TIDMSTVG
RNS Number : 1296F
STV Group PLC
06 July 2023
STRICTLY PRIVATE & CONFIDENTIAL
STV Group plc
Press Release 0700 hours, 6 July 2023
Acquisition of Greenbird Media for initial cash consideration of
GBP21.4 million
Accelerates STV's strategy to grow its production business,
further diversifying its earnings from outside linear broadcasting
and driving long-term shareholder value
Acquisition highlights:
-- STV acquires 100% of major UK unscripted production network
Greenbird Media through existing bank facilities
-- Greenbird's portfolio - which includes majority stakes in
leading unscripted companies Crackit Productions and Tuesday's
Child and minority positions in 13 other producers - not only
brings immediate scale and earnings enhancement but also the
potential for future growth through consolidation of minorities
-- Significantly boosts STV Studios returning series from 12 to
almost 40, including international series
-- Transaction is margin accretive for STV Studios and
materially earnings enhancing for STV Group from day 1, as well as
offering scope for future revenue and cost synergies
-- Takes STV beyond its diversification target of 50% of
earnings from outside traditional linear broadcasting by end 2023,
with estimated out-turn of at least 60%, while keeping the group
well within its financial covenants.
STV Group plc ("Company" or "STV") today announces it has
acquired, through its wholly-owned subsidiary STV Studios Limited,
100% of the issued share capital of unscripted television
production network Greenbird Media Limited ("Greenbird") for a
total cash consideration of approximately GBP24 million, of which
GBP21.4 million was paid on completion.
As well as helping its network of investee production companies
to accelerate their growth plans, Greenbird is also a service
provider, offering a bespoke back-office solution to enable
creatives to focus on pipeline development and programme
production.
Strategic benefits:
Accelerates the growth of STV Studios by more than trebling the
number of returning series, strengthening STV's existing rights
catalogue and future creative pipeline
-- Founded by respected television executives Jamie Munro and
Stuart Mullin in 2012, Greenbird has built the largest
independently-owned network of high quality producers in the UK,
with an archive of 2,000+ hours of content, and will this year
produce over 350 hours of new programming across 25 returning
series.
-- Greenbird network companies are behind such hit shows such as
LEGO Masters (C4, Fox in the US), The Hit List (BBC One), Animal
Casualty 24/7 (C5), The Misadventures of Romesh Ranganathan (BBC
Two), Late Night Lycett (C4) and Mortimer & Whitehouse: Gone
Fishing (BBC Two).
-- Greenbird directly owns majority stakes in two of the UK's
leading unscripted production companies, Crackit Productions (75%)
and Tuesday's Child (51%), founded and run by award-winning
creative leaders Elaine Hackett (ex Endemol UK board member
overseeing Big Brother) and Karen Smith (ex MD of Shine TV and
co-creator of Strictly Come Dancing) respectively. Tuesday's Child
in turn owns a majority stake in Interstellar (51%). Greenbird also
holds minority positions in a further 12 production companies,
including Rumpus Media (40%), Glasgow-based Hello Halo (30%) and
Flicker Productions (40%), offering significant scope for future
consolidated growth.
Delivers scale benefits for STV Studios as one of the largest UK
production groups and further diversifies STV Group's earnings
-- The acquisition will make STV Studios one of the largest
production groups in the UK, is a major step towards our stated
objective of becoming the UK's No.1 nations & regions producer,
and accelerates the STV Group's overall diversification
strategy.
-- We now expect to comfortably exceed our diversification
target that at least 50% of STV's operating profit should come from
outside linear broadcasting by the end of FY23, transforming STV
into a more balanced, resilient media company offering both linear
and digital reach, and the creation and ownership of valuable IP in
the growing global content market.
Provides significant opportunities for further growth
-- The acquisition will materially enhance the future growth
prospects of STV Studios creatively, commercially, and
internationally.
-- STV Studios production labels will more than double from 9 to
24 forming an unrivalled network of senior creative leaders and a
significantly expanded forward pipeline of new programme ideas, a
number of which have already been greenlit for 2024. The enhanced
scale of the group will allow STV Studios to realise more value
from a combined programme catalogue of 5,000+ hours in the
distribution and secondary sales markets.
-- The enlarged STV Studios will also pursue an international
growth strategy to generate maximum value from its shows outside
the UK and build on the recent success of LEGO Masters (20
territories including UK and US) and Bridge of Lies (16 territories
including UK & Spain).
-- The group will have expanded bases in Glasgow and London, as
well as offices in Belfast, Cardiff, Manchester and Brighton,
strengthening our ability to take advantage of the continuing
strong growth of production in the nations and regions.
