0m 20.0p £5.0m 10.0p - - 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2
Slide 5: Profit growth coming predominantly from topline revenue growth
Profit growth coming predominantly from topline revenue growth Operating profit bridge, 2017-2019 £30.0m 2.5 £25.0m 4.6 3.2 £20.0m 4.4 1.9 £15.0m 22.6 £10.0m 19.0 £5.0m - Operating National Regional Digital Restructuring Investment in Operating profit 2017 advertising advertising advertising growth
Slide 6: Strategic Update & Outlook
Strategic Update & Outlook Simon Pitts 6
Slide 7: We are pursuing the right strategy to grow our business for the long term
We are pursing the right strategy to grow our business for the long term 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 7
Slide 8: STV's broadcasting business remains uniquely strong
BROADCAST STV’s broadcasting business remains uniquely strong Across the top 10 commercial channels in Scotland, STV’s peak audience is now bigger than all the other channels combined 350000 300000 250000 200000 150000 100000 50000 0 STV CH4 CH5 ITV3 ITV2 E4 Film4 More4 Drama ITV4 STV viewing STV no
Slide 9: TV still dominates youth viewing and ad consumption
BROADCAST TV still dominates youth viewing and ad consumption, with STV reaching 92% of 16-34s 62% of 16-34 Big Screen viewing is TV 84% of 16-34 video advertising viewing is on TV Other 8% Other online (2%) (14mins) Youtube Cinema (1%) 8% (14mins) 16-34 BVOD (9%) Big Screen TV (57%) SVOD Viewing 1h
Slide 10: Despite two decades of online disruption, UK reliant on traditional platforms
“Despite two decades of online disruption, the UK remains reliant on traditional platforms and brands across the media sector – more so for older cohorts, but also for younger generations” Enders Analysis, The ‘surprising’ endurance of broadcast media, February 2020 10
Slide 11: The STV Growth Fund continues to drive regional growth
BROADCAST The STV Growth Fund continues to drive regional growth Growth Fund at a glance since launch £9.9m 396 allocated deals so far More than 50% of members 166 new saw their The focus for 2020 is our find, grow, keep strategy with aggressive price advertisers profits increase comparison to illus
Slide 12: The fund is building brand loyalty to STV and increasing repeat business
BROADCAST The fund is building brand loyalty to STV and increasing repeat business “The response was instant. The footfall has been insane. Every second person is coming in and they've seen us on TV so it's definitely working.” Yasmine Ali, Managing Director, Babyland “What TV can deliver that the o
Slide 13: Our digital business continues to grow strongly, well ahead of expectations
DIGITAL Our digital business continues to grow strongly, well ahead of expectations More people Watching more For longer Monthly active VOD stream Total online VOD users starts viewing +15% +37% +23% Creating more And more inventory revenue Ad impressions Digital revenue +44% +37% 13
Slide 14: The Sky launch has so far boosted STV Player usage by 30%
DIGITAL The Sky launch has so far boosted STV Player usage by 30% and ad impressions by 15-20% • Very successful launch of STV Player to Sky’s 800,000 Scottish homes in November • STV prominently positioned next to BBC iPlayer and receiving significant promotion • STV’s drama boxsets and Player-only
Slide 15: Player-only content has grown to 1000+ hours
DIGITAL Our Player-only content has grown to 1000+ hours, representing 15-20% of usage and growing Growth of Player-only content as % of total 2 new live STV Player streams 19% last 24/7 sports month channels 20 18 16 +110 hours 14 12 6% 12 months of drama 10 ago 8 boxsets 6 4 2 +450 hours 0 of new
Slide 16: Leading the market with innovative features to drive total digital viewing
DIGITAL We’re leading the market with innovative features designed to drive total digital viewing Live restart Recommendations • STV the first in the • Introduced across all UK to introduce platforms in 2019 broadcast live restart in SD and HD • 30% watch the next episode • 18% of Player streams res
Slide 17: Significant potential for future digital growth this year and beyond
DIGITAL We see significant potential for future digital growth this year and beyond New platforms New content Big exclusive events and a step change in Launched Launched Player-only content to Nov 2019 Feb 2020 come in 2020 UK wide STV Player rolling out across the UK in 2020 + Monthly retail price
Slide 18: Digital is STV's #1 marketing priority
Digital is STV’s #1 marketing priority 18
Slide 19: Very strong foundations laid for production growth
PRODUCTION In the last year we have laid very strong foundations for production growth • New creative leadership across the genres • Produced two new dramas for first time in a decade 2019 • Invested in new production companies, Primal and Two Cities 17 shows • More aggressive approach to existing a
Slide 20: A broader slate of new and returning shows
We now have a broader slate of new and returning shows PRODUCTION RETURNING RETURNING RETURNING RETURNING Inside Central Jerk ART/CART Catchphrase Station RETURNING NEW NEW Britain’s Biggest Warship The Cash Machine It Pays to Behave NEW NEW NEW NEW Home Free Clear Out, Cash In The Victim Elizabeth
Slide 21: Low risk acquisitions have strengthened our creative pipeline
