STV Group plc (STVG) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. I hope you all can hear well. You are very welcome. Thank you very much for joining us today. So in a moment, Lindsay and I will talk you through our results for the first half of 2024. We'll provide an update on our financial and strategic progress, as well as a sense of the outlook for the year. And as usual, we'll show you some on-screen highlights of shows that have been entertaining audiences on STV, as well as those we've been producing for other broadcasters and streamers in the U.K. and beyond over the last 6 months. But first of all, let me hand over to STV's Chair, Paul Reynolds, for some words of introduction. Paul?

Thanks, Simon, and hello, everybody. So in today's results, I want to talk about STV's strong performance for the first half of 2024, and about the leadership changes for the group. As you know, we continue to operate against quite a challenging macroeconomic backdrop, which has led to difficult market conditions in both advertising and program commissioning. But despite this, I'm pleased that we've grown the business in each of our divisions of Broadcast and streaming and production. The fact is we are in a much more balanced business, thanks to the diversification strategy that's been implemented over the last few years. This was designed to make us more resilient and to be able to navigate difficult times, and so it's proven. We've been helped this year, I think, in this the first half, by some early signs of improvements in the market conditions and from the boost of the Euros '24 football tournament, which has flowed through to revenues and viewing shares. And in Studios, there were a much broader mixed ecology in the large Studios business, and that's allowed us to benefit from more returning series as well as winning high-profile commissions. And that remains a priority for us going forward and key to trapping growth opportunities internationally, as Simon was alluding to. The Board is very much focused on the stretching targets of revenue growth, cost reduction and margin improvement that we've set right through to 2026. And I'm pleased to say that we're on track and already making solid progress to deliver against those targets. We remain very excited about the future of the business and building the momentum to deliver for our customers, for our viewers, our partners and for you, our shareholders. Going forward, though, as you know, there will be some changes at STV in the second half of this year and before we meet again for the full year results. So what are those? Firstly, Simon Miller, who's served on the Board since 2016 as our Senior Independent Director, our employee director, and [ recently ] is Interim Chair of the Audit and Risk Committee. Simon has decided to step down in December, and I'd like to take this opportunity to thank him sincerely for his outstanding commitment to STV over the past 8 years. His counsel and support has been highly valued by me and the rest of the Board. This month, we welcomed on Colin Jones as a new Non-Executive Director and as Chair of the Audit and Risk Committee. Colin has a really impressive track record as a FTSE 250 CFO and over the past few years as a Non-Executive Director and Chair, and brings with him a great deal of media and financial experience to the Board. I'm sure he will be a real great addition to our knowledge and skill base. But the big one, as we enter the phase under new leadership, having announced that Rufus Radcliffe will join STV as our new CEO in November. Rufus was a standard candidate who, I think, really gets the culture of STV and brings with them a rare breadth of strategic and operational experience. We think he's a perfect fit to continue STV on its growth trajectory. And I speak for the whole of the company when I say we very much look forward to working with him. And I know he's looking forward to meeting each of you in due course. And finally, as you know, Simon leaves at the end of October. Simon has been exceptional. His vision and tenacity and business knowledge has ensured that STV has not only survived but has thrived during very challenging times of company restructure, of industry reset, of COVID and of economic slowdown over the last 6 years. Simon led the successful transformation and diversification of STV into the dynamic business it has now become, and without which, we simply would not have been able to deliver the solid results for shareholders we're talking about this afternoon. Simon's incisiveness, collaborative approach and his integrity is matched by a real passion for the brand, the company and the people he works with, and he'd be very much missed by the Board and colleagues at STV. Simon, I'd like to thank you sincerely for your commitment to the company and wish you the very best of luck in your new role. But before you go, just one more thing. We have some results to present and some questions to answer, so back to you for one last time, Simon.