-- STV Studios is also one of the few multi-genre production
groups of scale in the UK with the capability to produce high
quality programming across scripted and unscripted, with our drama
companies delivering three high-profile new series in 2023: the
acclaimed Blue Lights for BBC One, series 2 of prison drama Screw
for C4, and Peter Capaldi/Cush Jumbo thriller Criminal Record for
Apple TV+.
Further strengthens STV Group's management team
-- Following the acquisition, Greenbird founders Jamie Munro and
Stuart Mullin will join the board of STV Studios in the roles of
Chief Commercial Officer and Finance & Integration Director
respectively, working alongside Chief Operating Officer Paul
Sheehan under the leadership of Studios Managing Director David
Mortimer, with a brief to drive the expansion of STV Studios both
in the UK and internationally.
-- The founders and creative leaders of the key Greenbird
production companies will remain with their businesses under
long-term incentive arrangements, forming an unrivalled network of
creative leaders across STV Studios.
Key financials:
STV has acquired 100% of the issued share capital of Greenbird
from Keshet International (60% shareholder) and Greenbird's
founders, Jamie Munro, Stuart Mullin and Karen Smith (the
"Founders"), for a total cash consideration of approximately GBP24
million.
An initial cash payment of GBP21.4 million includes GBP11.5
million for the repayment of loan notes to Keshet at completion, a
cash adjustment of GBP0.3 million, and the balance payable to the
existing shareholders, equivalent to 86% of the equity, including
Keshet's entire equity interest. Deferred consideration in relation
to the balance of 14% of the equity, currently estimated to be
GBP1.6 million, is payable to the Founders based on agreed EBITDA
targets over the two years ending 31 December 2024. The remaining
consideration of c.GBP1 million relates to surplus cash balances
held by the majority companies (being Crackit, Tuesday's Child and
Interstellar) at completion, which will be paid to the existing
shareholders at the point in future when STV, through Greenbird,
owns 100% of their equity or when monies are dividended by them to
Greenbird.
Immediately earnings enhancing and further diversifies STV's
revenues and profits
-- The acquisition will be materially earnings enhancing, in
terms of STV Studios and STV Group's revenue, profit and margin, as
well as STV Group's EPS.
-- On a proforma basis and in line with Greenbird's 'percentage
of completion' revenue recognition policy, Greenbird generated
consolidated revenues of c.GBP32 million, consolidated operating
profit of c.GBP3.5 million and consolidated profit before tax of
c.GBP2.9 million in the year ended 31 December 2022 (excluding
share of associates). Greenbird's gross assets as at 31 December
2022 were GBP18.5 million. The total revenue generated by entities
in which Greenbird held an investment in 2022 was c.GBP64
million.
-- Under STV's ownership, Greenbird will report in accordance
with STV's episodic delivery revenue recognition policy. On that
basis, the proforma FY22 results would have been revenue of c.GBP28
million, operating profit of c.GBP3 million and profit before tax
of c.GBP2.5 million. Furthermore, Greenbird is forecast to deliver
revenue of GBP20-25 million and operating profit of GBP3-3.5
million in H2 2023, which will be consolidated into the STV Group
financial statements for FY23. As the corporate structure of
Greenbird includes entities who are not wholly owned, there will be
an allocation of profit, via reserves, to minority interests that
we expect to be c.GBP1 million in H2 2023.
-- We expect the enlarged STV Studios division to deliver
revenue of GBP70-75 million and adjusted operating profit of
GBP6-6.5 million in FY23, taking the STV Group well beyond its
diversification target of achieving 50% of operating profit, to at
least 60%, from outside traditional linear broadcasting by the end
of 2023.
-- STV expects to deliver significant revenue and cost synergies
across the enlarged STV Studios business of at least GBP750k p.a.
from 2024.
Significant headroom remains in bank facility and key financial
covenants
-- STV has funded the acquisition entirely from its existing
GBP60 million revolving credit facility. The Group has also
released GBP10 million from its accordion facility to provide
additional liquidity headroom although does not currently
anticipate using this incremental funding capacity.
-- The enlarged group's net debt on day 1 will be approximately
GBP32 million, which comprises net debt in the existing STV Group
of c.GBP38 million and cash balances in the Greenbird network of
c.GBP6 million, of which GBP2 million is available to the Group on
completion. Greenbird currently funds working capital through
existing cash reserves and without external bank facilities, and
this is expected to continue for the foreseeable future.
-- STV Group's key financial covenants are net debt to EBITDA
(maximum of 3 times) and interest cover (minimum of 4 times). In
accordance with STV's debt facility, the Group expects net debt to
EBITDA to be c.1 times and interest cover to be at least 10 times
at the end of FY23.
-- STV expects to continue to generate adequate cash resources
to fund future growth. Its dividend policy will remain
unchanged.
