27 September 2023

Zinc Media Group plc

("Zinc Media", the "Group" or the "Company")

Interim results for the six months ended 30 June 2023

Zinc Media Group plc (AIM: ZIN), the award-winning television, brand and audio production group, is pleased to announce its unaudited interim results for the six months to 30 June 2023 ("H1 2023").    

Headlines

The Group is pleased to report excellent progress in H1 2023 and continues to trade in line with market expectations for the current financial year. The first half of 2023 includes the following highlights:

·      Revenue of £18.1m (H1 2022: £10.8m), an increase of 68% year-on-year.

o  Organic revenue growth (i.e. all businesses excluding The Edge) of 12% and a strong customer base providing continuing high net revenue retention

o  Growth in both TV and Content Production revenue

o  The Edge continues to perform ahead of acquisition expectations

·      Adjusted EBITDA¹ profit of £0.2m compared to an Adjusted EBITDA profit of £0.1m in the whole prior financial year (H1 2022: loss of £0.6m).

·      Gross margins in the period were significantly up at 41% (H1 2022: 33%).

·      Cash of £5.8m at 30 June 2023 is £2.2m higher than at 31 December 2022 due to working capital inflows. 

·      As at 25 September 2023, total revenue won and expected to be recognised in FY23 is £35m.  This is an increase of £4m since the last trading update in July 2023 and an improvement of £8m compared to the same point in 2022 in relation to that financial year.

·      With £35m of revenue already won and expected to be recognised this year, revenue for the whole year will significantly exceed the £30m of revenue generated in FY22.

·      The Group's pipeline remains strong with a further £7m of revenue that can be recognised in FY23 in highly advanced discussions.

·      Loss before tax in the period of £1.6m (H1 2022: £1.8m) is mainly driven by costs relating to the acquisition of The Edge (revaluation of deferred consideration due to The Edge's strong performance, amortisation, unwinding of discounted deferred consideration), depreciation and finance costs resulting from The Edge being in the Group this period, plus depreciation and finance costs. 

Operational Highlights

·      The Group was awarded "Production Company of the Year" 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  Making global headlines with the documentary Putin vs The West, which was one of the most watched programmes on BBC iPlayer.

o  Bowelbabe: In Her Own Words for the BBC, which details the extraordinary last five years of cancer campaigner Dame Deborah James' life, received national press coverage, was on the front page of the Radio Times and has been nominated for a Grierson award.

o  Gender Wars, exploring the issue of transgender women's rights, was made for Channel 4 as part of its remit to make agenda setting programmes which tackle contentious issues.

·      The Group won its largest ever television commission in a two-year deal worth over £7m.  The commission is from Channel 5 for 136 hours of the hit show Bargain Loving Brits.

·      The Group produced its biggest ever digital branded content commission Big in America with Alex Polizzi. It was commissioned by the Department for Business & Trade and is being broadcast on LinkedIn. 

·      The Group has partnered with Idris Elba to produce Paid in Full: The Battle for Payback (working title) for broadcasters CBC (Canadian Broadcasting Corporation) and the BBC, examining the systematic exploitation of black artists by the music industry.

·      The Group's television label Atomic Television, only launched in January 2023, won its first commission with a substantial contract worth over £1m for an international blue-chip broadcaster.

Outlook

·      The recent period of new business conversion underpins the Board's confidence in meeting market expectations for the financial year, including substantially increased Adjusted EBITDA profitability in the second half of the year.

·      The Edge is performing ahead of acquisition expectations and its integration is progressing well: cross-divisional business development opportunities have been identified and the co-location with Zinc's other London businesses is complete which will enable cost savings and further synergies.

·      The Group has a strong pipeline of potential new business for 2024 and has £11m of revenue already won and expected to be recognised in FY24. This is £5m ahead of revenue won at the same point last year for recognition in the following year.

Mark Browning, Chief Executive, commented: "We are delighted with our H1 performance in a challenging content production market.  Our year-on-year increase of this scale bucks the market trend.  This is the result of a robust strategy rooted in organic growth alongside the acquisition of The Edge. The investments made in the transformation plan are delivering, every business in the Group is growing and we are confident of meeting market expectations for the year."

A copy of the interim results will be made available on the Company's website, zincmedia.com.