Thank you, Paul. That is very much appreciated. As Paul says, this is my final set of results for STV, and it's been a real privilege to lead this business and serve STV shareholders for the last nearly 7 years. We've achieved a lot together in that time, and the success of our transformation strategy, rooted as it is in digital streaming and in our ownership of valuable content, together with the strength of the foundations that have been laid for the future, comes through very clearly in the results we're presenting to you today. So in a challenging economic climate, we continue to accelerate the delivery of our successful plan and generated top and bottom line growth in the first half of 2024, increasing total STV revenues by 20% and adjusted operating by 33%. Within that, our Studios revenue grew by 38%, bucking the trend in the wider global production market, as new commissions swelled our forward order book to over GBP 100 million for the first time. Our streaming revenues through STV Player grew by 14%, while maintaining our strong Digital margin. The advertising market improved markedly in the first half, leading to Broadcast revenue growth of 12% and an immediate boost in Broadcast profit of 47%. A highly successful Euro 2024 football tournament helped us to 13% growth in our total ad revenues across national, digital and regional. And we're also expecting low single-digit growth in advertising revenues in Q3, although we remain cautious for the full year, not least due to tough Q4 comparators containing the Rugby World Cup from last year. Our successful investment strategy in STV Studios continues to deliver tangled results, and we've today announced an incremental investment in Glasgow-based formats creator, Hello Halo, taking our stake from 30% to 51% in a deal that will be earnings enhancing for us from day 1. On screen, our audience position remains very strong with another record first half performance from STV Player, and our channel, STV, is still the most watched in peak in Scotland for the seventh year in a row, both helped by Euro 2024, of course. Overall, we remain firmly on track to deliver the ambitious 3-year growth target for the business that we set out back in March this year, and I'll provide more color on that in a bit. And against that backdrop, a strong first half performance. With a degree of caution over the U.K. economy in the second half, the Board is recommending an interim dividend of 3.9p per share, in line with 2023. Okay. Over to Lindsay to delve deeper into the financial results.

Thanks, Simon, and hi, everyone. Looking at the key financials for the 6 months. First, total revenue at just at over GBP 90 million was up 20% on the same period in the prior year, with all main revenue streams growing year-on-year. Total advertising revenue of GBP 52 million was up 13%, with national advertising up 16% boosted by the Euro 2024 championships. Regional advertising was up 1%, with a strong performance by the core Scottish SME customer base being offset by declines from the Scottish Govt. Digital revenues were up 14%, also benefiting from the football; and Studios revenue grew by 38%, driven by the acquisition of Two Cities at the end of January and the full year effect of Greenbird. Adjusted operating profit for the period was GBP 10.6 million, up 33% on the prior year, with the operating leverage in Broadcast driving profitability off the back of an improved ad market. Adjusted operating margin at 12% was 1 percentage point up on 2023. This trading performance, combined with higher interest costs, resulted in adjusted EPS of 15.5p, up 5% year-on-year. And total net debt was GBP 28 million at the end of June, slightly lower than the position at the start of the year. Moving to the group P&L, where you can see how all these highlights pulled together into one page. The intention behind our recent investments in production labels has been to build a portfolio of businesses with different dynamics that complement each other and bring to the group a portfolio of returning or returnable series and, therefore, a more stable P&L account. This strategy has proven out in the first half of the year, where the strong results in Two Cities and the full year effect of consolidating Greenbird have driven revenue growth in the overall Studios division year-on-year. Turning to interest, the average base rate and our average borrowings have both gone up in the first 6 months year-on-year, with interest costs going up as a result. Roughly 1/3 of the increase is due to the higher average rate of interest with the balance due to higher net debt, principally following the Greenbird investment last summer. In terms of adjusting items, the single largest amount is a High-End Television tax credit in relation of our drama programs. This claim was made under the previous regime and so requires to be adjusted on the face of the income statement. For new productions that qualify for the source of financing, the new Audio-Visual Expenditure Credit will be claimed going forward, which will be recognized as an operating profit and, therefore, not require adjustment. So things will be a bit simpler going forward on that front. The other adjusting items relate to the integration of Greenbird, including a portion of the second and final earn-out that will be payable in respect of 2024's performance, restructuring costs associated with implementation of the group's cost-saving program and noncash acquisition-related accounting items. Turning to advertising revenue. The table on the left shows the year-on-year performance for each of the main advertising revenue categories by quarter. With the exception of VOD revenue, performance was broadly the same year-on-year from Q1 to Q2. The other revenue categories also improved performance in the second quarter, principally buoyed by the football. We normally see our regional advertising outperform the national market, but the significant reduction in Scottish Govt. spend in the first half, down almost 60% year-on-year, has offset the 12% growth achieved in the core regional advertiser base. Our VOD revenues continue to benefit from ITV having taken over as national sales agent, with year-on-year