Zinc Media Group plc (LON:ZIN), the award-winning television, brand and audio production group, has announced its audited results for the year ended 31 December 2022 (“FY22”).
The Group has reported excellent progress for FY22, including the following highlights:
Financial highlights
• Revenue and Adjusted EBITDA[1] ahead of market expectations, with the Group profitable at Adjusted EBITDA level
• Revenue increased 72% to £30.1m (FY21: £17.5m) and marks the highest revenue the Group has generated in the last ten years
• Organic revenue growth of £6.8m or 39% year-on-year, reflecting the investment in new businesses and contracts
• H2 revenues increased 83% to £19.2m (H2 2021: £10.5m)
• Approximately 80% of revenue was delivered from existing customers, up from 69% in FY21
• Adjusted EBITDA of £0.1m, compared to a loss of £0.6m in FY21
• Strong H2 2022 performance with Adjusted EBITDA of £0.7m
• £3.6m of cash at 31 December 2022 and £4.6m as at 19th April 2023
• Loss before tax of £3.3m (FY21: £2.6m) is largely driven by acquisition costs related to The Edge acquisition in the year and amortisation related to previous acquisitions
Operational highlights
• The successful acquisition of The Edge in August 2022 has brought a quality, high margin business with significant repeat revenue
• The Edge is performing ahead of acquisition expectations, having achieved its best ever trading performance last year, generating £13m of revenue and £1.3m of profit before tax (of which £5.8m of revenue and £0.7m of profit before tax has been included in the Group’s consolidated results)
• The acquisition of The Edge has added considerable scale to the Group, with pro-forma revenues for the enlarged group of £37m in FY222
• The Group has been awarded “Production Company of the Year” at the prestigious New York Festival Film and Television Awards
Delivering a number of significant programme successes during the year
• Highly acclaimed documentaries that led the news agenda and got the nation talking include Putin vs The West, Tom Daley: Illegal to be me and Afghanistan: Getting out for the BBC
• Zinc’s largest ever volume commission, Bargain Loving Brits for Channel 5
• Programming with fresh talent and from new buyers such as Unprecedented for Discovery+, Space Jump for Red Bull, Martin Compston’s Scottish Fling for BBC, Spooked Ireland for Really, Naughty Tories for Channel 5 and Sunday Morning Live for the BBC
Current trading and outlook
• The Group is trading strongly with £26m of revenue already booked and expected to be recognised in FY23 (7 February 2023: £15m)
• In addition the Group’s pipeline remains strong with a further £6m of revenue at a highly advanced stage
• Together this provides the Board with confidence in delivering FY23 market expectations
• Integration of The Edge is progressing well: cross-divisional business development opportunities have been identified and the planned co-location with Zinc’s other London businesses later this year will enable cost savings and further synergies
Mark Browning, CEO of Zinc Media Group, commented:
“We are delighted to report a strong set of results for FY22: exceeding market expectations and revenues at a 10-year high. This is a great achievement and has been testament to the breadth and depth of our creative output. Performance in FY23 is very encouraging and there is a feeling of momentum and optimism around the Group. Zinc has a considerable pipeline of business and has already booked £26m of revenue to be recognised this year. As a result, the Board is positive for the outlook of the business and views the remainder of the year with confidence.”
Notice of annual general meeting
Accompanying the annual report and accounts is notice of the Group’s 2023 annual general meeting (the “AGM”), which will take place at 10.00am on 25 May 2023 at Singer Capital Markets’ offices at 1 Bartholomew Lane, London, EC2N 2AX.
Chairman’s Statement
2022’s results reflect a transformational year for the Group. The Board is delighted to see revenue grew 72% overall to a ten-year high, powered by excellent organic growth of 39% and a strong Adjusted EBITDA performance of £0.7m during the second half, plus the successful acquisition of The Edge Picture Company (“The Edge”). This follows huge amounts of hard work and is a much improved performance on the prior year.
The strong growth delivered by the Company and the high level of revenues delivered from repeat customers provides the Board with confidence of sustained Adjusted EBITDA profitability. The Board is pursuing a strategy built on strong organic growth, supplemented by selective acquisitions, to deliver long term profitable growth. The Group has continued to invest in talent and new business opportunities that are resulting in numerous contracts and should lead to growth and profitability in 2023 and beyond.
