28 September 2022

Zinc Media Group plc

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

Interim results for the six months ended 30 June 2022

Zinc Media Group plc, the award-winning television, brand, content and audio production group, is pleased to announce its unaudited interim results for the six months to 30 June 2022 ("H1 2022").    

Headlines

The Group is pleased to report excellent progress in H1 2022 and continues to trade in line with market expectations for the current financial year. The first half of 2022 includes the following highlights:

·      Revenue of £10.8m (H1 2021: £7.0m), an increase of 54% year-on-year.

·      Adjusted EBITDA[1] loss of £0.65m (H1 2021: loss of £1.1m), an improvement of £0.45m over the prior year period.

·      Gross margins in the period were 33% (H1 2021: 34%), which remain significantly up on 2019 and 2020 when they were 25% and 30% respectively.

·      The acquisition of The Edge Picture Company ("The Edge") post period-end, announced in August, will add scale to the existing Group, supporting long-term profitability. The Edge is one of the largest brand and corporate film making production companies in the UK. It closely aligns with the Group's other film-based production businesses and is a fantastic fit for Zinc Media.

·      The Group completed a fundraise of £5m (before expenses) alongside the acquisition of The Edge. This was supported by several new and existing institutional shareholders. The proceeds of the placing were used to finance the acquisition and will also provide additional growth capital for the Group.

·      As at 26 September 2022 the enlarged group has booked £27m of revenue which has or is expected to be delivered in 2022, representing an increase of £10m since the last trading update in May 2022 and an improvement of £10m compared to the same point in 2021 in relation to that financial year.

·      The Group has a strong pipeline of potential new business for 2022 and 2023 and is confident of trading in line with market expectations.

Operational Highlights

·      There were a number of significant programme successes in the first half of the year, which included:

o  Being awarded the weekly BBC ONE series Sunday Morning Live for an initial two year term in a competitive tender process;

o  The recommission of the Group's largest ever series with Channel 5;

o  The recommission from the Warner Bros. Discovery Group of Spooked Scotland;

o  A landmark programme for BBC ONE titled Tom Daley: Illegal to be me;

o  Afghanistan: Getting Out, a major production for the BBC; and

o  Nominations for prestigious industry awards including a BAFTA, an RTS award and two Emmys in recognition of the Group's quality and impactful content.

Outlook

·      The outlook for the Group is positive, with the recent period of new business conversion underpinning the Board's confidence in meeting market expectations for the financial year, including being profitable in the second half of the year.

·      The Edge are performing very well: they are having their best ever year and expect to post record revenues in 2022.

·    The acquisition of The Edge will further strengthen and provide significant scale to the Group, resulting in annualised proforma Group revenues for FY22 of over £35m.  

Mark Browning, Chief Executive, commented: "We are delighted with the current performance of the Group which has seen a considerable increase in turnover whilst maintaining an attractive margin, with good visibility of sustainable profitability.  The organic growth, coupled with the acquisition of The Edge, provides initial scale and the Board is optimistic about the Group's outlook and views the future with confidence."

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

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 (NOMAD and Broker to Zinc Media Group plc)     +44 (0) 20 7496 3000

Mark Taylor / George Tzimas

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

Graham Herring / Zach Cohen

CHAIRMAN'S STATEMENT

The first six months of 2022 demonstrate the Group has largely recovered from the Covid pandemic with revenues up over 50% compared to the same period last year and is trading in line with market expectations for the full year. With the acquisition of The Edge, which was completed in August, and the scale this brings, we look forward to sustained profitability in 2023.

The Edge is synergistic with our current portfolio and was priced at a sensible valuation multiple. The level of support from new and existing shareholders for this acquisition has been overwhelming, and we thank all investors for their ongoing support. Together with our employees and clients, we are building a premium content creation Group with the ambition and financial backing to operate at significant scale.

