Stv Group Plc · LSE:STVG
Stv — Q2 2023 Earnings Presentation
45 slides from Stv's earnings presentation, Sep 5, 2023
Slide 1: Diversification targets exceeded; new 3-year growth plan
Diversification targets exceeded; new 3-year growth plan STV Full Year Results – 5th March 2024 Criminal Record Tod Productions, Apple TV+ 1
Slide 2: Agenda
Agenda Introduction Paul Reynolds Overview Simon Pitts Finance review Lindsay Dixon Strategic update, targets & outlook Simon Pitts Q&A 2
Slide 3: Diversification plan delivers
Diversification plan delivers • Diversification strategy continues to accelerate: o Total revenue growth of 22%, with growth areas more than offsetting linear ad revenue decline o Studios revenue and operating profit trebles o Digital revenue +6% and digital operating profit +16% o 75% of Group adju
Slide 4: Finance Review
Finance Review Lindsay Dixon 4
Slide 5: FY23 key financials
FY23 key financials Total National Regional Total Digital Advertising Advertising Advertising Revenue Revenue Revenue Revenue Revenue £168.4m £97.3m £64.1m £15.1m £20.2m 2022 +22% 2022 -12% 2022 -16% 2022 -9% 2022 +6% Adjusted Adjusted Studios Adjusted Net Operating Operating Revenue EPS Debt Profit
Slide 6: Group Results
Group Results 2023 2022 Balance of revenue and profit swings Revenue £m £m Change towards Digital and Studios - Broadcast 81.4 95.1 -14% - Digital 20.2 19.0 6% - Studios 66.8 23.7 182% • Revenue from Digital and Studios more than 50% of 168.4 137.8 22% Group total for first time • Excluding Greenbir
Slide 7: Total Advertising Revenue
Total Advertising Revenue VOD advertising continues to perform strongly; linear impacted across year by broader macro environment 2023 v 2022 National advertising revenue Rolling average 2019 to 2023 H1 H2 FY 10,000 National -19% -14% -16% 8,000 Regional -14% -3% -9% 6,000 VOD +14% +1% +7% 4,000 2,0
Slide 8: Advertising outlook
Advertising outlook Visibility remains limited but there are some signs linear advertising may be stabilising Q1 advertising trends 25000 • National linear showing growth in Q1 with 20000 greater activity across wide range of sectors 15000 • expected to be up around 2% 10000 • Total VOD (pre commiss
Slide 9: Adjusted operating profit
Adjusted operating profit Positive contribution from growth areas and cost savings as planned 30 25 20 15 10 5 0 2022 National Regional VOD Studios Greenbird Digital IT Inflation Savings 2023 adv adv content investment 9
Slide 10: Studios
Studios Continued momentum and acquisition delivers revenue, profit and margin growth 2023 2022 £m £m Change Revenue 66.8 23.7 +182% • Key programme deliveries include Criminal Record (AppleTV+), Screw S2 (Channel 4), Operating costs (61.6) (22.3) Catchphrase (ITV), ART/CART (BBC), Adjusted operatin
Slide 11: Greenbird Media
Greenbird Media Business delivering in line with acquisition business case ACQUISITION FINANCIALS GREENBIRD TRADING H1 2023 H2 2023 FY 2023 £m £m £m £m Payment on completion: Revenue 12.4 15.0 27.4 - consideration 21.1 - surplus cash 0.3 Costs (12.4) (11.8) (24.2) 21.4 Operating profit - 3.2 3.2 Def
Slide 12: Digital
Digital Excellent cost control converts revenue growth to higher margin 2023 2022 £m £m Change Revenue 20.2 19.0 +6% • VOD advertising revenue c.75% of total • grew +7% year on year Operating costs (10.3) (10.5) -1% • commission payments to ITV for national VOD started on 1.1.24 Operating profit 9.9
Slide 13: Broadcast
Broadcast Linear advertising decline and cost inflation impact division’s results 2023 2022 £m £m Change Revenue • Revenue down across the division due to market conditions - National advertising 64.1 76.4 -16% - Regional advertising 15.1 16.5 -9% • Largest single operating cost is payment to ITV -
Slide 14: Operating cash conversion 169%
