Strongly positioned to resume successful growth strategy
2020 Interim Results – 1st September 2020
Landmark, from Primal Media for Sky in 2021
2 2
Agenda
Overview Simon
Financial Review Lindsay
Covid-19 Response & Strategic Update Simon
Q&A
2
3 3
STV strongly positioned to resume successful growth strategy
• Proactive steps taken to strengthen balance sheet and support STV colleagues and
partners
• Significant impact from Covid-19, but clear signs of recovery with total advertising -7% in
July and +1% in August, and all STV shows now back in production
• Crisis has reinforced fundamentals of STV’s diversification strategy, with delivery
accelerating:
o Continued record audience growth on TV and online
o Clear market leadership in Scottish advertising
o Digital business going from strength to strength
o Tangible progress in production with pipeline converting into significant new
commissions and talent deals
• Board proposes interim 2020 dividend of 3p per share to be satisfied by way of bonus share
issue, with intention to restore cash dividend at earliest opportunity.
3
4 4
Total
Revenue
Total
Advertising
Revenue
Regional
Advertising
Revenue
Digital
Revenue
Studios
Revenue
Operating
Profit
Adjusted
EPS Net Debt
Operating
Cashflow Interim
Dividend
4
£44.7m
-19%
£39.1m
-20%
£6.0m
-18%
£5.9m
+5% VOD +13%
£5.2m
-52%
£33.5m
Dec‘19: £37.5m
£1.6m
-17%
£10.5m
2019: £8.4m
10.8p
-50%
3p
2019: 6.3p
H1 2020 key financials
5
Financial Review Lindsay Dixon
Elizabeth is Missing, STV Studios for BBC1
6 6
Revenue
- Broadcast 35.0 45.0 (22%)
- Digital 5.9 5.6 5%
- Productions 1.6 2.0 (17%)
- ELM 2.2 2.3 (5%)
44.7 54.9 (19%)
Total advertising revenue 39.1 48.8 (20%)
Operating profit 5.2 11.0 (52%)
(1.4) (1.9) Finance costs
3.8 9.1 PBT pre-exceptionals
Exceptional finance cost (8.7) -
(Loss)/profit before tax (4.9) 9.1
Adjusted EPS (pence) 10.8 21.8 (50%)
H1 2020
£m
H1 2019
£m Change
Group Results
Almost half of the Covid-19 revenue impact mitigated at a profit level
• Revenue down 19%, a result of lower linear TV
advertising and limited programme deliveries
• Total advertising revenue down 20%:
o Digital posted revenue increase as strong
Q1 more than offset Covid-hit Q2
o Regional advertising severely impacted in
Q2 but helped by increased Scottish
Government spending throughout
lockdown
• Flow through of revenue reduction to operating
profit mitigated by ITV variable cost model and
management actions
• Net receivable due from the lottery fully provided
for at the end of the period, resulting in an
exceptional finance charge of £8.7m 6
7 7
Operating profit waterfall shows benefit of STV variable cost model and
other cost savings implemented
7
£m
8 8
Decisive steps taken to retain cash and strengthen the balance sheet
8
• FY19 final dividend cancelled and FY20 interim dividend to be paid via bonus share
issue
• Pension contributions in respect of April, May and June, plus the contingent cash
payment, all deferred to December 2020
• Capital expenditure plans delayed to FY21 (subject to reassessment over H2)
• VAT payable in Q2 2020 deferred to Q1 2021 under government scheme
• Bank facilities extended to £80m (from £60m), maturing in June 2022
• Equity placing completed on 7 July with 7m new ordinary shares admitted to trading,
realising net proceeds of £15.5m
9 9
H1 2020 H1 2019
£m £m
Strong operating cash conversion reducing net debt by £8.5m on last half year
• Operating cash conversion of 202% driven by
working capital cash inflow
• Limited capital expenditure beyond Q1
• Pension deficit payments reflect agreement with
trustees to defer Q2 contributions to December
2020
• Tax payments higher than 2019 due to non-
repeat of refund in respect of a prior year
• Investment in Two Cities made in January 2020;
funded from proceeds received on disposal of
minority investment in September 2019
Operating profit 5.2 11.0
Depreciation/amortisation – owned assets 1.7 1.4
Depreciation/amortisation – leased assets 0.9 0.9
Share based payments 0.2 0.1
EBITDA 8.0 13.4
Working capital 4.9 (1.7)
Lease payments (1.0) (0.9)
Capital expenditure (1.4) (2.4)
Operating cash flow 10.5 8.4
Cash conversion 202% 76%
Pension deficit payments (3.0) (5.9)
Interest and refinancing fees (0.8) (0.5)
Tax (0.9) 0.2
Re-organisation costs - (0.8)
Dividends - (5.3)
SCL funding (0.7) (0.9)
Share purchases - (0.9)
Investment in Two Cities Television (1.1) -
4.0 (5.7)
Net debt 33.5 42.0 9
10 10
