25 April 2024

Zinc Media Group plc

("Zinc" or the "Group")

Results for the year ended 31 December 2023

and

Notice of Annual General Meeting

Zinc Media Group plc (AIM: ZIN), the award-winning television and content production group, is pleased to announce its audited results for the year ended 31 December 2023 ("FY23").

The Group is pleased to report a strong set of results with a record year for revenue and profit growth for FY23, including the following highlights:

Financial Highlights

•     Full year revenue increased by 34% to £40.2m (FY22: £30.1m), ahead of market expectations.

o  Revenue growth was driven by 19% organic growth in television revenues of £3.9m alongside a full year contribution of The Edge which was acquired in August 2022.

o  The Group has significantly outperformed the UK television production sector with revenues growing by £23m in two years, a compound annual growth rate (CAGR) of 52%.

o  80% of revenue was delivered from existing customers, in line with FY22.

•     Gross margins have increased from 34.0% to 39.5%, driven by higher margin TV work and the full year impact of The Edge.

•     Adjusted EBITDA[1] of £1.0m (FY22: £0.1m), the highest for 13 years and in line with market expectations.

o  Profitability was supressed by some of the Group's businesses still being in an investment stage, where they are delivering rapid revenue growth but are yet to reach profitability and made a combined loss of £1.2m.

•     Robust balance sheet with cash of £4.9m as at 31 December 2023 (31 December 2022: £3.6m), a £1.3m increase on FY22 driven by the positive trading performance and working capital inflows. Cash as at 19 April 2023 was £5.8m.

•     Loss before tax narrowed considerably to £2.0m (FY22: £3.3m). The loss is largely driven by non-cash items including amortisation related to previous acquisitions, depreciation and one-off costs related to share options.

Operational Highlights

•     The Group's diversification strategy continues to accelerate and the diversified production base reduces the risk associated with exposure to any one market or territory.

o  Television production now accounts for 60% of the Group's revenues (FY22: 67%), whilst production for brands and businesses accounts for 40% (FY22: 33%).

o  23% of revenues come from outside the UK (FY22: 18%).

•     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 Edge Picture Company, acquired in August 2022, continues to perform ahead of acquisition expectations, generating £13m of revenue in FY23.  Integration of The Edge includes cross-divisional business development opportunities and the co-location with Zinc's other London businesses is enabling cost savings and realising further synergies.

•     The Edge won numerous awards for the quality of its work including Cannes Corporate Media & TV Awards, EVCOM London Film Awards and New York Festivals TV & Film Awards.

Highly Acclaimed Programmes

•     A record 15 television series were recommissioned, along with 6 new series which have the potential to return in future years.

•     The Group produced 250 hours of television production, up from 194 the previous year, with a number of documentaries leading the UK news agenda in FY23, including:

•     Putin vs The West, which made global headlines, was one of the most watched programmes on BBC iPlayer and has been nominated for a BAFTA Award.

•     Deborah James: 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 was nominated for a Grierson award.

•     Gender Wars explored the issue of transgender women's rights for Channel 4 as part of its remit to make agenda setting programmes which tackle contentious issues.

•     The Group was commissioned for its largest ever USA television series worth $9m called Top Gun: The Next Generation (working title) for National Geographic Channel and which will be available on Disney+.

•     The Group won its largest ever volume television commission in a two-year deal worth over £7m 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, commissioned by the Department for Business & Trade and broadcast on LinkedIn. 

•     The Group partnered with Idris Elba to co-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.

•     There are currently 40 television programmes produced by Zinc companies available to view in the UK, either on terrestrial channels, on-demand or via subscription TV platforms. A full list of Zinc produced programmes currently available to watch is on the Group's website: https://zincmedia.com/what-to-watch-on-tv/.

FY24 Trading and Outlook

•     The Group is trading strongly with £24m of revenue already booked and expected to be recognised in FY24.

•     The Group's pipeline remains strong with a further £8m of revenue at a highly advanced stage, along with significant opportunities in earlier stages of development.

•     The Group is targeting £0.5m of savings p.a by the end of 2025 as part of an efficiency and synergy programme.

•     The Group has good visibility to more than double EBITDA profit as current investments generate returns, modest organic growth continues and identified efficiencies are realised.

•     This provides the Board with confidence in delivering FY24 market expectations.

The FY23 results are summarised in a short film on the Zinc website here: https://zincmedia.com/annual-results-2023/

Mark Browning, CEO of Zinc Media Group, commented:

"This has been a year of record achievement for the Group and comes off the back of significant investment in our people and our businesses along with our acquisition of The Edge 18 months ago. We have big ambitions to scale this Group through organic expansion and strategic acquisition".

