Zinc Media Group plc (ZIN) Earnings Call Transcript & Summary

Welcome, everyone. Thank you for joining us for this short results presentation. I'm Mark Browning, the CEO of Zinc Media Group. Let me give you the headlines. So 2024 was the group's most successful year-to-date, both commercially and creatively. All our profit metrics for the year are up and we've now delivered 4 years of profit growth. You can see them on the screen. EBITDA of GBP 1.5 million, that is the highest for 14 years; operating profit is up to just under GBP 0.75 million; and for the first time in many years we have delivered profit before tax. Our gross cash at year-end was the highest ever and 95% of our revenue in 2024 came from returning clients and that is the highest we've done. We made big changes to the group during the year, restructuring the portfolio. So all our businesses now focus on production and that was to improve profitability, make the group a cleaner group, a more cohesive group, a group that's easier to run and offers further opportunities for efficiency savings because now it's completely focused on television and production for brands and businesses. So we closed our short-form video marketing business in Zinc Communicate. That was predominantly due to the downward pressures on budgets from advertisers and corporate budgets, which is typically based in the U.K. economy. We sold the legacy noncore publishing business. Zinc Communicate Publishing was a drain on our resources, it didn't fit our strategic vision as a production company operating at scale. While we divested of that, we acquired a profitable factual television company in an all-share deal in October, which improved the group profitability and brings with it returning series and a TV rights distribution business into the group. And we launched a new entertainment label called Electric Violet and we have ambition with that label to win large new entertainment series with IP over the next few years and as that IP comes through, that is high margin revenue. Now trust and quality are the cornerstone of our proposition. And we measure quality through ratings of television and streaming services, the ratings our shows get, the number of returning series we get year-on-year and by the number of awards we win. We won Production Company of the Year award for the second year running and were nominated again this year. This is an international award. We're up against the biggest television groups and broadcasters; the BBC, ITVs companies, Al Jazeera, people like All3Media and Banijay. We know that awards don't move share prices per se, but they are important because they're important to our people and our clients and our sector because they are a kite mark of that quality promise. In a sense, they are our sort of soft power that evidence the claim that Zinc is a business that can be trusted and produces high quality product. And we've transformed that product offering in the last 4 years or so. We've highly diversified our revenue base now across many price points and to illustrate that, we have won 9 GBP 1 million commissions in the last 8 months. That is a very high strike rate. So let's look a bit more at our financial results and Will will lead us through those.

So all our income statement numbers are from continuing operations following the restructure of the group and prior years have been adjusted to provide like-for-like comparisons. So revenue is down, but profits are up and this is because we're focused on higher margin revenue. Revenue is down due to Tern TV having a poor year with their revenue down GBP 4 million from prior year and for the first time in 20 years, they made a small loss. Group revenue was down due to a delay to The Inner Circle quiz commission and due to a number of long-running series not being renewed. The Edge also reported slightly lower revenue in FY '24 than FY '23, but with GBP 12 million of revenue, we're still well ahead of acquisition expectations. The other TV businesses all saw an increase. With the addition of Raw Cut during the year, on a pro forma 12-month basis, like-for-like revenues are actually flat. In terms of our profit KPIs, all metrics are green, they are all up. And this includes gross profit and that is up due to the margins being up 6 percentage points and margins were actually up 11 percentage points over the last 2 years. Adjusted EBITDA is up to GBP 1.5 million. And as we've been saying for last few years, this is now feeding through to operating profit, which is now up to nearly GBP 0.75 million. Cash was GBP 1.4 million up on prior year at GBP 6.3 million and we generated positive free cash flow of GBP 0.6 million and that's from all operations continuing and discontinued. And actually just from continuing operations, it was up GBP 1.5 million. Now the breadth of our revenue, high repeat customer and proportion of revenue at high gross margins, all speak to the quality of our revenue. So starting from the left of this chart, we've got a diversified revenue base, both by customer and by geography, and that reduces the risk associated with exposure to any one market or territory. So TV production accounts for 63% of revenues whilst production for brands and businesses accounts for 37%. So it's all film related content, but it's from different buyers. And almost half of our revenues come from outside of the U.K. and that has doubled in the last year. And as we move across, you can see that revenue generated from repeat customers has risen from 80% to 95%. And this repeat customer may be for the same or for different projects each year, but the critical thing is that the same customers come back to Zinc time and again because of the quality, trust and value for money that we provide. And many of these are huge customers; all the major TV channels and now streamers like Disney+ and then blue chip companies such as EY, PwC and Deloitte, who return to us time and again for corporate and brand film. We've got a mixture of gross margins in different parts of the group. It's worth just explaining this. So TV distribution revenue where we sell our IP is over 70% margin and a lot of The Edge content production is over 50%. Then we have a considerable amount of TV production, which is over 25% and then a small amount, which is under 25%. We've increased gross margins in recent years and in FY '24, they're the highest they've ever been, up 6 percentage points to 45%. Now we've decided to scale further as a group by investing in winning some high volume, lower margin contracts to gain a foothold in new television markets and these are at 15% to 25% margin. And this includes the likes of The Inner Circle quiz and a multimillion pound event in the Middle East. And commissions like The Inner Circle will then help to drive the higher margin IP revenues at the top. Zinc is on a growth trajectory to deliver long-term profit growth and this slide shows the clear direction of travel we've been talking about for the last few years. And our focus in our turnaround phase was on rapid revenue growth and improving gross margins and that drove EBITDA profit. For the last few years, we've been investing in long-term sustainable growth and now these investments are starting to deliver. We are delivering record EBITDA and it's now feeding into operating profit and PBT and in FY '24 we've delivered adjusted PBT for the first time in well over a decade. And this is forecast to continue to grow in the years to come.