Jun-20 Dec-19 Jun-19 Dec-18 Jun-18
Net debt (£m) 33.5 37.5 42.0 36.3 37.8
Leverage covenant 1.47x 1.28x 1.49x 1.36x 1.46x
Maximum n/a 3x 3x 3x 3x
Interest cover 20.2x 25.1x 23.5x 26.7x 32.4x
Minimum 4x 4x 4x 4x 4x
Net debt and covenants H1 leverage of 1.47x slightly lower than last half year and remains within self-
imposed target range
• Measures taken to maximise cash retention more than offset upward pressure on net debt from
reduced trading
• Covenants relaxed following agreement with lenders: in the event leverage exceeds 3x then that
covenant falls away and is replaced by a minimum liquidity threshold test
10
11 11
• Benefit of £3.5m to the cost base as a result of
the variable cost arrangement with ITV
• Other cost savings identified have been
delivered in line with plan
Broadcast
Benefit of variable cost base mitigates profit flow through of reduced revenues
11
Revenue
- National advertising 28.0 36.6 (23%)
- Regional advertising 6.0 7.4 (18%)
- Other 1.0 1.0 (13%)
35.0 45.0 (22%)
Operating costs (29.6) (34.0) 13%
Operating profit 5.4 11.0 (50%)
Operating margin 15.5% 24.3%
H1 2020
£m
H1 2019
£m Change
12 12
• Strong performance in Q1 drives revenue growth
for the first half
• Investment continued during H1 despite market
conditions with resultant impact on margins
• Cost base also reflects higher depreciation than
in the prior year following a period of intense
development activity
12
Digital
Revenues rise despite Covid; cost base reflects continued investment in growth
Revenue 5.9 5.6 5%
Operating costs (3.1) (2.5) (24%)
Operating profit 2.8 3.1 (11%)
Operating margin 47.4% 55.8%
H1 2020
£m
H1 2019
£m Change
13 13 13
Studios
Improved bottom line despite production hiatus and absorption of Primal costs
• Strong secondary sales performance (over £1m in the 6 months) at good margins
• Primal costs absorbed in H1 2020
• Cost savings across all major categories of discretionary and staff spend
H1 2020
£m
H1 2019
£m Change
Revenue 1.6 2.0 (17%)
Operating costs (3.1) (3.6) 11%
Operating loss (1.5) (1.6) 4%
Operating margin (94.4%) (80.9%) -2.5
-2
-1.5
-1
-0.5
0
H1 2019 Primal Programme deliveries Cost savings H1 2020
14 14
Accounting valuation H1 2020 H1 2019 FY 2019
14
Pensions
Assets (£m) 402.9 375.9 381.9
Liabilities (£m) (479.8) (450.3) (445.9)
Deficit (£m) (76.9) (74.4) (64.0)
Key assumptions:
Discount rate 1.4% 2.2% 2.0%
RPI 2.9% 3.3% 3.0%
Constructive engagement with trustees
• Swift agreement to postpone Q2 contributions
• Overall position benefitted from hedging
strategies in place
o Asset values increased over H1
• Risk weighting of investment portfolio
rebalanced to increase proportion allocated to
return-seeking asset classes
• Planning well underway for 2020 triennial
• Increase in accounting deficit reflects:
o Lower discount rate as a result of fall in
corporate bond yields
o Postponement of contributions
15 15
Scottish Children’s Lottery (ELM)
• Divestment process ongoing with timing impacted by Covid
• Focus is on sale of the business, rather than other investment or
partnership options
• Online ticket sales have held up well during lockdown, although retail sales
have inevitably been impacted
• Net debtor now fully provided for – exceptional finance charge of £8.7m
before tax
15
16
Covid-19 response and strategic update Simon Pitts
Catchphrase, STV Studios for ITV
17 17
Our focus is on accelerating our successful strategy, not changing it
Maximise value of
Broadcast
Drive Digital growth
Build world class
Production
• Maintain viewing dominance
• Reinforce leadership in ad market
• Use marketing power to boost rest of STV
• Strengthen content offer
• Aggressively drive UK expansion
• Continuous product upgrades
• Grow drama business
• Convert pipeline of returnable formats
• More talent partnerships
17
1
2
3
18 18
STV’s broadcast dominance grows, enhanced by lockdown
BROADCAST
18
Highest all time
audience share
since 2008 at
19.2%
Total audience
volume +12%,
highest growth
ever
97% of all large
commercial
audiences in
Scotland on STV
6/10 most popular
new dramas and
9/10 most popular
entertainment
shows
H1 viewing share
11% higher than
ITV, largest gap
in 18 years
Record audiences in H1 and still the biggest peaktime
channel, with gap widening
• 5 hours 46 mins TV viewing
per day in April +25% on 2019
• 90% of Scots watched STV
• STV News audience +40%
• STV daytime audience +48%
LOCKDOWN STATS
