STV Group plc

Today, we're reporting good performance for the group across 2024. As you know, the economic backdrop continues to be challenging in both advertising and programme commissioning. But despite this, I'm pleased to say that we are delivering in line with expectations. Due to our diversification strategy, we are now very much more a balanced business. This strategy was designed to make us increasingly resilient and able to navigate uncertain times. And so it has, and we're very well positioned for the inevitable market recovery. I'm also pleased to say that we've been controlling our costs tightly with more to come. And the combined mass reach of our broadcast and digital platforms across Scotland provides good confidence in STV's unique commercial proposition. And the demonstrable strong growth in the quality and quantity of our studios business provides very exciting prospects going forward. The new chief executive, Rufus Radcliffe, joined the company on 1st of November. He spent his first four months really getting to know the business and our people, and I'm excited about the future of STV Group under his leadership, as I know he is. We and the team can deliver much more for our customers, our viewers, our partners and shareholders. Thanks again for joining us today and for your interest in STV. And I'll now hand over to Rufus and Lindsay Dixon, our CFO and COO, to take you through the presentation on our 2024 results.

Thanks very much, Paul. And hello, everyone. I'm really pleased to be here for STV's 2024 results presentation. I joined STV on November the 1st and I've had the chance to meet many people. But for those that I haven't met yet, I thought I should kick off by properly introducing myself. I've spent all of my career in media and I know I'm biased, but I think it is an amazing sector to be in. It's exciting, fast changing and dynamic. I started my career working at two different blue chip advertising agencies, McCann Ericsson and JWT, working on clients like Kellogg, Nescafe, and although you wouldn't believe it looking at my hair now, L'Oreal Elviv Shampoo. I then moved to Channel 4, where I spent a lot of focus on expanding their brand portfolio, including the launch of youth brand E4, which is still going strong today, as well as more for a premium factual brand and the launch of their streaming proposition 4OD. And before joining STV, I had a range of roles at ITV. I was sitting on the exec board for eight years as chief marketing officer, running a range of direct to consumer activities, including gaming, live events, merchandise, and their interactive competitions business, and led the development and launch of ITVX, the fastest growing streaming service in the UK. I believe passionately in commercial public service media, or PSM as we call it, and its importance to the UK creative economy. And for three years was chair of Freeview, the PSM-funded joint venture which remains today the biggest TV platform in the UK. And summing up what has joined my career up to date, it is using digital to create opportunities, recognizing the power of brands to unlock business value, and putting viewers and customers at the heart of decision making. So that's my background, and now to STV. We are very pleased that 2024 saw a strong set of results against what is well understood to be a challenging advertising and commissioning backdrop, with financial performance as expected. Total advertising revenue was up 5% before National VOD Commission, with all elements of our advertising mix growing. Strong digital growth continued with revenue up 8% year on year, And alongside digital revenue growth, STV remains the number one destination for commercial viewing on a TV set in Scotland and the best place for advertisers to quickly reach their audiences. Looking beyond Scotland, our studios division delivered record revenue from our widest ever range of customers, maintaining our position as a top 10 UK indie. There is no doubt that the industry continues to change. And to ensure that SDV continues to perform strongly, we've embarked on a strategy refresh to build on the tremendous progress of the past few years, which we will be sharing further details of in May. We propose a final dividend of 7.4 pence, taking the full year to 11.3 pence in line with 2023. And before I talk a bit more about STV's excellent current strategic progress, I'll hand over to Lindsay for the 2024 financial review.