Let's move to the next slides, please. So the continuing improvement in operating profit and profit before tax was significantly enhanced last year because of this changing structure of our portfolio. We've restructured the group. So the closure of Zinc Communicate, the sale of that legacy publishing business, have streamlined the group. So solely focused now on production and that's reduced management distraction, improved margins, reduced bad debt, improved revenue quality. And in the same months that we disposed of those businesses, we replaced a loss-making noncore publishing business, we acquired the profitable television production business Raw Cut. And they are a market leader in what we call in television blue light programming, that is access to police forces and emergency services. They've got long-term relationships with forces across the U.K., make lots of returning series like Police Interceptors on Channel 5 and have a very good back catalog of intellectual property, IP, which drives high margin revenue. And we invested in this new entertainment label Electric Violet. It's our first move out of factual, which has been Zinc's heartland forever, into entertainment television and it's headed up by the former exec producer of Strictly Come Dancing. It's focused on winning these big glossy shiny floor entertainment formats. We call them shiny floor shows in television. They come with high tariffs where Zinc can then own the intellectual property, own that valuable IP and get high margin revenues from global sales in the future. So that is an investment now. We do not expect it to pay back this year or potentially even next year, but it will start to transform the business in the years ahead. So it's a big play for our long-term future. And over the last 3 years, we've been investing also in building this common group platform. The idea is this supports all our current businesses and new businesses as we launch or acquire them. Now the platform is far more than just common services. It's about supporting our businesses with specialisms and excellence that would otherwise be unaffordable for any individual stand-alone business on its own. So it's excellence in things like technology and post-production where you can really make a difference to the bottom line through margin management; excellence in areas like marketing and finance, excellence in HR and governance and commercial strategy to support our ambitions both for the businesses we have and those we're bringing in. So this is a level of expertise and excellence that comes by having this common platform. So everything we do around the group where we do it multiple times in common with other businesses, then we try to centralize those functions and drive efficiency and operational leverage. Now we acquired Raw Cut in October last year and were able because of the platform to integrate it into the group, into all our workflows; technology and finance and all the rest of it; within 3 months and that has enabled us to take out cost and improve their pro forma profitability. We expect to unlock value equivalent to about 25% of their pre-acquisition profitability during the course of this year. And at the same time, of course Raw Cut is benefiting from that broader range of higher quality services made available because we have this group platform. Zinc's growth is being driven by much more valuable and diversified revenue and a product than it's ever had before. If you look in this chart, 2019 Zinc's TV businesses were largely in specialist factual and the buying was heavily skewed to the BBC. This included a lot of single one-off programs, great programs, but singles and one-offs like panoramas and dispatches for Channel 4; but they were low margin, they had no IP intellectual property value, they couldn't sell around the world. So they're very domestic-focused programs, but great for reputation and very much in the specialist factual space. But over the last 5 years, we've completely diversified into new markets; we've got new markets, new genres, new price points and new geographies. And this means we're much more resilient now as a client base and how we've increased the profitability, got this long-term growth coming through that Will showed on those charts and the potential with any of these businesses now for a real breakout moment in the years ahead. With a falling wind and a decent economic climate, this group is poised for some really exciting opportunities ahead. We're a storyteller. We tell stories about life and we tell them on screen for clients, brands, businesses, streamers, television channels. But we also work really hard at how we tell our own story. That is ultimately what people buy from us. And we now punch way above our size in our profile partly because we're publicly owned, but primarily because of the programs we're making and the people that we make them with. So we're regularly featuring now in national, international press and magazines and their digital versions, on radio and television, in podcasts and we're pretty prolific now on social media. As investors, you should be receiving regular investor updates. We do webinars. We provide newsletters on a regular basis. So if you want to hear about Zinc's story and perhaps you want to hear about it recently in full, then I do commend you listen to The Business Case podcast, which is an hour about Zinc story from a city and an investor perspective. Let's have a little look at some of our creative highlights for last year. Our product is in the best shape it's ever been in without question. Our programs are now absolutely world famous. They get the highest ratings and the highest critical acclaim. You can see some of them on screen, whether it's Fighter Pilot for National Geographic, which is a Disney company or Israel and the Palestinians for the BBC. We're working with Lewis Hamilton for Mercedes. We're working with the biggest and the best and we've had 9 GBP 1 million commissions in the last 8 months and they're for the biggest TV channels around the world, all the U.K. TV channels and the world's biggest streamers too. So what does the future look like? Well, Will will take us through the pipeline first.

