STV Group (LSE:STVG) — Annual Results

0:01 Good afternoon, ladies and gentlemen. Welcome to the STV Group PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the top right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so, and these will be available via your investor meet company dashboard.

0:34 Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Simon Pitts. Good afternoon, sir. Good afternoon. Pleasure to be here. Thank you for joining us. Over the next few minutes, I'm gonna give you some perspectives on the future of the television market, and in particular, why my business, STV, offers both profit and dividend growth potential. But first of all, let me just briefly introduce STV because we're not necessarily a household name outside Scotland nor indeed a global powerhouse, at least at least not yet. So the simplest way to describe us is as the ITV of Scotland, but with go faster stripes, we like to think. So if you switch to button three on your TV set in Scotland, you get STV, not ITV.

1:32 Lots of familiar programming, the big soaps, Coronation Street and Emmerdale, 09:00 dramas, Saturday night entertainment, but also with comprehensive Scottish news, current affairs, and regional programming representing all parts of the country. We are very much Scotland's commercial public service broadcaster. We also operate STV Player, a streaming service, which has over three quarters of the Scottish population signed up as a registered user and has recently launched right across The UK for the first time. And we run Scotland's largest television production company,

2:08 STV Studios, which has now grown to nine creative labels covering the full range of genres, making shows for an increasing number of broadcasters and streaming companies from our bases in Glasgow, in London, and in Belfast. But before I go any further, why don't I show you what I mean rather than just talking about it? So if we could play the tape, that would be great.

2:38 Anyone could have seen me. They didn't. I was careful. This is your first murder, Jason. You're a sign of any trouble, you call me. Marcus Rashford for England. King Charles the third made his first address to the nation. Well, it's got action. It's got adventure, and it's certainly got an all star cast. This is STVG. Okay. Listen. That's enough. You have to tell me everything that happened that night. Be careful who you trust. I wonder what's going on over there.

3:30 The man I trusted most was a Russian spy. You have a knife. His moon is wetting her poutine. Get ready.

3:42 I'm Ross Kemp, and this is the Bridge of Lies. Look for secret drawers. I'm investigating a spate of deaths in The UK. We

4:01 want to see more women, more people of color, and more of those living with a disability taking part in our programs. I really just want to say thank you to everyone who's donated. It's good to unwind and enjoy a moment of calm.

4:57 So there you have it. Some fantastic programming to look forward to culminating this this year in a rugby World Cup, played in the autumn where all the home nations will be present. It should be should be very exciting. So 2022 saw us deliver another strong performance across the business, building again on the record results we posted for 2021. Adjusted operating profit was up 2% driven by our growth areas of digital and studios, which now make up 38% of our total earnings. The advertising market once again showed its resilience with total advertising down only 2% despite the economic uncertainty we all experienced in the second half of the year. And strategically, we are in a very strong place. Our TV channel remains by some margin the most popular in Scotland, and our free to air positioning is exactly where you want to be in a cost of living crisis.

5:54 Our digital service, STV Player, continues to grow and has surpassed our 5,000,000 registered user target one year early. And our production business, STV Studios, is rapidly building scale and reputation in what is an exciting global content market. The wider economic situation in The UK is is well known, as are the pressures on cost inflation for all businesses, and we're not immune from those at STV going into 2023. As expected, we've seen a weaker advertising market in the first quarter of this year. It's in line with our expectations for the start of the year given the very strong q one performance in 2022. And we have seen some encouraging signs in the regional advertising market as well as continued good growth in digital VOD advertising.

6:45 And, of course, we've we've been here before with TV advertising under pressure as the economy weakens. But each time, including the most recent case study of COVID, the market has bounced back quickly and decisively, and that's because TV remains the best, the most cost effective way of building advertiser brands, proves itself time and time again. And the proof of that generally is in the numbers with our total advertising revenues last year still comfortably ahead of our pre COVID year of 2019. So overall, we remain on track to hit our 2023 diversification targets as we become a more balanced, a more resilient business focused on the new growth areas of digital and studios.