growth broadly tracking ITV's, in line with our agreement. The chart on the right demonstrates the seasonality of total advertising revenue. You can see the dip in early Q2 this year, with revenues then building towards the end of the quarter and June's total advertising revenue being the third highest month over the last 2.5 years. In terms of the advertising outlook, we expect total advertising revenue for Q3 to be up low single digit year-on-year boosted by the second half of the Euros tournament in July. In terms of the component parts, we expect national advertising to grow in Q3, with strong growth in July dampened by declines in August and September and VOD revenues before commission that are expected to be up slightly in Q3. For both these revenue streams, we expect the year-on-year to be impacted by the strong comparators, which included the Rugby World Cup. Our regional business should also see growth in Q3, albeit the recent announcement from the Scottish Govt. brings some risk to the picture, as we don't yet know the impact of their spending cuts on campaign funds for the coming weeks. This chart was the profit impact of the various revenue points I've talked to. We have shown the gross movements in VOD revenues so that you can see the incremental sales and then the commission as a partial offset. When we get to next year and the impact of the commission disappears from the comparator, we'll revert to just a post-commission measure for simplicity. In terms for the cost savings realized in the first half of the year, the end bar on the chart there, we're on track with our program announced in March and we'll deliver at least GBP 1.5 million in savings in 2024. Roughly half of this has been realized in the first half of the year through a variety of actions, including integration of Greenbird and consolidating our London team into a single office, streamlining operations across certain areas of Broadcast and central functions, and bringing in-house some post-production activity. We've already started work on the next phase of savings targeted for 2025, and have a clear line of sight over the majority of actions required. Just a few words now in each of the divisions, and starting with Studios, where, despite a very challenging commissioning backdrop, the division has grown revenue year-on-year and maintained a small profit for the first half. One of the key impacts on the financial performance in H1 is the acquisition of Two Cities, which contributed GBP 18.5 million of revenue and GBP 1.4 million of profit since acquisition on the 30th of January. This includes revenue and margin in relation to Amadeus, which, although not scheduled for delivery until 2025, is what's called a producer-for-hire contract, with the associated revenue and margin required to be recognized on a percentage of completion basis over the period of production activity. This is helpful from a reporting perspective as it avoids a potential cliff edge for recognizing profit if delivery dates slip, giving a smoother revenue and profit recognition, which will help with guidance. Secondary sales have performed well in the 6 months, with the benefit of Greenbird's meaningful library of returning series IP coming through. And in terms of the profitability of the division, it's normal for the majority of the full year margin to be earned in the second half of the year because that's when the majority of programs are scheduled for delivery. Looking back at 2023, the full year profit of GBP 5.2 million was all delivered in the second half, with a double-digit margin realized in H2 against a first half of breakeven. And as we sit here in early September, we're starting to see those deliveries being made and the profits beginning to build. Touching briefly on the acquisitions we've made in the last 12 months, this slide summarizes the invested cash for both Greenbird and Two Cities. Taking Greenbird first on the left-hand side, we've now paid GBP 23 million of the acquisition cash for the business. Our return on invested capital is around 15% for the first 12 months of ownership, and so in excess of our WACC, albeit probably slightly lower than we expected a year ago given the market backdrop and the impact that's had with few new commissions being awarded. On the table on the right, we've shown similar information for the Two Cities investment, where the return on invested capital reflecting all investment costs to date is around 20% for the first 5 months of our majority ownership. As the commissioning market hopefully comes back over the coming months, we'd expect to win our share of new commissions being awarded and for the right metrics to benefit. Moving to Digital, where the division has continued to perform strongly, maintaining its profitability in the first 6 months of the year. Total VOD revenues are now around 75% of the division's total following a period of strong growth, with them up 12% year-on-year in the past. We expect the rate of year-on-year growth in VOD revenues to slow down for the second half with tough comparators. Margins will come back a little with incremental investment plan and third-party content, but overall, the picture should remain strong for the full year. When we're talking about the Broadcast performance for 2023, we were at a low point in the profitability of the division brought about by the broader macroeconomic environment and its impact on advertising revenues. But we made the point that the operating leverage of the division was such that even the modest increases in advertising revenues would have a significant impact on profit. Roll forward 6 months and that's exactly what you see on the slide here, with a 12% increase in advertising revenue translating to a 47% increase in profit. In addition to the margin benefit from the higher advertising revenues, we're also realizing cost savings in line with our plans. Turning to the cash flow and net debt. There's always lots of talking points here, so I've taken a slightly different approach this year and included the detailed cash flow statement in the appendix. This slide aims to explain a bit more of the complexity working its way into our banking arrangements these