2023 2022 Operating cash conversion 169% £m £m Year end net debt and leverage in Operating profit Depreciation and amortisation 6.4 5.2 25.3 4.8 line with guidance Share based payments EBITDA 0.6 12.2 0.8 30.9 Working capital (1.3) (19.4) Operating cash flow 10.9 11.5 Cash conversion 169% 45% • 2022
Slide 15: Pensions
Pensions Accounting deficit reduces by 13% 2023 2022 £m £m Assets 295.4 289.8 • Deficit reduction a result of updated Liabilities (350.2) (352.9) mortality assumptions • Asset valuation increases year on year Deficit (54.8) (63.1) • Work underway on Dec 2023 triennial Key assumptions: valuation; exp
Slide 16: Strategic Update & new 3-Year Plan
Strategic Update & new 3-Year Plan Simon Pitts Blue Lights, Two Cities Television for BBC1 16
Slide 17: We have exceeded our 2023 diversification targets
We have exceeded our 2023 diversification targets STRATEGY 2023 TARGETS ACHIEVED? RESULT BUILD WORLD Quadruple Studios revenue to £40m £67m CLASS STUDIOS £20.2m DRIVE Double digital revenues to £20m and registered users to 5m 5.7m registered DIGITAL users MAXIMISE Grow STV-controlled broadcast reven
Slide 18: We have transformed the revenue and earnings base of STV over the last 5 years
We have transformed the revenue and earnings base of STV over the last 5 years Now a much more balanced business with strong growth drivers STV Group STV Group STV Group Operating STV Group Operating Revenue FY18 Revenue FY23 Profit FY18 Profit FY23 2% 14% 21% 26% 25% 8% 40% 48% 78% 77% 49% 12% STUD
Slide 19: We have also laid strong foundations for the next phase of STV's growth
We have also laid strong foundations for the next phase of STV’s growth Reinvigorating the core business and building strong growth pillars GROWING BROADCAST STRENGTH, LEADERSHIP IN SCOTTISH OVERTAKING BBC1 ADVERTISING # of new 112 110 22.5% advertisers on 22.2% 91 22.2% 21.7% 21.8% STV 87 85 21.3%
Slide 20: Phase 2 of STV's transformation is about accelerating growth
Phase 2 of STV’s transformation is about accelerating growth Our new strategic objectives reflect our evolving business model 1. CONTENT 2. AUDIENCE 3. MONETISATION Accelerate UK & Drive streaming Maintain advertising international growth and maximise leadership and grow Studios growth total STV vie
Slide 21: STV Studios is now a leading UK production group
CONTENT STV Studios is now a leading UK production group 24 creative labels across scripted and unscripted, up from 9 #2 Nations & 58 new 68 series 34 620 hours of #1 production Regions commissions produced in returning TV in company in production in 2023 2023 series 2023,+154% Scotland company in U
Slide 22: Our expanded drama slate shows how far we've come in Studios
CONTENT Our expanded drama slate shows how far we’ve come in Studios Now producing premium drama for the best in the business Criminal Record Screw Successful launch in over 130 countries Season 2 launched on C4 Blue Lights Amadeus Average 5.7m audience for series 1; Coming to Sky in 2025 Already so
Slide 23: Our Studios investment model is delivering significant returns
CONTENT Our Studios investment model is delivering significant returns Other minority stakes in the Group • £3.2m operating profit • £55m+ of future revenue contribution in FY23, already secured ahead of guidance • Series 3&4 of Blue Lights • On track to deliver at and new drama Amadeus least £900k
Slide 24: Our Studios forward order book is greatly enhanced, and margin is improving
CONTENT Our Studios forward order book is greatly enhanced, and margin is improving Secured future Studios revenue Clear progress towards our 10% margin Mar-24 £87m 10% Mar-23 £53m 7.7% Mar-22 £27m 5% Mar-21 £26m Mar-20 £9m 2019 0 20 40 60 80 2021 2023 Target £m -1% The Hit List, Tuesday’s Child for
