Earnings Call: H1 2020

Aug 6, 2020

Good morning, everyone. Thank you for joining us today for ITV's 2020 interim results. In a moment, Chris will present our operational and financial performance for the half. I'll talk you through our response to and operations under COVID-nineteen and update you on our strategic progress and priorities going forward. We will then, of course, have time for questions. ITV took swift action to manage and mitigate the impact of COVID-nineteen. Our overriding priority was our colleagues and their safety while working from home or while they were producing programs. The majority transitioned seamlessly to home working, benefiting from the investment we've made in technology and systems. Those who needed to continue to work on-site were subject to robust safety protocols, as you'd expect. To enable our colleagues to remain feeling connected to and engaged with the wider business, I've recorded weekly vodcasts with a broad range of the ITV team and external experts. ITV is strongly committed to supporting the physical and mental well-being of all of our colleagues at all times. And we've leveraged our existing tools and launched new ones such as Big White Wall, a peer to peer mental health platform to support well-being. We also implemented measures to reduce costs, tightly managing our cash flow while continuing to inform and entertain the nation. Of course, ITV's operational and financial performance in the first half has been significantly impacted by the COVID-nineteen pandemic. Despite this disruption, we continue to work on our strategic priorities, protecting investment in them, and we are making really good progress in executing the strategy. We have continued to implement the ITV Hub acceleration plan with increased content, which is delivering strong online viewing. We're successfully rolling out Planet V. We have also extended the distribution and content on BritBox UK, which is performing ahead of our original plan. And we have augmented our data and analytics team. Now while the outlook remains uncertain, today, we are seeing an upward trajectory. ITV Studios has been very innovative and agile in restarting productions. Of the two thirty productions that were impacted or paused by the lockdown, around 70% have been delivered or are actually back in production as of today. We anticipate restarting further productions in the coming weeks. Our commercial team have worked, as you would expect, really closely with advertisers and agencies, but they've done that actually throughout the crisis, creating effective and relevant campaigns and bringing new advertisers to TV. Currently, we are seeing advertising trends improving into July and August. While we saw good momentum in Q1, from mid March, the lockdown measures in The UK and internationally caused us to pause, as I said, almost all our productions and see a significant decline in the demand for advertising. We have seen some positive uplift in the sales of our library content in ITV studios. Direct to consumer has benefited from increased demand for competitions, and there has been increased demand for BritBox in The U. K. And internationally. But overall, revenues were down 17% in the first half. We've delivered £51,000,000 of savings in H1, but profits were down 50% with the margins of both businesses significantly impacted by the decline in revenue, ongoing fixed costs and our essential investments to support the strategy. Profit cash conversion was strong. We continue to have good access to liquidity. I will now hand you over to Chris to go through our financial and operating performance in a bit more detail. Thanks, Carolyn. Good morning, everyone. I'll start with the performance of Studios. ITV Studios started 2020 with good momentum, expecting a good slate of deliveries over the full year and year on year revenue growth. COVID-nineteen has changed this outlook. The resulting delay in the production and delivery of our programmes has caused ITV Studios total revenue to decline by 17% in the 2020 to £630,000,000 with external revenue down 18% to $397,000,000 ITV Studios U. S. Was the region to show revenue growth in the period benefiting from an increase in revenues from over the top platforms. Global Distribution also saw revenue growth, up 2% with demand for the library content. However, this was more than offset by a decline in global format sales. Total organic revenue at constant currency was down 17%. Adjusted EBITA was down 47% year on year at GBP 62,000,000 with the adjusted EBITA margin at 10%. ITV Studios is a largely variable cost business. The decline in margin reflects the ongoing fixed costs in the business and costs associated with social distancing guidelines and health and safety protocols, partly offset by £26,000,000 of cost savings. The impact of on the rest of this year and 2021 will depend on how quickly COVID restrictions are reduced. For instance, with a one meter rule, we can make entertainment shows without an audience, but we'd need an exemption to make drama at scale. And local travel quarantines makes multi location filming impossible. Moving on to Broadcast. Broadcast total revenue was down 17% in the first half at GBP $824,000,000. This decline was entirely driven by a decrease in total advertising revenue which was down 21%. Online advertising revenues were down just 3% within that benefiting from a very strong Q1 with Winter Love Island. Following a third quarter of successive growth in advertising in Q1, the COVID-nineteen pandemic had a significant negative impact on advertising demand in Q2, which was down 43%, the most severe decline in the history of ITV. Direct to consumer revenue grew 8% to £43,000,000 with growth driven by interactive. Our competitions have seen strong engagement over the period corresponding with the increase in viewing of our daytime shows along with the return of Saturday Night Takeaway. Other revenue increased by 9% to 74,000,000 and includes revenue from BritBox UK, which has