days as we engage with more and more commissioners and require different sorts of financing for production activity. Nowadays, in addition to our core RCF, we also have nonrecourse production financing debt and ring-fenced cash advances from commissioners. Starting at the left-hand side of the table with the balance of RCF, which is the core net debt of the business essentially. This has increased by GBP 7 million to GBP 36 million at the half year as a result of the incremental investment to increase majority stakes in 2 of the Greenbird businesses, plus the investment of Two Cities. Operating cash generation of the business covered all other cash flows: so CapEx, interest, tax, pensions, dividends. Net operating cash conversion in the first half of the year was well above 100%. Against this RCF measure of net debt, our leverage at the half year was slightly up in the full year to December 2023 at 1.4x, well within the covenant maximum of 3x. The other columns for nonrecourse production financing and ring-fenced cash relate specifically to individual programs in production. For the third-party debt, the providers of the finance have no recourse back to the STV Group in any event of default and the ring-fenced cash can only be used for the specific program to which it relates. So they don't really form part of the debt of the group, and we'll pull these balances out for you going forward. The only other point to touch on is the refinancing that we're in the process of kicking off, with the aim of completing early in 2025 and certainly in advance of signing off on our 2024 annual report. Lastly, a few words on pensions, where the accounting deficit of our defined benefit schemes is reduced to GBP 45 million at the half year, down 17% on the December position, reflecting an increase in the discount rate and cash contributions paid over the period. The relationship between company and trustees has much improved over recent years, and this has borne fruit in the quality and tenor of discussions around the 2023 triennial valuation. I've been consistent in my messaging that my aim for this valuation was for the company contributions not to go up, and that remains my priority. We've made good, good progress with the trustees and are now in the final stages of reaching agreement, and I'm confident we'll have some positive news on this in relatively short order. Okay. I'll stop there and let you take a look at our Studio to see what we've been up to in the first half and what you've got to look forward to over the next few months. [Presentation]

So there we are. You can see it was another big 6 months on screen for us. Mr Bates vs The Post Office, a successful Euros from Germany, a general election and a burgeoning number of new STV Studios shows on a range of networks and streaming services around the world, with plenty more to come in the second half of this year, crucially. As you know, over the last few years, we've laid strong foundations for the next phase of STV's growth. Firstly, reinvigorating the core broadcast business by overtaking and then putting clear blue water between us and our main audience rival, BBC1; as well as launching our innovative STV Growth Fund to attract hundreds of new Scottish advertisers to TV for the first time. Then building strong growth pillars for the future through our fast-growing streaming service, STV Player, and our production arm, STV Studios, which is now a highly successful network of 20 production companies making big shows for the best in the business. Phase 2 of the transformation is about accelerating that growth. And back in March, we set out refreshed strategic objectives for the business which reflected how viewers and advertisers are increasingly behaving focused on content creation, total audiences, monetization, and the organization we need to become to make the best of each of those opportunities. Our new objectives are to accelerate our U.K. and international Studios growth, to drive streaming growth and maximize total STV across both Broadcast and Digital, maintain our advertising leadership as growing new profitable revenue streams, and modernize and simplify our business for a digital first world. Alongside those objectives, we also set new stretching 3-year financial targets for the group that will make us an even more balanced, profitable and internationally focused business by 2026: doubling Studios revenues to GBP 140 million, with a target to achieve a 10% margin; driving our Digital revenues by a further 50% to GBP 30 million at a margin of at least 40%; growing international revenues to at least 15% of group revenues and 25% of Studios; while at the same time, achieving a further GBP 5 million a year of savings in our cost base by simplifying and modernizing our business to set us up to compete. And I'm pleased to say that we're firmly on track to meet each of these targets, as today's results illustrate. We're also making good progress against our new KPIs that underpin the strategy and the targets as we summarize on this slide. In content, we're growing our number of returning series, the proportion of our shows with IP revenues attached and our international revenues. In audiences, STV remains #1 for commercial share. We continue to grow our reach and streams through STV Player. And we'll be focusing, in particular, on growing monthly active users in Digital over the coming years. And you can see against our monetization KPIs that we're still on track against the important metrics of new advertisers and rebooking rates, with a renewed focus on growing our paying subscriber base in this next phase of the plan. As we said back in March, we'll report on these regularly going forward to give a sense of our strategic progress. Moving to a slightly more detailed updates on our key objectives. And first up is content and our Studios business, where we continue to make excellent progress. As you know, we see huge growth potential for STV Studios. And in recent times, we started to deliver on that potential with significantly improved financial results. That's despite the difficult economic climate that has persisted in the wider TV market and the reduced spend we've seen from