The acquisition of The Edge in August 2022 has been a strong addition to the Group. It has delivered record financial results in its fourth quarter, helping the Group to report strong H2 profitability. The Edge entered 2023 in a good position with record pre-booked revenue. Cross-selling opportunities and integration into the wider Group is progressing well and cost benefits will be realised with the planned move of The Edge from its current premises in Covent Garden into Zinc’s London headquarters in H2 2023.
The Group continues to deliver world class television and brand content. Putin vs The West grabbed the news headlines across the world when it was first broadcast in early 2023. Afghanistan: Getting Out gave the inside track on the chaotic withdrawal of western forces from Afghanistan and Bowelbabe In Her Own Words provided exclusive access to the final days of Dame Deborah James’ battle with bowel cancer. In addition, Zinc has produced hundreds of hours of television for all the main UK and many international broadcasters including Zinc’s largest ever volume commission for Bargain Loving Brits, and brand content produced for companies including Red Bull, EasyJet and Lego alongside large multi-nationals in the FTSE100, government departments and NGOs. The Company continues to receive notable endorsements for its quality of production and programming, most recently winning “Production Company of the Year” at the New York Festival Awards.
The Board would like to thank the management team, the employees and freelancers for their professional and dedicated work, as well as our shareholders for their support in what has been a year of strong progress.
CEO’s Review
The strategic priorities for 2022 were to deliver good organic growth, supported by high quality acquisitions, with the ambition to build a strong core business by the end of 2022 that would deliver long term sustainable profitability. All these were delivered in the year.
Revenue growth
The Group grew strongly in 2022 with total revenue up 72% on FY21 to £30.1m. This growth was achieved as a result of investments made in London Television and Zinc Communicate during the previous two financial years and the acquisition of The Edge in August 2022. Following the easing of Covid-19 restrictions in H1, revenue growth in H2 was even stronger, increasing 83% year-on-year to £19.2m, and delivering an H2 Adjusted EBITDA of £0.7m, in part driven by the acquisition of The Edge in August, which has performed ahead of our expectations.
Organic revenue growth powered Zinc’s top line performance and grew £6.8m or 39% in FY22, driven by a very strong performance from the Group’s new businesses which were up 97% (£4.2m) as well as excellent growth from the Group’s established businesses, which grew 20% (£2.6m).
The Group comprises twelve businesses that operate in two areas: television production (Tern TV, Brook Lapping, Red Sauce, Supercollider, Rex, Bumblebee and Atomic TV) and content production for brands and businesses (The Edge and the Zinc Communicate businesses in Brand Entertainment, Audio, Corporate Film and Publishing).
Four of these businesses, Tern TV, Brook Lapping, Zinc Communicate Publishing and The Edge have been established for many years. Seven are new businesses that have been launched in the last three years as part of the Group’s transformation plan and are growing at an accelerated rate. These comprise the London TV labels Red Sauce, Supercollider and Rex, alongside Zinc Communicate businesses in branded entertainment, corporate film and podcasting, and the post-production business Bumblebee. Together the new businesses contributed £9m of revenue in FY22, almost doubling year-on-year. A new Bristol based TV label, Atomic TV, was launched in January 2023.
The Edge has helped add scale to the Group, as well as an increasing proportion of revenue from repeat customers. Zinc’s pro-forma group revenue for FY22 was over £37m (on the basis of The Edge having been acquired at the start of FY22).
Strong customer base built on high levels of repeat customers
The Group has a solid and growing base of existing business with 79% of revenue in FY22 from repeat customers, up from 69% in the prior year, delivering a high level of earnings predictability. This is particularly pleasing when taking into account that the Group has a large number of new businesses that are still establishing their client base. The revenue delivered from the repeat customer base within the Group’s established businesses is 90% of their revenue.
Continued revenue diversification delivering a more robust Group
The Group’s revenue and customer diversification was enhanced with the acquisition of The Edge in August 2022. The Edge is one of the world’s leading producers of corporate and brand films, producing work of a consistently high quality for a stable base of long-term returning clients. It achieved healthy gross margins of around 50% and had its best ever year in 2022. It started 2023 with record levels of pre-booked revenue.
The addition of The Edge creates a more balanced Group where television now accounts for around 60% of Group revenue and Zinc Communicate and The Edge representing the remaining 40%. This revenue mix and diversified portfolio has created a strong platform on which to build future growth and de-risks the Group’s previous dependency on high value but binary TV commissions.
Path to sustainable profitable growth
The Group is pleased to report a profit at Adjusted EBITDA level for FY22 of £0.1m, including a profit of £0.7m in the second half, and we will look to accelerate growth in profitability in the coming years.