So the pipeline for this year, we've got GBP 27 million of revenue that is already booked and expected to be delivered in the account in FY '25 and that includes GBP 6 million of new commissions since we last updated in February. And that compares to GBP 23 million that was booked at the same time last year on a like-for-like basis. So GBP 27 million is up on the GBP 23 million that we had at the same point last year. We've then got GBP 7 million of highly advanced revenue on the pipeline and that means that it's either verbally commissioned or at a contracting stage and this is the same as last year. So we need to win and book in the year another GBP 14 million of revenue and much of this will come from The Edge where their pipeline moves much more quickly and so we would not expect to have visibility of it yet. And we typically find our business is weighted towards the back end of the year.

This is a really important slide to look at where we might go in the future. I have increasing confidence that this group has the ability to really accelerate scale in the next few years. We have lots now of organic initiatives. All the things we've put in place last year and the year before are really starting to show fantastic green shoots in the market. So the question I often ask myself is what do you have to believe? What do you have to believe as an investor? To see Zinc accelerate towards GBP 50 million turnover plus. Could we double our Middle East revenues from an average of GBP 5 million in the last 4 years to GBP 10 million? Well, we're on track for GBP 8 million in the Middle East this year. I don't think you have to believe in fairy tales to imagine a company going from GBP 5 million of turnover in the Middle East to GBP 10 million if it's on track for GBP 8 million this year. Will our entertainment ventures deliver a big hit for us in the next few years? Well, we launched it 6 months ago. It has GBP 18 million of pipeline opportunity in front of it. Could it land a GBP 5 million commission from the GBP 18 million or a GBP 10 million commission from the GBP 18 million? Could it land all of it? It could. So take a midrange of that opportunity and that feels like it's in great place. Could our IP revenues increase by 1/3 from GBP 2 million to GBP 3 million? Absolutely, they can. They could do that this year. But imagine if The Inner Circle becomes a really good hit on the BBC and gets returned and then gets picked up around the world in other English speaking territories. It could generate sizable revenues at very high margins in the next 2 to 3 years. So any one of these initiatives could deliver this sort of accelerated growth or all 3 could. And we've got other labels, I haven't put on here, that could also accelerate rapidly in the years ahead. So you don't have to believe in crazy ambition to see how Zinc could add a further GBP 10 million to turnover in the next few years. This would translate to EBITDA and might see our EBITDA pushing up to GBP 4 million and our PBT to nearly GBP 3 million. Remember, Zinc has doubled in size in the last 3 years and could grow fast again if these organic investments come through. And our long-term ambition is to be GBP 100 million turnover group and this will require further organic growth and some acquisitions along the way. But the organic horizon looks really good. So it feels like a good time to join the Zinc story. Despite the AIM challenges, we've had a very strong start to the year. We are ahead of the same point we were this time last year. We've improved that revenue quality with 95% of business now coming from repeat customers that feels very, very good and all those customers are happy and getting good products. Our profit margins are improving at EBITDA and the PBT level as we exceed those cost savings and drive improvements across the group as we look for revenue growth, organic investments; all have the potential to accelerate. And we've got this strong platform of excellence that's supporting all our businesses in all the right areas both from creative perspectives, cultural perspectives and commercial perspectives. So we are in very good shape. Thank you.