seen good growth since its launch in 2019 and has benefited during the pandemic. Whilst we've made every effort to maintain the quality of our broadcast schedule, the program budget was lower, down due to the postponement or cancellation of shows as a result of the pandemic, such as the European Football Championships and Love Island. We expect the program budget to return to more normal levels in 2021. We continue to manage our non program costs tightly and delivered £25,000,000 of savings. The costs overall were higher due to increased bandwidth and rights costs for the ITV Hub, greater interactive costs associated with the increase in the revenue in the period and our investments in the ITV Hub, Planet V, Data and BritBox. The BritBox venture loss was £23,000,000 in H1, which is consistent with our guidance for the full year. In total, despite the significant savings we've made, Broadcast excluding BritBox delivered a 15% margin, down from 22% last half year due to its very high operational gearing. During the pandemic, people have been watching more television. We saw ITV total viewing increase 4% in the first half and ITV family viewing by light viewers, one of our important target audiences, increased by 8%. This was driven by strong performances from our dramas such as White House Farm and Flesh and Blood, Entertainment such as The Masked Singer which was one of the most successful format launches in recent times and Britain's Got Talent. We had innovative programming such as the Virtual Grand National. And most of our daytime shows are having their strongest viewing in years including Good Morning Britain, This Morning and Loose Women. We continue to be the home of scaled mass audiences delivering 96% of all commercial audiences over 5,000,000 and also delivering on our targeted demographics. ITV main channel share of viewing and ITV family share of viewing both declined as viewing was impacted by the volume of news output from the BBC, fewer episodes of Coronation Street and Emmerdale and lower volumes of new content following the pause in production. ITV main channel share of commercial impact however was up 1% to 26.2. Online viewing has been strong, up 13% with dwell time up 11% and a 15% increase in monthly active users. Our focus now is to keep those users and drive incremental active users and dwell time. At the start of 2020, there was good momentum in total advertising with revenues in Q1 up 2%. However, from early March, we saw advertisers, particularly travel, start to defer their advertising. As lockdown measures were implemented during March, we saw most categories reducing or stopping their spend entirely. With the decline in demand and the increased viewing, we saw significant deflation in pricing which was down between 5060%. We continue to see good demand from some online brands, but overall non gambling online advertisers were also significantly down in the first half, impacted particularly by online travel companies. The trend in July and August is improving with July down 23% and August better than July. We're seeing spend increase in a number of the hardest hit categories as they try to stimulate demand including some FMCG, some retail, publishing, cars and interior furnishing. We have been and continue to work very closely with advertisers. On investments, our previously announced investments to support the strategy have not changed. We continue to expect essential investment of £18,000,000 in the year and BritBox venture losses are expected to be between 55,000,000 and £60,000,000 as guided. At the same time, we've put in place measures to reduce overhead costs by GBP60 million this year, of which around GBP10 million are permanent savings as part of the ongoing cost reduction plan which we announced in 2018. The temporary overhead savings largely comprise of a reduction in senior management and board pay, recruitment and pay freezes, cancelling the company wide bonus, furloughing where appropriate and reducing nonessential travel and other costs. We've delivered GBP 51,000,000 in the first half across the business and are on track to deliver the full amount by the end of the year. We expect the program budget to be GBP $960,000,000 for the full year, a higher saving than originally estimated, which is due to the cancellation of Love Island and lower than anticipated replacement programming costs. As I said earlier, these savings will reverse in 2021. Going forward, we continue to look at ways to reduce our cost base permanently and we are still targeting a further £25,000,000 to £30,000,000 of savings by 2022. Turning to adjusted and statutory results. Adjusted earnings for the year were down 52% to 118,000,000 and adjusted EPS also declined 53% to 2.9p. Adjusted financing costs were down £2,000,000 year on year reflecting slightly lower levels of debt in the period and are expected to be around £40,000,000 over the full year. The adjusted tax rate was 20% and we expect it to remain between 1819% over the medium term. Statutory EPS decreased by 90% to 0.5p. Net exceptional items were £89,000,000 Acquisition related costs of £10,000,000 were lower than in previous years as were restructuring and reorganization. COVID related costs were £27,000,000 and include impairments mainly in relation to sports rights due to the change in scheduling of the Euros, costs associated with the closure of ITV Studios productions and their subsequent safe restart and incremental costs to maintain the production of daytime program during the lockdown. Other exceptional costs were £49,000,000 including an estimate of the settlement of the Box Clever case and the impairment of some other sports rights costs which were not directly COVID nineteen related. Over the full year, our current best estimate of exceptionals is £110,000,000 which includes £35,000,000 of COVID related costs. Our cash conversion was strong at 138% on a rolling twelve month basis. This was driven by a large working capital inflow arising from a reduction in