Five of the eight new businesses launched in the last three years are in the investment and early growth phase, and we expect them to start contributing positively to Adjusted EBITDA in FY23 and beyond. Similarly, the Group has added some strategic high volume, lower margin TV revenue in FY22 that is supporting the Group’s expansion into new TV markets. We believe these contracts will provide long-term benefits by bringing new capabilities to the Group, establishing Zinc in new markets and driving profitability in the future. These contracts include a seven-figure development funding from a global streaming service for an access documentary, securing the Group’s first weekly live television series for the BBC and the commission of a high-volume daytime commission for Channel 5, which have provided a foothold in the previously untapped global streaming, live television and daytime markets.
Shareholder engagement
The Group conducted many engagements with shareholders during the year. Alongside regular trading updates, the CEO and CFO presented to all shareholders and interested parties three times during the year using the Investor Meets Company platform and investors can follow the Group via the DirectorsTalk platform. In addition, the Group held a capital markets day at the Zinc headquarters in London. This provided the opportunity for investors to meet the executive team and Chairman along with members of the senior management team, and the CEO presented market insights and showcased the creative work from around the Group. Following its success, the Company intends to present another capital markets day this year and further details will be announced via RNS in due course. Investor Focus Communications (IFC) is the Group’s investor relations and financial PR advisor. News is regularly posted on the Group’s website and on the Group’s social media feeds. Links to these can be found at www.zincmedia.com.
Looking forward in FY23 with confidence
The Group entered 2023 with the highest amount of pre-booked revenue since the new management team took over in 2019. As at 18 April 2023, revenue booked and expected to deliver and be recognised in FY23 stands at £26m, with a further £6m on the pipeline at a highly advanced stage. Last year £18m of revenue was booked between May and December and recognised in FY22. Taken together, these underpin the Board’s confidence in comfortably achieving market expectations for the year ahead.
Zinc’s programmes have led the national conversation so far this year and include Putin vs The West and Bowelbabe: In her Own Words which received 5-star reviews with The Times calling the film “a masterclass in how to make life and death meaningful”. Channel 4 has announced a high profile commission titled Gender Wars which will explore one of the most polarised issues of our time, the meaning of sex and gender. BBC One has broadcast Dr Xand: Con or Cure and also recently announced their first commission from Rex TV called Get your Eurovision on!.
The size of the opportunity ahead is significant. H2 2022 results provide evidence that the Group can generate healthy Adjusted EBITDA and cash as it scales. Growth will come organically and from pursuing selected earnings accretive acquisitive opportunities. We are optimistic that growth will accelerate in 2023 and beyond.
Programme highlights
2022 was packed with programme and editorial highlights.
Putin vs The West was produced in 2022 for the BBC and aired in Q1 2023. This programme secured exclusive access to world leaders including former UK Prime Ministers Theresa May, David Cameron and Boris Johnson, along with former French President François Hollande and current Ukrainian President Volodymyr Zelenskyy, in addition to the Director of the CIA. This three-part series told the story of how through the decades of clashes, the West has struggled to deal with President Putin.
Bargain Loving Brits: the long running series was super-sized in 2022 with Channel 5 commissioning over 50 episodes of fun-loving ex-pats in Spain setting up businesses, enjoying retirement and always searching for a bargain on the Costa del Sol.
Tom Daley: Illegal to be me: As thousands of athletes prepared to compete on the global stage at the 2022 Commonwealth Games in Birmingham gold medallist and double world champion diver Tom Daley exposed the brutality faced by gay athletes in many competing countries where it remains illegal to be gay, including 56 member states of the Commonwealth.
Space Jump: This special feature documentary for Red Bull was released to mark the tenth anniversary of Felix Baumgartner’s 2012 record-breaking sound barrier bursting, mega jump from space. Baumgartner broke the speed of sound in freefall reaching a speed of 843mph, and also broke all records for live streaming, a record that still stands today.
Afghanistan: Getting Out was a two part documentary for the BBC in partnership with numerous other global broadcasters telling the twenty year story of the West’s conflict with Afghanistan culminating in the chaotic withdrawal of Western forces in 2021.
Martin Compston’s Scottish Fling: Tern TV secured The Line of Duty star to present this factual entertainment series for the BBC, showcasing the spirit of Scotland through its people and places.