Copies of the annual report and accounts

The annual report and accounts is available on the company's website at www.zincmedia.com and a hard copy will be posted to those shareholders registered to receive one. 

Notice of annual general meeting

Accompanying the annual report and accounts is notice of the Group's 2024 annual general meeting (the "AGM"), which will take place at 10.00am on 22 May 2024 at Singer Capital Markets' offices at 1 Bartholomew Lane, London, EC2N 2AX.

This announcement contains inside information for the purposes of the UK Market Abuse Regulation. The Directors of the Company take responsibility for this announcement.

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 / Sam Butcher

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

Graham Herring / Zach Cohen

About Zinc Media Group

Zinc Media Group plc is a premium television and content creation group.

The award-winning and critically acclaimed television labels comprise Brook Lapping, Red Sauce, Supercollider, Tern Television, Rex and Atomic, along with Bumblebee Post Production, and produce programmes across a wide range of factual genres for UK and international broadcasters.

The Edge Picture Company produces film content for brands and corporates in the UK, Qatar and other international markets. Zinc Communicate specialises in developing cross-platform content for brands, businesses and rights holders.

For further information on Zinc Media please visit www.zincmedia.com.

Chairman's Statement

2023's financial results continue the strong improvement in performance of the last few years. The Board is delighted to see revenue grow by over 30%, especially in the face of a challenging UK production market, powered by excellent organic growth and a full year contribution from The Edge. Most importantly the Group delivered the highest Adjusted EBITDA in the last 13 years, in line with market expectations.

The Group reports high quality revenue with a significant volume of repeat business, a record number of returning series and a highly diversified client base. Gross margins in the year were at record levels and the Group closed the year with a strong balance sheet.

The Group's content proposition is built on trust and quality.  Zinc Media is trusted to tell the world's most important stories, like Putin vs The West for the BBC, trusted with complex and sensitive access, as seen in the brilliant documentary Deborah James: Bowelbabe in Her Own Words, trusted with enormous returning series like Bargain Loving Brits, and trusted to work with the biggest stars in the world, as seen in our current collaboration with Idris Elba. These are all delivered to the highest quality and are recognised with awards such as Production Company of the Year at the New York Festival Film and Television Awards, and the BAFTA nomination in March 2024.

The Group has a clear pathway to more than doubling EBITDA profit and with it delivering long term sustainable operating profits. The Group continues to balance profitability with further organic investment in new markets and continues to seek out suitable acquisition opportunities which can accelerate growth and add to shareholder value by driving further synergies and scale in the Group.

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 record achievement for the Group.

CEO's Review

The strategic priorities for 2023 were to:

•     deliver strong organic growth initiated by investments made in previous years;

•     successfully integrate The Edge acquisition which completed in August 2022; and

•     deliver against market expectations for both revenue and EBITDA.

Each priority was achieved in the year.

Revenue: Strong organic growth

The Group defied weak market conditions in 2023, delivering total revenue growth of 34% to £40.2m (FY22: £30.1m). It is particularly pleasing that television revenue grew organically by 19% to £24.1m (FY22 £20.2m).  This significantly outperformed the wider television market and followed investment in previous years which has seen the Group launch new television labels and diversify into new markets in both the UK and US.

The Group comprises a total of twelve businesses that operate in two areas: television production (Tern, Brook Lapping, Red Sauce, Supercollider, Rex, Atomic Television and Bumblebee post-production) 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 and are consistently profitable. Seven were launched as part of the Group's transformation plan and are growing income at an accelerated rate, but not all are profitable yet. These comprise the London TV labels Red Sauce, Supercollider and Rex, alongside the Zinc Communicate businesses in brand entertainment, corporate film and audio, the Bristol based business Atomic Television and the post-production business Bumblebee. Together these new businesses contributed £13m revenue (FY22 £9m), accounting for 32% of the Group's turnover. 

The Edge performed strongly in the year, delivering £13m of revenue. It is now co-located at the Zinc head office in London, which has supported cross selling with all parts of the Group, and final integration, including all finance systems, will be complete by the end of H1 24. 

Excellent revenue quality and a highly diversified client base

The Group has established a loyal customer base built on high levels of repeat business with 80% of revenue delivered from existing customers, which is in line with FY22 and significantly ahead of FY21. This, despite a soft market, demonstrates the Group's resilience and bodes well for when market conditions return to more normal levels. A high level of returning business is particularly pleasing when taking into account the number of new businesses within the Group that are still establishing their client base.