programme stock where we delivered some programmes but were unable to continue producing and the deferral of VAT payments, which we've agreed with the tax authorities. We expect the majority of this inflow to reverse in the 2020 and in the 2021. It remains our objective to run an efficient balance sheet and to manage our capital structure over the medium term consistent with investment grade metrics. Our reported net debt at the end of the period was £783,000,000 including IFRS 16 lease liabilities with reported net debt to adjusted EBITDA of 1.3 times on a rolling twelve month basis and adjusted net debt to adjusted EBITDA which better reflects how the credit agencies look at us of 1.6 times on a rolling twelve month basis. We have good access to liquidity with £829,000,000 of undrawn facilities. We have an undrawn £630,000,000 revolving credit facility in place until 2023, which has leverage and interest covenants. Although we're trading comfortably within our covenants, as a precautionary measure, we've agreed with our banking group that for the period from 03/31/2020 to 12/30/2021, the existing covenants will be replaced by a cap on net debt and a minimum covenant liquidity requirement. We also have a bilateral financing facility of £300,000,000 which is free of financial covenants. And in March 2020, we extended its maturity by five years to 06/30/2026. A 199,000,000 of the bilateral is unused. We have no bond repayments until September 2022. And finally, our pension schemes are reporting a surplus of 26,000,000. The movement since the December reflects the decrease in bond yields offset by a reduction in gilt yields and our deficit funding contributions in the period. I'll finish by running through the 2020 planning assumptions. These are based on our current best view, but of course, it will depend on how events unfold over the rest of the year. I've talked you through most of the P and L assumptions. On the cash side, we expect profit to cash conversion of around 75%. And like all businesses in 2020, we will have to pay six quarters of Corporation Tax rather than four, although this is offset by the agreed deferral of VAT payments into next year. And due to our successful cost and working capital management, we're able to resume our essential CapEx at around GBP 85,000,000 to 95,000,000 for the year, broadly in line with our original guidance. And this principally relates to the costs associated with Planet V, the integration of Talpa and our U. S. Property moves. Exceptional cash items will be around £250,000,000 which includes COVID related costs and the final element of the TALPA earn out. And pension deficit funding is expected to be 59,000,000 which is lower than 2019 due to the agreed deferment with the that we agreed with the trustees. I'll now hand back to Carolyn. Thank you, Chris. As you know, our aim is to be a digitally led media and entertainment company that creates and brings our brilliant content to audiences wherever, whenever and however they choose. As you would expect, we have reviewed our strategy and priorities in light of COVID, and the outcome has been a reinforcement of the strategic vision for More Than TV with acceleration in specific areas. We remain focused on three priorities: transforming our broadcasting business, growing our U. K. And global production business and expanding and strengthening our direct to consumer relationships. Each priority is supported by a number of initiatives for how we can compete in an ever changing environment. And as I said, we are making good progress and we need to continue to make this progress with pace. ITV takes its responsibility as a public service broadcaster very seriously. We are looking forward to the outcome of the PSB review due by the end of this year. We've been in discussion with key stakeholders, as you would expect, for many months. We have a unique ability to drive meaningful change. And now more than ever, we can use our position to shape culture for good. During the pandemic, we have continued to amplify ITV's social purpose, raising awareness and inspiring positive change through the massive reach of our platforms, delivering against our four priorities, better health, diversity and inclusion, the environment and giving back. We relaunched our mental health campaign, Britain Get Talking, during COVID, encouraging people to stay connected. Our healthy eating campaign, Eat Them to Defeat Them, encourages kids to eat veg. And we have been working with Public Health England and the government on encouraging healthy behaviors during the pandemic. We have launched our diversity acceleration plan across ITV on and off screen with a particular focus on black, Asian and minority ethnic and disability representation. We have launched our environmental targets to reduce carbon emissions, become zero waste and deliver a 100% sustainable supply chain out to 02/1930. ITV has been ranked ninth in the June 2020 edition of the Tortoise Responsibility 100 Index, which reviews the social and environmental impact of the FTSE one hundred. ITV is the top media company overall. During the pandemic, we have used our position to help raise over £3,600,000 for NHS charities together and are again working closely with UNICEF on Soccer Aid twenty twenty. On a separate point, you will know that last week, the government announced a package of measures to reduce obesity, including a ban on HFSS advertising on both TV before 09:00 and online, with a consultation on a total ban on such advertising online. We can't quantify the impact of this today because there is much we don't yet know about how the government's plans will work and nothing is likely to be implemented until 2023. And as you would expect, we are discussing this with government. I'm now going to take you through the progress we're making in each of our strategic priorities, and I'm going to start with the ITV studios. We paused our production systematically to enable them to resume quickly and efficiently and