Sunday Morning Live: Tern TV secured this live weekly programme for BBC ONE in an open competitive tender, in a production partnership with Green Inc Film and Television. Sunday Morning Live is an ethical discussion programme picking up on the week’s topical news and events.
Productions made outside London (“MoL”) are important for the UK’s Public Service Broadcasters (“PSBs”) and Zinc is well placed to address this need, with substantive long term production centres in Manchester, Glasgow, Belfast and Aberdeen. At the beginning of 2023 the Group opened a new TV label in Bristol, a city world renowned for producing specialist factual programmes including natural history, travel and adventure and history. Over two thirds of Zinc’s production revenues in 2022 were MoL, driven by the success of Red Sauce in Manchester and Tern TV in Scotland and Northern Ireland.
Supercollider, Zinc Communicate and The Edge produced hundreds of brand and corporate films in 2022 for many of the world’s largest and most recognisable brands including Red Bull, EasyJet and Lego alongside multi-national FTSE100 organisations as well as NGOs and government organisations.
There were dozens of other programmes produced by Zinc Media Group in 2022, which can be seen on www.zincmedia.com. Zinc’s group of companies produces content watched by tens of millions of people across the world every year, and its programmes have led the news and the national conversation across the United Kingdom.
Market and outlook
In television the PSBs (comprising the BBC, ITV, Channel 4 and Channel 5) represent the largest market for Zinc and the Group produces for all these channels.
The total TV commissioning market in 2022 for UK producers still remained below pre-Covid levels at £4.3bn (£4.7bn in 2019) but the factual television spend in 2022 remained consistent at £1bn, of which c. £850m was spent with independent production companies, not owned by the main broadcasters or channels (Source: Ofcom 2022). PSB’s account for just over 50% of this commissioning market and Channel 4 is the single largest commissioning channel from the independent production sector. Zinc has made specific investments in Tern TV and Rex TV to grow the number of programmes it makes for Channel 4. Subscription Video on Demand (SVoD) spending on UK factual programming by the likes of Netflix and Disney+ has risen significantly, although the number of hours commissioned remains far lower than the PSBs, and UK multi-channels have also increased their spend from the independent production sector.
Zinc is well placed to continue to grow from this large factual commissioning market. Approximately £200m of the UK PSB spend on television commissions is spent outside of London, which validates Zinc’s continued investment in Tern TV (Glasgow and Belfast), Red Sauce TV (Manchester) and the launch in 2023 of the new Atomic TV (Bristol).
While premium documentary programmes such as Putin vs The West and Tom Daley: Illegal to be me have generated both recognition and awards for Zinc, it is the factual entertainment market which offers the greatest potential for accelerated growth. This genre represents the largest proportion of PSB commissioning spend in non-scripted television and Zinc has diversified into this market in recent years with the launch of Red Sauce TV and Rex TV as well as new investment in factual entertainment within Tern TV. While this is the largest addressable factual market for Zinc, it is dominated by a large number of returning series. This makes it initially hard to penetrate but provides lucrative and long running returning revenues once business is secured. The super-sized Red Sauce commission from Channel 5 is testament to this, and Rex TV has a growing pipeline in this market. Factual entertainment also offers the opportunity for increased international distribution and format sales.
In addition to broadcast television production, the Group’s commercial content production division Zinc Communicate continues to grow at pace, with CAGR of 22% over the last three years. If these high levels of organic growth can be sustained in the years ahead, the Group will have developed a prominent position in this large, and higher margin, market for corporate and brand films. The addition of The Edge accelerates the Group’s presence in this market.
We are very encouraged by the high rate of new business wins in recent months, including high profile television programmes, large volume series and the new businesses gaining excellent traction in the market:
• The Group’s newest TV labels, Red Sauce, Rex and Supercollider, have booked £9m of revenue into FY23; Bristol based Atomic TV was launched in January this year
• The Edge has booked £8m that is expected to be recognised in FY23, which is the highest amount of pre-booked revenue it has had at this stage of a financial year
• Red Sauce has won the Group’s largest ever commission worth £7.3m, to be recognised over FY23 and FY24, and is in production for two new series which are yet to be announced
[1] Adjusted EBITDA is defined as EBITDA before Adjusting Items (see Note 8) comprising share based payment charges, loss on disposal of fixed assets, reorganisation and restructuring costs, acquisition costs and contingent consideration treated as remuneration
2 Pro-forma revenues demonstrate performance had The Edge been owned by the Group for the whole of FY22