Thanks Rufus and hello everyone. STV performed well in 2024 with total revenue at £188 million up 12% on the prior year and all main revenue streams in growth. Total advertising revenue on a like-for-like basis with 2023 was up 5% to £102 million. Both national and regional linear advertising grew by 4% in the year with digital revenues up 8%. Studio's revenue grew by 26%, driven by the acquisition of two cities at the end of January, and with roughly half of the revenue recognised in the year coming from scripted programming. Adjusted operating profit was £20.6 million, up 3% on the prior year, with profits growing in broadcast and studios partly offset by the impact of National VOD Commission coming into play for the first time in digital. Adjusted operating margin at 11% was slightly down on 2023, principally due to the growth in studios at lower margin. Growth in adjusted EPS matched that of operating profit up 3% to 29 pence. And net debt associated with the group's principal banking facilities at £28.8 million was in line with the start of the year, with operating cash generated being used to finance acquisitions, dividends, interest and pension contributions. Moving to the group P&L, where you can see how these highlights pool together into one page. It's worthwhile highlighting the strong first contribution from two cities during the year, who contributed a revenue of £31.5 million and adjusted operating profit of £2.7 million, off the back of delivering Series 2 of Blue Lights for the BBC and completing most of the production activity on Amadeus for Sky. The average base rate and our average borrowings were both higher in 2024, and so interest costs went up as a result. Roughly one quarter of the increase is due to the higher average rate of interest, with the balance due to higher average net debt, the latter principally a result of the Greenbird investment in 2023. This is the same position as we spoke about at the half year. In terms of adjusting items, the single largest amount is production tax credits in relation to scripted programming. Where claims are made under the high-end television tax credit regime, we make an adjustment to reflect the income as a contribution to costs rather than as a tax income as that better reflects the nature of the amount. The value of these has gone down in the current year due to phasing of activity and as we transition to the new regime of audiovisual expenditure credits. These new credits are recognised with an operating profit and so don't need adjusting, which will be much simpler going forward. However, 2025 will be a year where we make claims under both the high-end TV and audio-visual arrangements, so the adjustment will continue to appear for this year as well. From 2026, we expect to only be making claims under the new regime and the need to adjust results for this income will be gone from then. The other adjusting items relate to acquisition and integration costs and non-cash acquisition related accounting items. Turning to advertising revenue, the table on the left shows the year-on-year performance for each of the main advertising revenue categories for H1, H2 and the full year. After the strong Euros-driven performance in the first half, you can see the relative softness in the national linear market in H2, a product of changes in the UK political landscape and the first Labour budget, and strong Q4 comparators that included the Rugby World Cup in 2023. The regional performance is a combination of our core SME customer base and the Scottish Government, with the latter reducing spend over the last couple of years with an almost hiatus on marketing currently in force. Over the course of 2024, our core customer base generated revenues that were 12% higher than the prior year, whereas revenues from the Scottish Government declined by just under 40%. For 2024, the Scottish Government represented just 8% of total regional revenue, down from over 20% in 2022 and even higher in the Covid years. VOD revenues before commission grew in the second half, albeit at a slower rate than in the first. Against a national linear market that went backwards by 6% in H2, growth of 7% in VOD was a strong performance. In 2024, STV controlled revenues, so all those within the remit of our commercial team based in Glasgow grew by 5%. The chart on the right demonstrates the seasonality of advertising revenue, where we still follow a fairly normal cycle across the year, with the Euros in June and July last year providing the peak I've already touched on. In terms of the advertising outlook, visibility remains limited and in 2025 we've the shift in timing of Easter, which distorts the individual year on year comparison of March and April. Therefore, we've sought to eliminate that from our guidance and have shared expected performance for the first four months of the year. But before going into the detail, it's important to bear in mind the underlying trends. The charts on the left show the 12-month rolling average revenues for both linear advertising and digital advertising since January 2019. You'll remember all the ups and downs of linear advertising over the last few years, but when you look at the underlying trends, the market has been resilient. From January 2019 to the end of December 2024, the compound annual linear advertising decline was only 2%. And looking at the digital performance, we've delivered a double-digit CAGR of 12% over the same period. It would be wrong to project linear forward from the current ad market and assume it will persist forever. History tells us that the ad market goes in cycles and every time it dips, it comes back. The question is when and how quickly. So with those words of caution, we're currently expecting total advertising revenue for the first four months of 2025 to be slightly down. This is a combination of national linear down around 5%, regional slightly up, and VOD continuing to grow at around 6%. The comparators for Q2 include a very strong Euros performance and so are difficult, and we have the introduction of HFSS legislation from the 1st of October, although we don't yet know how that's going to be implemented. So there are some short-term headwinds. The sense we're getting from advertisers is that they're reducing marketing spend temporarily, while they identify mitigations for the impact on their businesses of increased employee costs and lower growth forecasts. And our expectation is that behaviours start to change once plans are identified and executed. Clearly, some wider positive market stimulus wouldn't go amiss either. This chart shows the profit impact of the various revenue points I've talked to. We've shown the gross movements in VOD revenues with the incremental sales and then commission as an offset. When we get to 2025 and have commission in both years, we'll revert to reporting a single net number. Cost inflation in the business in 2024 was driven by two areas. The first is salary inflation for our colleagues and the second relates to one of the agreements we have with ITV for national linear sales that under the terms of the contract increases in line with CPI each year. And the revenue-linked cost bar is things like ad serving that are directly linked to growth in streams and revenue associated with STV player. In terms of cost savings, we delivered £1.9 million against a target of £1.5 million in 2024 and so are on track to deliver a full year run rate saving of £5 million per annum by the end of 2026. The main areas where savings have been realised are in studios where we have completed the integration of the Greenbird businesses and consolidated our London-based teams into a single office, in broadcast where we have