Zinc Media Group plc (ZIN) Earnings Call Transcript

Good morning, everyone. Thank you for joining us for this short presentation on our interim results. So the first period of the year, January to the end of June. On your screens is a picture from our first cinema release. This is a documentary feature film in over 1,000 cinemas around the world in over 40 countries. And it's telling the story of WHAM! and how they did the first ever tour to China. It's called WHAM! 10 days in China. If you haven't seen it, you've probably bumped into it somewhere in your reading over the last month or so. We'll return to that in a minute, but let's give you a summary of the first half of the year. We've done very well in our strategic priority growth areas. These are areas we've identified that can accelerate our growth over the next 2 or 3 years and we are in our first year of those, and they're doing very well indeed. They're ahead of actually the targets that we set internally, which I'll explain in a moment. Revenue-wise, we've got line of sight now of GBP 38 million for the year, of which GBP 32 million is secured and GBP 6 million is in the process of contracting. Gross margins are doing very well. We'll explain why shortly. We have had some big movements in the first half of the year between H1 and H2, GBP 8 million, quite a lot of that in the Middle East, which was initially on our slate to deliver in the first half of the year, and we book our revenue on activity. That activity has shifted to the second half of the year, so the revenue has shifted with it. We've done well on our cost savings plan as part of our One Zinc initiative and implemented these, they're not just identified implemented, and our programs are rating well and getting great critical acclaim. That's the summary. Just to start with, let's look at the numbers with Laura.

So I will take you through our half year key financials here. We have booked GBP 13.2 million of revenue in this half of the year. That's down from this time last year by [ GBP 9.7 million ] but it's actually at the same level as the prior year in 2024. As Mark said, GBP 8 million of revenue has moved from H1 into H2 this year, and I'll come on to the seasonality of our revenue more in a second. Gross margins are up to 44%. We said in prior years that actually some of the investments that we've made in previous years would start to come through in our gross margin, that's what we're seeing. And it's also pleasing that we've managed to sustain our gross margin when there has been cost pressure, so managing our cost of sales in our productions. Our gross cash balance was [ GBP 2.8 million ] to the period end, and our EBITDA has moved down to an adjusted EBITDA loss of GBP 0.9 million. This is in direct correlation to a high reduction in revenue, again, at a very similar level to 2024. And finally, we'll talk about the pipeline more in due course, but we have GBP 38 million of booked or highly advanced revenue at this point of the year. So that's revenue that we expect to book in this financial year. So seasonality I've got two slides on this just to show you briefly what this looks like for us normally. What you can see from this slide is that 2025 was a bit of an outlier for us. In 2025, we booked 55% of our revenue in the half year and 45% in the second half of the year. What we're seeing this year in '26 is actually the seasonality is moving back to what we would think of as more of a normal pattern for Zinc. So 35% in H1 and the balance in H2. And you can see there's actually in absolute numbers now here. So we just brought up '24 and '26 to compare the two because they are very similar in their patterns. In '24, we booked GBP 13.3 million of revenue at this point of the year and in '26, we book GBP 13.2 million, and again, very similar gross profits and very similar gross margins.