7:30 And it's against that backdrop that the board is recommending a final dividend of 7.4p per share, taking the full year divvy to 11.3p, 3% up on last year as we maintain our commitment to a progressive dividend alongside the need to invest for our future growth. So a quick reminder of our diversification strategy and growth targets. We have a clear, a well understood plan that has delivered strong financial results in recent years. That plan is built on maximizing the unrivaled strength of our broadcast business by maintaining our clear viewing and advertising leadership in Scotland. In digital, it's also about becoming a leader in streaming by continuously growing our STV user base and driving VOD advertising revenues.

8:18 And in studios, we have an exciting opportunity to build a world class production business headquartered in Scotland, but globally facing and fully focused on building a bank of high quality returning series. We have clear twenty twenty three targets in place for each of our businesses. We remain on track to hit or exceed them as part of an overarching objective for at least 50% of our earnings to come from outside traditional TV by the end of this year. And moving on to the divisional updates, and I'm gonna start with our studios business, which continues to exceed expectations. This on this chart is STV Studios on a page. We doubled our new commissions last year to 30.

9:04 We now have 11 returning series versus only four in twenty eighteen when we started out on this journey. And last year, we grew our delivered production hours by nearly 50% across our nine labels. Our stated goal here is to become The UK's number one nations and regions production company by turnover, by profit, and by reputation, and we're making excellent progress towards that goal. 2023 will be a breakthrough year for STV Studios. We've already secured over £50,000,000 in production revenue more than double last year across over 20 series with an encouraging spread across different genres and across our different production labels. More than a third of that revenue will come from returning series as the pie chart on the right of the slide shows.

9:54 We've always said that this is the foundation of a successful production business, delivering returning series. But, of course, you also need new ideas coming through all of the time, and that's why we've placed a number of creative bets on individuals and production businesses. And you can see that this is starting to pay off with two thirds of our revenue this year set to come from brand new original shows that we hope will become the returning series of tomorrow. Every one of our production labels has delivered encouraging commissions, and there isn't a single one off nonreturnable show in that 50,000,000 of secured revenue. We really are building for the future. This next chart also shows that we're starting to stand out as well in what is, as everyone will know, a very competitive TV marketplace. Marketplace.

10:44 This is a snapshot of the 6PM family slot on Saturday nights in January this year where three STV Studio shows actually went head to head across BBC one, BBC two, and ITV one, the three biggest channels in the country, collectively delivering nearly 7,000,000 viewers and accounting for almost 50% of all viewing in The UK at that time to TV. Last month, we achieved another first when four of our studio shows were aired on the same day. And these encouraging milestones show how far we've come as a production business and certainly don't go unnoticed in the industry. And it's our drama business that's the standout performer in 2023 as this slide shows. This year, we'll produce three major drama series for channel four, for Apple, and for the BBC, collectively worth over £35,000,000 with our three drama companies each contributing series. And drama is a vital part of a successful production group because of its sheer scale and potential profitability, particularly if you have a long running returning drama.

11:52 So it's really very encouraging that each of our scripted shows on the screen there is either already returning in the case of Screw for channel four or returnable in the case of Criminal Record and Blue Lights. This is also further evidence of our positioning as a nations and regions production company, really starting to bear fruit with Screw filmed in Glasgow and Blue Lights in Belfast. And filming is actually already finished on each of these shows. Blue Lights launched on BBC One on Monday, just gone to huge popular and critical acclaim. Five star reviews across the board. And if you missed it, all six episodes of the of the series are available on BBC iPlayer right now. And that show, Blue Lights, is produced by a company called Two Cities Television, a production company we took a minority stake in in 2020.

12:45 Hence, its performance isn't yet consolidated into STV Studios' financial results. However, under the terms of our deal, we have an automatic route to controlling the business as it moves into profitability, and this provides us with another way of accelerating the growth of STV Studios over the coming years. And we have similar structures for each of our minority investments, as you may already know. Turning now to digital, and 2022 was another year of good growth for our streaming service, STV Player, against all the key metrics. Our vision here is to be Scotland's leading advertising supported streaming service as well as a UK wide free streaming destination featuring thousands of hours of premium drama from Scotland, The UK, and around the world.