streamlined operations across a number of areas and in-sourced post-production to internalise margin and better recover our overhead, and a reduction in spend in other areas including freelance, property and other central functions. We've already started work on the next phase of savings targeted for 2025, which will total a further £1.7 million and have a clear line of sight over the majority of actions required. Salary inflation is the single biggest inflation-linked cost for the business, and the increases in employers' national insurance that come into effect from April present a significant increase to our cost base. The full year effect of this is expected to be around £700,000, with the 2025 impact around half a million. We're working hard to identify ways in which we can offset this incremental cost in the P&L account, but do not expect to be able to do so in 2025. From a cash perspective, however, the lower interest rate negotiated as part of our recent refinancing should mean that we make cash interest savings that will go some way towards covering the incremental NI. Just a few words now on each of the divisions and starting with studios where, despite a challenging commissioning backdrop that persisted through the year, the division has grown both revenue and profit. Our portfolio approach has benefited us with the timing of moving to majority in two cities well judged given their production activity during the year. In terms of scripted activity, we were in production on four dramas during 2024, with a revenue of more than 40 million recognised across those titles. Across unscripted, all majority-owned labels won and delivered commissions during the year, and secondary sales of our increasing IP library also grew, reaching almost 8 million in the year at very attractive margins. These secondary sales are one of the main contributing factors that will support our drive to a 10% margin for the division. The margin in 2024 reduced slightly on 2023, principally due to a mixed shift towards drama programming in the year and margin pressure being applied by commissioners given the macro backdrop. A year ago, we introduced a new KPI, the Forward Order Book, as a way to demonstrate the progress being made in studios. Guiding to annual revenue targets is difficult, given we've little control over the timing of delivery of programmes, which is the basis of revenue recognition for most of the content we produce. But the Order Book gives a good sense of the growth in activity in the business. A few points to highlight. First, there is a very strong upward trajectory in this number since 2020, as we've built momentum in the business and made key acquisitions in Greenbird and Two Cities. Second, in the early years, most of the programmes we made were unscripted and so had lower budgets. Therefore, the movements in the order book from one month to the next were smoother. In more recent times when we've been successful in winning scripted commissions, you can see how bringing a large drama into the order book and then delivering it has much more of an impact on the size of the order book at any point in time. Winning dramas though is a good thing, it just means that the order book will not necessarily increase each time we report it. Lastly, it would also be right to say that while we have continued to win commissions throughout 2024 and into early 2025, the rate at which commissions are being awarded has slowed. This is true industry-wide, although we are starting to see some green shoots in commissioners being open for business again. It will take a bit of time for that to convert to the order book, but momentum is on our side. Moving on to digital, where the division has continued to perform well. On a like-for-like basis, revenue in the division grew by 8% in 2024, with VOD revenue, around 75% of the total, growing by 9%. Having had a 12-month holiday from commission on national VOD advertising in 2023, this kicked in at the start of 2024 and had a resultant impact on total revenue and profit in the division. Now that this cost is reflected in the baseline, we expect to return to revenue and profit growth in 2025. Under our agreement with ITV, our national VOD revenue will grow in line with theirs, and we continue to focus on acquiring third-party content to the player on a revenue share basis, avoiding upfront costs and ensuring that we only pay in success. In terms of margin, we've maintained an operating margin at above 40%, which is our target minimum for 2026. The operating leverage of broadcast is such that relatively small improvements in advertising revenues have a meaningful impact on profitability. Here you can see the 4% increase in total divisional revenues translates to a 12% improvement in profitability. Of the two million increase in costs year on year, around one and a half of this relates to amounts paid to ITV for the national programme budget, which flexes in line with national advertising revenues. The remaining cost increase is the net remainder after realising savings during the year, with broadcast bearing most of the inflationary increases in the group. Turning to net debt, this slide shows the components of the group's total net debt between amounts drawn on our core RCF, cash on hand, and the drawdowns on non-recourse production financing facilities. Taking the RCF first, we had drawn 40 million of our 70 million facility at the year end and had cash balances of 11 million available. Taking those together, that's the equivalent of facility headroom of 40 million pounds. We had amounts drawn under two non-recourse production financing facilities relating to two specific programmes where the costs of funding are met by the Commissioner as part of the programme budget. Both facilities are expected to be repaid over the first half of 2025 and based on current production schedules we expect there to be around 5 million of drawings under similar facilities at the end of the year. Operating cash conversion for 2024 was strong at 134% and leverage excluding the non-recourse production financing was 1.1 times. And touching on our refinancing, we renewed our RCF in February, putting in place a facility of 70 million for a minimum of three years with a 20 million uncommitted accordion. Our key financial covenants remain the same as before with the same covenant limits, but our new facility doesn't have a margin ratchet for interest payable. Instead, we pay a flat margin at a lower level than before, regardless of leverage. This is clearly beneficial to the group when working capital associated with production financing can be more variable, as we will no longer be penalised for short-term outflows while awaiting cash from commissioners. And lastly, a few words on pensions, where the accounting deficit of our defined benefit schemes has reduced to £48 million, down 12% on the prior year, reflecting an increase in the discount rate and cash contributions paid in over the period. I think more important than the accounting valuation is the triennial funding valuation, which was agreed in October with committed contributions at a slightly lower level than previously. In addition, we've agreed to pause the contingent cash mechanism until at least 2028. The recovery plan period for the schemes has been maintained at October 2030, with a deficit of £61 million compared to £116 million in the 2020 valuation. The relationship between company and trustees remains strong and we're working together to identify ways in which full funding could be achieved more quickly. We're now going to have a look at our showreel and you'll get a glimpse of the great telly you've got to look forward to over the next few weeks.

