Zinc Media Group plc (LON:ZIN), the award-winning television and content production group, has announced its unaudited interim results for the six months to 30 June 2024.
Commenting on the results, Mark Browning, Zinc Media Chief Executive, said: “Since the Group’s trading update on 8 July 2024, we have experienced a significant uplift in new business, £5m of which will be recognised in FY24 with a high level of pre-bookings for FY25. Our revenue mix in FY24 is delivering higher gross margins than prior year and we are achieving efficiency savings faster than anticipated. This currently underpins our confidence of delivering to full year EBITDA expectations of £2.1m1. The uplift in production and commissioning of new business we are seeing in H2 mirrors the wider UK production market being heavily weighted to second half performance.
The fundamentals of Zinc are excellent. We have an increasingly diversified client base, high levels of repeat business, healthy gross margins, and produce content across a range of price points within our markets. We are particularly pleased with the level of recommissions, reflecting recognition of the quality of our work, the trusted relationships we have with our clients and our strong reputation in the industry. We are on course for significant profit growth this year and are well placed to benefit from future consolidation of the UK production sector.”
Headlines
· As at 25 September 2024, revenue won and expected to be booked in FY24 is in line with the prior year (after adjustment for Zinc Communicate which was loss making and discontinued in the first half) at £33m, with a further £5m that could be recognised in FY24 in highly advanced discussions.
· In addition, the Group has successfully met its targeted annualised efficiency savings of £0.5m.
· The Group has good visibility of further revenue and profit growth in FY25 with £11m of revenue already secured for FY25. This is in line with prior year.
Financial Highlights
· Group revenue of £14.1m (H1 20232: £17.7m) from continuing operations was lower than prior year, in line with the wider market which is seeing production weighted to the second half of the year.
o While H1 reported revenue is down compared to prior year, it represents growth of 31% compared to H1 2022 as the Group delivers long term growth.
· Gross margins of 41% were in line with H1 2023, and up on the prior full year (FY23: 39%).
· Adjusted EBITDA3 loss of £0.9m (H1 2023: profit of £0.6m) reflects the H2 revenue weighting.
· Cash of £4.1m at 30 June 2024 (December 2023: £4.9m) remains robust and provides the Group with sufficient working capital.
· Net cash of £0.6m (December 2023: £1.5m).
Operational Highlights
· Following a strategic review, the Group decided to wind down the loss-making Video Marketing and Brand Content division which sat within Zinc Communicate and to focus its content production strategy for brands and businesses via Supercollider and The Edge, which continues to perform well.
· The Group was crowned “Production Company of the Year” for the second year running at the prestigious New York Festival Film and Television Awards.
· The Group produced a number of highly acclaimed documentaries that led the news agenda and got the nation talking including:
o Putin vs the West: At War: The 3-part series for the BBC, which is available on iPlayer, documents the days leading up to Russia’s invasion of Ukraine, with exclusive access to the key protagonists.
o Rob & Rylan’s Grand Tour: This new series for the BBC launched to considerable critical acclaim and delivered the highest viewing figures for BBC Two so far this year.
o Chasing Glory chronicled the pursuit of gold medals by six of the world’s most recognisable athletes in the run up to the Paris Olympics and was exclusive to Discovery+, who held the main UK broadcast rights to the Olympics.
o Martin Compston’s Norwegian Fling: The Line of Duty star took an epic road-trip across Norway for the BBC.
o The Pilgrimage of Gilbert & George: This series for Sky Arts explored the extraordinary journey of art icons Gilbert & George.
o Sunday Morning Live: The backbone of BBC One’s Sunday morning schedule continues to be produced by Tern TV.
· Post period end, the Group has won several new and recommissioned contracts, further strengthening the Group’s forward bookings and visibility into FY25, including:
o Bargain Loving Brits in the Sun: The series has been recommissioned for an impressive 80-episode series, with filming due to begin in Q4 and continuing into early FY25.
o Rob & Rylan’s Passage to India: This new series follows the highly acclaimed Rob & Rylan’s Grand Tour.
o The Group’s newest label, Atomic Television, which launched in January 2023, won its second commission with a new substantial multi-million pound series for a major global streaming platform.
o In addition, Zinc has been commissioned by a global music label to produce a major new biopic on one of the biggest pop bands of the 20th century.
A copy of the interim results will be made available on the Company’s website, zincmedia.com.
1. The Board considers consensus Adjusted EBITDA expectations for FY2024 to be £2.1m.
2. Prior period comparators are stated excluding discontinued operations.
3. Adjusted EBITDA is defined as EBITDA before Adjusting Items comprising share based payment charges, profit/loss on disposal of fixed assets, reorganisation and restructuring costs, acquisition costs and change in fair value of contingent consideration.
CHAIRMAN’S STATEMENT
Zinc is currently on course for a year of record EBITDA profits, and it will do this against the backdrop of a challenging television commissioning market and well documented economic headwinds in H1 affecting both the UK and international markets. This will be an excellent performance.
