INVESTOR PROPOSITION

Our streaming service, STV Player, is available on all major UK platforms, has grown ahead of the market and continues to scale rapidly. It is capturing the viewing shift from linear to digital, offering a rich mix of exclusive, original and acquired content. We are now one year into a strategic partnership for content sharing and advertising sales with ITV, which creates incremental digital value for our business. The long-term agreement sees STV Player take exclusive Scottish rights for an exciting range of ITVX original content over the coming years; and sees ITV’s market-leading sales team sell our national VOD and simulcast advertising, allowing us to benefit from their scale and market leadership. VOD advertising revenues trade at a premium over their traditional linear equivalent. Our content acquisition is a careful blend of licence and revenue share, allowing us to minimise risk and upfront payments.

Our Studios business is strongly positioned to take advantage of increasing demand for quality content in a UK production market worth more than £3.9bn, as well as growing international opportunities. In July 2023, we announced the acquisition of Greenbird Media boosting the number of labels within STV Studios from nine to 20, making shows across all genres for a wide range of networks and streamers. STV Studios now has an expanded presence across the UK, strengthening our ability to take advantage of the continuing growth of production in the nations and regions. We have an ever-growing library of content, which we sell in secondary markets at a higher margin, and have an increased international presence achieved via global streaming commissions and format sales. STV Studios revenues and profits have trebled in 2023, demonstrating its growth and considerable potential.

We have a Revolving Credit Facility in place for £70m with an accordion facility of £10m attached, maturing in March 2026. At the end of the year our net debt was £32.3m demonstrating significant liquidity headroom, even after our acquisition of Greenbird Media, and scope to continue to invest in the business and make continued distributions to shareholders.

Over the last 3 years we have successfully executed a £30m investment programme to drive growth in Studios and Digital, in addition to the Greenbird acquisition, and have the scope to continue investment – both in terms of investment capital and working capital over the coming years. The pension deficit is well managed with core deficit recovery contributions remaining constant.

Operating cash conversion in 2023 was 169% (2022: 45%) with working capital associated with Studios dependent on activity levels and the proportion of work being cash-flowed by commissioners. Over a 3-year period, operating cash conversion was 107%. We believe this good cash generation will continue and will enable us to fully execute our investment programme.

We have a strong track record of delivering efficiencies across our operations. This can be seen in the recent modernisation of the STV newsroom; our approach to deals on digital content; our low-risk strategy of taking minority stakes in production companies which we consolidate in success in our Studios business; and astute cost control across the business. This approach has delivered cost savings/avoidance of c.£3m in 2022 and c.£2.5m in 2023. This focus on cost management will remain a key element of our management of the business going forward.

Our focus on sustainability continues to accelerate, with significant progress on our STV Zero strategy, setting down our commitment to reduce our environmental impact and promote climate action in an accessible way to our viewers. We have ensured all programmes produced at STV now meet industry standards for carbon neutrality and continue to set intermediate milestones on the road to becoming a net zero carbon business by the end of 2030. We are proud members of Project albert and a co-signatory to their Climate Content Pledge.

We are making good progress on diversity across the organisation. We set ourselves specific targets for representation from minority groups and full details of how this is going and our plans for 2024 and beyond can be found in the ESG report.

We recognise the importance of a regular, progressive dividend. Our approach to setting dividends is to balance the needs of the business (for reinvestment), with those of our defined benefit pension schemes and other stakeholders, and in setting the level of dividend proposed we consider the proportion of free cash flow post pensions that it represents. We are committed to maintaining a balance between shareholder return and investment in our business to continue to deliver the growth strategy. Since 2019, we have increased our dividend by 80%.

Our values are central to everything we do and define how we work to support our colleagues and deliver for our audiences, advertisers, partners, and communities. We’re committed to business integrity and professionalism across all our activities.

Whether we’re making, sharing, watching or celebrating it, we’re passionate about content. Along with our people, compelling content is at the heart of STV. We’re locally focused and proud of our Scottish roots, but our international ambition knows no bounds.

We’re commercially driven, and we work hard to innovate, create and get deals done. But always with respect, and it’s important that STV is a fun place to work.

We use the power of TV to make a difference. Whether that’s via our STV Children’s Appeal, our Advertising Inclusion Fund or our sustainability programming – we support and connect with our partners, audiences and communities, and we
believe we can make a difference.