Please take your seats. The show is about to start.

DS lecker fall back. Subject is approaching. You stay back!

Stay back!

We're watching you.

I can honestly say, I don't have many of these to sell.

You can assure me you're actually an auctioneer. This isn't some weird burglary.

I hope you're all ready. Winning is as simple as walking from A to B.

ready to tell our stories.

This is how we play. This is how we walk. We can play.

I'm feeling a bit anxious and nervous, but we're going to give it our best shot, aren't we, Bazza? Yeah.

You should see this. It's all over the internet. Oh, they should have plenty to talk about.

This week on STV, we are all about sustainability.

If it wasn't for the appeal, we just wouldn't be able to run to the extent we are.

STV has got some brilliant content coming up in 2025. Now, before talking about STV's excellent strategic progress, allow me to take a quick step back because with the speed of change and some of the news flow, it's easy to forget that some of the fundamentals of why TV remains a good business. First of all, it's an amazing time to be a viewer. Viewers have never been happier. When I started my career, viewers used to complain that there was nothing to watch. Now pretty much every program ever made, thanks to technology, is available at the touch of a button. But despite the rise in global tech brands, broadcaster channel and VOD viewing still dominates the big screen. And this is predicted to remain the case over the next five years, and indeed as far out as models go. TV remains the most effective brand building platform for advertisers. You could argue that it is the ultimate in performance marketing. We're also delighted that the Media Bill helps protect public service media by securing prominence for all public service media channels and streaming services. And whilst we might not see the return of the huge content streaming wars, demand for premium content and lower cost high volume series will continue. And in an industry that is changing fast, the digital world constantly creates new opportunities to engage with viewers and advertisers. So, TV is a good business. STV is a great business. Since I joined STV on 1st November, I have been struck by just how strong the STV brand is. Indeed, it's not an exaggeration to say it is one of the most famous and most loved brands in the whole of Scotland. However you want to look at it, by day, by week or by month, STV's reach is huge. STV Player has grown strongly over the past few years, helping to capture linear viewing declines with excellent content, distribution and also viewer experience. We have a record number of digital brands choosing to advertise with STV. STV Studios is a fast growing content business with a growing international profile, also with a record number of customers. And all in all, despite the tough environment, STV continues to deliver with strong cost control. And that is why I jumped at the opportunity to become STV's next CEO. Obviously, I was very familiar with and admired STV during my time at ITV. But since joining as CEO, I've been focused on really immersing myself in the business. I visited all of our offices across Scotland and London, met our customers from both our advertising and studios businesses, have done a deep dive into viewing trends of both STV and non-STV viewers, and obviously listened to the views of a range of shareholders whilst working with the leadership team on our strategy refresh. The refresh is building on the excellent strategic foundations already in place. But it is looking at both the three-year horizon and beyond 2030, when in terms of pensions, we will have reached the end of our recovery plan period and no more cash contributions into the scheme will be required. The refresh is focused on three areas. Firstly, what is the next chapter for the studio's business? How do we make sure we continue to win in a changing content market, identifying international growth and ensuring we remain the best home for ambitious creative talent? Secondly, what's the next chapter for our advertising business? How do we remain Scotland's strongest marketing platform and how can we embrace digital opportunities to further advance our proposition for customers? And thirdly, what further revenue opportunities exist? All of this work is being underpinned by ensuring we have the best operating model to deliver profitable growth and shareholder value. You will hear more about our plans in May. And if we look at our strategic foundations in a bit more detail, we are doing this refresh from a position of strength. The STV team in most recent updates looked at our existing strategy through the lens of content, audience, and monetization. So let's take these in turn. Firstly, content and STV studios. In a tough commissioning market, here are some impressive numbers. 51 commissions, 37 returning series, 403 hours of TV made, firmly established as a top 10 UK indie. And I just wanted to touch on the 37 returning series number. This shows the enduring quality of our content because in a tough market, commissioners are more risk averse and want to revert back to known brands, which STV Studios is getting stronger at every year. Just two years ago, STV Studios was a family of eight labels, but through the successful acquisition of Greenbird, we now have a portfolio of 21 labels, which means that when the commissioning market strengthens, we are well set to benefit. As we laser focus on content that continues to be in demand, premium drama, tentpole entertainment, and high volume factual, building on the strength of our returning brands. In 2024, we had a record amount of customers from a wide ranging pool of broadcasters and streamers, 24 in total, all of which you can see on this slide. and our content is increasingly IP and international brands. As we speak, we have three international dramas in production, The Witness for Netflix, Amadeus for Sky, the second season of Criminal Record for Apple TV, and Blue Lights, now in production for its third season, can be found on the BritBox US streaming service. We also have four shows in production in changed format versions in other territories, The Hit List, Fortune Hotel, Bridge of Lies, and Lego Masters. And for the first time, we have over 4,500 hours in distribution. And if we look at the KPIs the team presented this time last year, taking us to 2026, around returning series, shows with IP revenues and international revenue, all of them are on track. And now turning to our all important audience. You may know this, but not only do Scottish viewers watch more TV than the rest of the UK, but in fact, in 2024, the gap grew to a further 49 minutes. STV itself remained in number one position as the most watched commercial channel, six share points bigger than Netflix in peak. We have the most watched news program in Scotland. And STV was the most watched commercial channel on 363 days out of 366, or 99.18% of the time, which should have been even higher if it hadn't been a leap year. SDV Player also had another strong year with more viewers coming to the service, a 13% growth in registered users, and we had a good year for subscriptions with 36% growth in subscribers to our ad-free Player Plus service. We also had more viewers watching, a 45% growth in the amount of viewers watching at least five different titles. Red Rock became our quickest ever title to a million hours of viewing. And in fact, over 20,000 viewers have watched all 117 episodes, which is really going some. And this all led to viewing on our owned and operated platforms growing by 8%. Now, almost 38% of all STV's viewers use STV Player. And in fact, 11% of our reach is entirely delivered by STV Player, showing that it is a truly established streaming proposition in Scottish and UK homes. And I just wanted to touch on drama on the right-hand side of this slide. It might surprise you to know that dramas on broadcast TV command around the same sized audience today that they did 10 years ago. What's changed isn't how many people watch them, but the way they choose to watch them. In 2024, you'll see how the majority of younger viewers, in this instance under 45s, now choose to watch STV drama on STV Player. And for some dramas, in this graphic looking at a title like Red Eye, the majority of viewing from all ages is now on STV Player. Since joining STV, I've also been really impressed by some of STV players' content acquisitions. STV is a small and agile business that means we can move really quickly. Red Rock that I touched on earlier is an Irish soap opera that ran from 2015 to 2020 and was just sitting on the shelf with no UK streaming home until STV swooped in. It went live in Q4 2024 and has had over three and a half million viewing hours already. Brookside went on STV Player in 2023, but continues to grow from strength to strength with a huge volume of shows and consistently in our top five performers almost two years on. And there are still hundreds of episodes still to drop on the service. And just a couple of weeks ago, Shortland Street, New Zealand's number one soap, landed on STV Player and is the exclusive UK home. And the really smart thing about these deals is that they are all de-risked by being revenue share based. And for many viewers, STV Player is not just about on demand, but also live viewing. It's just the normal way to watch TV. Euro 2024 was the biggest ever live event on SDV Player. I'm a Celeb had a 40% increase in live viewing year on year, and the Six Nations has been huge, in particular the England v Scotland game in which I stayed strictly neutral. And the strength of the live experience on STV Player, particularly around sport, means it can deliver the audiences that advertisers demand at scale. Player Plus, STV Player's ad-free proposition at £3.99 a month, had a great year with a 36% increase in subscribers. And we went live three weeks ago with our partnership with Premier Sports, where for the price of a Premier Sports subscription, you get Player Plus for free. It's very early days, but it's been a very smooth launch and is currently on plan. And another example of how we can bring new, hard-to-reach audiences to the STV brand. And a further example as well of revenue diversification. Touching on the media bill, we're really pleased that the media bill was enshrined in law last year. It is not an exaggeration to say that this is the most significant piece of legislation from the past 20 years. It not only ensures prominence for our linear channel, but also for STV Player and means that our viewers will continue to be able to find our content however they choose to watch it. And more good progress on the KPIs announced at the start of 2024, with the only one classified as Amber being monthly active users. And last but certainly not least, monetization. I think it's important to remember first and foremost that in a world with an explosion of online content, TV remains a highly regulated and therefore brand safe, auditable, trusted platform. And our commercial proposition is uniquely set up to have the best of both worlds. Our partnership with ITV gives us a national scale, which in 2024 led to revenue growth of 5%, and within that, national VOD up 10%, with a huge digital brand count and world-class targeting capabilities through access to ITV's programmatic platform, Planet V. And on the right hand side, we continue to have incredible regional strength and strong relationships with our advertisers, leading to our STV controlled revenue also up 5% with regional VOD growth up 6%. And an average in 2024 of almost 100 regional brands per month. We also have seven discrete target for regions from Scotland wide through to individual cities and regions. And touching on the Growth Fund, having spent time with some of our advertisers, it is really evident that we are true business partners. And our Growth Fund adding value to clients' campaigns has been a real game changer. You can see some of the testimonials on this slide here. Two facts I'd pull out, one, 97% of our growth fund customers would recommend TV advertising, and two, 83% have seen an increase in footfall by advertising on STV. The monetization KPIs are in great shape, and the only one that is amber is subscribers, but with good growth from 2023 to 2024. And now for outlook and summary. Firstly, the outlook we all know in the short term, the ad market is really challenging. And the macroeconomic backdrop will have an impact on advertising and commissioning budgets. And we will have a clearer picture when we come back to you in May. Looking at the first four months of the year because Easter is in April, TAR is expected to be slightly down with national advertising expected to be down 5%, regional advertising expected to be slightly up and VOD expected to be up 6%. Studios has a strong order book of £76 million at the end of February with most scheduled for delivery this year. Cost savings are on track, although the increase in NI is material to the group at £0.5 million this year. But beyond the short term, STV is a more diversified business. We have growing momentum in content creation, a resilient audience proposition, and we remain a highly effective platform for our advertisers. We also have a consistent track record of delivery, and this means that when conditions improve, which they will, STV is well-placed to take advantage. We'll be presenting our strategy refresh in May, building on STV's excellent strategic progress. But for now, it's time for questions.