some of the bigger players, with the result that smaller production companies have really struggled over the last couple of years. We're not immune from those market conditions of course, but our growing scale and the resilience that comes from now having dozens of returning series in our portfolio means that we've been able to continue to grow in spite of the market. There are also more encouraging signs that the commissioning sector is starting to recover, with Channel 4 recently saying that their program spend returned to pre-COVID levels in the first half of this year. Our focus continues to be on growing our reputation in what we see as the most important market segments: premium scripted, where we now have 4 major drama shows in production with some of the biggest players; returnable unscripted shows and formats, where we have 34 returning series and a number of new returnable shows on the way; and international, where we already have traction with the likes of Lego Masters, Amadeus and Bridge of Lies, but which is more and more of a focus for us given the size of the market opportunity. Our Studios' vision, we think, remains as relevant as ever. We're becoming a world-class producer for the biggest networks and global streamers, and closer than ever to our goal of being the U.K.'s #1 nations and regions production company by turnover, profit and reputation. And with that goal firmly in mind, we were delighted to confirm our latest Studios deal this morning. We've made an incremental investment in Glasgow-based formats creator, Hello Halo, increasing our stake from 30% to 51% to assume majority control of what is already a profitable business. Hello Halo was founded by a highly respected producer Wendy Rattray and focuses on factual formats, but also on children's shows and on natural history programming where we don't have a strong presence at the moment in Studios, and so this investment complements our existing portfolio of genres very well indeed. Hello Halo makes shows like River Hunters with Rick Edwards and My Life In The Wild with Hamza Yassin, as well as kids series Dog Squad and Junk Rescue. And they've just secured an exciting new crafting format called The Game of Wool for Channel 4, which is set to launch later this year. The structure of the deal with Hello Halo is a familiar one for us where there are puts and pulls in place for the remainder of the equity, which reward profitable growth. And even though the upfront consideration paid for the additional 21% stake is relatively modest, the investment will be earnings enhancing for STV in 2024, with a strong return on invested capital expected in the short term, given the strength of Hello Halo's portfolio of commissioned series. And this latest investment also underlines the value of the M&A strategy we pursued these past few years. We have deliberately targeted not just majority stakes in larger businesses, but minority positions in companies we believe had real future potential, like drama producer Two Cities who had no commissions when we acquired a 25% stake in 2020. But when we converted our option to take majority control earlier this year, had 2 huge drama commissions in Blue Lights and Amadeus, and subsequently delivered nearly GBP 20 million of revenue in the first half of this year alone. Our acquisition of Greenbird Media last summer again gave us both an immediate earnings uplift from the majority-owned entities in their portfolio and the option value of the minority stakes they held, which we again hope to convert to majority as they grew their success in future. And so that has proved, as you'd expect, we've spent some time over the last few months reviewing the creative labels in our newly expanded portfolio to focus on those with the highest potential, which we define as production houses that can create returnable, internationally focused, higher-budget formats. And the result of that review is set out on this slide. To the left, the original majority-owned labels pre-Greenbird. Next to that, the 5 labels where we've been proactive in increasing our stakes over the last few months. The previously mentioned Two Cities, Tuesday's Child and Crackit, where we already held majority stakes but where we've been delighted to increase our positions as these producers have continued to grow. Rumpus Media, which continues to win new shows in the comedy entertainment space. And Hello Halo, which we've announced today. The middle right box contains the 10 minority stakes, which we still consider to be high potential. We also said at the time of the acquisition last year that we didn't expect every producer to be successful. And in the far right box are the 4 labels that we've now parted company with following our review. Taking the overall number of production companies in the STV Studios' portfolio to 20. This portfolio of companies continues to perform really well, securing 36 new commissions and recommissions so far in 2024, despite the challenging market conditions, including a number of high-value wins like the ones featured on this slide: a second series of Criminal Record for Apple; a huge new international drama for Sky, Amadeus; 2 new series of Blue Lights for the BBC; not to mention our first drama Commission for Netflix called The Witness. It's rare to find a big budget entertainment hit, and so we're delighted that The Fortune Hotel is reopening its doors for series 2 on ITV in 2025; our U.S. version of Bridge of Lies, Beat the Bridge, is performing well stateside. And our Auction House franchise gets bigger and bigger for Discovery. All of which means that our Studios' forward order book, the metric we introduced earlier this year to provide further visibility around the health of our Studios business, is stronger than ever. And for the first time, stands at over GBP 100 million of secured future revenues. As you can see on the chart, since we last shared the metric back in June when the total stood at GBP 86 million, we've added a further GBP 34 million of new commissions, with GBP 19 million of programs either being delivered or having their revenues recognized in that period, resulting in a new total of GBP 101 million. That's GBP 75 million