13:33 And the strategy for achieving that is straightforward. We want more people watching more content for longer because we know that that is what translates into more financial success. And you can see that we're on track against the stretching three year targets we set ourselves back in 2021. We surpassed our goal of 5,000,000 registered users in January this year, nearly a year ahead of target, though our main objective is now evolving into converting not just users, but active users and VIP users because it's these loyal audiences who watch more STV content. We're also on track to double our digital viewing by the end of this year compared to our 2020 baseline with streams and overall consumption both up last year. And our target of £20,000,000 of digital revenue is very much within our sights, as you can see, with 19,000,000 last year secured at a very healthy 45 percent margin.

14:34 The most significant digital development in recent weeks has been the new streaming partnership we struck with ITV just before Christmas. And the benefit of our arrangement with ITV has always been that it allowed us exclusive access to a high quality broadcast set schedule of UK original programming without having to fund the full cost of that programming ourselves. And in recent years, these content costs have been tied to advertising revenues, ensuring that STV has a very attractive variable cost model to guard against fluctuations in the advertising market. And what we've now managed to do is extend that favorable deal from the broadcasting world into the streaming world. We all know that putting new exclusive content onto our streaming service before it gets a linear transmission on our TV channel is vital if we're going to compete effectively with the global platforms, if we're going to meet changing viewing demands.

15:34 But we also know that new content is very expensive, and that is why for us, partnership really makes sense. And our agreement allows us to largely mirror the original shows on ITV's new service, ITVX, providing us with exclusive access in Scotland to over a hundred hours a year of additional box sets that will be windowed on STV player up to six months ahead of their linear transmission on STV, the channel. Rather than pay for these shows up front, our costs would be linked to success, paying ITV a share of the ad revenue generated in these preview windows. It's a model we've successfully introduced for other third party content in recent years and which will serve us well because it guarantees that we will have access to brilliant new shows on an affordable basis for the long term.

16:27 And it's early days, obviously, in this new partnership, but we're already seeing the benefits of the new content with regular weekly box set drops generating millions of streams so far and growing STV players user base. This next chart illustrates the step change in our content offer under this extended partnership. Our key differentiator in a very crowded marketplace is new UK content, not American shows. That is our USP with audiences and also with advertisers. And last year, we launched 14 new drama box sets on STV Player before they hit linear television. This year, that number will more than double to 34 drama titles. Big names, big shows, and no waiting around for weeks for your next binge worthy series.

17:19 On screen are just some of the new drama titles available this quarter, including the brilliant Unforgotten, which I really hope you've seen already, a new one, The Dry, an Irish drama, which launched this week from the creators of Normal People, and a brilliant new drama set in Glasgow

17:36 called six four, which launches tomorrow. The second dimension to our new partnership is digital advertising sales, and digital advertising has been a strong performer for STV in recent years. Revenues more than doubling since we started our transfer transformation in 2018. But advertising is about scale with the largest players attracting the highest yields, And that scale allows these players to maximize reach and frequency for advertising brands while at the same time delivering targeted addressable advertising at very high volume, something the market is increasingly demanding as standard. Outsourcing our digital sales to ITV as we have now done gives gives STV that twin capability at a stroke, and we can see the impact in our numbers even after only a few short weeks.

18:32 We also announced recently that STV Player has now launched on ITV's Planet V, which is the second largest programmatic video ad platform after Google in The UK, allowing ad agencies to book data enabled, fully addressable advertising at scale on STV Player for the first time. Over 90% of our digital advertising is now targeted by genre, by geography, and by socio demographic, and this compares to less than 40% targeting on STV Player last year. And as well as national advertisers, we're also opening this targeting capability up to Scottish advertisers and Scottish agencies for the first time, providing another dimension to our local advertising sell.