minimize the costs of disruption. With the innovation and dedication of the ITV Studios team, we have continued to produce our daytime schedule and some entertainment shows during lockdown, such as The Graham Norton Show and Saturday Night Takeaway, and we made Isolation Stories, a four part drama written, filmed and edited during lockdown. Differing country restrictions has enabled us to continue filming in some of our international locations, including The Netherlands, Germany and Sweden. We have also delivered programs which had already been filmed using remote editing. We have maintained our development budget and the teams have been very focused on the development of the creative pipeline during this time. ITV worked closely with the UK government and the industry to develop a set of protocols to resume production as quickly and as safely as possible, obviously minimizing health and safety risks during production. We've undertaken risk assessments and are developing procedures outlining how the protocols should be applied on each production globally. This has enabled us to successfully resume production on some of our key programs, including Coronation Street and Emmerdale in The U. K. And The Voice in Australia, Balthazar in France and Sabura and Mas Antonio in Italy, which we'll deliver in the second half. There remain operational challenges, of course, with producing content. However, we are working well on overcoming them. Talent remains an absolute key to building a successful studios business, and ITV Studios U. S. Agreed a number of interesting deals to strengthen our creative talent. These included a joint venture between Tomorrow Studios and Nick Widenfeld to launch Work Friends, the first primetime TV animation label in ITV Studios America. Tomorrow's Studios has partnered with French producer, Eric Rochard, to create a global spy drama. ITV Studios America has also launched joint venture with producer Tony To and director producer Dan Sackheim to create a new entertainment label, Bedrock Entertainment, and they've also partnered with format creators Nobody's Hero to develop and produce reality shows. We have continued to integrate Talpa into ITV Studios as we've reorganized our international distribution and commercial business to strengthen our position as a creator, producer and distributor of world leading formats. We have a number of new formats that have been developed, including Rat in the Kitchen, a U. K. Format and Let Love Rule, an ITV Studios Netherlands format that has started to travel and will be produced by ITV Studios Sweden. We continue to build our pipeline of scripted programs as well, which is becoming an area of strong growth. We saw real success in the first half in The U. S. With Snowpiercer performing extremely well on TNT and Netflix and The Good Witch for Hallmark has been renewed for a seventh season. In Europe, we are continuing to deliver four OTT platforms and local broadcasters with programs such as Saburan Balthazar. We have further diversified our customer base as we have strengthened our relationships with OTT platforms, particularly in The U. S, where we have projects with all of the main OTT platforms there. In the first half, we produced a number of programs for them: The Fifth Season of Queer Eye, The Great Flower Fight for Netflix, Hot Drop for Quibi, Love Island France for Amazon and Becoming for Disney plus Our UK and international businesses are more reliant on local broadcasters and we continue to deepen our relationships with free to air broadcasters with programs such as Noughts and Crosses for the BBC, Love Island for CBS, The Voice for TF1 and The Chase for Seven Network in Australia. Going forward, we will increasingly harness the position of the ITV Studios group to further develop relationships with OTT platforms globally as well. This tape shows the strength of our pipeline and the breadth of our customers as well as how we have adapted and innovated our productions in response to the challenges of COVID. Attention all passengers. Order will be restored. What's going on? This is happening. Okay. Let's begin. What is this? It's the VT we've all been waiting for. Two weeks ago, fucking And the zombie apocalypse is happening. So how many do you are there? I'll show you how to take them on. To be in lockdown, make it Hawaii. Made it. I love that. This has turned into a phenomenal Nothing keeps us down, does it, girl? Stammie Leeway is one of the sharpest minds in Australia. It's a really worrying time. We want you to know that we're here for you. Because we've spent weeks refusing to accept the severity of this crisis. Should we endorse other values? As one gets older, one gets wiser. Very good mom. Too surprising, isn't it, love? It's time to couple up. Oh my god. Welcome to the jungle. I'm not a fan of bugs. We got rats in here. I don't I can see that to a bastard. I want you to look sexy. The world is ready for this. Yes. We are more than just a dance team. We're a family. Wow. That looks spectacular. What we do keeps the world's economy afloat. We laugh at the wrong person. Only so much one person can do. So at least you that much. It's where it all started. I am blown away. Turning now to broadcast. The key priority at the start of the pandemic was to keep ITV on air and the ITV hub and BritBox fully operational. We broadcast over ten hours of live programming every single weekday with our daytime and news programs, and we have played a key part in providing our viewers with accurate and trustworthy information during the pandemic. Our commercial team worked really closely with our advertisers and agencies to create relevant and innovative marketing and advertising opportunities, BT technology tips, for example, Waitrose Pick for Britain and the People's Ad Break. With weekly emails and frequent webinars, which over 3,000 people viewed, we were able to use our breadth of experience, creativity and our unique platform to bring new campaigns and new brands to TV such as Mindful