Thank you for the questions that have been submitted so far. We've had a significant number of those both pre-submitted and live. And just a reminder, if you like to ask a question, please do type it in, in the Q&A box which is situated on the right hand side of your screen. We're going to now move to the questions. And first one is how big is the opportunity to win more international work, particularly from U.S. or streaming platforms?

I'll happily take this one. It's the biggest market, the biggest buying market, the U.S. particularly. We've said here we've doubled our international business. I think it's enormous. The critical thing with Zinc to remember is it has a very small market share. It's impossible to measure the market share of what we're doing in the U.S. But in the U.K., we're only 2% of the available market share. So we'll be a fraction of that in the U.S. So the headroom is significant. We don't yet have permanent base in the U.S., we don't have people out there pitching and winning, but we will as we expand and the opportunity is enormous. Absolutely enormous for us to do that as the streamers require more and more content to differentiate their product and drive their consumers. And fundamentally as an investor, you have to ask the question do you believe that consumers are choosing their platforms because of the content on there, which I think everybody does believe? And therefore, the power is in the producer's hand to come up with great ideas and sell those to those streamers and global broadcasters.

Related to that, can you tell us more about the potential to exploit IP internationally?

IP exploitation internationally happens typically off the back of a big show in an existing territory. So the best case study would be The Inner Circle. It's a new quiz format for BBC One. It's both daytime and prime time Saturday nights. And when a company -- and Zinc owns the format and the IP and the IP is the intellectual property so we can sell the program to other international broadcasters. If it's a hit on BBC One; Canadian broadcasters, American broadcasters, South African, Australian; they'll all want to take a look at it. They might buy that program from us and pay us a fee or they might buy the format and make a local version themselves because the presenter doesn't work in their country or the questions aren't right or they want to localize it or they might ask us to do it in their country. So there's a lot of opportunity when you have an idea as an independent production company and you own the program rights and the format to take that internationally. And when you sell those, if you just sell the program, there's very limited costs. So that is very high margin revenue and will make an enormous difference to a company like Zinc that because its heritage has been in specialist factual one-offs like dispatches and panoramas, that's why it's always struggled to find a way through to making really exciting profits. But now we're in these new territories, it's a matter of time before that kind of income starts to come through.

And are you actively considering acquisitions to complement your organic growth plans?

We are. We've got a very good pipeline of acquisitions, some of which we could do like we did with Raw Cut for no cash and all share deals, some of which we've got cash to do and we might, others would be completely transformational. But our focus is on organic growth. And I'm really keen that people often ask that question because they're trying to hear is this company about to go to market for asking for money? It's not. We can do what we need to do. So if you believe that this growth journey is something that is going to happen, which I do over the next 3 years and we're about to have another growth spurt, then now is the time to join when you see the value of the company.

Now GBP 27 million of revenue already booked for full year '25, which is up from the last time -- from this time last year is very impressive. How does this forward visibility compare to prior years? And what gives you confidence the remainder of the year will be even stronger?