- excluding lease liabilities
Simon Pitts, STV CEO said: "Growing STV Studios into the UK's #1
nations and regions production company is one of our core strategic
objectives. This transformative acquisition represents a major step
towards that goal, adding significant scale and creative firepower
to the group and immediately accelerating STV's overall
diversification in terms of both revenue and profit. We're
delighted to be partnering with Greenbird and to welcome their
incredibly talented network of creative leaders to the STV family
as we jointly aim to grow our production base in the UK and
internationally."
David Mortimer, Managing Director of STV Studios said "Over the
last 4 years we have transformed STV Studios' creative and
commercial performance, so now feels like the right time to take
our next big step towards becoming one of the UK's most successful
production groups. I've known and worked with many of the team at
Greenbird and their associated companies previously and can't wait
to get on with the job of integrating these great production
companies into the STV Studios family. Jamie and Stuart have built
a brilliant business and they'll bring unrivalled commercial
expertise as part of our senior management team. Over the next few
years, we will be making some huge television shows for
broadcasters and streamers both here in the UK and around the
world, so this feels like an exciting new era for STV Studios."
Jamie Munro and Stuart Mullin, Greenbird founders, said: "This
is an exciting new chapter in Greenbird's history. We are hugely
proud of the Greenbird incubator model we have built. It has given
creatives space to flourish and deliver some of the most
innovative, entertaining and loved programmes in the UK. Their
creative power is unrivalled and has been recognised by viewers,
critics, awards panels and through the volume of international
sales that their shows have generated.
We're delighted to be working with Simon and David at STV. We
look forward to a future together helping a wider network of
creatives realise their ambitions."
There will be a presentation for analysts and investors today,
6(th) July 2023, at 12.30pm, via Zoom. Should you wish to attend
the presentation, please contact Angela Wilson,
angela.wilson@stv.tv or telephone 0141 300 3000.
Further information
The Greenbird network comprises the following production
investments:
Majority positions
Crackit Productions (75%)
Tuesday's Child (51%), which in turn owns 51% of
Interstellar
Large minority positions
Flicker Productions (40%)
Rumpus Media (40%)
Pi (40%)
Riverdog (37.5%)
Hello Halo (30%)
Kalel Films (25%)
Small minority positions
Top Hat (5%)
Goat Films (5%)
Owl Power (5%)
Little Dooley (5%)
Big Light (5%)
Rockerdale Studios (3.2%)
Enquiries:
STV Group plc Stephen Innes, Senior PR Executive 07500 757 049
Panmure Gordon Rupert Dearden / Sam Elder / Dominic Morley 020 7886 2678
(Joint Broker)
Shore Capital Mark Percy / Rachel Goldstein 020 7408 4090
(Joint Broker)
Camarco Geoffrey Pelham-Lane, Partner 07733 124 226
(Financial PR) Ben Woodford, Partner 07790 653 341
This announcement contains inside information for the purposes
of Regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310 (as amended). Upon the publication of this
announcement via a Regulatory Information Service, this inside
information is now considered to be in the public domain.
Under the FCA Listing Rules, the acquisition of Greenbird
constitutes a Class 2 transaction and, as such, this announcement
is made in accordance with STV's disclosure obligations pursuant to
Chapter 10 of the FCA Listing Rules. For the purposes of LR 10.4.1
R (Notification of Class 2 transactions), the gross assets of the
Greenbird network were GBP18.5 million at 31 December 2022 and
profits for the year then ended were GBP2.5 million.
Notes to Editors
STV Group plc
STV Group plc is Scotland's home of news, entertainment and
drama, providing audiences with top-quality programming on air,
online and on demand.
STV's broadcast channel reaches 3 million viewers each month,
with a packed schedule across the day. STV's fast-growing streaming
service, STV Player, offers viewers across the UK home-grown and
international drama box sets and a vast array of factual
entertainment series. Production company STV Studios - one of the
UK's leading content businesses - has an impressive track-record of
success across a wide range of broadcasters and streamers, with
productions including BAFTA-winning Elizabeth Is Missing for BBC
One and prison drama, Screw for Channel 4, quiz format Bridge of
Lies for BBC One and much-loved returning series Celebrity
Catchphrase (ITV and STV) and Antiques Road Trip (BBC One).
Greenbird
Greenbird is both an investment business and a services business
to help production companies achieve their full potential. Founded
in 2012, it invests equity capital to accelerate companies' growth
plans, and provides a bespoke back office solution to ease the
process of running a business as well as offering commercial
advice.
With more than 30 years' experience in television production,
Jamie Munro and Stuart Mullin provide producers with access to
innovative funding models, offer expertise in the commercial
exploitation of intellectual property and licensing deals; give
strategic and operational support and provide administration
services including business affairs, IT, legal, accounting and
HR.
Since 2012, Greenbird has helped 22 unscripted indies deliver
approximate 2,000 hours of programmes - an estimated GBP300m worth
of production activity.
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