Chef, Peanut, Vionic and even Life Boys Soap who haven't advertised since 1978 on TV. Significant price deflation helped encourage advertisers to TV and delivered really successful campaigns. Our challenge, of course, is now to keep them. We have a significant new B2B initiative, ITV backing business, to drive their growth and revenues. Now this initiative includes using our creativity to provide marketing support and digital content, information to help advertisers create really effective campaigns, giving consumer insight to help advertisers stay close to their customers, sharing success stories from business leaders with Business Get Talking, providing relevant support to help digital native brands, brands that are new to TV and specific sectors which have been hit particularly hard by COVID, such as charities, universities and cultural heritage. We've developed a new ad format on the ITV Hub, Hub Shout Outs, to provide a cost effective alternative to a full linear advertising campaign. And we're making booking advertising with ITV more flexible, such as removing late booking charges and launching special offers and incentives. Now increasing booking flexibility will make it a bit more difficult to give TAR guidance going forward. The ITV hub has grown rapidly again in H1 as we have continued to deliver the Hub Acceleration Plan. Our investment has been focused on redesigning the interface on all platforms to continue to improve the overall user experience, increasing personalization and prominence to make it a destination for viewing our content, strengthening the content available. For example, we showed the nineteen ninety six European Football Championship and the two thousand and three Rugby World Cup for those viewers missing sport, both of which performed really strongly. We're trialing an extended catch up window for content on Hub during the summer, and we've redesigned the ITV News online site. It's massively improved. We are continuing to successfully rollout Planet V, our scaled programmatic addressable advertising platform to agencies. This platform puts the buying in advertisers' hands, enabling them from their own terminals to buy ITV Hub inventory seamlessly and cost effectively, build their own audiences, add their own data and monitor their own campaigns. In July, 35% of VOD inventory was delivered through Planet V. While our schedule has been impacted by production stoppages this summer and we have used more repeats, we continue to invest in the schedule and have a really strong slate for the autumn. This tape shows that together with some of our highlights of h one. Have a seat, everybody. I can't wait to get going. It's all or nothing. This is a big one, and I need everyone doing their job. I have to win no matter what. It seems I'm in possession of a secret. Good work. I never ever dreamt it would end like this. Are you here to find love or a good time? A one could really love this. A step of man could like this. If you want a family worth it, start in your own backyard. Keep your spirits up with This Morning. Downing Street issued a worrying update. Our nation prepares to clap for carers again tonight. Yes. There's been overwhelming support. You know. You know. We have never needed each other more. So come on, Brynn. Get talking. I wanna see you go as far as you can. Welcome to be the chaser. Here comes the question. Fantastical. Don't go anywhere. Shall we just press on? Please, God. I just wanna get them too. You can go holiday. It's a bit of an idea. There's no dear. Game of art. Have you got what it takes? So lots to look forward there in the autumn slate. Turning now to our direct to consumer business where we have seen a positive impact actually from COVID. We've seen good growth in our interactive revenue as we've improved the ITV Win platform and extended our competitions. We have, however, had to close all our live events and tours. BritBox UK, as I said, has seen good growth in subscriptions in the period and churn rates tracking in line with our expectations. We have extended the distribution of BritBox U. K. With the service now available to 60% of streaming households and on around 20,000,000 devices, up from 15,000,000 devices in March. We have also strengthened content with Channel four programming becoming available in April. We've just announced partnerships with Royal Shakespeare Company, the Donmar Theatre, the Royal Ballet and the Royal Opera House to bring major productions to BritBox. And BritBox now has brand awareness reaching 84%. Subscribers for BritBox U. S. Have continued to grow strongly, currently exceeding 1,200,000, and the service is profitable. We are on track to launch BritBox in Australia in the 2020. Hub plus continues to perform well with around 390,000 subs. This is down from the same time last year due to the absence of Love Island, lower volumes of content reflecting the change to the schedule and of course, less demand for EU portability given travel restrictions. We have specific priorities for the rest of the year and into 2020 to continue to deliver our strategy. Firstly, in studios, key in the short term is, of course, to resume production safely and at scale. We will continue to strengthen our talent. We are working on a number of potential opportunities as we speak. And finally, we are very focused on continuing to build and monetize a strong pipeline of programs internationally. We're focused on growing scripted, creating global formats that travel and return and diversifying our customer base and increasingly creating programs for streaming platforms worldwide. In Broadcast, we will further strengthen the hub with our focus for the rest of the year on its redesign, strengthening its user experience even further, including offering a start again option on simulcast and linear TV, along with increased content and distribution. The ITV Hub, as you know, helps ITV reach valuable younger audiences. And in our drive to increase their engagement, we will be producing