19:18 We'll continue to sell all the regional advertising ourselves through our in house sales teams based right across Scotland, but adding new targeting capability will create a genuinely one stop shop for Scottish advertising across linear, VOD, and now programmatic advertising. And just a final word in the digital section on our third party content strategy because that remains very important to us even in a world where we've secured access to more original programming. And that's because it's these programs that are available right across The UK on the STV Player rather than just exclusively in Scotland. We've built a compelling proposition over the last few years through content partnerships with some of the world's best known program makers.

20:03 As a result, we now have over six thousand hours of content, up another sixteen hundred hours just last year. 39% of our video on demand streams on our streaming service came from third party titles in 2022, some fifteen million hours of consumption across an impressive 167 different drama box sets. So there really is something for everyone if you look hard enough on the player. Our latest program acquisition has also caused quite a stir in recent weeks because we've brought back an iconic soap called Brookside. You may have heard of it, to play from the very first episode exclusively on STV Player. The audience response to this has been amazing.

20:49 It's already our fastest growing title ever, racing to over 3,000,000 streams in a little over a month, attracting well over a 100,000 new users to STV Player in the process, two thirds of whom are outside Scotland. In turn, that's propelled our share of VOD streams from across The UK from outside Scotland to 25% of our total in q one this year versus 15 to 20% last year. And the point here is that success in streaming is obviously about having, on the one hand, enough of these big shiny new shows to stand out from the crowd. But it's also about strength in-depth and having a strong archive, and our smart acquisitions over the last few years have given us just that.

21:37 Turning then finally to broadcasting, our third, division, and it's only in recent months that we've been able to track the performance of the whole market, including the viewing figures of the streaming services like Netflix, Amazon Prime, and Disney plus as their viewing is now being measured by the industry measurement tool, Barb, for the first time. And the results here show very clearly that the terrestrial broadcasters and their VOD services continue to dominate these subscription streaming services. On the left are STV's top three dramas of 2022 in audience terms, plotted against the top three dramas from Netflix, from Disney plus, and from Amazon Prime in Scotland in 2022.

22:22 Two key takeaways here. Firstly, the STV's top dramas are at least twice as big, twice as popular as all the others. And secondly, that all of the biggest dramas on the global streaming services are US dramas, not UK ones. That point I was making earlier, underlining our key and enduring differentiator in the market that we are about new stuff from The UK. The chart on the right is even more stark, I think, because it shows the top 500 program episodes across the whole of the market in 2022. Together, STV, BBC One, and Channel four accounted for 99% of the top 500 episodes last year, including 66% on STV, 329 of the top 500 programs that equates to.

23:16 Netflix, on the other hand, only 1% of the top 500, and the other streamers, nowhere to be seen. And, of course, in the middle of a cost of living crisis, that competitive advantage of free to air television is only going to get stronger. Now I'm not saying that Netflix and Amazon and Disney plus aren't popular and aren't here to stay. I'm just saying that what we are doing is several times larger in audience terms than those competitors. This next chart illustrates our enduring strength in the broadcast market. I won't labor it, but we were, again, the biggest peak time TV channel in Scotland for the fourth year in a row last year. The combination of I'm a celebrity, back in Australia and the Football World Cup took us to a near twenty year high in November.

24:08 The top right box is worth calling out too because the big channels are often criticized for leaving younger audiences behind. And in fact, STV's 16 to 34 audience was bigger last year than that of the younger skewing channels, channel four, ITV two, and BBC three put together. And these big audiences convert directly into commercial success for us, which is an important point for us to make, and that's what this chart demonstrates. STV's ratings peaked at over 500,000 viewers in Scotland on two hundred and three separate days in 2022 compared to only eighteen days for our nearest commercial competitor channel four. And that translates into an STV share of commercial impacts, effectively our advertising market share that was more than three times bigger than our closest rival last year.

25:03 Our Scottish advertising performance was also resilient in 2022 despite a tough second half of the year. Total regional advertising ended the year down 4%, but this masked quite an encouraging trend in the underlying SME market in Scotland that is worth briefly highlighting. On the left of the page, you can see that our average regional brand count continues to grow steadily, the number of advertisers that are advertising with us each month, and that 2022 was actually the first year since COVID that brand count was at a consistently healthy level throughout the year. These brands generated an 18% increase in revenue from SMEs across Scotland with sectors like travel and transport, household equipment, entertainment, all performing particularly strongly.