Record levels of Adjusted EBITDA profit with clear path to operating profit

The Group is pleased to report £1.0m of Adjusted EBITDA for FY23 (FY22 £0.1m), with £0.9m of this coming in the second half of the year, which is typically the Group's strongest half. This is the highest level of Adjusted EBITDA since 2010, and before the Group became a predominantly television-based business.

This million-pound milestone is a significant threshold and opens the door to long term sustainable profitability. The £1.0m of Adjusted EBITDA was supressed by some of the Group's businesses still being in an investment stage, where they are delivering rapid revenue growth but are yet to reach profitability and made a combined loss of £1.2m. The Bristol based Atomic Television was launched in January 2023 and won its first commission in April that year. Rex TV and Supercollider are at a similar stage of their development.  Alongside a profit lag caused by these investments in maturing labels, two businesses within the Zinc Communicate portfolio struggled in the face of a significant decline in the UK advertising market. The Branded Entertainment and Audio business and the Corporate Film business were both hit by tough trading conditions and were subsequently restructured in Q1 2024 and are now more closely aligned with The Edge.  

Everything we produce benefits from Zinc's platform. We've invested in technology, operational infrastructure, post-production and remote workflows so that we can produce content from anywhere in the world, and our work environments enable creative collaboration to thrive. This powers all our companies by bringing specialist expertise together, driving efficiencies, improving margins and building a successful creative culture. Zinc's platform means we can scale quickly as new opportunities arise and it has supported the doubling of revenues over recent years. 

To aid the delivery of sustainable operating profitability, the Group is targeting further efficiencies which are anticipated to yield £0.5m of annualised savings in FY25.  Current investments generating returns and further organic growth give the Board confidence that the Group can more than double EBITDA without the need for further rapid revenue growth as realised over the last few years.

With operating profitability expected as Adjusted EBITDA reaches the £2m level, we're confident this will be achieved in the near future as the television market recovers.

Programme highlights

2023 was an unrivalled year of programme and editorial highlights.

Across the Group's television labels, 15 series were recommissioned. This is the highest number of returning series the Group has achieved. Returning series are the critical factor of a successful television company as they underpin long term growth and investment. Returning series include Sunday Morning Live, Con or Cure, and Martin Compston's Norwegian Fling for the BBC, Special Ops: Crime Squad UK for Dave, Zinc's largest ever volume commission, Bargain Loving Brits, for Channel 5, and a second series of Putin vs The West for the BBC. A significant number of series have once again been recommissioned for FY24 with some crossing into FY25. 

Our television companies produced a total of 250 hours of original television production, up from 194 hours in FY22. Alongside the commercially valuable returning series were a high volume of reputational feature documentaries and singles. While these do not span numerous years they build considerable industry reputation, which often sees the commissioning channel return year after year for further commissions.  These include Deborah James: Bowelbabe in Her Own Words, Gender Wars, Gilbert and George, Blackadder: The Lost Pilot and Get Your Eurovision On!.

Zinc's proposition is built on trust and quality. It has a global reputation for delivering the highest quality production as evidenced in numerous awards including being crowned Production Company of the Year for the second year running at the New York Festival Awards. It is trusted by clients to deliver exclusive access as demonstrated by the Putin vs The West series which featured contributions from the UK Prime Minister and former Prime Ministers, President Zelensky, the Director of the CIA and the UN Secretary General. Zinc is trusted to deliver at significant scale, as evidenced by the 136 hour series Bargain Loving Brits for Channel 5. It is trusted to work with some of the biggest global presenters and is currently co-producing a high-profile series with Idris Elba, and it is trusted to deliver on time and on budget which is why the Group has received such high levels of repeat business.

There were a number of significant firsts in the year including:

•     The Group's largest ever USA television series worth $9m called Top Gun: The Next Generation (working title). This was commissioned by National Geographic Channel and will be available on Disney+. Production commenced in FY23 and the series is due to be delivered in FY25. Zinc has secured trusted access to the US military training base for elite pilots.

•     The Group won its largest ever volume television commission in a two-year deal worth over £7m.  The commission is from Channel 5 for 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 was broadcast on LinkedIn. LinkedIn is the largest B2B networking website in the world, and this is the first televisual series it has broadcast.