short form content, particularly targeted at this demographic, and we plan to launch that later this year. We will complete the rollout of Planet V to most of the major agencies by the end of the year and 100% of hub inventory will be delivered through this platform by that time. Over the medium term, we will explore linear addressable opportunities. We're also further deepening our strategic and creative relationships with advertisers, which we started before COVID, of course, and we've made really good progress on that. And finally, D2C, we are continuing to grow BritBox, as you've heard, through extending its distribution and content. We are exploring opportunities to expand its distribution further and are working with a number of platforms to enable this. The first original commission, Spitting Image, will launch on the service in the 2020 with Film four content arriving in the autumn. BritBox has also recently commissioned a number of original dramas. Aspire Monks Friends starring Dominic West and then discussions with Damien Lewis, The Beast Must Die starring Kush Kajumbo and Jarrod Harris, Crime, which is based on, Irvin Welsh's novel and Magpie Murders, which is based on the Anthony Horowitz novel. These are all expected to be available in twenty twenty one-twenty twenty two. We're working through the planning for a phased rollout of BritBox internationally to up to 25 countries. These are countries we have identified where research shows we could launch the surface profitably, managing our SVOD rights much more effectively and driving more value from them. Our investment in the rollout will be funded by our share of BritBox U. S. Cash flows, and we will undertake, of course, a full business case for each territory before we launch it. We continue to support Hub plus and strengthen ITV win. We are, of course, also very focused on delivering the cost savings, which Chris has taken you through, and we're also identifying permanent savings we can make over the medium term. To do this, we will be using data and technology as we continue to transform ITV digitally, digitizing our processes even more in the content supply chain and core central functions and using our learnings from COVID such as increased smart working and remote editing. Now on the outlook. We have taken difficult decisions to deal with the crisis, but they have put us in a really good position to continue to invest in our strategy to transform ITV into what we have said we want to be, a digitally led media and entertainment company. And as I said, and I hope you can see, we are making really good progress. We have strong foundations. We are clear about what we need to do. It does require relentless focus on delivery to build that stronger, more diversified and structurally sound business. The next phase of the strategy will further position ITV to take advantage of these evolving viewing and advertising trends. We continue to monitor the risks associated with COVID-nineteen and a wide range of possible financial scenarios. Our colleagues' safety and well-being continues, of course, to be an absolute priority, and we are adapting our business and developing and implementing plans to address the challenges in the short and medium term, including a potential second wave. We are, as you hear, very focused on tightly managing our costs and our cash. Given the continued level of uncertainty for both ITV Studios and Broadcast, it's not possible to provide financial guidance for Q3 or for the remainder of the year. Today, we are seeing an upward trajectory, productions are restarting and advertisers are returning to take advantage of our highly effective mass reach and addressable advertising platform in a brand safe environment. And finally, as they say on News at ten, I wanted to say a few words about the way our people have responded to this crisis. We've all had to learn to work in new ways over the last few months, all of you as well. Today's virtual results presentation is an example of that, and not everyone has found that easy. The way our teams across ITV moved to remote working and innovated to keep our shows in production and on air has been remarkable. There was a true sense of mission and purpose in their desire to ensure that our viewers were kept informed about the unfolding crisis while also offering them an escape from it. Every single person at ITV wanted to help and support the mission to do whatever it took to inform, to entertain and reassure our viewers. Now I knew we employed some really creative people, but their ingenuity and their inventiveness has been absolutely astonishing, whether that was people editing from their bedrooms with their curtains made into backdrops, our news and daytime teams who complied with the ever challenging lockdown regulations while actually reporting on them, our internal comms team who have a really small team and have broadcast dozens and dozens of broadcasts and webinars to keep and inspire our own people, so to keep our people informed. Our commercial team, who I'm so proud of, have been relentless in their pursuit of anything that's going, persuading even a car manufacturer to advertise in a period where showrooms were closed. Our sports team even ran a virtual grand national and that raised money, millions of pounds for NHS workers. And I could go on, every single bit of ITV has performed really well. But I will just say, we have done better both in revenue and restarting production than we ever thought at the start of this crisis. And that is entirely because of the determination and sense of purpose of the people who work at ITV. Now over to you for questions. First question comes from Joe Barnett Lamb from Credit Suisse. There are three from me. Firstly, as you progress through both the pandemic and the unlocking, how are your thoughts evolving with regards to progression of Studios into next year? Should we think normalized absolute Studios revenues, normalized growth even at the lower base or potentially