higher than it was only 2 years ago. Overall, we're really pleased with our progress in Studios, and I hope you're getting a strong sense of the team's excitement and ambition here. We have a clear vision and strategy, and our target is very deliberately both U.K. and international growth. Turning now to our audience objective to drive streaming growth and maximize total STV viewing across both Broadcast and Digital. And another reminder that despite Netflix and Disney+ and Amazon, Broadcast channels and their streaming services still dominate video viewing. To the extent that according to Barb, the average Scot watched nearly 5x more broadcaster content on a TV set in the first half of 2024 than they did SVOD content. Over 3 hours a day for broadcasters versus 38 minutes for the SVODs, with 66% of all TV set viewing going to the broadcasters in the first 6 months of the year, up 2% on the equivalent period in 2023. And on the right-hand side, respected forecaster, Enders, are saying they expect broadcasters to continue to dominate viewing share on TV sets out to 2030, with YouTube growing, SVODs like Netflix plateauing and broadcaster on-demand services gaining back a good proportion of the inevitable volume losses suffered by their linear TV channels. Again, this speaks to the resilience of the broadcaster business model. In Scotland, our audience position relative to our competitors is as strong as it's been in my time at STV. We're still the most popular peak time TV channel for the seventh first half running and now way ahead of BBC1, the reverse of the situation in England where BBC1 leads ITV1. And our flagship News at Six is now the most watched news program of the day in Scotland by nearly 100,000 viewers, 1/3 bigger than BBC Reporting Scotland. But it's our audience performance versus our commercial competitors that matters most, of course. All of our competitors that is, including the likes of Netflix and Disney, who now carry advertising for some of their subscribers only. And there, I'm pleased to report that STV and STV Player combined is still the clear #1 on TV sets, nearly double the size of Netflix, with our lead over them growing by 1 share point in the first half of the year, and we're also 4x bigger than Channel 4 and Disney. On the right, what we're also seeing as streaming grows is the reach of STV Player growing as a percentage of total STV reach. We connect with 3.36 million people each month, and that gives us a huge Scottish audience and a big competitive advantage because, of course, we can convert those STV viewers to be digital viewers on STV Player. As a result, you can see on the right-hand side that STV Player is already 39% of our total reach and growing, with the target of our streamer delivering 50% of our total reach by 2026. Looking at our Digital performance in a little more detail, and we had another record first half for STV Player in terms of streams. The simple goal remains to be more -- attracting more people watching more content for longer because we know that, that translates into more financial success. Active registered users were up an encouraging 33% across the first half, with VIP users, those who watch most STV content, up a further 19%. That translated into a more modest 4% increase in streams and a 5% decline in total online consumption, with both figures impacted by a changing audience mix in the first half where we had fewer drama box sets but more live sports, although that didn't impact financial performance with Digital revenues up 14% and profits maintained at GBP 5 million. In part, it was that different audience mix that underpinned the good revenue number we saw. We still delivered strong viewing volumes with 8 titles achieving 1 million or more streams on STV Player, double that of H1 last year. But we also saw live viewing jump 33%, 18 to 34 streams grew by 35% and male streams by 23% as a result of a huge increase in live sports driven by the Euros, of course. And all that helped to sustain and grow the Digital premium paid by advertisers in the first half. Now we can't just rely on shows coming through the ITV partnership. Key to our Digital growth over the last few years has been an increasing portfolio of third-party content, and that continues to be an important part of our strategy. We've acquired thousands of hours of high-quality shows to bolster our streaming proposition for viewers, much of it on a revenue share basis to reduce our commercial risk. And our latest notable deal is a 2-year agreement with Disney to secure 10 drama series from the U.S. The first 3 have launched and already amassed over 3 million streams. And the encouraging news here is that nearly 1/3 of people who have watched one of the Disney dramas have gone on to watch another on our platform. We've also got plenty more stellar content to come in 2024, with series 3 of acclaimed drama at The Tower launching last night; 6-part drama Joan, starring Sophie Turner of Game of Thrones fame; the return of UEFA Nations League football; and another series of the sleeper hit reality show My Mum, Your Dad, which I thought was as touching to watch as it was slightly cringey. The next area of focus for us under our newly refreshed strategic objectives is the effective monetization of all of our viewing. And here, we know that we have a market-leading commercial offer for advertisers, a one-stop shop for brands, combining the unrivaled mass reach of national advertising with our uniquely powerful local advertising platform for Scottish SMEs, and now also a highly targeted Digital advertising capability via STV Player. No other media owner offers that breadth of proposition in Scotland, and no one comes close to matching our scale, as the graphic on the right shows, with 99% of the top commercial audiences in Scotland on STV in the first half of 2024, 495 of the top 500 programs. The other 5 that weren't on STV were all episodes a Bake Off on Channel 4. And indeed, no other event showcases that dominance better than Euro 2024, which was a major success for us. Huge audience numbers as we expected, with streams up 61% on the last Euros, and our average viewing share 3 points up on ITV even though Scotland