Accelerating STV's diversification 2020 Full Year Results - 16th March 2021
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Accelerating STV’s diversification
2020 Full Year Results – 16th March 2021
1
Agenda
Overview Simon
Finance review Lindsay
Accelerating STV’s diversification Simon
Q&A
2
Coming through Covid with confidence
• Covid profit decline more than halved in H2
• Maintaining record audience growth on TV and online
• TV advertising showing its resilience, with trends improving
• Digital and Studios businesses both accelerating
• Achieved 2020 diversification target of 1/3 profit from new revenue streams
• Furlough grants of £1.6m to be repaid
• Agreement reached in principle to sell the Scottish Children’s Lottery
• New 3 year plan focuses on accelerating STV’s diversification
• Reinstating the cash dividend at 6p (FY20: 9p) is a measure of the Board’s
confidence
3
Finance Review
Lindsay Dixon
Unforgotten, STV
4
2020 key financials
Total Regional
Total Digital Studios
Advertising Advertising
Revenue Revenue Revenue
Revenue Revenue
£107.1m £90.9m £14.1m £13.7m £8.7m
+5%
-14% -10% -5% VOD +12% -36%
Adjusted Operating
Adjusted Full Year
Operating Cash Net Debt
EPS Dividend
Profit Conversion
£18.2m 108% 37.5p £17.5m 9p
-19% 2019: 93% -18% Dec‘19: £37.5m +43%
5
Group Results
Better than expected result underpinned by early cost action and resilient business model
2020 2019
£m £m Change
Revenue
• Revenue down 14%, a result of lower linear
- Broadcast 81.2 92.3 (12%)
TV advertising and programme deliveries
- Digital 13.7 13.0 5%
- Studios 8.7 13.7 (36%) • Total advertising revenue down only 10%, a
- ELM 3.5 4.8 (27%) significant improvement on H1, down 20%
107.1 123.8 (14%)
Total advertising revenue 90.9 101.6 (10%) • Operating profit impact mitigated by ITV
variable cost model and management
Adjusted operating profit 18.2 22.6 (19%) actions
Share of associates (0.1) -
Finance costs (excl. IAS19) (1.5) (1.6) • Share of associates reflects Two Cities
minority investment
Adjusted PBT 16.6 21.0 (21%)
• Adjusted EPS down in line with profit, and
Adjusted EPS (pence) 37.5 45.8 (18%) benefitting from reduced effective tax rate
6
Operating profit waterfall illustrates the benefit of STV’s variable cost
model and other savings realised
Investment in the digital business continued despite Covid disruption
25
20
15
Savings Investment
10
Revenue related items
5
0
7
In June 2020 we set out the steps we were taking to save costs and retain
cash; these have been delivered in full
Cost savings £m Cash retention £m
Non-payment of bonuses 1.9 Cancellation of FY19 final dividend 5.5
Furlough and Board salary sacrifice 1.6 Delay capex plans to 2021 3.0
Regional programming budget 1.0 Deferral of VAT payments to Q1 2021 1.7
Property and facility costs 0.7 Interim dividend for FY20 paid in shares 1.3
Marketing 0.5
Studios cost base 0.3 Total cash retained 11.5
Other operating costs 0.8
Total savings 6.8
We also raised net proceeds of £15.5m from an equity placing in July 2020 and agreed an increase in bank
facilities and certain covenant relaxations to enable us to trade through a severe downside scenario
8
Strong operating cash conversion and placing proceeds materially reduce debt
2020 2019
£m £m
Adjusted operating profit 18.2 22.6
Dep'n / amort’n – owned assets 3.3 2.9 • Operating cash conversion strong at 108%;
Dep’n / amort’n – leased assets 1.8 1.9 tight control of working capital and pause in
Share based payments 0.5 0.3 capex
EBITDA 23.8 27.7
Working capital - (0.3)
• Pension contributions paid in full
Lease payments (1.9) (1.9)
Capital expenditure (2.1) (4.5)
• Interest cashflow higher due to refi fees and
Operating cash flow 19.8 21.0