We will now begin the webinar question and answer session. If you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you have dialled in by phone, please press star nine to raise your hand and star six to unmute. The first question is from Fiona Orford Williams at Edison Group. Please unmute yourself and begin with your question.

Good afternoon. Thank you very much for taking the questions. First, I'll do three because that's traditional. First of all, you talked about green shoots in commissioning. Is there any pattern to that? Is it particularly international or is it any more colour that you could give us on that? That would be the first one. Secondly, just in that final section, just on the KPIs, you mentioned that they were amber on a couple of things. the monthly average users and subscribers. Is that just indicative of a slightly sluggish economy background? And the third one, HFSS, how significant is that as an issue? And would you expect if advertisers can't push those goods, they'll just shift their budgets to other products? Thank you.

Thanks very much for those three questions. Let me start. I'll start with the KPI one. I think in terms of monthly active users, they were flat from 23 to 24. But I think one of the things that the team are focused on this year is marketing of STV player. And we're confident that we're going to get good growth with that moving forward. But you will have also seen that In terms of STV Player, we had excellent viewing growth in 2024 with 8% viewing growth and also 8% in digital revenue growth as well. The other thing on subscribers for STV Player, we had really, really good growth from 2023 to 2024. And also, we're excited about the partnership that we announced. Well, we didn't announce. We went live with a few weeks ago with Premier Sports. where for the price of a Premier Sports subscription, you get STV Player Plus for free. So I think there is good momentum around subscription, good momentum around viewing for STV Player and a focus for the team on monthly active user growth in 2025. In terms of the content market, Look, we've got a really, really strong portfolio of 21 labels now and we cover all the main genres. So we've got lots of really positive conversations in place across all of the genres that you would expect. And looking at the momentum that we had in 2024 with 51 commissions and also 37 returning series, I think we're really well placed there. Lindsay, do you want to take the HFSS one?