So some of the creative and strategic operational achievements in the first half of the year. Looking at our product, which ultimately drives all of our numbers. It's been a very impressive slate actually in the first half of the year. You hopefully have seen some of these. I'm just going to pick out perhaps 3 or 4 because they relate to our strategic plan. Bottom left hand corner is a show called Race Against the Tide. I'm highlighting this because it is a new entertainment format for us. It is part of one of those strategic growth pillars, which is to diversify our product offering into areas which are lucrative areas where there's good returning, sticky revenue and where we can make high-margin IP intellectual property-related turnover. Race Against the Tide is one of these. It is a new entertainment format that is airing on the BBC at the moment. And we have high hopes for it to return, but it also plays to why this year is something of a transition year. This -- the revenue for this was actually all booked in 2025. This is a program that takes contestants, puts them on a beach and they have to risk against the tide to make sand sculptures before the tide comes in and ruins their work. This was shot in May last year, 2025, all the revenue going with that activity and the program was delivered originally for transmission last year. Transmission changed to this year, to August. So you can see it just about now, its on the iPlayer. The consequence of that is that we haven't had a second season recommissioned this year because they weren't recommissioned their second season until the first one has performed. It's performed very well in the ratings, but it is a summer-based show. So the first available slot to refilm this will be in next year in spring. That is part of the challenge of half year and full year results in a production company. We are not fully in control of when the revenue is booked in our accounts. So it's a good illustration of why you should look at Zinc over a period of multiple years to get a sense of the trajectory. Next one I want to pull out is 9/11, The Unseen Tapes. That went out last week, to mark the 25th anniversary of 9/11. It's a good illustration of our premium documentaries and it is a returning franchise. We're talking about other unseen type documentaries. Third one to pull out is Police Interceptors. This is a very big returning series for us that also drives that strategic pillar of IP-related distribution revenues. It sells all around the world. It's in its 17th or 18th season. We're having conversations about next year. And this, we both make our money on the production, but also on the sale of that show around the world, just the last one to pull out is WHAM!. It is our first cinema release. It has absolutely put us on the map for being able to do these big, large music biopics. We've done quite a lot in music over the years. This one has elevated our story in music, and we're in conversations about which other big global artists could we revisit and do a music biopic for next year. So they all play to our long-term strategic plan, and there's plenty of others that you might want to look at on the website too. Awards are an important part of our business model because they ultimately make clients feel good they credibly illustrate that we deliver on our promise of being the best-in-class as a production company. And of course, they give you a reason to pick up the phone, speak to the client and ask for more business, as our ratings and critical acclaim. They're all genuinely verifiable ways of delivering on the promise that the Zinc is a global production company at scale and with high reputation. Other things we've done in the first half, all tie into our growth plan. The growth pillars are genre expansion, geographical expansion and IP exploitation. In the first half of the year, we launched our first AI production label, and it's also a label that wraps up all new technologies, which are driving content creation. This is an in-house team able to support all of our businesses, and we are increasingly being asked to produce AI-specific content, especially for brands. Geographical expansion is part of our mix. We agreed terms to acquire a business that's complementary to our existing business in Qatar, in Doha. We've been in that country, in that city for 15 years, producing production content. We've increasingly moved into entertainment production content. And you may remember, we did a big production in the Middle East last year. So this is a very neat strategic acquisition. It's an all-share deal. We have announced it. It's available to read via an RNS on our website. It should complete before the end of the year. And then IP exploitation, which wraps up digital as well. We are selling our content better. We are monetizing our owned property better, and we're distributing it to more countries around the world. and it's very high-margin revenue. So good progress on all three of those. And we launched the One Zinc initiative. This is where we've brought all of our 13 companies together internally to operate as a seamless individual company. So we've removed silos. We've removed complicated and duplicated workflow, and it has enabled us to remove cost we've implemented, a GBP 1 million of savings that will be fully realized next year. So to the rest of this year and next, Laura.

So this is our pipeline. This is how we measure and track how we are doing over the course of the year. So I'll just walk you through it from left to right. Last year, in 2025, we booked GBP 41.5 million of revenue in the full year. This year, we have contracted GBP 32 million of revenue that we expect to be booking in this financial year. And we are at a highly advanced stage, so nearly contracted on a further GBP 6 million revenue. Then we have further visibility of GBP 6 million, which is either advanced or what we call engaged discussion. So we have a pipeline range for this current financial year of GBP 38 million to GBP 44 million. Then for next year, because we also obviously look into next year in terms of how we are going to start the year, we have line of sight on GBP 9 million of revenue, which is either contracted or highly advanced and then a broader pipeline of GBP 39 million, which is at the advanced or engaged discussion stage. So that's a good point in time and a good metric for us to see how we're going to go into the next financial year as well.