25:51 However, that growth was offset by a decline in Scottish government spend, which ramped down by nearly 50% as expected as the COVID threat receded. The bar chart on the right shows that we're now returning to much more normal ratios of government to SME spend with the trend continuing into q one this year, which is for us very encouraging because it shows that we're starting to get back to something like normality. Clearly, there is caution in the regional market at the start of this year given the economic picture just as there is nationally. But, again, the decline we've seen in q one is largely down to further expected falls in government spend with other regional spend flat to slightly up for the quarter so far.

26:36 And once again, we're seeing STV's advertising growth fund doing its job in a tough market, making TV advertising more accessible, more affordable, and generating a healthy influx of new advertisers, the vast majority of which go on to become repeat clients.

26:53 Our fund celebrated its thousandth deal last month since launch, quite a milestone for us and a big reason why we've been able to consistently grow regional revenues and regional margins in recent years. So our strategic priorities for 2023 are very clear. In studios, the focus remains on returning series, and we will also consider larger scale investments and partnerships given our strong financial position and our desire to accelerate production growth even further. In digital, we'll be pushing our exciting new player box sets as well as continuously improving the user experience, including the imminent launch of a brand new STV player app for Sky Q customers in the next few days.

27:42 And in broadcasting, we're obviously intent on maintaining our leadership here in programming and in advertising, but we're we've also been looking for certainty on the extension of our public service licenses as well as a favorable new media bill that guarantees prominence for STV and our fellow public service broadcasters on new digital platforms for the future. And I'm delighted to say that just this morning, the UK government published their new media bill as well as confirmed that our broadcast licenses will be extended for another ten year period, offering us very welcome long term reassurance on the future prospects of our broadcast business. And in terms of the outlook for the year ahead, the main message is that we remain on track to hit our big diversification milestone of 50% of our total profit coming from our new growth areas for the very first time.

28:37 Total advertising is expected to be down around 15% in q one, albeit as expected and compared to a first quarter last year that was up over 20% by comparison. Within that, though, we expect digital advertising to be up an encouraging 15 to 20% in q one and Scottish advertising down around 20%. But when you net out Scottish government spend, the underlying regional market is broadly flat to slightly up, as I say. Our first look at April, although it's still a relatively early estimate, is that we will be down about 10 to 15%. You'll appreciate it's hard to predict the remainder of the year, but clearly, we hope for a better second half fueled by a recovering economy and greater consumer confidence.

29:27 And most importantly, we have been here before, of course, many times, and we know how quickly the TV ad market bounces back after economic shocks. We saw that very clearly post COVID. What also gives us confidence is that we have another incredibly strong content lineup this year with a record amount of new original content culminating, as I say, in the rugby world cup exclusively on our channel, all 48 matches in fifty one days in September and October. And our studios business continues to build encouraging momentum, and our previous guidance is reconfirmed of at least £50,000,000 in revenues and £3,000,000 in profit in 2023, a step change in performance or more than doubling in performance year on year.

30:14 Okay. That's it. I'll leave you with the summary and our key messages on screen. Thank you very much for listening. I'm very happy to take any questions now. Thank you. Simon, that's great. And thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while Simon takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Simon, as you can see there in the q and a tab, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions.

30:59 But, Simon, if I may just hand back to you to respond to those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Will do. Many thanks. So the first question is with total advertising revenues and studios revenues currently standing at a 100 and 10,000,000 and 23,700,000 respectively, What are your ultimate ambitions over the medium term for studios as a percentage mix of overall group revenues? Good question. We've said that even by the end of twenty twenty three, we would like to be in a position where 50% of our earnings, our operating profit comes from the new areas of either digital streaming through STV Player or studios. We've guided that studios will be at least 3,000,000 of profit by the end of this year.