Yeah, I think the reality here, Fiona, is that we don't quite even know how this is going to be implemented yet. So it's difficult to say in terms of how significant it would be clearly this year. It doesn't come in until the 1st of October. So it's three months only for 2025. But exactly how the sort of less healthy foods definition is going to be applied is difficult to tell. It is true, though, that this has been on the horizon for some time now. And so we have been engaging with customers both locally and ITV have said, nationally to support them through the decisions and the discussions that they've been having around what their options are. I guess as many businesses are currently thinking about how they can make themselves more sustainable, there are equally many businesses at the minute wondering and trying to work out other alternative products, et cetera, that they can be selling that wouldn't get caught by this definition. So I realize that is a lot of words that says we're not really quite sure yet. But hopefully it gives you a little bit of colour around the activity that's actually happening in the sector.

Lovely. Thanks very much. Thank you.

The next question is from Alistair Young from Shore Capital. Please unmute yourself and begin with your question.

Hi, guys. Thanks very much for the presentation. The studio's business is meaningfully larger than even just a couple of years ago. And I wondered if you could perhaps go through the extent to which the additional scale is helping you in terms of picking up new commissions or at least getting your foot in the door for conversations that you might not have actually had access to in the past. Thanks very much.

Wow, he just asked one question.

That's never happened before. We were expecting at least two more. Shall I go on that? Yeah, go for it. I mean, I think you're absolutely right. Only two years ago, STV Studios was just eight labels and now we're 21 labels. And I think what we're really encouraged by is our ability to scale internationally now as well. And what we've got is we've got new versions of shows in multiple territories, which is really encouraging. Bridge of Lies, which we actually... The film just down the road here in Glasgow is called Beat the Bridge in America, and we've got 100 shows on the Game Show Network. Lego Masters is in over 20 territories. And I think also when we look at some of the commissions we've had for the streamers, like Criminal Record for Apple TV, that doesn't just go out in our domestic market, that goes out simultaneously in 100 markets. So I think the ability of STV Studios to scale now is really, really encouraging. And I think having 37 returnable brands that were recommissioned last year as well means that we are really, really well set for that acceleration to continue. Lindsay, do you have anything to add on that?

Not particularly. I mean, I think what we have is a portfolio that we are managing. And we've sort of consistently said that we needed to build a certain amount of scale to better leverage the fixed cost base and get that working harder for us. And that we would do that through growing the hours in the IP library, because those secondary sales and those format sales in international markets and domestically are much higher margins. and we needed to have a higher number of returning series that gave us more certainty from one year to the next. And you see that coming through the order book as well with that on a generally positive trajectory. So I think you're right, we've got a lot of scale now. The labels are well matched against where we think that the demand is going to come from in the sector. And all of the sort of the key metrics that we believe will drive that continued growth and improve the margin within that division around returning series, IP hours, et cetera, are all going in the right direction. Thanks, Alistair.

Thanks very much. Much appreciated.

The next question is from Jonathan Barrett at Panmure. Please unmute yourself and begin with your question.

Hi, guys. Hopefully you can hear me. yeah we can yeah so um i i have got three questions but it's only three pieces i've got six so um i'll stick to three for now um first question just um on your library rights income which was up about 10 in the year can you just explain to us how to look at the margin on that and how you expect that to evolve going forward um and then Second question is again on studios. Can you just explain whether you get any EBIT margin benefit from using your own balance sheet for financing productions? Maybe you could shed a little bit of extra light on that for us. And then thirdly, just on the player, on this TV player, just explain the key revenue drivers, what actually makes that go up, that revenue line for us, please. Thank you.

Okay, thank you, Jonathan. Okay, so just taking them from the start, the library rights income, you're right, that's grown by about 10% in the year. It is not just the sale of tapes of already made programming, but it also covers the sale of a format, which we can either co-produce with another producer in another territory, or we license the rights to them to use that format. And depending on which of these categories you're in, the revenue and the margin is slightly different. But by and large, you would look to see a gross margin of 60 plus percent on those sales. So with four and a half thousand hours now in the library, much bigger than we've had in the past. and an increasing number of formats being sold internationally, as Rufus mentioned earlier, you can see that that margin enhancement should start to come through really meaningfully in the coming years. So it's, as I say, it's a mix of tape and format and whether we go pro or not. In terms of the EBIT margin benefit for financing productions, what we look to do when we are involved in either a large scripted or unscripted programme is, wherever possible, get the commissioner to cash flow those. so that we are not drawing down on our RCF and incurring interest wherever possible. Now, that is not always achievable, and particularly in the current climate, some commissioners are increasingly putting pressure on producers to cash flow programmes themselves. Where we can't get or we can't agree with the commissioner that they will cash flow it and it is of a meaningful size, what we will look to do is go to a third party bank to get third party non-recourse production financing the cost of which, so the interest cost of which, is included in the programme budget and therefore paid by the commissioner. So it doesn't impact the group's interest cost, it doesn't impact our interest cover or anything like that. It falls as part of the programme budget as cast, crew, your trip to eBay for your costumes or whatever it might be, it gets covered in the programme budget. So it isn't a direct cost to the group. And then on STV player, in terms of key revenue drivers, 75% of the revenue in the division is VOD revenue. And as you will know, we appointed ITV as our national VOD sales agent back in December 22. So they've been going two plus years now. And part of the deal there was that the growth in our national VOD revenue was would be tied to the growth that ITV achieved themselves. So a similar sort of arrangement to one that we had in place with Linear, where there are protections for STV. And as you will also know, ITV have got some very punchy digital revenue targets for the end of next year. So essentially we should benefit from them striving for those targets and essentially match their growth in our P&L account. Outside of that, it's all around sponsorship of the player, of carousels in the player, of content in the player, subscriptions, a bit of display advertising and other areas that come into the digital revenue. So there's a big chunk that's advertising and monetising an audience directly through VOD and then the balance, as I say, sponsorship, subscriptions, etc.