Yes, I'll take that. So I think it's easiest to look at it on a kind of proportional basis. So in order to get to our target of GBP 41 million, it means that there's GBP 27 million booked, we're about 2/3 of the way there, 66% booked. In prior years at the same point, we've been around 70%. So we're in and around the same ballpark. And this year we've also got the likes of Raw Cut being part of the group, but also some more mature TV businesses such as Atomic, which was launched 2 years ago and therefore, the ability to be able to win more business going through this year and into the back half is higher than it's ever been. And as we said before, typically we're a business that is weighted towards the back half of the year certainly in terms of revenue recognition and The Edge is a key component. The Edge is 37% of our revenues and they typically book on a much shorter time scale and therefore, wouldn't be expected to have a great deal of visibility at this stage and included within that GBP 27 million.

Now the share price has been relatively flat despite operational improvements. What steps are you taking to improve investor awareness and long-term shareholder value?

Well, it's frustrating that the share price is flat given the company's performance is clearly improving considerably and there is a massive disconnect between the performance of the company and the performance of the share price and that's driven by the fact that we're at the small end of AIM. AIM has been very, very difficult for everybody and we have a highly illiquid shareholder base. They're all in it for the long term. We have fantastically supportive large institutional shareholders making up over 75% of our register. So all of our institutional investors say to management focus on building the business, focus on running the company, just grow your profit base, grow your revenue and invest for the long term. And eventually that dislocation will reconnect between performance of the company and valuation of the company. We have to tell our story as best we can and we've invested and improved that. So I urge investors to sign up to newsletters, come to events like this, go to our webinars, follow us on the website. The website has been completely refreshed, all the information you need is there. Come along to any of our CMD days or open days and find out for yourself more about the company. That's ultimately as much as we can do while the market is doing what it's doing.

95% of revenue came from existing customers. Do you see this as a strength or a risk?

It is a strength without question. If it was lower, 60%, 50%; the question would be where is all the risk and what are you going to do about it? So absolutely it's a strength. The critical thing with that is to understand that these clients aren't just buying the same thing and therefore, might get bored. They're coming back to Zinc for some of the same thing, a returning series, but also for more product as they need it. So it's a constantly refreshing cycle of product, but from the same clients. So it's an absolute strength when you're working with all of the U.K. PSBs, all of the big global streamers and these big multinational brands who've been working with this company for 10, 15 years, but they're not buying the same thing. They're buying from the same company because of the trust and the quality that we deliver for them.

And what steps are you taking to grow your base of new clients?

Well, we've launched 8 businesses or so in the last few years and we continue to look at those opportunities. There are lots of new clients emerging. There are new genres we could move into. We don't work with Apple at the moment because Apple TV is typically in drama. So we may well start to move into places like that in the future. But we're expanding within existing clients, trying to find new commissioners, trying to find new markets even in places like The Edge. When you're working with Deloitte or EY or PwC, you're often opening up -- we're often opening up new conversations within those markets and it's the same in the Middle East. We have a small number of clients in the Middle East making up that GBP 5 million. If we add another 3 or 4 to that and there are plenty, they could all spend GBP 0.5 million, GBP 1 million each and suddenly those numbers move quite significantly.

And is there a path to paying dividends eventually or will everything be reinvested?

Well, certainly for the foreseeable, we'd expect that any potential dividends would be reinvested as we scale and as we get to the place where we need to be. But obviously then looking out further, there is that potential. But certainly for the foreseeable, it's about reinvesting the money that we have.

And can you provide more detail about the overall GBP 0.5 million saving target for FY '25?

Sorry, just say that again?

Can you provide more details about the overall GBP 0.5 million saving target for full year '25?

Yes. And so we've said that we absolutely expect to achieve that for FY '25 and we have got visibility of doing more than GBP 0.5 million of savings and that comes from 2 areas in particular. One is our London accommodation office bases where we have rationalized our space. And as we did an acquisition of The Edge a couple of years ago, that enabled us to move into 1 building and save a considerable sum of money. We have also then restructured some parts of our business and lost head count and that has delivered savings as well.

What are your priorities when it comes to capital allocation?