H1 Highlights Source: BARB, Jan-Jun 2020, peak time (18:00-22:30),individuals
19 19 In July, STV beat BBC1 across all time, peak time and daytime for the first time ever
Not just a lockdown phenomenon
STV’s audience was growing before lockdown, and has grown since
BROADCAST
19
Peaktime lead over BBC1 growing
Jan Feb Mar Apr May Jun Jul H1’20
Month by month audience growth on STV in 2020 vs 2019
STV News’ audience continues to grow strongly H1 viewing share
74% OF TV
SET VIEWING
WAS STILL TO
BROADCAST
TV IN H1
Live TV and
broadcast
VOD
‘Unmatched’
viewing like
Netflix &
Youtube
26%
74%
STV News
BBC Reporting Scotland
Source: BARB Jan-Jun 2020, individuals, total
TV/unmatched/non-linear, average mins per day
Source: Barb : Jan-Jun 1800- 2230 Source: BARB : Jan-Jun’2020 ; 0930-2400
Source: Barb – Jan-Jun 2017-2020, Weekdays 1800-1900
20 20
STV still attracted
55 new clients from
April-Sept,
incentivised by
Growth Fund
Regional spot back
to year on year
revenue growth in
both July and
August
We are seeing advertisers return to TV as lockdown eases
Brand count and revenue are increasing again in the regional spot market
20
BROADCAST
Average of c.100
brands per month
in normal times,
which reduced to
32 at lowest point
in May
Revenue supported
by strong Scottish
Government spend,
over 20 different
campaigns across
H1
REGIONAL
BRAND
COUNT
Steady
improvement in
June/July/August
driven by
household goods,
tourism and retail
96
32
80
21 21
190 new
advertisers
Our focus has been on reinforcing STV’s position as the advertising
market leader
21
BROADCAST
STV Growth Fund now
doubled to £20m
“STV was the obvious choice
for us in terms of the profile
and reach, trusted brand and
flexibility in approach as we
try to recover from this
pandemic.” Vicki Miller, Director of Marketing & Digital, VisitScotland
No.1 choice for Scottish
brands
Big marketing push to
highlight TV’s
cost-effectiveness
£10.3m allocated
so far
448 deals
New TV campaign launches
across STV this month
22 22
This crisis has also reinforced STV’s strong sense of social purpose as
Scotland’s public service broadcaster
HEALTH &
WELLBEING
DRIVING THE
LOCAL ECONOMY
DIVERSITY &
INCLUSION
CHARITABLE
GIVING
• On screen Black
Voices campaign in
response to BLM
• New target to double
BAME colleagues by
2023 plus on screen
representation targets
• £1m ring-fenced for
diverse ad campaigns
• Part of wider diversity
and inclusion
commitment
22
• Online campaigns
targeting mental health,
exercise, healthy eating
and public health
• £1m campaign to
celebrate local business
and charity heroes
• Range of new Growth
Fund partnerships to
boost local economy
• STV has distributed
over £1.5m to 300+
Scottish charities
• “Pause for applause”
for the NHS every
Thursday at 8pm
We are creating a lasting social impact in our communities by using the power of TV to do
good and effect change
23 23 The Bridge, exclusive to
STV Player continues to accelerate strongly, well ahead of the competition
DIGITAL
More people Watching more For longer
And more
revenue
Creating more
inventory
Monthly active
users
+16%
VOD stream
starts
+72%
Total online
viewing
+86%
Ad impressions
+37% VOD revenue
+13% 23
24 24
After a very strong start to 2020, VOD revenue didn’t fall as
sharply as linear in Q2, and is now building back
DIGITAL
24
VOD
BRAND
COUNT
Revenue impact not
as immediate as
linear as pre-booked
national brands fulfil
their deals
May/June the most
severe period given
full lockdown
July/August gradual
recovery driven by
FMCG, motors and
travel
Agency deals also
starting to ramp back
up
100
80
64
VOD REVENUE
+57% IN Q1
VOD REVENUE
-23% IN Q2
25 25
TOP 10 DIGITAL PROGRAMMES SO
FAR IN 2020
5 of the top 10 shows were Player-exclusive
STV’s digital content strategy is working, with our 1500+ hours of
Player-exclusive content making up 30% of viewing in H1
DIGITAL
25
In June there were more streams for Player-
exclusive content than channel 3 content
1. Coronation Street
2. Emmerdale
3. White House Farm
4. The Bridge
5. Liar
6. The Slap
7. Janet King
8. Acceptable Risk
9. Take the High Road
10. Flesh and Blood
Source: Adobe Analytics, FreeWheel Jan-Jul 2020 Source: Abode Analytics/ FreeWheel Jan-Jul’20
CH3 Content STV Player Exclusive
26 26
The Singapore Grip
87 hours of new
entertainment
More new Player-exclusive
content
Soaps back to full strength
from early September
The H2 Player content line-up will be its strongest ever DIGITAL
40 hours of Network drama