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

There are currently over 40 television programmes produced by Zinc companies available to view in the UK, either on terrestrial channels, on-demand or via subscription TV platforms. A full list of Zinc produced programmes currently available to watch is on the Group's new website: https://zincmedia.com/what-to-watch-on-tv/

The number of television productions which are made outside London ("MoL") is an important criterion for the UK's Public Service Broadcasters ("PSBs") and Zinc is well placed to address this need, with substantive production centres in Manchester, Glasgow and Belfast. 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. 70% of Zinc's television production revenues in FY23 were MoL, up from 67% in FY22, 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 2023 for many of the world's largest and most recognisable brands, with The Edge winning numerous awards for the quality of its work including Cannes Corporate Media & TV Awards, EVCOM London Film Awards and New York Festivals TV & Film Awards.

Dozens of other programmes were produced by Zinc Media Group in 2023, and many more of these can be seen on the company's website, zincmedia.com, and social media channels. Zinc's group of companies produce content that is watched by tens of millions of people across the world every year, and its programmes lead the news and the national conversation across the United Kingdom.

Market

In television, the UK PSB network groups (comprising the BBC, ITV, Channel 4 and Channel 5) represent the largest addressable market for Zinc with the Group producing for all of them. 

The total TV commissioning market for UK producers is worth approximately £4bn[2] (UK PSB network groups account for approximately half this), with the factual television spend (specialist factual, general factual and factual entertainment), Zinc's core competence, at £1bn.

The fastest growing market for UK television producers is with the large international channels and subscription video on demand ("SVoD") platforms, which has almost doubled since 2021, reflecting the entry of new players like Apple and Disney. Zinc is capitalising on the growth in this market, having secured its highest ever commission in FY23 with the National Geographic Channel, a joint venture with Disney, and includes SVoD platforms Disney+ and Hulu.

The biggest growth in revenue and share is coming from the largest UK television producers (over £70m turnover), which underlines Zinc's desire to become a producer at scale.

Over the last three years, between 60% and 70% of UK original commissions (i.e. not repeats or acquisitions) has been on returning series, underlying Zinc's focus on securing its highest level of returning series in FY23. 

Zinc is well placed to continue to grow from this large factual commissioning market especially as the UK PSB's continue their push to spend on television commissions made outside of London. This validates Zinc's continued investment in Tern TV (Glasgow and Belfast), Red Sauce TV (Manchester) and Atomic Television (Bristol).

While factual television, which is Zinc's television heartland, accounts for approximately 25% of UK original television production, Entertainment and Drama are the two largest genres, being 27% and 37% respectively.  As Zinc's proposition develops in the next phase of its growth, it will seek out opportunities to expand organically and via acquisitions into these lucrative genres.

In addition to broadcast television production, the Group's corporate and brand production company The Edge continues to grow at pace, delivering record revenues in FY23 and investing in new markets in FY24.  It is anticipated that these investments will deliver further record revenue for The Edge in FY25, further cementing its position as one of the market leaders in this large, and higher margin, production sector.

Outlook

The Group entered 2024 with a significant amount of pre-booked revenue, putting it in the best possible position to navigate the ongoing weak television commissioning market. As at 22 April 2024, revenue booked and at a highly advanced stage on the pipeline totals £32m, which is in line with the same stage in FY23. The Board is confident in achieving market expectations for the year ahead and has heightened confidence that as the UK television market and wider economy recovers, the long-term prospects for sustainable growth, profitability and reputational success remain very strong.

CFO's Report

Income statement

Revenue

The key drivers for the increase in revenue from £30.1m to £40.2m are organic growth of £3.9m from television revenues and £6.2m from growth in content production. Television revenue growth has been driven by the investment in recent years launching new labels focused on particular sectors of the television market to target new customers and diversify revenue. Content production includes brand and corporate film production, radio and podcast production and publishing, as well as a full year of The Edge which had another strong year following its acquisition in August 2022.

Revenue (£m)

Gross margin and operating expenses

The Group's gross margin increased during the period from 34.0% to 39.5% as margins increased across both television and content production due to winning higher margin TV work and the full year impact of The Edge.  In FY22 a strategic decision was taken to increase the volume of lower margin television revenue to support the Group's expansion into new television markets. As these programmes have been recommissioned in FY23 the Group has been able to increase margins due to learnings from earlier series and finding economies of scale across productions. Content production for brands and businesses is typically delivered at a higher margin than television production and a full year effect of The Edge has helped to increase margins in aggregate for the Group. 

Group gross margins are the highest they've been in recent years, as demonstrated in the graph below.

Group gross margins (%)

Adjusting items incurred during the year amounted to £0.3m (FY22: £1.3m), which mainly comprised costs relating to share options of £0.5m (FY22: £0.2m) offset by a £0.4m change in the fair value of contingent consideration in respect of The Edge (FY22: nil). 