I think for capital allocation, I would point investors back to those 3 areas of organic growth. They could all really fly in the next few years. So Middle East being one of them, let's double that. So to do that, we need to invest in more people. So in 1 of our territories there, we're hiring more business development people. That comes with more business so we're going to need to expand our footprint and expand the office production center. In another territory in the Middle East, we don't yet have permanent people in country. We fly in and out. We will have permanent people in country and more of them this year. So we're going to be investing there. That's why there's confidence that we can double our business in the Middle East. In entertainment, we've made a modest investment. It's hundreds of thousands of pounds of investment at the moment. As we start to win business, then we'll want to add -- again it's a people business, we'll want to add more people in there. There might be some technology and some kit that we need to add in order to make better margins on that kind of program. And then we've got this IP and formats and again how we sell those. We currently subcontract that out to BBC Studios and they're the biggest sales house in the world so representing U.K. content. So there are things we can do with our capital, particularly around those areas. But events is another space we're moving into and we won a significant multimillion pound production to film events. That would be an area we could move into. AI isn't going to replace events. So it's a good area of growth.

On the market environment, is there a risk that high dependence from U.K. broadcasters could be a bottleneck for future growth?

The U.K. broadcasters and the BBC in particular, but Channel 4 too, are half the entire spend of U.K. original commissions. And the U.K. original commissions just in factual is just under GBP 1 billion a year. So there's plenty to go for when you have a market share of 2%. So I don't see a bottleneck. The bottleneck, if anything, is our side where it would be about how much resource we choose to put against that market opportunity. The market itself and the fact that we're already doing business with all of them isn't the bottleneck. It's our ability to scale fast and deliver continued profit growth and that's always the challenge we have. How many people do we have, how much resource do we put against something and what's the payback time? And I know that investors have asked when is the payback going to come through. You saw a slide that shows over the last 3 or 4 years how we're really now starting to push growth through to the bottom line. But we're not running the company for absolute profit at the moment. We're running it for long-term higher profit growth. So we've got costs that are a drag on our PBT at the moment, but they'll unwind and that will come through in the years ahead.

And what do you see as the key risks for FY '25?

I'll speak to a few. Maybe you can pick up somewhere if you want. But the main risks are macro risks, risks that sit well outside of Zinc. The war in the Middle East has affected our business in the Middle East unsurprisingly. That is a big issue. The change to national insurance contributions from the government's budget in October was terrible, completely messes up small businesses. So these are the sorts of things that come your way and what we have to do is stick to our plan, be clear on how we can navigate external factors which we're doing and just steadily and continually reinvest and grow the business. So in terms of risks inside Zinc, I mean we manage them. They're about people, but we're a good people company. So most of the risks, the significant ones would be external factors as we've seen before.

I'd just add that there are cost pressures around production and we have said that gross margins are the highest they've ever been in FY '24. Coming to FY '25, we have taken on some business such as The Inner Circle quiz that is at lower margins. This will mean that there are challenges this year from that point of view. But as we said, it's about that medium-term growth and the medium-term trajectory around that, that allows us to get into these new areas and it means also that we can drive more IP, which is higher margin; but selling something like the quiz into other territories, the format, selling the program; that is likely to come through at the back end of this year or more likely next year as opposed to this year.

Could you provide more detail on the synergies or operational efficiencies expected from the Raw Cut acquisition?

There's a number of areas that we are looking at. As Mark has talked about, there is the group platform where we have central services, central expertise and around post production, around finance, HR, marketing. And that provides both cost synergies, but also improved services, if you like, to Raw Cut. There's a benefit from a business development and a creative point of view. which we expect and hope to mean that revenue grows over time, but also on that cost side where things can be done more efficiently. There are bigger economies of scale as a result of Raw Cut coming into the group around production management, around editing, around having cameras, kit and post production facilities.

And what is the average size of a contract or commission you're now signing?

Well, average size, I mean I don't know what average size would be. I can tell you what television would be. It's irrelevant really what an average size might be across the group. Typically Edge corporate businesses, there's 6-figure commissions. In television, they tend to be 7-figure commissions. Some can be multiples of those. So as I said, we've done 9 GBP 1 million commissions in the last 8 months. The other way of looking at it is the price per episode. Factual, premium factual, TV has a price point per episode of between GBP 150,000 and GBP 350,000 per episode. But on big global streamers, it can be GBP 1 million an episode. In drama, it can be GBP 5 million an episode. Daytime TV could be GBP 30,000 an episode for half an hour or cheaper. So there's a whole range of tariffs. In public service broadcasters, they are publicly available so you can find them on the BBC's website. And so clearly when we're operating at one end of the market if it's a low tariff program where it's tens of thousands, we want lots of episodes and that would be where we'd ask for hundreds of episodes of that show. If it's a big global streamer and they're paying GBP 1 million an episode, you might get 6, 8, 10 episodes for a commission. And if it's an entertainment, again the tariffs are slightly different. Entertainment format might be a total of GBP 5 million or GBP 10 million for a run of 10 or so. So there is no real average, it's about the product at the time.

