Zinc Media Group plc (LON:ZIN) Chief Executive officer Mark Browing caught up with DirectorsTalk for an exclusive interview to discuss a strong trading update, a record high for EBITDA, diversified production revenue, The Edge performance, and what the next year looks like for the group.
Q1: First off, congratulations on the strong trading update that you’ve released. Can you talk us through the highlights?
A1: Yes, let me pull out one or two things for you, all of course subject to audit.
Revenue, we expect to be at around £40 million for FY23, that will be up 30% on prior year.
I think the really important thing to understand, not just the overall headline growth, is that a big part of that is driven by organic growth. Organic growth in our TV businesses last year will now be up about 20% so really important to keep a track of that organic growth metric. Of course, it’s against the backdrop of a declining television market in 2023.
We’d expect adjusted EBITDA to be at the £1 million mark, that would be the highest ever under the Zinc Media brand.
So all in all, FY23 will deliver against our market expectations.
Q2: You just mentioned that the EBITDA figure being the record highest, can you tell us what’s driving that?
A2: I think there are two main things.
One is the investments we’ve made over the last three years in our television labels. We always said that initially those investments would drive rapid top line revenue growth, which it’s done. Those that choose to reread reports from prior years will find out, we grew 40% in FY22, in revenue terms.
What we’re now seeing in FY23 is continued revenue growth, but that profit coming through. As those investments unwind and really start to generate a contribution to the whole group, the likes of Red Sauce, Atomic, Supercollider, Rex, they’re now starting to deliver, that’s coming through in the EBITDA line. So that’s the one reason.
The second is as there is now some initial scale in the group at revenue level, so the operational gearing of the group is starting to come through, that’s the relationship between top line revenue and operating profits.
So, with revenue at a much better scale, we’re seeing that operational gearing coming through at the EBITDA line. The investments in the Zinc platform that support all our companies, technology and finance, HR, etc., and being a PLC, they’re largely fixed costs so as we grow that top line, as that operational gearing comes through, we see the profitability starting to flow through at EBITDA and then to operating profit.
Q3: You now have a much more diversified production revenue base, how have you achieved that and what does it mean for the business?
A3: Well, we’ve been intentionally diversifying into every area of production over the last three years.
So, in television, diversification has meant diversifying our price points across a whole range of prices in the market. We now do high-volume, low-cost factual, we do mid-price daytime television, we do high-end premium factual for international streamers and so forth. Lots of diversification in price point.
It also has meant diversifying in the genres we make, that now includes specialist factual, it includes daytime, it includes live TV, it includes factual entertainment.
Elsewhere in TV, we’ve diversified the client base so moved into multi-channel networks like UKTV and Sky and international broadcasters like Disney Plus.
So lots of diversification within television, which makes up 60% of our total group turnover, and of course, we’ve diversified outside of television in that other 40% bringing The Edge into the group, which themselves are diversified in the UK and internationally and within our Zinc Communicate portfolio as well.
Q4: Now, the group acquired The Edge Picture Company in August 2022, how has it been performing since then?
A4: They continue to do very well. Last year, FY23, they delivered ahead of the expectations we had when we acquired them so it’s been another strong year and they had the record year in FY22. So, everything about The Edge is going in the right direction and they’re all set to have another strong year this year.
Integration has gone well, we’ve co-located all our London businesses, including The Edge into our headquarters so all our companies that are London-based now operate out of the same central location, continue with integration around finance systems and payroll and things like that and marketing.
So, in terms of their performance and their integration, it’s all going in the way we want it to.
Q5: Talking of strong numbers, you’ve already secured £17 million of revenue for FY24, what does it look like for next year for Zinc Media?
A5: The wider market is really difficult, TV commissions in the UK is slow, its commissioning is slow, channels are delaying decisions and we all know that advertising across the board in the UK, across all sectors, is down significantly and that funds a lot of our clients.
However, the group is currently defying gravity. We can only focus on the things we do, we can only focus on putting one foot in front of the other every day and being the best in class, winning share where we can.
We are entering the year with more pre-booked revenue than at any previous year, and we have a strong pipeline so in that sense, we’re in the best shape we can be entering a new financial year.