Operating expenses have risen by £4.0m to £17.1m, and whilst this represents a 31% increase on the prior year, the growth has been mainly driven by the full year impact of the costs related to The Edge being part of the Group. Nonetheless, operating costs as a percentage of revenue have fallen for a second consecutive year to 42%.

Adjusted EBITDA of £1.0m (FY22: £0.1m) is the highest for 13 years and in line with market expectations. Adjusted EBITDA is suppressed by £1.2m due to businesses launched in recent years that are yet to reach profitability. The businesses launched in recent years include Atomic Television, which was launched in January 2023. It has already won its first commission, which is being recognised across FY23 and FY24, and we expect it to grow in FY24 and start to contribute to the Group's profitability. The Zinc Communicate businesses in Brand Entertainment and Corporate Film had a challenging year due to being sub-scale whilst trying to grow in difficult market conditions. At the beginning of FY24 these businesses have been restructured and more closely aligned with The Edge's brand and corporate film business. The loss made by the Zinc Communicate businesses has partially offset The Edge's profit within the Content Production segment of the Group.

Finance costs have risen from £0.4m to £0.8m as a result of £0.4m of interest relating to the unwinding of the present value of contingent consideration on The Edge acquisition (FY22: £nil). £0.3m of interest was payable on the Group's long-term debt (FY22: £0.3m).

Loss before tax has narrowed by £1.3m to £2.0m driven by the improved trading performance and non-recurring acquisition costs.

Earnings per share

Basic and diluted loss per share from continuing operations in FY23 was 9.05p (FY22: loss per share of 12.43p). These measures were calculated on the losses for the period from continuing operations attributable to Zinc Media Group shareholders of £2.0m (FY22: loss of £2.3m) divided by the weighted average number of shares in issue during the period being 21,985,965 (FY22: 18,480,039).

Dividend

The Board has not recommended a dividend in respect of the year ended 31 December 2023 (FY22: £nil).

Statement of Financial Position

Assets

The cash balance at the end of December 2023 was £4.9m, representing an increase of £1.3m, or 36%, during the year. The increase in the Group's cash balance was driven by the positive trading performance and working capital inflows, particularly on large projects where working capital has been efficiently managed. 

Trade and other receivables have remained flat at £10.6m (FY22: £10.6m) despite revenue increasing by 34%, having agreed more favourable payment terms with customers. 

Equity and Liabilities

Total equity has reduced from £7.0m to £5.8m as the loss in the year more than offset the issue of new equity in relation to The Edge's year 1 earn out target being achieved and share options exercised by directors.

Total liabilities increased by £1.4m to £18.5m due to advance payments being received from customers for recognition in the income statement in FY24. The Group had an outstanding balance on long-term debt of £3.5m at year-end (FY22: £3.5m). The long-term debt holders are also major shareholders who own 41% of the Group's shares. 

Cash Flows

The Group generated cash of £3.5m in the year (FY22: cash used of £4.6m) in its operations, mainly driven by a decrease in working capital due to tight working capital management, including receiving advance payments from customers on some large productions. The net movement in the year was an increase in cash of £1.3m (FY22: decrease of £2.0m) after financing activity cash outflow and finance costs of £1.6m (FY22: inflow of £3.9m) and cash used in investing activities of £0.5m (FY22: £1.2m), driven by £0.3m of contingent consideration paid in respect of The Edge earn out, £0.5m on capital expenditure (a £0.3m reduction year-on-year), lease payments of £0.9m mainly relating to the Group's offices and £0.4m of long-term debt interest payments.

Key Performance Indicators (KPIs)

In monitoring the performance of the business, the executive management team uses the following KPIs:

·      Revenue growth, including revenue from repeat customers and new business pipeline strength

·      Profitability assessed by key measures including gross margins and Adjusted EBITDA

·      Cash generation and cash management

·      Performance and integration of acquisitions

These KPIs have been reported on within the Strategic Report.

Consolidated income statement for the year ended 31 December 2023

The loss for the period attributable to equity holders from continuing operations is £1,990k (31 December 2022: £2,297k).

The accompanying principal accounting policies and notes form part of these consolidated financial statements.

Consolidated statement of comprehensive income for the year ended 31 December 2023

Consolidated statement of financial position as at 31 December 2023

The consolidated financial statements were authorised for issue and approved by the Board on 24 April 2024 and are signed on its behalf by Will Sawyer.

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Company registration number:  SC075133

Consolidated statement of cash flows for the year ended 31 December 2023