And how much of an opportunity is your regional footprint in the U.K. as a platform for capturing PSB commissioning spend?

Good question. It's a big part of our offering. The fact that we are now with the addition of Raw Cut in all the English nations, including Wales, Northern Ireland, Scotland, England with substantive production basis, you have to qualify by actually having people and senior people and the amount of spend that you spend in each nation is part of the criteria for qualifying. And I think it was a part of the way that we were able to win that BBC tender for the quiz, which ultimately came down to 2 independent production companies. Fundamentally, it was about the idea. Then it was about the commercial reality of the price point, but it was also about making it in Glasgow. And with a substantive production base that's been there for 2 decades or more, that helped to win the pitch for Zinc. And it's the same when we come out of Northern Ireland with BBC stuff like [indiscernible] for BBC1. And now we have Wales, we have Cardiff in the mix following the acquisition of Raw Cut. So we are one of the few indies that genuinely has a permanent base in all the nations.

Does the growing proportion of large scale commissions increase the group's risk profile and does it impact short-term gross margin?

It can impact short-term gross margin, but not every time. We've got very good margins on some of our global streaming contracts, which are significant millions of pounds. Does it add risk that 1 of those might not return? Yes. Does it add opportunity that 3 more might return? Yes. More opportunity than risk, more streamers, growing client base, bigger pipeline. Where is the balance of risk and opportunity? Weighted towards opportunity would be my view.

I think it can make the revenue a bit lumpier and we saw last year that in the first half of the year, we reported our results and they were lower than in previous years. But in the second half, more than made up for that and actually in the autumn, we had a large volume of multimillion pound commissions that have been a long time in the pipeline and in the making. So sometimes you have to be a little bit patient for them to come through. But I think the key thing is that as the market has shifted to kind of fewer, bigger, better commissions; we are in a prime position to take advantage of that. A lot of the market has now moved to the kind of the big showy kind of series and we are able to deliver those. And sometimes you need to be able to win a big tender with the BBC and show that you've got the infrastructure for that or it might be for a streamer, might need to be able to do that in 4K, but also it might be a high volume, low cost series like our Bargain Loving Brits series for Channel 5. But typically, they are GBP 1 million-plus commissions. There are more of them and the smaller indies are finding it increasingly difficult to win them because they don't have the credibility, don't have the infrastructure that we do.

With streamers and broadcasters under budget pressure, what are you doing to ensure that your content stays in demand and competitively priced?

I would point to a case study of Rob and Rylan's Grand Tour, which Series 1 was last year. And the BBC has been under enormous pressure, but this is a case study to answer the question about everybody being under pressure with budgets. When you have a good idea and it rates, buyers will come back and buy it. And I just find that so heartening that the show that hadn't finished its first run was recommissioned very quickly by a broadcaster that's under budget pressure because it worked. So our job is to make sure that we deliver high quality programs that deliver audiences and if we do that with a tiny market share that we have even in a market that's flat at best in TV, we can grow well. And that is our story and that's our objective. So it's making sure that we just deliver a good product. They will find the budget if it works even in tough times.

And with the launch of new labels like Electric Violet and Atomic Television, what kind of return on investment are you expecting from these ventures and how soon?