phasing of rollovers; p&l charge flat year on
Cash conversion 108% 93% year
Issue of shares 15.5 -
Pension contributions (10.5) (10.3) • Underlying SCL funding £0.8m; balance of
Interest and refinancing fees (1.9) (1.1) £0.6m relates to VAT recoverable, received
Tax (0.4) 0.1
post year end
Re-organisation costs - (1.0)
Dividends - (7.6)
SCL funding (1.4) (1.8)
Share purchases - (2.1)
Investment in Two Cities / sale of deltaDNA (1.1) 1.6
20.0 (1.2)
Net debt 17.5 37.5 99
Bank facilities renewed in March 2021 for minimum 3 years, providing
liquidity and flexibility for the medium term
Dec 2020 Jun 2020 Dec 2019
Net debt (£m) 17.5 33.5 37.5 • Existing facilities set to mature June 2022 so
refi expected in H1 2021
Leverage (max 3x) 0.7 1.5 1.3
• New arrangements incorporate:
Interest cover (min 4x) 27.7 20.2 25.1 • £60m RCF with £20m accordion
• Three year tenor, with two one-year
extension options
• Normal covenant package:
• Leverage < 3x
• Interest cover > 4x
10Agreement in principle reached to sell the lottery operation; completion
expected in the coming weeks
2020 2019
£m £m Change
Adjusted operating profit 18.2 22.6 (19%) • Agreement subject to Gambling Commission
approval
Operating exceptional costs (0.5) -
• Transaction will combine modest
consideration and a multi-year advertising
Operating profit 17.7 22.6 (22%) agreement
Share of associates (0.1) - • Total net exceptional charge of £8.7m
Total finance costs (2.7) (3.6) • Increased provision for lottery debtor
Exceptional finance costs (8.2) - made at half year; minimal change in
H2 (total £8.8m in finance costs)
Profit before tax 6.7 19.0 (65%) • Finance exceptional partly offset by VAT
recovery of £0.6m, received post year-
end
• Operating exceptional reflects cost of
disposal 11
11Pension deficit narrowed since half year; next triennial valuation underway
Accounting valuation FY 2020 H1 2020 FY 2019
Assets (£m) 437.2 402.9 381.9
Liabilities (£m) (507.5) (479.8) (445.9)
• Improvement on half year although liabilities
Deficit (£m) (70.3) (76.9) (64.0) still impacted by Covid-driven market
Key assumptions: • Stronger than expected asset returns
Discount rate 1.25% 1.4% 2.0%
RPI 3.0% 2.9% 3.0% • Next triennial valuation due as at 31/12/20 –
early stages but process underway
12Key finance takeaways
Better than expected 2020 financial performance
Actions to protect profits and cash executed in line with plan
Strengthened balance sheet in support of investment for next stage of growth
Lottery process now close to resolution
The Bridge, exclusive to 13Accelerating STV’s diversification
Simon Pitts
The Bay, STV 14The last 3 years have seen sustained strategic progress
GROWING BROADCAST LOCAL ADVERTISING
STRENGTH GROWTH
STV peak time # of new
87 91
share % advertisers on
21.9 STV
21.3 21.7
22.2 48
20.9
19.8
2018 2019 2020 2018 2019 2020
DIGITAL STRENGTHENING STUDIOS INCREASING
ACCELERATION PIPELINE DIVERSIFICATION
68% 19 % STV profit
34%
Online viewing # of new from outside
growth commissions broadcasting 28%
24%
11
23% 10
18%
2018 2019 2020 2018 2019 2020 2018 2019 2020
15Our focus is now on accelerating this successful strategy
• Maintain viewing leadership
Maximise value of
1. Broadcast
•
•
Grow Scottish advertising revenues
Secure new licences and PSB future
• Continuously strengthen content offer
2. Drive Digital
growth
•
•
Grow UK-wide audience and revenues
Increase active users through personalisation
• Double returning series across the genres
3. Build world class
Production
•
•
Target global streamers as well as broadcasters
More partnerships and acquisitions
16We are setting ambitious targets for the end of 2023
Double digital viewing, users and revenues
Quadruple production revenue
At least 50% of operating profit to come from