I think our sales team have been really excellent in identifying sponsorship opportunities for STV Player as well. If you look at STV Player, which obviously you can do outside of Scotland as well, you'll see there's been some fantastic partnerships that have been done.

Thank you.

The next question is from Roddy Davidson at Singers. Please unmute yourself and begin with your question.

Hi, Rufus. Hi, Lindsay. Thanks for your presentation.

Hi, Roddy.

I have three questions also, but they're all kind of on studios, so maybe that keeps it more simple. First one, just wondered if you could provide a little bit of granularity on sort of commissioning behaviour. In terms of, particularly in terms of sort of genres and price expectations during this sort of more challenging phase. Secondly, you obviously recommissioned or had recommissioned Celebrity Catchphrase recently. And I think for memory, catchphrase has been going for about 10 years ago, 10 years since you revised that. Just wondering, given that that's a pretty strong demonstration of the potential to reinvigorate sort of resting franchises, if you like, if there are any more of those out there that you've managed to identify. And the final one. was really just around some of the coverage which has been out there of late on the sort of number of creatives, producers, et cetera, who are out of work, general level of unemployment in the sector. It's obviously a very tough time. Just wondering if that's created any opportunities to cherry pick talent or indeed thrown up opportunities to invest in the indie sector. And sorry, finally, just on that point, Could you talk a little about your thoughts at the moment in terms of consolidating minorities? Thanks.

I'll start, Lindsay, and then you chip in. I mean, I think in terms of behaviour, obviously commissioners are putting pressure on price, but I would also say that A point we made in the presentation is that in a tough market, commissioners do tend to gravitate towards returning brands and are inevitably a bit more risk averse. And with the portfolio of returning brands that we have, that means that we're in a good position. So in 2024, we had 37 returning brands. You're right to point out Celebrity Catchphrase, which is one of my favourite programmes, and we announced the return of it. Who would have thought? It was actually 40 years ago that Catchphrase first came along. But yeah, it was reinvigorated 10 years ago. And look, we're always, you know, exploring our catalogue and IP opportunities and, you know, lots of conversations always in place. And I think... one of the big focuses and one of the big impressive things about the strategic progress of stv over the past few years has been that laser focus on generating ip um which means that they can be returning formats and returning brands so that will continue to be a focus moving forward In terms of, you know, the sector and where it is at the moment, you know, I think, first of all, you know, we do know it's difficult out there and we do know that, you know, we know it's difficult for the freelance community as well. The market changes often. We're very happy with where we are at the moment with 21 labels. We think we're really well set for the future. But if opportunities come along that are the right ones for us, we'll always look at it. I think I did it. Was there an additional question?

Yeah, just on the minorities. So I think, yeah. We have some commitments that we've already made around increasing what are already majorities to the 100% over the next few years through various put call option structures. So there's an amount of commitment there that we've already made. When we're looking at the minority stakes that we have, and I guess potentially other opportunities that might come up, one of the things that we are very cognizant of is just that changing shape and dynamic in the market. where there's a bit of a polarisation from commissioners just now where they're focusing either at the top end of really good quality scripted drama productions and shiny floor entertainment or the lower end of the high volume, slightly lower cost. And there's a bit of a gap forming in the middle where many programmes and labels would have sat previously. So when we're looking at opportunities and when we're thinking about the minorities that we currently have within our portfolio, we are reflecting on, well, how do they sit against that changing dynamic? And is that going to match and then get us the best value for going forward? And you'll possibly remember back to September where we spoke a bit around the sort of label review that we'd done within the organisation and that four labels had actually left the portfolio. And that was part of the reasoning behind that. I think that was everything, Roddy. Is that okay?

Yeah, that's perfect. Thank you. Cool. Thanks, Roddy.

The next question is from Andy Renton at Cavendish. Please unmute yourself and begin with your question.