In H1, UK and US broadcasters have been slow to put commissions into production and in some cases, they have delayed delivery. Where Zinc produces content for brands and businesses, notably within Zinc Communicate and The Edge, the headwinds in the UK economy and the war in the Middle East have suppressed H1 performance. The net result for the Group is that revenue has moved into the second half of the year to give an unusually high weighting in the second half.
Zinc’s fundamentals are excellent. It has a highly diversified revenue mix with 60% of revenue coming from television commissions and 40% from production for brands and businesses. In television it’s diversified across UK PSBs (Public Service Broadcasters), multi-channel networks, international broadcasters and global streamers. It has a product to suit all price brackets, whether that’s high-volume, low-cost daytime television or high cost global premium factual. It’s also highly diversified within production for brands and businesses with the additional geographical diversification in the Middle East. Revenue quality is excellent with 80% of revenue from returning clients. Strong gross margins at 41% and long-established client relationships reinforce the fundamentals of the Group.
Creatively, H1 saw Zinc maintain its position at the top of the commissioning league table with a creative vision to tell stories about life, on screen. The year started with the highly acclaimed Putin vs The West for the BBC, which was closely followed by Rob and Rylan’s Grand Tour, demonstrating the breadth of Zinc’s unscripted production. The Group continues to pick up new clients, including the global streamer Discovery+ which broadcast Chasing Glory in the run up to the Paris Olympics. Sky Arts broadcast two Zinc programmes in H1: Jake Chapman’s Accelerate or Die! and The Pilgrimage of Gilbert and George, which both came from Zinc’s Supercollider label. Add to this our returning series Sunday Morning Live for BBC One and Channel 5’s Bargain Loving Brits and it’s clear Zinc’s television business is in rude health. Much of the content produced by The Edge and Zinc Communicate is confidential to those clients we work with, but their list is no less impressive.
Notwithstanding the well documented slowdown in television commissioning, wider inflationary pressures, the ongoing war in Gaza affecting confidence in the Middle East and the macro issues affecting the UK AIM markets, the future of Zinc Media Group is looking very good. With the excellent progress made since the summer, and the cost actions taken, the Group is on course for another record year of profitability.
The Board would like to thank the management team, employees and freelancers for their professional and dedicated work, and our shareholders for their continued support.
Christopher Satterthwaite
Chairman
CEO’S REPORT
CURRENT TRADING, STRATEGY AND MARKET OUTLOOK
Zinc is trading well and following a series of new commissions totalling £8m which were commissioned in the last four weeks the Group remains on track to deliver EBITDA in line with market expectations for the full year.
The recent run of large new business wins exemplifies the challenge with half year reporting within a television production business of this size. Whilst trading in the first six months of the year is down compared to prior year it is up 31% compared to H1 2022 demonstrating the Company’s long-term growth.
Equally, the commissions won during the year have a higher margin mix, due to a number of large low margin commissions won in the prior year. This gives strong confidence over profitability growth in the second half of the year and FY25 as they are produced.
Following a difficult year of trading for the Group’s brand and content marketing business within Zinc Communicate in FY23, which continued into FY24, we made the decision in H1 to discontinue with this venture. The business had been growing revenue year on year since 2021 but had not managed to reach the required scale to contribute profit into the wider group. This venture is reported under “discontinued operations” and revenue and profit comparisons have been adjusted for this to be on a like-for-like basis.
At the beginning of this year we targeted annualised efficiency savings of £0.5m. In H1 operating expenses have reduced by £0.2m, and the Group will deliver the full annualised savings within Adjusted EBITDA from continuing operations by year end. Following the closure of the loss-making element in Zinc Communicate, and good progress on the targeted savings programme, the only material risk for FY24 is unexpected delays to existing commissions, and were these to materialise, there would be a corresponding improvement to visibility for FY25.
All Zinc’s businesses unite behind a reputation as a trusted partner delivering the highest quality content to a range of international and blue-chip clients in either television production or production for brands and businesses. All benefit from a shared platform that offers a wide array of resources, including post-production facilities, broadcast technology, financial management, human resources support, public relations, marketing expertise and IT assistance. This enables end to end production and allows Zinc to capture all available margin. In addition it provides our businesses and customers with specialist expertise and governance which is a requirement for large global broadcasters and corporate clients, and gives us the opportunity to scale and respond to new opportunities as they occur. Additionally, some of the services available through Zinc’s platform are now being made accessible to third-party production companies as a means of generating revenue.