didn't make it out of the group. Those audience numbers translated into tangible commercial success, 350,000 lapsed STV Player users were reactivated during the tournament, with about 160,000 of those or 46% going on to watch something else on STV Player since. National advertising revenue was up over 80% in the month of June, and local brand count was also up over 80%, partly because we use the halo effect of the Euros to bring in lots of new local advertisers, showcasing dozens of local brands in our unique [ Come-On Scotland ] advertising campaign across the tournament. It worked commercially, but it maybe didn't work for the team. Over the next couple of slides, we'll break out the performance of national and Scottish advertising in the first half. And this chart defines national as linear plus VOD, as both are now sold for us by ITV, as you know, under our long-term partnership. You can see that we have good category growth across retail, across entertainment, food and household stores, in particular, offset a little by lower finance, telco and government advertising. That all translated into excellent national linear advertising growth of 16% and national VOD growth of 12%. The linear outperformance explained by its relative weakness in recent periods, but also the fact that the Euros was primarily a live linear event, delivering huge audiences to broadcast TV. Our Digital brand count also continues to surge ahead, up 75% on last year. Another benefit of our enhanced advertising partnership with ITV, where we are now fully integrated into ITV's automated sales process through Planet V. Turning to Scottish advertising now briefly, where we remain the market leader by some distance. Total regional advertising got back to growth in the first half, up 1% despite continued declines in Scottish Govt. advertising, which now makes up less than 10% of our local spend. Conversely, Scottish SME advertising was up 12% for the period, with encouraging growth in rail travel, particularly ScotRail, energy services and B2B advertising, as you can see from the category chart on the left. Performance was obviously buoyed by the Euros, with increased activity from big brands like tenants and retailers Scotmid Coop, alongside our [ Come-On Scotland ] and Good Luck Scotland initiatives. Encouragingly, we also saw regional VOD advertising continue to grow, up another 13% in H1, with 60% of our local brands now combining both VOD and linear spot advertising together, up from half last year and 1/3 of our advertisers in 2022. And across the bottom, you'll see our advertising growth fund continuing to do its job, making TV advertising more affordable, more accessible, generating a healthy influx of new advertisers, over 400 since the fund launched, the majority of whom going on to become repeat clients, another of the KPIs that we track regularly. In terms of the outlook, we can certainly report an improving picture so far this year, although there is inevitably still caution around the rest of the year and beyond given the continued macro uncertainty in the U.K. But we've delivered strong total advertising growth in the first half of 13%, and we expect Q3 total advertising to be up low single digits, driven by a good July, thanks to the Euros. That should translate into overall growth for the full year 2024, although Q4 has the added headwind of a Rugby World Cup in the 2023 comparator, which will inevitably weigh on the year-on-year performance. The Studios' outlook is also positive with our strongest ever forward order book and GBP 34 million of new commissions secured since June. And overall, that should translate into an improved revenue and profit performance for Studios for the full year, which would be a terrific result in the current muted production environment. And as Lindsay said earlier, we're on course to exceed our 2024 savings target of GBP 1.5 million, and we have a good line of sight to the run rate of GBP 5 million in annual savings that we're targeting by 2026 as we simplify and modernize our business for the future. And that is literally it for me. Now I know I'm biased, but I think STV is very well placed to accelerate its growth from here. We're a much stronger company strategically, creatively and commercially, but also culturally. And that's something you can't measure with numbers, but does bode well for the future. We've also created core growth areas in Digital streaming and in Studios that are now flourishing, and set to be the cornerstones of STV's future success. I've always said that our Broadcast business is more powerful and more resilient than most commentators would have you believe, and its audience and commercial performance over the years, this year included, continues to support that theory. Our first half numbers illustrate all of that in a nutshell, with strong top line and bottom line growth delivered across the group despite the challenging environment. And overall, we have strong foundations in place, a first-class team with real ambition and drive that I cannot speak highly enough of, and we made a fast start against our stretching new financial targets for 2026. That will give new CEO, Rufus Radcliffe, a good platform to take forward when he starts on the 1st of November. I worked with Rufus at ITV, he is a great hire and I think the company is in excellent hands. So thank you all. Lindsay and I will pause there for your questions.

Okay. Let's go to Roddy first. He's blatantly got his virtual hand up.

And perhaps to start with 2 questions on the pro forma Studios business, if I may. Just wondering if you could perhaps elaborate a little on how you see the environment for content acquisitions, particularly given your remarks and your widespread report that the difficulties facing some of the smaller producers. But also in that, if you could also touch on talent deals. And looking in-house, just would be really interested to know whether -- or what we should perhaps expect to see coming down the track in terms of further increases in minority positions or indeed majority positions within your portfolio, and interested whether there are any others that are still under review and that you could possibly exit.