Hi guys, thanks for the presentation and well done on a strong set of results. Yeah, a few questions from me. So you mentioned you were looking at viewing trends as part of the strategic review. Just wondering if there's any other interesting trends you picked up on that you haven't shared already. Second one was any sort of potential impact on you from the ITV speculation around sort of split up and take private and sort of any thoughts you have around that and how you would handle that. And the third question was, we sort of hear quite a lot from yourself and other sort of more linear TV focused public companies around the power of TV advertisers.

you see a world where you could actually have a a rotation and swing back from digital to traditional as people seem to pick up on that again thanks okay great i'll i'll i'll have a go at those yeah so look i mean i i think i think the the first thing to say around viewing trends is i i think if you if you listen to the news flow you'd think that no one was watching tv anymore and the numbers for for stv are really, really impressive. One of the things I pointed out in the presentation was that 97% of the top 500 commercial audiences are on STV. And so we have the ability to reach huge audiences very, very quickly. And that's always going to be hugely in demand for advertisers. And obviously, what we do is we look at where we are now, but we also project moving forward. In 2024, 62% of TV set viewing was to broadcasters and BVODs. That's 62%. And even if you project forward to 2030 and beyond, the majority of viewing on a TV set is forecast to be by broadcasters and BVODs. So I think the main point around viewing trends is that that not only is broadcast going to continue to be a very significant way in which people watch TV, but what we're doing is the best of both worlds. We're driving our streaming proposition as well because we're obviously mindful that lots of people watch TV in very different ways. So I think that's the answer to the viewing trends. In terms of ITV speculation, look, we're absolutely focused on growing STV, growing our advertising proposition and growing STV studios, and we're really well-placed to do that. And then in terms of the... power of TV and whether advertisers would move back to linear. I think what we're finding is lots of advertisers are buying broadcast and VOD as a combination. And I think that works well because what we have is the best of both worlds. We have the mass targeted proposition, sorry, the mass simultaneous reach proposition. I mean, you know, whether it's live sporting events or, you know, big moments that bring everyone together. But we've also got tremendous targeting capabilities on STV Player as well. So I think what we don't view it as an either or or whether advertisers will swing back. I think lots of our advertisers are buying both our broadcaster and VOD proposition. And both those capabilities are working well for them. Did that make sense? Is that OK, Andy?

Yeah, that's really helpful. Thanks.

OK, thank you.

And then ITV.

I mean, your question was around ITV speculation, wasn't it?

Well, yes. And effectively, do you have any sort of contingency plans or any sort of thoughts around if they do sort of take a private and split up the business?

We've got long-term contractual arrangements with ITV. We're working really well with them. We're really happy with the deal. And so that will continue.

Great. Okay, thanks.

And the next question is from Brodie Davidson at Singers. Please unmute yourself and begin with your question.

Hi, thank you. Just had a couple of additional ones, if I may. ITV mentioned last week that they were seeing a bit more activity from Channel 4 in the commissioning market. Just wondered if that's something you'd concur with. And also, if you could just talk about general demand in a nations and regions context. And then finally, for me, just you mentioned in the statement some technology investment in studios, I think both in Aberdeen and in Glasgow and what that might deliver. Could you give us a little bit more granularity around that, please?

Sorry, I didn't pick up the last point, Roddy, sorry.

It's the, so that I can pick up on that one. So that is just in the first half of this year, we are redoing the news studio sets within Glasgow and Aberdeen, as you say. So there's an amount of capex, about a million pounds or so, that we'll go into. We've not redone the sets yet. for 10 plus years. So they're in need of it. And as part of a sort of wider look at brand, etc. It is the right time to be focusing on the new sets and the graphics and things like that, which have moved on quite considerably since we last did it.

Yeah, okay. And look, in terms of activity from Channel 4, there's lots of conversations going on with lots of people. We've obviously got a great working relationship with Channel 4. We've done some great content with them over the years. Two series of Screw, which is a very high profile drama, for example. And on Channel 4 also, we're delighted that they've commissioned Game of Wool, which I've seen a sneak peek of, actually, with Tom Daley presenting it. It looks absolutely excellent. So, you know, long may that continue. In terms of nations and regions, look, we do lots of stuff. Obviously, in Scotland, we're very proud to be the number one producer in Scotland. And we do Bridge of Lies, Game of Wool that I've talked about, The Hit List. And Scotland is a great place to make TV and we're confident that our customer base will continue to want to do that.

The only other thing I would add to that is one of the, other than Blue Lights being completely brilliant, which it is, it's a Northern Irish drama with two cities based out of Belfast. So we have got a very clear centre of gravity in both London and Scotland. Glasgow, but we also have a presence in Manchester, Belfast, Cardiff. So we're increasingly through the portfolio that we're building, covering the various nations and regions, Roddy, and Channel 4 and others still have those targets to hit in terms of commissioning spend outside the M25. We are really well placed to take advantage of that and in a number of labels have got some really good momentum.

That's very clear. Thanks again. Thanks, Roddy.

There are no further questions on the webinar. I will now hand back to Rufus Radcliffe for closing remarks.

OK, well, look, thank you very much for coming today. I mean, I think... We are 2024 was a great set of results and I think the main thing I just wanted to say was that there are fantastic foundations in place for the business. We know that the short term macro is difficult. We know that the ad market is going through a difficult time at the moment, but the ad market always comes back and it's a question of when not if and we will be well placed for when that happens. STV Studios has had really really good growth in 2024 and again with our 21 labels we are really well placed. Our focus at the moment is on the strategy refresh which as we've talked about earlier is absolutely based on the really strong strategic progress of the business over the last five years and we look forward to talking to you more about that in May. If there are any questions that came through on the chat, for the power of modern technology, we can't actually see them. But if they are there, we will reply to all of those as well. And many thanks for your time today.