outside traditional broadcasting
17BROADCAST
The TV advertising market showed its resilience in 2020
Pace of bounce back last year bodes well for 2021, with trends now improving
Q2 2020 Q3 2020 Q4 2020 Jan-Apr 2021
20.00%
10.00%
0.00%
2021 so far
-10.00%
-20.00% • TAR Jan-April +7-9%
-30.00% • Regional Q1 +5%
-40.00% • VOD Q1 +15%
-50.00%
TAR Regional VOD
• Ad market bounced back strongly after lockdown#1 to finish only -10% for 2020
• Jan-April TAR forecast at +7-9%, with April +60-75%
• STV-controlled advertising outperformed in 2020 and trend continuing in 2021
• All sectors including travel now coming back as confidence builds
18BROADCAST
STV delivered another record year of viewing in 2020
We are the most watched commercial channel in Scotland across every timeslot
3x bigger than
600 STV C4
500
400 Channel 5 ITV2
300 5x bigger than
200
100
0
1500 - 1529
0930 - 0959
1000 - 1029
1030 - 1059
1100 - 1129
1130 - 1159
1200 - 1229
1230 - 1259
1300 - 1329
1330 - 1359
1400 - 1429
1430 - 1459
1530 - 1559
1600 - 1629
1630 - 1659
1700 - 1729
1730 - 1759
1800 - 1829
1830 - 1859
1900 - 1929
1930 - 1959
2000 - 2029
2030 - 2059
2100 - 2129
2130 - 2159
2200 - 2229
2230 - 2259
2300 - 2329
2330 - 2359
2400 - 2429
10x bigger than
Biggest audience Total audience 97% of all large Viewing share
Highest all time
gain in 2020 of volume +14%, commercial 12% higher than
audience share in
any channel in highest growth audiences in ITV, largest gap
12 years at 19.2%
Scotland ever Scotland on STV ever
Source: BARB Jan-Dec 2020, individuals, average daily minutes for STVis 09:30-24:00 19BROADCAST
Our viewing growth is continuing in 2021
And despite the rise of streaming, broadcast TV continues to account for over 70% of all viewing
Peak time lead over BBC1 growing YoY audience growth on STV by month
23.4
21.9 27% 2021 so far
21.3 21.7
23%
22%
20%
19% 18%
22.2 16% 17%
13%
20.9 10% 10%
19.8 5% 7%
19.0
STV
BBC1
FY 2018 FY 2019 FY 2020 2021 to-date
Source: BARB: Jan-Dec 2020, Jan-Feb 2021, 1800- 2230, share % Source: BARB: 2019-2021 ; 0930-2400
STV News’ audience continues to pull away from the
‘Unmatched’
competition 2021 viewing like
605k
515k 28%
404k
Netflix &
392k 514k 2020 72% OF TV
298k 466k YouTube
SET VIEWING Live TV and
85k 113k 91k 146k 146k
28k 62k 18k
WAS STILL TO broadcast
9k 16k
BROADCAST 72%
VOD
TV IN 2020
Source: BARB Jan-Dec 2020,
individuals, total TV/unmatched/non-
Source: BARB Jan-Dec 2019-2020, Jan-Feb 2021, weekdays linear, average mins per day
Enders Analysis forecast that broadcasters will still account for 61% of total video viewing in 2027
20
20BROADCAST
We are enhancing the successful STV Growth Fund to help drive
Scotland’s economic recovery
Regional airtime
14,000
+5%
+24%
12,000
-1% -4%
10,000 -5%
8,000 -7%
£m
6,000 Launch of STV
Growth Fund
4,000
2,000
0
2015 2016 2017 2018 2019 2020
• New Green Fund and Inclusion Fund STV Growth Fund so far:
Doubled to £20m in 2020
• STV Self Service will target high
street businesses £12.6m allocated so far
• STV Growth Fund+ will combine the 566 deals
reach of STV and STV Player 236 new advertisers
21We have also prioritised STV’s social impact as Scotland’s public service
broadcaster
SUPPORTING LOCAL COMMUNITIES SUSTAINABILITY
New sustainability strategy, STV Zero, targeting net
£3.7m distributed to 300+ charities in 2020
zero carbon by 2030
MENTAL HEALTH DIVERSITY & INCLUSION
Prioritising mental health and wellbeing for viewers New stretching targets to improve on and off screen
and STV colleagues representation
22STV’s newly launched sustainability strategy will see us become a net
zero carbon business by 2030
Clear commitments to reduce emissions and raise awareness
ENERGY & WASTE PROGRAMME-MAKING