The Group continues to deliver outstanding programmes and content across all divisions. The award of the BBC ONE series Sunday Morning Live demonstrates that the Group is ambitious to enter new markets; the renewal of the Group's largest ever series commission, Bargain Loving Brits in the Sun for Channel 5, demonstrates sustained creative and commercial firepower; and the brilliant Tom Daley: Illegal to be me for BBC ONE shows the Group continues to produce some of the most talked about factual television in the UK. With Zinc Communicate also growing by almost 80% in the period, this is a Group that is attracting the right kind of attention.

September 2022 concludes the Group's initial three year strategic plan which was announced in 2019, with all aspects successfully delivered, including the Group's latest acquisition. This is a phenomenal achievement given the significant headwinds encountered due to the Covid pandemic and current global economic conditions.  

Notwithstanding inflationary pressures and the impending economic downturn, the future of Zinc Media is looking very positive. Current strong trading and the acquisition of The Edge post period end allows for the return of market forecasts. The Group is on course for a period of steady organic growth and sustainable profitability, with the Board focussed on providing returns and 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 strong with organic growth seeing revenues increase 54% to £10.8m (H1: 2021 £7.0m) with an adjusted EBITDA loss of £0.65m, an improvement of £0.45m over the same period in the prior year. 

Following the acquisition of The Edge in August, market estimates were reinstated, and the Group is trading in line with market expectations and expecting to be profitable at EBITDA level in H2 2022.

As at 26 September 2022 the enlarged group has booked £27m of revenue which has or is expected to be delivered in 2022, representing an increase of £10m since the last trading update in May 2022, and an improvement of £10m on the same point in 2021 in relation to that financial year. The Edge's financial performance will be consolidated in the Group's results from 23 August 2022 (the date of acquisition).

The strategy for 2023 and beyond is to deliver organic growth at both the revenue and EBITDA level while maintaining healthy cash reserves and continuing to strengthen the balance sheet.  As the Group delivers these objectives, it will also seek further growth through selective acquisitions. These may accelerate growth in existing business areas, further diversify Group revenues in new content genres in either television or Zinc Communicate or further build the Group's non-UK business. It remains our ambition to be a listed content producing Group operating at substantial scale.

The first six months of 2022 have seen a number of editorial highlights and new business launches in the Group. 

The television labels continue to produce some of the UK's most watched television. H1 2022 saw Red Sauce win the Group's largest ever volume series, a recommission of the now highly successful Bargain Loving Brits in the Sun for Channel 5. This label was launched in 2020. This was recommissioned for 54 episodes and is now running in a daytime slot as well as a peak time slot and delivering excellent ratings for the channel.  It has the added benefit to the buyer in that it can also run on some of the other channels owned by Viacom, making it a strong commercial proposition. Brook Lapping continues to produce highly reputable television. This includes the excellent Afghanistan: Getting Out which explored the chaotic withdrawal of western forces from Afghanistan, a prime-time BBC ONE documentary titled Tom Daley: Illegal to be me, which was broadcast to coincide with the Commonwealth Games and shone a light on the plight of many LGBTQ+ athletes from countries where it is illegal to be gay. The first half of the year also saw the launch of the Group's latest television production label, Rex, which aims to diversify television revenues into the large market for factual entertainment, which can deliver long running series and commercially valuable IP and formats.

Tern TV's Belfast based division delivered another successful series of the daytime series Critical Incident for BBC ONE. Tern TV Glasgow delivered their first series for Really (part of Warner Bros. Discovery) with a programme titled Spooked Scotland, exploring the paranormal activity north of the border. H1 2022 saw the launch of the Group's new weekly BBC ONE series Sunday Morning Live, which is produced in partnership with Green Inc who are based in Northern Ireland and have live television expertise. Tern TV also delivered one of the BBC's masthead Easter programmes, Jill Halfpenny's Easter Walks, for BBC ONE. Tern continues to be a trusted supplier to BBC Scotland, producing many programmes for the channel including Addicted which is presented by Darren McGarvey.

Zinc Communicate continues to grow rapidly with revenues up 78% on the same period last year. It has diversified its digital publishing revenues off the back of new products focusing on sustainable energy and producing content for the home renovation market championing green initiatives. The video marketing business, which sells and produces corporate films, secured an enviable list of new partners in the reporting period including The London Institute of Banking and Finance, Sustainable Travel International and the Association for UK Interactive Entertainment, and films are being made for blue chip companies including Shell, American Express and Easyjet.  Revenues in this division are on course to double in 2022. The branded entertainment and audio division grew audio revenues with new business from the BBC, and brand partnerships with the likes of Universal Music, The Independent and The Evening Standard.