Slide 25: STV Studios is also becoming a more internationally-focused business
CONTENT STV Studios is also becoming a more internationally-focused business Increased emphasis on international formats and IP revenues Stronger catalogue driving IP revenues STV Studios of tomorrow – more IP and internationally-focused Increasing hours in distribution over time 4,200 *indicative o
Slide 26: There is no ceiling to the growth of STV Studios
CONTENT There is no ceiling to 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 FOCUS ON LARGE- CONSOLIDATE REFRESHED INTERNATIONAL STRATEGIC SCALE PR
Slide 27: Broadcast channels and their streaming services still dominate video viewing
AUDIENCE Broadcast channels and their streaming services still dominate video viewing Average Scot spent 5x longer watching broadcaster content than the SVODs in 2023 2023 TV set viewing in Scotland 47 mins (17%) 64% of all TV set viewing still to broadcasters and their VOD 15 mins services in 2023
Slide 28: Combined impact of STV & STV Player maintains market leadership
AUDIENCE Combined impact of STV & STV Player maintains market leadership STV the clear No.1 for commercial STV Player now 37% of STV’s total audience share in Scotland in 2023 reach and growing.... 0% 10% 20% 14% of our total monthly 20% reach watch STV 12% Player only, bringing in 30% a new audienc
Slide 29: Mr Bates vs The Post Office shows the power of linear + on demand
AUDIENCE Mr Bates vs The Post Office shows the power of linear + on demand Mr Bates vs The Post Office STV Player viewing in 2023 Preview Live Catch-up Acquired/Archive 16% 23% 35% 26% On- demand 895k 38% average TV Source: Adobe Analytics & FreeWheel, Jan-Dec 2023 audience 1.5m+ Linear streams 62%
Slide 30: 2023 was another year of strong growth for STV Player against all key metrics
AUDIENCE 2023 was another year of strong growth for STV Player against all key metrics More Watching For More people more longer success 5.7m registered 149m 71m Digital revenue users +17% streams hours £20.2m, +6% Active registered users +20% Digital profit +28% +25% VIP users +33% £9.9m, +16% 2023
Slide 31: 2023 saw a step change in our streaming performance, driven by new drama
AUDIENCE 2023 saw a step change in our streaming performance, driven by new drama More big shows than ever Drama consumption up 34% YoY (# programmes with 1m+ streams on STV Player) 18 45.0m hours 33.6m hours 12 2022 2023 2022 2023 Payback, STV & STV Player Source: Adobe Analytics/FreeWheel Jan-Dec
Slide 32: STV Player development is focused on where the growth is: connected TVs
AUDIENCE STV Player development is focused on where the growth is: connected TVs 86% of STV Player viewing now on a TV set New app launches in 2023 2023 86% 10% 4% 2019 68% 22% 10% Connected TV Mobile Web Source: Adobe Analytics & FreeWheel, Jan-Dec 2023 The UK Government’s new Media Bill should gua
Slide 33: 2024 has started strongly in STV Digital
2024 has started strongly in STV Digital H1 Highlights Digital streams +22% & online consumption +19% so far this year Already 6x shows with 1m+ streams (Photo credit: SNS Group) Source: Adobe Analytics/FreeWheel, YTD (up to 15th Feb 2024) 33
Slide 34: Video advertising still dominated by terrestrial players
MONETISATION Video advertising still dominated by terrestrial players, with STV way ahead of commercial competitors 83.5% of video advertising still with STV delivered 97% of the top commercial Broadcast and BVOD in 2023 audiences in 2023 in Scotland ALL INDIVIDUALS 3.1% 486 of top 500 16-34s 11.4%
Slide 35: A year on, STV's digital partnership with ITV is delivering results
MONETISATION A year on, STV’s digital partnership with ITV is delivering results Digital brand count up strongly in 2023 AVERAGE: 2023-169 2022-135 2021-117 2020-88 2019-97 250 Brand count up 200 Average brand count up over a quarter across the year 2023 150 2022 2021 Addressable advertising up 2019