• Switch to 100% renewable energy • All STV programmes to be
• Reduce business travel project albert registered &
• Zero waste business certified
• Sustainable supply chain • Including news & current affairs
ADVERTISING AWARENESS
• New £1m STV Green Fund for Scottish SMEs • STV’s reach to promote sustainability
• Supporting Ad Net Zero from the UK ad • Editorial around COP26 in Glasgow
industry
23DIGITAL
STV Player is the fastest growing broadcaster streaming service in the UK
70.5 678
2160
502
42.7
34.9 1200 356
998
2018 2019 2020 2018 2019 2020 2018 2019 2020
Total Streams (M) Total Time Spent (M mins) Ad Impressions (M)
More Watching For = More
people more longer revenue
Monthly Total Online VOD
users streams viewing revenue
2020
+50% +65% +68% +12%
Janet King, exclusive to 24DIGITAL
Player growth is being driven by our digital-only content, which now
stands at c.3000 hours
8 out of STV’s top 15 shows in 2020 were Player-only New content was one third of all STV Player viewing in 2020
Total streams
Coronation Street 9.2m 6%
14%
Emmerdale 6.2m 29%
High Road 2.1m 36%
The Bridge 2.0m
Des 1.4m
White House Farm 1.3m
94%
I'm a Celebrity... Get Me Out of Here 1.3m 86%
Striking Out 1.1m 71%
64%
Liar 1.1m
Janet King 980k
Gracepoint 960k
The Slap 930k 1H 2019 2H 2019 1H 2020 2H 2020
Acceptable Risk 790k
Taggart 780k STV content STV Player-only
Britains Got Talent 690k
2020: 19 content deals, 1200 new hours
Source: Adobe Analytics Jan-Dec 2020, FreeWheel Jan-Dec 2020 25DIGITAL
We aim to double the size of our digital business in 3 years
2x 5m 2x
Streams Registered Digital Advertising
Users Revenues
We will double total We will hit 5m We will double digital
streams to 140m by registered users by revenues to £20m by
2023 2023 2023
Striking Out, exclusive to 26DIGITAL
Clear priorities underpin the next phase of our digital growth
CONTENT LOYALTY & PERSONALISATION COMMERCIAL
• Double viewing by 2023 • Double monthly active users • Programmatic on all
by 2023 platforms
• New boxset every week
• Improve personalisation and • New UK-wide ad sell
recommendations • All users signed in and
• Launch new loyalty scheme – identifiable by 2023
STV Player VIP – to drive
repeat usage WHY LOYALTY MATTERS
Annual value of:
Unregistered user 258 ads/year (100%)
• Better user experience
Registered user 282 ads/year (109%)
• Exclusive access to content
New for 2021, 350 hours of • Extras like prize draws and
Opted-in
commercial offers 368 ads/year (143%)
drama from Sony & eOne registered user
27STUDIOS
STV Studios achieved a record 19 new commissions in 2020, including 16 series
STV wins six-part prison
drama commission from
Channel 4
4 SERIES
Screw Inside Central Station 6x60 Celebrity Catchphrase Antiques Road Trip Clear Out Cash In
6x60 Christmas Special 1x60 10x60 100x45 8x30
The Yorkshire The Tabloids & The Royals Landmark Is Covid Racist? Our Family Farm Rescue
Auction House 10x60 4x60 7x60 1x60 4x60
2 SERIES
Daily Record Pride Catchphrase: Wonders of Scotland STV Appeal Celebrity Antiques
of Scotland Awards 1x90 Catchiest Moments 3x60 4x30 1x60 Road Trip 40x60
28STUDIOS
Returning series are key to Studios growth and our aim is to double these
from 4 to 8 by 2023
New returnable series already commissioned for 2021
CURRENT RETURNING
STV Studios secured Channel
SERIES 4 deal for prison drama from
Killing Eve writer
•
Rob Williams reunited with production
Catchphrase company behind his show The Victim
• Antiques Road Trip Screw Landmark Our Family Farm Rescue
• Celebrity Antiques 6x60 7x60 4x60
Road Trip
• Inside Central
Station STV cashes in on C4’s
contestable pot
Murder Island first format to emerge
+2
from multi-million pound fund further new series to
Yorkshire Auction House