26
Des
27 27
Source: Adobe Analytics Jan-Jun 2020, Jan-Dec 2019
now pre-installed on around half
of the UK’s 42m connected devices, with
potential for further growth
UK-wide distribution offers another big growth opportunity for STV Player
DIGITAL
27
22%
31%
7%
11%
71%
58%
H 1 2 0 2 0
F Y 2 0 1 9
Mobile Web Connected TV
Big screen is where the growth is % of STV Player usage by platform
• Launched UK-wide July
2020
• 3 million additional devices
• Prominently positioned in
app section
• STV controls and sells all
ad inventory
• Launched UK-wide August
2020
• 10 million additional devices
• Prominently positioned in
app section
• STV controls and sells all
ad inventory
28 28
STV joined forces with other broadcasters to adopt
Covid safety guidelines
Catchphrase was the first UK entertainment show to
resume filming in June
TV production has resumed, with all STV shows back filming STUDIOS
28
Antiques Road Trip back out on the road in July for
series 22
A Government-backed insurance scheme will
support high-end drama
29 29
• Screw, new returnable 6x60 drama series for
Channel 4
• Set in a prison
• For delivery in 2021
• Funding/international distribution already in place
• From the writer of The Victim, Rob Williams, and
STV Drama team behind BAFTA – winning
Elizabeth is Missing and The Victim
Our strong creative pipeline is translating into significant new commissions
29
• Ambitious 8x60 series for Sky
• Artists and communities create the next great
British landmark
• For delivery in 2021
• Created by Primal Media
• STV acquired majority stake in Primal in 2019
Drama
STUDIOS
30 30
ART/CART 140x45/60
Catchphrase 3x60
Catchiest Moments
We’re currently in production on shows for 9 different networks, our
busiest period ever
Catchphrase 10x60 Inside 6x60
Central Station Jerk 4x60
Royals vs 4x60
The Tabloids The Yorkshire 10x60
Auction House
Is Covid Racist? 1x60 It Pays To Behave 1x60 30
STUDIOS
RETURNING
NEW
RETURNING RETURNING RETURNING
NEW NEW
NEW NEW
31 31
A new creative partnership, with Barefaced TV , targets younger – skewing
factual entertainment formats
31
• Founded by well-respected producers Rosie Bray
and Lucy Golding
• Formerly at BBC, ITV, Endemol, NBC
• Co-created younger skewing formats like Snog,
Marry, Avoid? (BBC3), Naked Beach (C4)
• Barefaced will be a wholly-owned label within STV
Studios from 1st September
STV Productions rebranded
to reflect status as home of a
range of creative labels
Now 7 creative labels under one roof
Drama Entertainment
Factual
STUDIOS
32 32
STV Studios’ creative pipeline is stronger than ever and we have already
secured £15-20m of commissions for 2021
32
35 in funded
development
68 projects in active
development
39
scripts
SCRIPTED Across 3 drama
companies
UNSCRIPTED Across Entertainment, Factual &
Primal Media
75 projects in active
development
50 priority
projects
15 in
advanced
discussions
STUDIOS
33 33
Priorities at STV in H2 2020
1. Broadcast
2. Digital
3. Studios
4. Corporate
33
• Consolidate ratings lead with strong H2 schedule
• Partner with advertisers to lead recovery
• Progress PSB regulatory settlement
• Continue to strengthen content offer
• Further increase UK distribution
• More personalisation
• Continued safe resumption of production
• Convert more of scripted and unscripted pipeline
• More talent partnerships
• Continued focus on cash and costs
• Complete lottery process
• Pension triennial review
34 34
Outlook
• Having taken proactive steps to strengthen the business and support our people, the focus is now on
accelerating our successful strategy to grow and diversify STV
• Given the continued market uncertainty, it is not possible to provide firm guidance for H2
• However, the fundamentals of our business are strong and improving:
o STV’s viewing performance remains excellent, with a strong H2 schedule to come
o Our digital business is expected to continue to grow strongly
o Advertising trends have improved materially in July and August, with August back in positive
territory
o Production hiatus will impact revenue rather than profitability in 2020, with £15-20m of
commissions already secured for 2021
• We will continue to manage cash and costs carefully, with our variable broadcast cost base offering
ongoing protection
• Board proposes interim 2020 dividend of 3p per share to be satisfied by way of bonus share
issue, with intention to restore cash dividend at earliest opportunity.