some capacity for catch up? That's question one. Question two, with regard to your improved advertising trends into July, some other broadcasters in Europe seem to have seen unusually high auto spending over the summer, a period where they don't normally spend as a result of unlocking. Are your July advertising numbers materially buoyed by autos? And then finally, you've disclosed intentions to progressively roll out BritBox to up to 25 countries. I was wondering if could you give us just a little bit more information around the cadence of that rollout and the costs associated to it. You did mention it would be funded out of BritBox U. S. Profit. So to confirm, should we assume no incremental costs over those BritBox U. S. Profits? So thanks, Joe. Let's start with the Studios question. As you know, we're ramping up production now. It varies by production, as I said in my presentation. Drama is really quite difficult with a one metre rule, but we can do it with exemptions. I think as we move into next year, it really is too early to say how that will develop. I think the one thing we know is that the market for content is going to carry on growing over the medium term. So that's a given. It really is a question of how budgets between OTT, FTA, U. S, U. K. Regionally, they all develop and also on the ability to ramp up production. Yes. So it's our intention, obviously, to get the dramas, the 30%. So we're 70% now, and that number is moving up. It's clearly our intention to get up to 100% production to back to where we were. And the 30% is dramas. As you've heard, we're getting dramas back, but there is a pipeline of those at the moment. So it is all about phasing. It is all about timing. And that's one of the reasons we can't give guidance. That's why we're not giving guidance really because it all depends on what we can get up and running. And we're already at scale in production. So when we were writing this a few weeks ago, we were not up at scale. So quite quickly, we've got up to 70% of our productions being delivered or being made. We've still got a bit to go to get back to where we were. So very difficult, I think, to look into next year just at this moment in time. I think on the ad trends, it's worth saying that July is markedly better, as you can see, and August is markedly better than July. The categories, though, are really FMCG, retail. So anyone who's got supply, who's open for business, they're the categories that are advertising. Interiors, for instance, DIY, that's all come back. Cars is interesting because they are back, but they're not back in full flight. And I think that's partly because of Europe has gone into lockdown differently and is coming out has come out much earlier than we have. Do you want to add to that? Yes, Joanne. I think you're probably referring to the sort of the Spanish and French experience which they had a much deeper dip in Q2 and they started earlier as Carolyn said, they were in March and then they've come back more strongly. But as Carolyn said, cars are, whilst they're better in July, it's not the main driver of the uptick. But it would be worth saying there's not one main driver. Actually across the board. Everyone's come back a bit. And the conversations we're having with autos are very positive. It's just that I think we've only just started manufacturing the cars, and I don't think they want to they don't want demand to exceed supply, put it that way. So I think there's a few months or weeks to go on cars. Your third question, Jo, I think was on BritBox. Yes. So the international rollout. Yes. So as you know, the priority for us at the moment is Australia, which we want to launch towards the end of this year. And then we are into as Carolyn said, we've looked market by market. We have made no commitments in any one market. We will we've effectively got two waves. We've got as you'd expect, we've sort of tiered them. So we've got the countries we'll look at first, which will be over the course of probably another year and then a second wave of those, if I can use that term in these times. So I think that's very much watch this space. We have to do the detailed market analysis because the reason we're doing it, as Carolyn said, is we want to improve the value of our secondary exploitation of our content and BBC's content in each of those countries. So we need to be sure that we're creating value by doing it via the BritBox route. That's great. Thank you very much. And then sorry, just finally on BritBox with regards to the investment associated with that. With regards to you saying you're being funded out of BritBox U. S. Profits, can you confirm that, that means there's no incremental cost over and above any profits from BritBox U. S? Yes. Yes. Thanks very much. Appreciate it. Okay. Bye. The next question comes from Adrian de Saint Hilaire from Bank of America. Adrian, please go ahead. Hello. Good morning, everyone. Good morning, Caroline. Good morning, Chris. I hope you can hear me well. First of all, I have a question on the potential impact that the government has discussed on ads for drunk foods. Have you made any preliminary assessment on how much could be at risk? Secondly, Chris, you talked about the long term outlook for content being unchanged. I don't think you have formally repeated your guidance for EBITA margin to be 14% to 16% in Studios. So is that still the target? And how long do you think it will take to get back there? And lastly, if that's possible, I was just wondering if you could strip out maybe the Love Island headwind from your June and July advertising numbers because I'm sure the Love Island cancellation impacted the numbers. Yes. It's a good point. On HFSS, we obviously well, firstly, the government has made it pretty clear that this is end twenty twenty two, 'twenty three, so that's the first thing. In our longer range financial modeling, we have obviously taken it into account as a risk. So it is absorbed in our financial scenarios going forward. But actually, one