31:45 And and but the main, I guess, answer to your question is that there is no ceiling to the growth of our studios business. There is no reason why our studios business in the next two, three years can't be just as big as our broadcasting business. We've set out at a recent Capital Markets Day that, we want our target margin of of at least 10% in studios to be achieved by 2025. There's no reason we can't be a a studios business turning over more than a £100,000,000 and generating 10 millions million pounds of profit in the medium term. And beyond that, as I say, with demand for content very high, there's no reason we can't kick on both across The UK and across the world. And that's the beautiful thing about a studio's business and particularly one with the serendipity of being a nations and regions producer, first of all, where the demand for making shows outside the Southeast Of The UK is growing ever stronger, and also one lucky enough to have the English language as our primary language that can be exported so so so so well across the rest of the world. There's no reason why we can't continue to grow and grow strongly from here. And a more balanced STV will be a more robust STV for the long term.

33:17 And following on from that content question, another question on the production business. What is the typical sales cycle to winning a commission for work, and what's the normal win loss ratio when tendering for new commissions? Well, I would love to have a win loss ratio that was impressive sounding. The truth is that you will lose more than you will win in terms of new commissions, and that is why you have to have a very strong creative pipeline. One of the issues that we faced a few years ago when myself and the new team arrived was that we didn't place enough bets in our production business on people, on ideas, on scripts. We had too many, eggs in one basket, where we were developing a couple of shows at a time in drama rather than a whole raft, for example.

34:10 And now we have hundreds of shows in scripted drama and in unscripted, so factual and entertainment and and factual entertainment shows in development at any one time. It's why we have nine separate creative production companies and labels, three in house and six companies that we've we've invested in because we want to spread our bets just as you would as investors spread your bets and not just back one company, however good that company was. That's what we need to do in production. And the lead times there, to your question, are variable depending on which of the genres you're working on. So in drama, the lead times are quite long from the point where you maybe option a book or start discussing an idea with a script writer to writing the first episode script, to getting that funded by a commissioner, to moving into a period of exclusive development with a commissioner, to a green light, to then putting it on air can be as short as eighteen months and as long as three years for for scripted, which is why it is so important to have a lot of ideas in the pipeline at different points of development.

35:34 So we have at the moment a load of shows that are at the very early stages. They are germs of ideas. They are books that we might have optioned, and we have an equally good healthy number of shows that are on the cusp of a green light or a refusal more more realistically. But it takes time in scripted. And in unscripted, the turnaround times are much shorter because you can make a factual show or a documentary or an entertainment show reasonably quickly. So it's it's much more like six, nine, twelve months there. And the ratio is is difficult to predict. As I say, you will have many more shows turned down than you will commissioned.

36:25 The the key is to have a lot in development and to be a company that develops a reputation for delivering high quality returnable series because your best calling card for getting a new commission is pointing to an existing show that you do a brilliant job on. And, you know, this is a momentum business and a and a business about reputation. And if you're the the the the company that created Screw for channel four, then you've got a a much better chance of winning a show like Blue Lights as we did in Belfast or or winning the Apple Commission criminal record as we've done. And that's really the key to this momentum and working with the best creative talent.

37:13 A further question, a change of subject here. Given the current share price, would you undertake a share buyback program in parallel to dividends? Well, we'd certainly always consider this, and you'll not be surprised to hear from me, although I'm totally biased. I think that we are undervalued at the moment in terms of our forward multiple given the strength of the business and the growth prospects and our record in recent years of of delivery. But there's no point me thinking that. The market has to think that too, and we have to continue to deliver on our growth strategy. And to do that, we have to invest behind those areas that we really believe in as well as balance the need to manage our pension contributions and also pay our shareholders a healthy growing dividend, and that's the balance that we strike.

38:09 When I first joined in 2018, we were in the middle of a share buyback program that I have to confess I I brought to a to a sort of premature halt because I felt strongly that there was a better use of the money that we were spending on buying back our shares to invest in the business for the long term. Now that isn't to say we would never do another share buyback program. Our board is assiduous in looking at the options to create value for the company, every time it meets, including looking at this, but there are no current plans to do that. There are, however, plans and extensive plans to invest to grow the business as we have been so far.