Thank you, Roddy. Well, look, it's certainly been a difficult period for producers, difficult for the freelance community who are the lifeblood of the of the creative industries. We are immune from those market conditions, of course. We'd have loved to have delivered even greater growth in the first half of this year. But you can see in the numbers that it's our scale and growing resilience that comes from now having dozens of returning series in our portfolio, that means we been able to continue to grow despite the market. And that's about securing high-value recommissions and new commissions, 36 so far this year, which is strong. Big returners like Bridge of Lies and The Auction House and Criminal Record, which is a huge one, obviously, for us for Apple. Also some new format commissions, including from our latest incremental investment, Hello Halo, a big show called The Game of Wool. Crafting is a big deal, as everyone knows, these days. And so that's an interesting new show. It has been encouraging in the first half of this year that the ad market has come back in the way that it has, up 13% for us. Of course, the U.S. writer strike is now behind us, which is a good thing. Both of those factors, I suspect, will have a positive knock-on impact in the commissioning market in the future. It will take time, though, because the market has taken a bit of a pounding in the last 18 months or so. But there are more encouraging signs. We're hearing more broadcasters put their head above the parapet and talk about program spend coming back. We heard the Channel 4 bosses saying that at the Edinburgh festival a couple of weeks ago that their spend in the first half of this year had returned to pre-COVID levels. But the biggest barometer of all of this is, of course, our economy. And should we get better news on a long-term basis about the economy, then both the ad market and the commissioning market will benefit. One final comment on this on the long-term demand, because I still think that is extremely strong, both globally and in the U.K. There will always be good demand for high-quality shows, particularly drama shows, particularly formatted entertainment and factual. I think some of the smaller, lower-budget shows are getting -- falling between the cracks a little. And that's why our focus increasingly is on bigger shows, higher volumes, higher budgets, international potential. Which sort of takes me on to your second question, Roddy, about our portfolio and talent deals. And we will always keep looking at talent deals in our business because that is the lifeblood of our business, working with the best creative talent, be they producers or writers or directors or format creators. We wouldn't rule out doing more deals in the future, but that will be a matter for the Board and the new CEO. You can see how well that strategy has served us over the last few years and in our numbers for the first half. We said when we completed the Greenbird acquisition that our focus would be on the labels in our existing portfolio because there were so many that had potential to grow. And so it's proven. I mean we've done -- in quite short order, we've done 5 incremental investments within that portfolio, taking the majority of number of producers, including Two Cities and then Hello Halo today. And we have another 10 minority stakes. I'm not going to predict now which one of those is the next one that we will take the majority in success, but I suspect there will be others. And you can see whether it's Two Cities or it's Tuesday's Child or it's Crackit or Hello Halo, that each of those has managed to contribute positively to our earnings as we've consolidated them. And that's certainly been the strategy all along and is starting to pay dividends. Okay. Thank you, Roddy. Jonathan Helliwell has his hand up as well.

Congratulations on the great innings at STV, I have to say. A couple of things I want to ask you, though, before we disappear. The first is just continuing on this theme of acquisitions. You're putting a lot of emphasis -- a lot more emphasis now on international side of Studios. So would that be limited to just exporting U.K. program and U.K. formats? Or would you be interested in feet on the ground and acquisitions internationally, or you or your successor? And then I think -- the second thing is just, which might be more for Lindsay, going back to this producer-for-hire contract, which -- is that something that's very much a one-off to do with Amadeus? Or is it something we might see more of coming into the mix and therefore seeing a smoother revenue progression out of that in Studios over the medium to long term?

Lindsay, do you want to answer that one first and then I'll come back to Jonathan's first question.

Yes, sure. So it will be less common, I think, Jonathan. So these will predominantly be the larger streamer commissions where we agree upfront to sell all rights associated with the program. And so therefore, for the [ PD ] that are actually making the program, we are a producer for hire in the context of accounting standards or whatever. So I think it will be a good thing. The majority of our revenue in terms of -- for commissions in terms of number of commissions will continue to be on delivery because we will continue to hold the IP and then have access to the secondary market and all the higher-margin revenues there. But for high value but potentially lower quantity of commissions that are these producer for hires, it will be a good thing because we will not have this cliff edge that could happen if delivery dates move. And you'll know that we've said in the past that one of the changes that you can have is that commissioners change when they want to [ TX ] something, which means they change when they want to take delivery of it, which then can have a knock-on impact on us. So it's relevant for Amadeus, it's relevant for most of streamer commissions, where you're selling the IP rights upfront. But it probably allows us to foresee a smoother trajectory, if you like, through the next 2 or 3 years rather than arguably trying to predict when big lumps of revenue and margin might fall. Does that help?

Yes.