PRODUCTION Low risk acquisitions have significantly strengthened our creative pipeline • Excellent creative track record Patrick • Excellent creative track record Melrose • Very strong pipeline • Very strong pipeline • No upfront consideration • Low upfront consideration, fully • Payouts only in suc
Slide 22: STV's drama development slate is now particularly strong
PRODUCTION STV’s drama development slate is now particularly strong, with The Victim and Elizabeth is Missing significantly enhancing our reputation Drama Initial 25% stake with path to 100% owned 50/50 joint venture control 23 projects in active 9 projects in active 20 projects in active developmen
Slide 23: On track to hit our 2020 diversification target
We are on track to hit our 2020 diversification target Non-broadcast earnings as a % of operating profit 33% 28% 24% 19% 23
Slide 24: Coming up at STV in 2020
Coming up at STV in 2020 • Consolidate ratings lead over rivals 1.Broadcast • Refresh STV Growth Fund positioning • Progress regulatory settlement over licences and prominence • Continuous focus on broadcast cost base • Monetise strong viewing growth 2.Digital • Step change in Player-only content •
Slide 25: Positive outlook
Positive outlook • Strong start to 2020 - STV viewing share up - STV Player viewing accelerating - Total advertising revenue expected to be up in Q1, and down 5% in April • Across the full year we would currently expect: - Single digit growth in regional advertising - Strong double digit growth in d
Slide 26: Financial Review
Financial Review Lindsay Dixon 26
Slide 27: Group Results
Group Results Strong performance in an uncertain market; total advertising revenue up 2% 2019 2018 £m £m Change • Revenue down 2% reflecting slightly lower Revenue Productions deliveries and a lower lottery - Broadcast 92.3 94.5 (2%) recharge - Digital 13.0 9.6 37% - Productions 13.7 16.3 (16%) • To
Slide 28: Group Results: adjusted operating profit up 13%
Group Results Adjusted operating profit up 13% 2019 2018 £m £m Change Adjusted operating profit 22.6 20.1 13% Exceptional items - (11.1) • Net nil exceptionals in 2019 Operating profit 22.6 9.0 • Other finance costs comprise; Finance costs - non-cash pension of £2m; and - funding (1.3) (1.1) - lease
Slide 29: Broadcast
Broadcast Strategic growth drivers more than offset national advertising weakness 2019 2018 £m £m Change • Stronger second half for national advertising, Revenue with full year decline of 4% - National advertising 75.3 78.1 (4%) - Regional advertising 14.9 13.4 11% • Double digit growth in regional
Slide 30: Digital
Digital Excellent revenue growth delivers increased profitability 2019 2018 £m £m Change Revenue 13.0 9.6 37% • Strong H1 revenue performance improved Operating costs (5.7) (4.4) (33%) further in H2 as a result of the consistent focus on new product features and an enhanced Operating profit 7.3 5.2
Slide 31: Productions
Productions Full year performance in line with guidance in a year of transition 2019 2018 £m £m Change Revenue 13.7 16.3 (16%) • Programme deliveries heavily weighted to second half Operating costs (13.8) (15.8) 13% • H1 performance recovered as guided, from a Operating profit (0.1) 0.5 (123%) £1.7m
Slide 32: Strong operating cash conversion
Strong operating cash conversion 2019 2018 £m £m Operating profit 22.6 20.1 • Strong operating cash conversion of 93% Dep'n / amort’n – owned assets 2.9 2.4 • Cash conversion lower than 2018 as prior year Dep’n / amort’n – leased assets 1.9 - impacted by timing of ITV working capital of Share based
Slide 33: Net nil exceptional items in 2019
Net nil exceptional items in 2019 2019 2018 £m £m Operating exceptionals Gain on sale of investment 2.0 - • In September, the Group disposed of its minority Development cost write-off (1.9) - shareholding in deltaDNA, a gaming software Cost of acquisition – Primal (0.1) - company, for a total consid
Slide 34: Pensions
Pensions Accounting valuation reduces by 18% due to asset performance Accounting valuation 2019 2018 Change Assets (£m) 381.9 343.4 11% • Triennial valuation process (as at 31 December Liabilities (£m) (445.9) (421.9) (6%) 2017) completed in April 2019 Deficit (£m) (64.0) (78.5) 18% • Deficit fundin
Slide 35: Scottish Children's Lottery (ELM)
Scottish Children’s Lottery (ELM) Divestment or partnership being actively sought • Current trading in line with projections • Independent review of the ELM operation completed • Concluded that STV is not the best long term owner of the lottery and process commenced to investigate partnership or div
Slide 36: Appendices
Appendices 36
Slide 37: Corporate costs – additional information
Corporate costs – additional information As reported Restated 2019 2018 2018 Realloc’n 2018 Corporate costs £m £m Change Broadcast 15.3 4.1 19.4 Operating costs (4.5) (5.0) 11% Digital 4.7 0.5 5.2 Productions 0.1 0.4 0.5 Corporate - (5.0) (5.0) Adjusted operating profit 20.1 - 20.1 • Key elements of
Slide 38: Group operating profit bridge
Group operating profit bridge Strategic growth drivers more than offset national advertising weakness Adjusted operating profit £25.0m £20.0m £15.0m £10.0m £5.0m - 2018 op profit National Regional Digital Productions News STV2 closure Other 2019 op profit advertising advertising restructure • Digita