Post period end, and off the back of outstanding technical innovation in the market of post-production, the Group has launched a new UK wide business called Bumblebee Post Production. Bumblebee is led by Olly Strous, the Group's CTO, who joined Zinc Media in the summer of 2021.  It offers the television and branded content market a highly automated, fully remote technical solution for uploading content and post producing programmes and aims to be carbon neutral. It will make use of Zinc Media's existing technical hubs in London, Manchester, Glasgow and Belfast, and has already secured clients including Avalon Television and the BBC.

The Group continues to be recognised within its industries for producing market leading, high-quality content, with nominations for prestigious awards including a BAFTA award, an RTS award, two Emmy's and a Broadcast Digital Award.

The market for premium factual television along with content for brands and media owners remains strong.  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. While there will now be some recessionary headwinds, particularly in the UK, which may well impact speed of growth, the Group remains confident of delivering further organic growth and profitability in the years ahead.

Mark Browning

Chief Executive Officer

CFO'S REPORT

INCOME STATEMENT

Group revenues in the reporting period were up by over 50% year-on-year to £10.8m (H1 2021: £7.0m).  All divisions increased revenues year-on-year in the period, with London TV up 62%, Tern TV up 37% and Zinc Communicate up 78%.

Gross margins in the period were 33% (H1: 2021 34%), which remain significantly up on 2019 and 2020 when they were 25% and 30% respectively. 

Gross margins were lower in the period than the full year 2021, when they reached 38%, as a result of the Group deciding to invest in winning certain lower margin contracts in order to gain a foothold in new television markets, including live TV, that can provide the Group with high volume commissions in more diverse areas. This includes multi-million pound contracts for the BBC and Channel 5.

The Group has continued to invest in anticipation of further growth in H2. It has invested in new business winning talent in television, including launching a new television label called Rex in March, in sales and production teams in Zinc Communicate, and in technology, which has led to the launch of the post-production business, Bumblebee.

These initiatives suppressed the full impact of the healthy uplift in revenue during the period, resulting in an Adjusted EBITDA loss of £0.65m. This is a £0.45m improvement year-on-year, and improved profitability is anticipated in H2 2022 in line with market expectations.

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 2022 was £2.6m, having decreased by £3.0m during the period as a result of working capital required to service the increase in activity and due to the unwinding of working capital held at December 2021 where broadcasters had funded some large productions up front. Conversely trade and other receivables have increased by £3.0m since December 2021 as a result of the volume of commissions increasing markedly.

As at the end of August 2022 the Group's cash position had risen to £5.4m, driven by the proceeds from the capital fundraise in August.

Equity and Liabilities

The £0.8m reduction in equity and liabilities results from the loss for the period and a £1.0m increase in trade and other payables as a result of the increased working capital requirement in the period.

The Group had an outstanding balance on long-term debt of £3.5m as at 30 June 2022 which has remained almost unchanged (2021: £3.4m), held by two of the Company's shareholders and with no financial covenants relating to the debt. During the period the long-term debt holders agreed to extend the term of the debt by two years, such that the repayment of the debt is now due on 31 December 2024.

Post balance sheet events

The Company announced in August 2022 that it had acquired The Edge Picture Co Limited, one of the largest brand and corporate film making production companies in the UK, for an initial consideration of £1.56 million in cash and £0.54 million satisfied by the issue of 540,000 new ordinary shares in the Group, and deferred consideration of up to a further £3.875 million to be satisfied by a combination of cash and ordinary shares in the Company.

The Company also announced in August 2022 that it had raised £5.0 million (before expenses) by way of a placing of 5,037,059 ordinary shares.  

The proceeds of the placing were used to finance the initial cash consideration due in respect of the acquisition and will also provide additional growth capital for the enlarged business.

Will Sawyer

Chief Financial Officer