Just picking up on that, bit of detail. There is the GBP 38 million, GBP 32 million and GBP 6 million, that Laura just talked about. One of the big things that is happening in the market at the moment is there's a lot of movement because of big macro geopolitical events. We were due to repeat the big event that we did last year in May this year. It's for an AI company. It's in the Middle East, and it was due to be repeated at a bigger scale this year. So it was in our forecast. That has moved because of the Iran-conflict to next year. And that fundamentally has been that GBP 7 million shift. There are a couple of other things. There is a band film, again, for a Middle Eastern company that we've been commissioned to do, but we can't do the activity on, so we can't book the revenue. Again, because of the Iran-war, so GBP 6 million of that GBP 7 million has moved because of the Iran-war and one has moved just through normal delays to delivery. That's a quite a significant shift there. But it's one commission that in effect, has moved out of this year. Next year looks solid as Laura says. Just to give you a flavor of these strategic growth pillars and why we do stand behind our long-term, medium-term effect forecast of getting this business to about GBP 50 million and GBP 5 million, GBP 50 million turnover, GBP 5 million EBITDA would be our midterm ambition. And that's going to come from these three areas that I've made the subject of this update for you. We want to go in effect, improve them from last year, they all contributed GBP 14.4 million. So we want to try and get them to about GBP 24.5 million by 2028. We set this out in April last year with a view to adding that GBP 10 million over 3 years, and we have achieved GBP 9 million in the first year. At the bottom is the breakdown of the three strategic pillars: geographic expansion, genre, product diversification and IP exploitation. You'll see there that our geographical expansion is what's particularly driven this year's very significant uplift. We have more than doubled the size of our businesses in the Middle East, and that's before this acquisition comes through. It is a growth market for us. And my gosh, if it's growing at that speed now, think what it will do when this conflict eventually resolves. So put it in another way, last year, we did GBP 41.5 million. You've seen that number a couple of times in this presentation. How do we get to GBP 50 million? We add this GBP 10 million, of which we have already done GBP 9 million in this year. So we are very confident that we'll get this company to a GBP 50 million and GBP 5 million position over the medium term because we can see these growth pillars delivering for us one year in. We show in the light purple, the potential upside opportunity. Of course, there is an alternative view of this, which is the GBP 41.5 million which is assumed as set, softens and it will soften and it has softened already this year. But the point of slide that shows the potential. Even if the GBP 41.5 million softens a bit, we have demonstrated by doing GBP 9 million of our target of GBP 10 million in the first year that we can make up that ground from these growth pillars over the next 2 or 3 years. Here is the illustration of the changing dynamic of our business. The left-hand side of your graph here, you see our revenue from 2024, which was broadly 60-40 split between Television and Production for brands and businesses. with a small amount of IP in the green. Last year, we made these areas a strategic priority. So we want to grow our business in new markets, IP, geographic expansion and genre expansion. And you can see this year how that green box has improved significantly. But what's also happened is the purple box has dropped. Everything else has stayed or grown. And that purple box is traditionally in our heritage heartland of U.K. television production. The U.K. television production market is soft at the moment. You see that in reports from all of our peer group. Because we've identified these strategic pillars last year, we've been able to have some degree of shielding against that U.K. softened market. And that will level out into next year and our strategic growth pillars will continue to grow and the evidence is there for all to see. So the shape of our business is definitely evolving in response to the market, and you can see that too on the right-hand side, which is our geographical breakdown. You can see back in 2024, we were predominantly a U.K. business with some rest of the world and a small proportion, 10% or 15% in the Middle East. Here we are this year, where our Middle East business will account for just under 40% and of our total income generation. And the U.K., going forward, we expect to be less than half the group. That's just the response to an economy that is struggling here but growing faster elsewhere. Which is why we, as a group, are more shielded and are proving to be more resilient to those that are absolutely based in U.K. and only based in Television. We are a content-making production company, content for screens. And you can see that we are increasingly moving into brand businesses, corporate production, AI production, direct-to-consumer production and still some Television Production. This is illustrative of why that strategy has worked for us against our peer group. This is a chart that tracks a number of our peer group, private and publicly owned, large and small, over a 3-year period because that is how we advise investors to assess a production company. Don't assess it on a half year, don't assess it on a sole year because revenue follows activity. And if activity moves so numbers can move with it. See it over a 3- to 4-year period. This is the 3 years us and our peer group. The reason we have outperformed is because we are a highly diversified group. So this is our conclusion, doing well this year, on site for GBP 38 million, good growth. In fact, I'm going to say, exceptional growth. We've achieved broadly our 3-year plan for growth from our new verticals in the first 12 months. Really good visibility of next year, supportive shareholder base and an increasingly diversified product by genre and by geography and by price. So thank you for your time. Very happy to take some questions.