^[1]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

For further information, please contact:

Zinc Media Group plc                                                                                      +44 (0) 20 7878 2311

Mark Browning, CEO / Will Sawyer, CFO

www.zincmedia.com

Singer Capital Markets (Nominated Adviser and Broker)                                 +44 (0) 20 7496 3000

James Moat / George Tzimas / Alex Emslie

IFC Advisory Ltd (Financial PR)                                                                      +44 (0) 20 3934 6630

Graham Herring / Zach Cohen

CHAIRMAN'S STATEMENT

We are delighted to report a strong set of H1 results. Content production is typically weighted to H2 so for the Group to report a small profit at Adjusted EBITDA level, while maintaining investment for the longer term, is outstanding.  It is worth putting this performance in context.  These H1 results are better than the full year results in 2021. This is the scale of growth we are reporting.   

In our interim results 12 months ago we said we were looking forward to sustained profitability in 2023 and we are achieving this. With a positive Adjusted EBITDA in H1, we are confident of at least delivering in line with market expectations for the full year, which in turn will be Zinc's strongest financial performance for many years.

This is a company transformed under this management team.  They came to Zinc with a track record of turning around underperforming media companies and the results for Zinc are excellent.  This turnaround is all the more impressive given the run of poor market conditions which included Brexit, Covid, the cost-of-living crisis and economic downturn impacting on commissioning budgets.

Having invested over the past three years in starting new businesses to increase our addressable market, we are pleased to report that both TV and Content Production are increasing their revenue which is outstanding in this tough market. This year more of the businesses are positively contributing at Adjusted EBITDA level, which is demonstrated in the excellent Adjusted EBITDA year on year performance. Some remain earlier in their investment phase and therefore do not yet contribute positively to the Group's profit but they are of strategic importance and we expect them to do so in time as we continue to invest in their growth. Operating profit is now in sight and with it sustained cash generation. 

Creatively, H1 has also seen Zinc at the top of its game with our content leading the national conversation with the likes of Gender Wars for Channel 4, Bowelbabe: In her own words which told the story of Dame Deborah James, Blackadder: The Lost Episode and Putin vs The West for the BBC.  In production we have Paid in Full: The Battle for Payback (working title) in partnership with Idris Elba, The Grand Tour with Rob Rinder and Rylan Clarke and Legends of Comedy with Lenny Henry.  Much of the content produced by The Edge and Zinc Communicate is confidential to those clients we work with, but no less impressive.

Notwithstanding inflationary pressures, the tough content commissioning market and the macro issues affecting the UK public markets, the future of Zinc Media Group is looking brighter than ever.  The Group is on course for a period of steady organic growth and sustainable profitability, with the Board focused on providing value to shareholders. 

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

Trading in the first six months of the year has been excellent with organic revenues increasing 12% to £12.1m (H1 2022: £10.8m), pushing total H1 revenue to £18.1m including The Edge, which was acquired in H2 2022.  This excellent performance sees the Group report Adjusted EBITDA profit of £0.2m compared to a H1 2022 loss of £0.6m.  For further context the H1 2021 loss was £1.1m, which demonstrates the transformation within the Group.

Despite significant market headwinds in the UK, the FY23 position remains strong with total revenue won and expected to be recognised in this financial year of £35m (as at 25th September). This is an increase of £4m since the last trading update in July 2023 and an improvement of £8m compared to the same point in 2022 in relation to that financial year. This figure already exceeds the £30m of revenue generated in the whole of FY22 and with £7m of revenue at a highly advanced stage we expect further revenue to be won and recognised this year.

The content commissioning market remains poor, particularly within the UK, but the Group is trading strongly with £11m of revenue already won and expected to be recognised in FY24, and this is supported by a healthy pipeline.  For context, at this point in 2022 there was £6m booked for FY23.

These financial results demonstrate the effectiveness of the transformation plan enacted in 2019.  Our strategy is anchored in investment in organic growth, supplemented by strategic acquisitions, with the aim of delivering a profitable and cash generative content creation group of significant scale listed on the UK public market.  Despite unprecedented headwinds caused by Brexit, Covid and more recently inflation and the cost-of-living crisis, the Group is delivering to plan and trading in line with market expectations.

Zinc Media Group now comprises 12 businesses, of which 8 are new since 2020.  All are united by a reputation as a trusted partner delivering the highest quality content to our range of international and blue-chip clients in either television production or production for brands and businesses. All Zinc businesses benefit from a shared platform that offers a wide array of resources, including post-production facilities, cutting-edge broadcast technology, financial services, human resources support, public relations, marketing expertise, and IT assistance. 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 2023 have seen a number of creative highlights and further new business launches in the Group. 