The first six months of 2024 have seen a number of creative highlights across all companies united in an editorial vision to tell stories about life, on screen. H1 2024 saw the launch of the Group’s newest hit format, Rob and Rylan’s Grand Tour. This series brought Rob Rinder and Rylan Clark together for the first time, as they recreated the original Grand Tour across Italy. The series delivered the highest viewing figures on BBC Two so far this year and received critical acclaim in both The Telegraph and The Times. As announced on 26 September this format has been commissioned for a second series and has begun production. The new series of Putin vs The West for the BBC launched in January, accompanied by a screening hosted at Kings College in London. The team behind this programme have been commissioned for a new project. Zinc continues to pick up new clients as well as high levels of repeat business. Warner Bros Discovery commissioned Chasing Glory for Discovery+ to accompany their exclusive UK rights to the Paris Olympics, and this series chronicled the pursuit of gold by six of the world’s most recognisable athletes in the run up to the Paris Olympics. Zinc further expanded the number of clients it works with by producing two programmes of note for Sky Arts. Jake Chapman’s Accelerate or Die! and The Pilgrimage of Gilbert and George both aired in H1. Sunday Morning Live, the scheduling backbone to Sunday Morning’s on BBC One, returned for a new series produced by Tern TV in Northern Ireland.
Despite the challenging television commissioning market and delays to Middle East business for The Edge caused by the war in Gaza, the demand for high quality television and content for brands and businesses remains strong. Zinc has a small market share in all its verticals, leaving plenty of headroom for growth. With a strong orderbook and pipeline, as well as the savings realised in the period, the Group is confident in its EBITDA performance for the full year. In addition, the outlook for 2025 is very strong with £11m of revenue already won and expected to be recognised in FY25. With a healthy pipeline, the Group therefore remains confident of delivering further organic growth and profitability in the periods ahead.
Mark Browning
Chief Executive Officer
CFO’S REPORT
INCOME STATEMENT
Group revenues from continuing operations in the reporting period were down by 20% year-on-year at £14.1m (H1 2023: £17.7m). TV revenues reduced by 25% to £8.2m (H1 2023: £11.0m), driven by delays to filming on two productions, Top Gun: The Next Generation and Paid in Full: The Battle for Payback, for reasons outside of the Group’s control, which has moved recognition of £1.2m of revenue from H1 to H2 2024 and 2025. In addition, a challenging TV market has led to a slowdown in commissioning which has had an estimated £0.9m impact in H1. Content Production revenue reduced by 12% to £5.9m (H1 2023: £6.7m) due to the instability in the Middle East affecting some international business.
Gross margins in the period were 41% (H1 2023: 41%). Despite downward pricing and upward cost pressures, gross margins have been maintained at the same levels as H1 2023 and are higher than in the full year 2023 (FY23: 39%). This has been achieved by an increased focus on using in-house production kit and post-production facilities which have benefited from investment over the last year.
The Group’s focus on its cost as part of the Group’s efficiency and synergy programme has resulted in operating expenses reducing by £0.2m to £7.6m. This includes a £0.1m year-on-year reduction in occupancy costs as a result of re-locating The Edge to the Group’s London headquarters.
The loss before tax from continuing operations in the period of £2.2m (H1 2023: £1.2m) is mainly driven by the Adjusted EBITDA loss coupled with costs relating to the acquisition of The Edge in FY22 (amortisation, unwinding of discounted deferred consideration) plus depreciation and finance costs. Amortisation relating to acquisitions remained flat at £0.2m whilst deprecation fell by £0.3m to £0.5m, driven by property efficiency savings, and finance costs reduced by £0.1m to £0.5m due to a reduction in the unwinding of discounted deferred consideration. The loss from the discontinued operations of Video Marketing and Brand Content was £0.4m (H1 2023: £0.4m).
Much improved profitability is anticipated in H2 2024 as further savings are realised as part of the Group’s efficiency and synergy programme, and as television production is typically weighted to the summer and autumn months. This is supported by the Group’s pipeline.
Earnings per share
Basic and diluted loss per share from continuing operations in the period was 10.13p (H1 2023: 5.57p).
Dividend
No dividend is proposed. The Board considers the Group’s investment plans, financial position and business performance in determining when to pay a dividend.
STATEMENT OF FINANCIAL POSITION
Assets
Cash at the end of June 2024 was £4.1m, having decreased by £0.8m during the period.
The Group used cash of £0.3m in the year (H1 2023: cash generated of £3.5m) in its operations, mainly driven by the loss in the period offset by a decrease in working capital due to tight working capital management. Cash used in investing and financing activities was £0.5m, a £0.4m reduction year-on-year, as capital expenditure was kept to a minimum.
Zinc Media had an outstanding balance on long-term debt of £3.5m as at 30 June 2024 which has remained unchanged (2023: £3.5m). The Directors believe the Group has strong shareholder support. The long-term debt holders are also major shareholders who own 41% of the Group’s shares, and the debt has no financial covenants.
As at 25 September the Group’s cash position was £4.2m.
Equity and Liabilities
The £2.6m decrease in equity and liabilities results from the loss for the period of £2.6m.
The Group had an outstanding balance on long-term debt of £3.5m as at 30 June 2024 which has remained unchanged (2023: £3.5m). The Directors believe the Group has strong shareholder support. The long-term debt holders are also major shareholders who own 41% of the Group’s shares, and the debt has no financial covenants.
Will Sawyer
Chief Financial Officer