[Operator Instructions] Our first question is you've had success with the inner circle and are moving further into entertainment formats. Is entertainment likely to become one of the biggest growth areas for Zinc over the next few years?

It is our ambition to make it one of the best ones. It certainly could be the most lucrative in terms of its value to us. It doesn't necessarily have to be the biggest by turnover because in entertainment, you typically also have the intellectual property, and that's the intellectual property that sells around the world. So yes, it's working for us. We're getting there. It is a hard market to break into, because with the Inner Circle, we've managed to get the first ever quiz out of Zinc, and it's a Saturday Night Primetime BBC show, with Race Against the Tide, similarly we have a good slate of things, but the number of opportunities are quite few and far between. So we pick and choose carefully where we place our investment in there. So yes, we intend to be part of it. It may not be on revenue terms, but it should be on profitability terms.

Our next question is, what savings have you achieved this year? And are there any more to come?

So we have so far this year, implemented savings, as Mark mentioned earlier. And we've identified for the rest of the year of [indiscernible] which we are expecting to implement in the next quarter. So that's [ 1.2 ] for the full year of savings implemented and we'll see the full year benefit in 2027. We talked a little bit about our One Zinc initiative. And in a company like ours, we are always looking at ways that we can be more efficient, whether it's through processes or through AI or through -- as we bring in acquisitions through synergies. So, at the moment, we have achieved what we set out to achieve, which is important. We will see that flow into our bottom operating cost next year, and then we will continue to look at other opportunities.

Our next question is, I've heard that Channel 4 has announced it's reducing its headcount by 1/3. What does this mean for the TV market and will this negatively impact on Zinc?

It's illustrative of the challenges of the U.K. TV market. I mean that announcement by Channel 4 isn't them keeping the business in shape and pruning it, it's them fundamentally reshaping the business. in response to the soft market for U.K. original TV commissioning. That is just a fact, and it's the same with other companies that are very dependent on U.K. TV commissioning. The impact on Zinc actually will be relatively -- I mean it could be 0 in all honesty. We do some work for Channel 4, but it's a very small proportion of our work. We have a small market share with Channel 4. So actually, we can still grow our market share from their new structure and their new commissioning rounds. They've done this because they want to put more money into the market. So actually, there is arguably an opportunity for us, given we have a very small market share with that channel to be able to win some commissions if they're going to be reinvesting in the production market. So I think from Zinc's point of view, really, we'll wait and see, but I don't see any downside to Zinc in the short term.

Our next question is, please, can you explain how you are saying you're growing in the Middle East, but also you are seeing projects delayed or postponed?

Fair question. So there's a nuance in here. We have had businesses, and we have staff permanently in Qatar and permanently in Saudi. And we've been in those countries doing business for 15 years with a local presence. Business is pretty normal in those countries for the citizens of those countries and the businesses in those countries. It's not as we see necessarily what we've fed here. I'm out there regularly. Our teams are there regularly with permanent people out there. Business is being conducted, life is normal. So where we have those businesses in country, they're trading normally, they supply typically within the country from within the country. And that's the same actually as we've looked at WMP, which we don't own yet, but similarly, they provide events to the government and the health sector and the pharma sector and in Qatar, our Edge business is doing fine in Qatar. So that is true. Where there are international opportunities that we typically produce as a global production company, and those opportunities happen in the Middle East, they are being delayed. So the illustration we have is this big event. That is an international event. It's hosted by a Middle Eastern country. It's attended by the world, and it's produced by a global production company. They have postponed it because there is too much risk that a big global event can't happen and people can't travel and insurance can't be had. So those are things that are at risk at the moment, not the actual business as much. There are some delays, but not as the business as much in country.

Next, we have what do your current shareholders say about the performance of the group?