be announced soon
Murder Island
10x60 6x60
29STUDIOS
We have already secured £20-25m of Studios revenue for 2021 vs £8.7m
in 2020
STV Studios’ creative labels • Targeting profitability for all
existing labels within next 3 year
plan
• Clear criteria for new acquisitions
and investments:
• First class creative leadership
• Proven commissioning track
record
• Focus on global formats
• Short-term path to profitability
30GROWTH INVESTMENT
We are planning to invest £30m over 3 years to accelerate our growth strategy
Investment principles
Balance between growth
• Platform development
investment, progressive • Higher content investment
dividend and pension • Increased marketing
obligations • Aim to maintain 45-50% digital margin
• Margin may erode slightly to sustain growth
At least 75% of additional
investment focused on
Digital & Studios
Mix of shorter term (within 3
• Ongoing in-house development
years) and medium term • Consolidation of existing investments
returns • New investments & partnerships
• No short term margin erosion but returns beyond 3 years
Marcella, STV 31Improving outlook
• Strong start to 2021 on TV and online
• Advertising trends starting to improve materially
• April TAR currently forecast at +60-75%, with Jan-April +7-9%
• STV Studios has now secured £20-25m of revenue for 2021 and is
maintaining commissioning momentum
32Coming through Covid with confidence
Resilient 2020 performance and well placed to benefit from the economic recovery
Unrivalled position in home market
Clear progress in key growth areas of Digital and Studios
Headroom to invest to accelerate diversification
Returning to dividend a statement of confidence in the future
Des, STV 33APPENDIX Catchphrase, Studios for ITV 34
Broadcast
£5m saving from variable cost base model and regional outperformance protect margins
2020 2019
£m £m Change
Revenue
- National advertising 64.9 75.4 (14%) • Benefit of £5m to the cost base as a result of the
- Regional advertising 14.1 14.9 (5%) variable cost arrangement with ITV
- Other 2.2 2.0 10%
81.2 92.3 (12%) • Other cost savings delivered in line with plan,
principally across the regional programme
Operating costs (65.7) (72.4) 9% budget and discretionary spend
Operating profit 15.5 19.9 (22%) • Broadcast margins maintained at over 19%
Operating margin 19.2% 21.6%
35Digital
Revenue growth mitigates margin impact of continued investment
2020 2019
£m £m Change
Revenue 13.7 13.0 5% • VOD revenue growth of 12% underpins
performance with margins maintained at near
Operating costs (7.2) (5.7) (26%) 50%, despite investment for medium term
growth
Operating profit 6.5 7.3 (10%)
Operating margin 47.5% 55.7% • VOD revenues are becoming an increasing
proportion of total division revenues, and at
c.60% will support margins for the medium term
• Cost base reflects:
• Additional content costs associated with
expansion of Player-exclusive
programmes
• Higher depreciation charges driven by
development of Player over last 2 years
36Studios
Bottom-line impact of lower revenues mitigated by strong secondary sales
2020 2019
£m £m Change
Revenue 8.7 13.7 (36%)
• Revenues impacted by production hiatus in
Operating costs (9.0) (13.8) 35% Q2 2020
Operating loss (0.3) (0.1) • Profit impact of fewer programme deliveries
mitigated by increased high margin
Operating margin (4.0%) (0.8%)
secondary sales and cost savings
• Secondary sales in the year were c.£4m
compared to £3m in 2019, previously the
record year
37STV Studios is operating in a growing market, with UK production
revenues reaching a new high of £3.3bn in 2019
Revenues from international broadcasters and streamers are the fastest growing
segment
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