38:58 Okay. Moving on. You mentioned how competitive the market is. How do you look to grow your position in that market? Are there any plans to further innovate and enhance functionality on the STV player? Absolutely, there are. And I've I've already spent some time talking about our focus on growing the studios business, which is a real point of focus for us and importance for us. And and as I say, there's no ceiling to the growth of that business, and we think we are making great progress. In digital too, we are twice as big in terms of our streams, in terms of our ad revenues, in terms of our users as we were when we set out our new strategy back in twenty eighteen, nineteen. And we've no no no intention of slowing that growth in digital.

39:50 You can see that viewers are changing the way they consume content and focusing more and more on streaming, and we absolutely have to be there to take advantage of that with the best possible service. That means converting our core existing strong following in in in broadcasting into streaming, but it also means attracting new users. And we can innovate there in a number of ways to your to your question about innovation and functionality. Firstly, we can innovate in content, and that's the most important innovation that we can offer the market. These days, we often premiere a new series on digital first. And it used to be the case that we would play out those shows, week by week, as you know, and we would then make them available on a catch up basis. Increasingly, every single one of our shows is made available ahead of TX, of transmission, and in and in box set form. So if you wanted to watch Unforgotten at the moment, you can get all six episodes. You don't have to wait for the series to finish. The same as the new series of four, which drops tomorrow. All four episodes will be available immediately.

40:59 That windowing strategy, which innovates on the the traditional norm of playing things out week by week, is very important particularly for our younger audiences. So we see a real difference between the age profile of people consuming content in that way ahead of transmission on a linear channel than we do in slightly older demographics. So we can innovate in content and keep bringing in that new content. We have a huge amount ready to go over the next twelve, eighteen months or so. But we now also need to innovate in functionality, as you say. Our our latest launch, and we are forever updating our apps. We have, you know, a dozen or more different apps that we or different versions of STV Player that we use, whether it's on Apple or on on on Virgin or on Sky or on Amazon Fire.

41:52 Our latest app will launch in the next couple of weeks on Sky Q where you'll see our own branded app for the first time. It allows us to do our own advertising, to do our own recommendations, and to personalize the experience on the Sky platform a bit more. That area of personalization of the user experience is really very important for us in terms of innovation because these days, have to help people navigate content because there is so much of it available and almost too much, you might think, because you have this sort of, paralysis of choice about new shows that you can watch. So what we have to do is make sure we stand out. Now firstly, we're getting some new legislation, as I mentioned, announced and published today that will guarantee prominence for public service streaming platforms like STV Player on all platforms, which which is great.

42:48 But secondly, we can serve people recommended content based on the viewing that they have already done on our app. So if you love Coronation Street, and we know you love Coronation Street because that's what you watch on our platform, our job when you click on our site is to get you to the next episode of Coronation Street as quickly and, seamlessly as possible. If you have never watched an episode of Coronation Street, and in fact, you hate Coronation Street, we should never show you an image of Coronation Street. We should take you to something you want to watch, maybe something you were in the middle of watching or something that is similar in genre or in tone to what you are watching. Recommendations will have a big part of our future in in streaming and in STV player, and we are honing that those algorithms and and and that functionality all the time.

43:42 And, of course, we want to focus outside of Scotland across the whole of The UK with our streaming service. So you'll see us commission and acquire more content that is available across the whole of The UK. We now have six thousand hours, not just Brookside, but plenty of other 150 plus other drama box sets. So we can grow our audience in that way. So there's lots of innovation, and you have to, frankly, to keep up with the Joneses and to make sense of what is an increasing increasingly complicated viewer landscape for our audiences. The next question is about our holdings in independent production companies through STV Studios. How do these relationships work?

44:28 Do you plan to make further investments of this kind? Well, as I say, the rationale for these investments is that we are placing bets on creative companies and individuals that we think are terrific and that we think are gonna create the hit shows of the future. And that's what we look for in these investments. We don't look for, you know, suits at the top of an organization who are good at managing businesses. We actually mostly because we can do that or we like to think we can and help them do that. We look for creative talent that have a proven track record of getting shows away, winning awards, generating returning series that have been successful in The UK and around the world.