Slide 36: Scottish advertising performance remains resilient despite tough economic climate
MONETISATION Scottish advertising performance remains resilient despite tough economic climate Regional advertising down 9% in 2023, but underlying SME spend only down 1% AVERAGE: 2023-86 2022-81 2021-79 2020-69 2019-101 Brand count up 120 2019 2023 Average regional brand count +6% 100 2021 2022 80
Slide 37: We are developing new, profitable digital revenue streams
MONETISATION We are developing new, profitable digital revenue streams We see significant scope to grow STV ScotPulse is STV’s B2B consumer Player+ subscription revenues research business • Player+ rolled out to all platforms in 2023 • Scotland’s largest online audience panel with over 40,000 people
Slide 38: STV already has a uniquely variable cost base for a media business
ORGANISATION STV already has a uniquely variable cost base for a media business c.65% of the Group’s cost base is variable and linked to revenues • Three largest areas of spend are: Breakdown of the Group’s cost base • programme production costs 2% • payments to ITV 7% • staff costs 6% 23% 3% • Oper
Slide 39: Costs – inflation and mitigation
ORGANISATION Costs – inflation and mitigation We have delivered our £2.5m targeted cost saving in 2023 Cost savings (£m) FY23 FY22 • Savings exclude lower NAA fee which flexes with national advertising revenues Lower variable pay 0.3 2.2 Property savings - 0.6 • Mix of permanent and temporary Pensio
Slide 40: We will now aim to deliver a further £5m p.a. cost saving by 2026
ORGANISATION We will now aim to deliver a further £5m p.a. cost saving by 2026 We have a clear 3-year plan following a comprehensive cost review Approach to Cost Review Key areas of focus • Deep review of Group cost base conducted across Q4 2023 Facilities & property footprint • Zero-based exercise
Slide 41: We will continue to invest to support delivery of our growth targets
ORGANISATION We will continue to invest to support delivery of our growth targets Allocation of capital will be balanced across investment in the business and maintaining a sustainable, progressive dividend • Main area of capex spend will continue to be Broadcast as we 2024-26 ensure operational res
Slide 42: We have set stretching new 3-year financial targets for the Group
We have set stretching new 3-year financial targets for the Group By 2026: a more balanced, profitable and internationally-focused business • We will double Studios revenues to £140m with a STUDIOS target to achieve a 10% margin • We will grow our digital revenues to £30m at a DIGITAL margin of at l
Slide 43: Our financial targets will be underpinned by new KPIs aligned to the strategy
Our financial targets will be underpinned by new KPIs aligned to the strategy CONTENT AUDIENCE MONETISATION KPI TARGET KPI TARGET KPI TARGET Commercial Ad market Stay No.1 # returning series 45 audience share leadership: % of 90%+ large commercial STV Player reach audiences on STV as % of total STV
Slide 44: Improving outlook
Improving outlook • Advertising market showing growth so far in 2024 • Total advertising revenue (TAR) expected to be up around 5% in Q1 • Digital VOD advertising expected to be c.+12% in Q1 • Scottish advertising down around 4% in Q1 reflecting Scottish Government declines (underlying SME advertisi
Slide 45: Summary
Summary STV now a more balanced business with strong foundations for the next phase of growth • 3-year diversification targets fully achieved; revenue/ profit base now much more balanced • 2023 profit impact from weak advertising partly mitigated by Studios and Digital growth • Transformative acquis