So these take a factual business like Atomic, which we launched at the beginning of 2023. We typically invest a few hundred thousand pounds in 2 or 3 people in total plus overheads and running costs and development. So the investment might be GBP 300,000 to GBP 400,000 in the first year and for that we will see no return in that first year. But in factual unscripted TV, you would expect to start seeing a return in that second year and it should cover its costs. It should win enough business, GBP 1 million, GBP 1.5 million at 30%-odd margin to cover its costs in its first full year or its second year if it was launched partway through a year and then it starts to pay its way thereafter. So payback 12 to 18 months for it to get through the system. We've had a lot of those in play, which is why there's been this drag on profits and why we're seeing profit now at PBT level because the ones we've done in the last few years have unwound and started to push through. Entertainment has a longer lead time. We make similar sorts of investments in those sorts of labels. But in all honesty, you're trying to win shows that come up rarely; but when they come up, they come up in big volume and big tariffs. So maybe second year, third year, you'd start to hope that you could get something away. And if after 3 years, there's really no line of sight, of course you'd have to review that. So it's GBP 200,000, GBP 300,000, GBP 400,000 investments on any of these labeled initiatives with an 18-month to 2.5-year payback. And that's why changes like national insurance are really unhelpful because that's the sort of pot that we would typically be investing each year that we've now got to find alongside an increase in national insurance contributions of about the same amount.

Now revenue fell by 12%. Was this expected? Is this a concern?

I think as we've said, it was expected with the changing of the portfolio. We bought Raw Cut towards the end of the year. So actually on a pro forma basis with 12 months of Raw Cut, revenues would be flat on a like-for-like basis. And whilst revenues did fall, actually profit at all levels increased. And I think that it just shows the opportunity as we go forward that even on a reduced revenue, we can still deliver profits. That speaks to the opportunity going forward to increase those profits.

Now cash increased to GBP 6.3 million, but has since dropped to GBP 3.9 million by April 2025. Can you explain why and whether investors should expect further fluctuations?

Yes. I mean our cash does fluctuate and the reason for it falling again was expected. A lot of these big commissions that we won in the autumn, we negotiated good payment terms. We managed our working capital very well and we had advance funding for those productions and we have then seen an unwinding of that coming into this year.

Now you highlight Zinc's strong reputation and industry trust. How does this competitive edge translate into higher margins, repeat commissions or winning new work?

It definitely translates into the second 2 of those; winning new work, repeat commissions. It's a relational industry built on people and ideas. So we work hard at making sure we've got the right people, we have the right relationships at the right buyers -- with the right buyers and who are great ideators and who have teams of people who can help them with their creative firepower. In terms of driving margins, that's much more about the platform and the execution of how we do it than the relational side. That's about having good systems, good technology, good production management and being commercially confident to know how to make a margin in TV. And as we've demonstrated, our margins are up 11 percentage points at gross margin level over 2 years. So they're slightly separate issues. Repeat customers are up because of the quality of relationships. And as the commissioning market changes and buyers move around so we have to adapt our team to be able to meet that market demand. But the evidence and the data points are client retention, client spend, gross margins.

Now with the larger commissions, how is the revenue recognized? Are there stage payments? Is it weighted upfront?

Revenue recognized on larger productions is exactly the same on smaller productions and it's based on activity. It's based on production activity and that is broadly milestone related. The milestones directly relate to invoicing and cash payments, but the revenue recognition is based on the activity, the amount of cost that goes through from a production point of view and revenue is recognized on that basis.

That's all the questions we have at the moment. So Mark, maybe if I could pass back to you for any closing remarks.

I'm just going to pick up on couple of things. The questions have led us towards the risk opportunity. Television is a lumpy business. It doesn't come in neat gentle curves of accelerated graphs that constantly do this even though ours have done that. You will find when you invest in TV that there are big moments where things go forward and then periods where things are flat for a while or drop a bit as productions move across years, across reporting periods. That is television, that is production in every sector. It's nothing to be concerned by. Keep your eye on the long-term growth trajectory and take a look at some of those slides where we've tried to show over 3 or 4 years the journey. But ask yourself is this the time to join Zinc's story? And I would take you back as an investor to the start of this year, which is the strongest we've had, ahead of where we were at the same point last year, 95% of revenue last year came from repeat businesses. Profit and EBITDA up, highest level it's been 14 years; profit before tax for the first time in over a decade; good strong balance sheet; cash to reinvest and organic investments already in the market that could accelerate growth in the next few years. I'm feeling confident about where we go in the phase ahead.

Super. Well, I'd like to thank both Mark and Will for the presentation today. Thank you for all the questions. If you could please take a moment to complete a short survey following the event. And please be aware that the recording of this presentation is made available on the Engage Investor website following the event. Thanks very much for your time today.