45:13 And that is a prerequisite for any deal that we do. We also want to we're open to supporting startups, but we want the people at the top of that company to have a a good track record and also to have a very strong pipeline of ideas that are ready to go. We also want a business that is likely to be able to turn a profit in the short to medium term. So not, you know, five, seven years away, but, you know, the next two, three years at most. We have good relationships with each of those production companies. Our stakes in them vary from 25% to to 52% where we've already consolidated our position in a company called Primal, but we have minority stakes in companies like Mighty Productions who focus on quiz shows in Two Cities Television. These are the guys that made Blue Lights, the new cop drama that just launched from Belfast on Monday night on BBC One.

46:13 And each of these deals has a route for us to move to controlling the business and then fully consolidating the business, owning a 100% over time. The the route to consolidation is often set out as a trigger to to pay to acquire more equity in the company when that company moves into profitability. And that is certainly the trigger for for Mighty and for for for for two cities and for another company that focuses on entertainment shows called Hello, Mary. And that means that we don't take a big risk that they're gonna be loss making for a long time. We only consolidate their financial results in success when they have started to deliver a profit, and in which case, we are then happy to pay them a multiple of their profits in order to recognize the success that they've had.

47:12 We tend to have close working relationships with those businesses once we've acquired them. We have monthly or bimonthly boards. We go through their commissioning slate. We go through their finances to make sure they're in good order. To varying degrees, we then, as a group, offer support and back office support to the creative companies, whether that's business affairs to negotiate contracts or or legal support or finance support or sometimes cash flowing support because small companies don't wanna spend all their time, you know, negotiating loans with banks to to fund TV shows that they're making. So we take that hassle off their plates often, and we try to free them up to do what they wanna do, which is making great shows, creating great shows.

48:04 And do we have aspirations to get bigger? Absolutely, we do. And we can do that in in one of three ways or probably all three of these, I would say. Firstly, organically, where our existing production labels continue to win more work and grow, and you can see they've grown from 23,000,000 last year to more than 50,000,000 in in 2023, so doing very well there. I mentioned we had minority stakes that we could consolidate to majority over time. I'd expect one or two of those, to start to happen in the next, year to eighteen months, which is another way of us sort of in a quasi m and a way boosting the growth and accelerating the growth of our studios business. And, of course, the third way is us investing in new businesses, making fresh investments.

48:56 And, yes, I would expect us to be doing more of that using our strong balance sheet to to invest in good talent for the future. And we've actually said, you know, we'd look at slightly larger scale investments in order to progress even more quickly than we have been. Okay. I think that was it in terms of live questions in the q and a. Simon, absolutely. Thank you very much indeed for being so generous of your time then addressing every single question, that came in from investors this afternoon. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review. To then add any additional responses, of course, where it's appropriate to do so, we'll publish those out on the platform.

49:42 But, Simon, just really before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great. Sure. Well, look, firstly, thank you for your time. Thanks for listening. I appreciate you've got a lot of businesses that you will cover. It's been another year of of good profit growth at STV as our diversification plan continues to deliver and deliver well. Our audience position remains very strong even when you compare it with the new global streamers. Not that you would believe that if you picked up the press sometimes. You think it's all about Netflix and Amazon. I can assure you that is not what the data tells us of what people are actually watching. We have a greatly enhanced streaming strategy now with a new ITV partnership, both in terms of the content that we are providing across The UK and our advertising sales capability.

50:39 At the same time, as you heard, our studios business, our production business is exceeding expectations, and there is plenty of room still to grow, we think. And overall, we are on track to hit our diversification targets this year despite the economic uncertainty out there as we become a more balanced, a more resilient digital media company focused on the future and focused on growth. So thank you for your time. Simon, that's great. And thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can best understand your views and expectations. This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company.

51:25 On behalf of the management team of STV GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all.