Our television labels continue to produce some of the UK's most talked about television. H1 2023 has been outstanding for Zinc companies.  In January Putin vs The West made global headlines.  This was closely followed by Bowelbabe: In Her Own Words, which told the story of cancer campaigner Dame Deborah James, and was featured on the front cover of The Radio Times. Gender Wars for Channel Four sparked nationwide debate as it skilfully explored the complex issue of trans-gender rights. Gold commissioned Blackadder: The Lost Episode which marked the 40th anniversary of the hit show, and the BBC launched a new daytime series Dr Xand's Con or Cure. Further successes included the recommission of many Zinc programmes including the hit Bargain Loving Brits in the Sun for Channel 5.  The company announced a partnership with Idris Elba to produce a series investigating the exploitation of Black music artists and a series with Rylan Clark and Rob Rinder. Tern TV's Belfast based division delivered another successful series of the daytime series Critical Incident for BBC ONE and continues to produce the weekly BBC ONE series Sunday Morning Live.

Zinc Communicate continues to grow steadily in the face of a difficult advertiser market which is suppressing brand and marketing spend in the UK. Despite this macro-level context, it secured the Group's biggest ever digital branded content commission Big in America with Alex Polizzi. This was commissioned by the Department for Business & Trade and is being broadcast on LinkedIn. This piece of work demonstrates the power of the wider Group as this was pitched and developed by Zinc Communicate but produced by Tern TV. Zinc Communicate's documentary series The Future of Food, produced in partnership with the World Farmers' Organisation, launches at COP28 in Dubai later this year.  Many of the clients in the Zinc Communicate portfolio of businesses and The Edge keep the nature of the work confidential. One significant new venture in H1 was the launch of the Group's first direct to consumer podcast series, Tony Robinson's Cunningcast. Radio programmes in H1 included Marvel vs DC for BBC Sounds.

The Edge is performing ahead of acquisition expectations.  H2 is typically its strongest half of the year, driven by activity in the Middle East.  Integration is progressing well with the company now co-located with Zinc's other London based businesses. Cross-divisional business development opportunities have been identified and property cost savings will start to be realised from H2 2023.

Despite the challenging wider market, the demand for high quality television and content for brands and businesses remains strong, especially in markets outside the UK, where Zinc has diversified in recent years and is further enhanced by the acquisition of The Edge. Broadcasters, platforms, media owners and brands continue to see content as a differentiator with their consumers. Zinc Media Group now produces for all these markets and, while growing, still maintains a relatively small market share. The Group therefore remains confident of delivering further organic growth and profitability in the period ahead.

Mark Browning

Chief Executive Officer

CFO'S REPORT

INCOME STATEMENT

Group revenues in the reporting period were up by 68% year-on-year to £18.1m (H1 2022: £10.8m).  TV revenues have grown by 20% to £11.0m (H1 2022: £9.1m), driven by strong performance from the Red Sauce, Supercollider and Rex labels that have only launched in the last few years, plus a strong H1 from Tern.  Content Production revenue has grown by 331% to £7.1m (H1 2022: £1.6m) which is driven by the acquisition of The Edge in H2 2022.

Gross margins in the period were 41% (H1 2022: 33%), with the growth attributable to The Edge joining the Group which produces content at higher gross margins than traditionally achieved in television. Despite downward pricing and upward cost pressures, gross margins in the TV and Zinc Communicate businesses have been maintained at the same levels as in FY22. 

Operating expenses have risen by £3.3m to £8.7m, a 65% increase on the prior year, which is slightly lower than the Group's revenue growth and is a result of the acquisition of The Edge and continued investment for growth in Zinc Communicate and the new Atomic label in television. Finance costs have risen from £0.2m to £0.6m due to the unwinding of the discounted deferred consideration in relation to The Edge acquisition and the interest rate on the Group's long-term debt having increased. 

Improved profitability is anticipated in H2 2023 as television production is typically weighted to the summer and autumn months. This is in line with market expectations.

Earnings per share

Basic and diluted loss per share in the period was 7.44p (H1 2022: 10.48p).

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 2023 was £5.8m, having increased by £2.2m during the period as a result of working capital improvements.

As at 22 September the Group's cash position was £5.7m.

Equity and Liabilities

The £2.6m increase in equity and liabilities results from the loss for the period being offset by a £4.1m increase in trade and other payables, largely due to an increase in contract liabilities resulting from cash received up front from customers, which will unwind in future periods.

The Group had an outstanding balance on long-term debt of £3.5m as at 30 June 2023 which has remained unchanged (2022: £3.5m). The Directors believe the Group has strong shareholder support, evidenced by shareholders investing £5.0m in new equity last year to support the acquisition of The Edge. The long-term debt holders are also major shareholders who own 42% of the Group's shares, and the debt has no financial covenants. 

Will Sawyer

Chief Financial Officer