of the key things to say is that we can't quantify it at the moment because we don't know what categories are going to be. HFSS is an extremely broad category. It includes olive oil, which most people think is a very healthy product, and it is, but it includes it. So we need to be much clearer about the categories. We need to be much clearer about the food manufacturers' response to this in terms of how they will change products that they advertise. We need to be so there's just there's so many unknowns at the moment, which is why we're talking to government. We're in dialogue with government about this and how this will be implemented, which is why we can't quantify it. What we can do, of course, is prepare and plan and know what our mitigations are, etcetera, and that is included in our financial scenario planning. And it's also worth saying that the government have said that it will be it's probably likely to be 2023 before we see the detailed proposals. On studios, yes, you saw in the first half the studios margin was 10%. There are additional costs of production under COVID restrictions. So we'd see margins continuing to be suppressed for the rest of this year and definitely into 2021. Difficult to say by how much that will be because it does vary production by production. And it also depends on, as Camden said, the ingenuity and creativity of the production teams, I'm sure that those additional costs will come down over time. Your third question was you make a good point about the Love Island headwind over the summer and excluding it from June and July. I wonder whether we should just come back to you on that because we don't tend to do that because then you would know precisely what Love Island was. But we could come back to you and maybe give you a kind of feel Yes. For yes, certainly, it was a headwind for us in the July number we reported in the June. Yes. The next question comes from Anik Maas from Exane BNP Paribas. Anik, please go ahead. Thank you. Good morning. So my first question is again on studios. So just thinking about the midterm growth of studios really, with the pressure on TV broadcasters across the world and that implicitly having an impact on studios, I just wondered, do you think beyond next year, actually, this 5% CAGR would be sustainable for studios or not? And my second one is just on the July advertising number you suggested, I assume some of the budgets that have come through in July had been postponed from Q2. So is there really some budgets that have been new money in a way? Or is it all really rescheduled budgets that you've seen so far? Then on BritBox, just putting the CapEx in a position to share a bit more KPIs, such as churn, for instance? And my last point, just on the overhead cost savings, the ones that are recurring, you could maybe give us an indication of how you expect those to be split over the next year? Okay. Lots of questions there. I think, look, we are we have said that we believe that the content the global content market is definitely a growth market. We can't see why that would change. In fact, we think that probably has improved because of COVID because there's such a backlog of people wanting content to fill their screens. So our estimation has been the global market would be 3% to 5% growth over the next three to five years, so over the medium to long term. So I won't I'm not going to go into a CAGR for studios because we're not giving guidance, but I would just talk about the global market and then you can take you can extrapolate from that. And we believe in Studios, a very strong business. It's shown how quickly it can actually come back to production at scale from a standing start. And I think we will continue to invest in it with talent deals and continue to grow it. So I'll just leave it at that because I think you can see what I'm indicating. On July and the advertising deferments, some would be deferred, but actually a lot of people deferred into second half actually rather than into Q2, to be absolutely honest with you. So and I know July just falls into the second half, but many of them deferred into the autumn because they actually thought that was a safer thing to do. So we haven't broken down exactly I mean, Kelly will have that number, but we haven't broken down exactly that proportionality. But I would say the majority that came in, in July has been advertisers in July rather than deferments. On the KPIs for BritBox, we have given as much as we can in terms of subscription trends and free trial conversions and so on. What we've said is that until we have our content distributed across all the platforms that we can have, at the moment, it's up to 60%. We haven't had an original drama yet. That's coming in the second half of the year with Spitting Image. I think until we have a kind of steady state for BritBox UK, where we can actually compare like with like and make some meaningful KPIs for you, we won't disclose those. But we will do that as soon as we believe we have a steady state for BritBox UK. And then on the permanent cost savings, as we've said, we around £10,000,000 of the £60,000,000 savings this year are permanent. And then we've said it will be 25,000,000 to £30,000,000 of additional savings over the 2021 and 2022. We haven't split between those two years, but we are looking at this as a multiyear project. And actually, what we're doing, as all companies I'm sure are doing, is we're looking much more deeply at how we work going forward and where there could be much more permanent savings as a result of changing how we do things and how we work. The next question comes from Patrick Wellington from Morgan Stanley. Patrick, go ahead. Yes. Good morning, everybody. Three questions. Firstly, when you look at advertising, you're talking about an improving trajectory. Do you see a marked step up improvement in Q4 over Q3? I mean, July and August are both down about 20%. September is a big month. So it's really got to be Q4 if we're going to step up. And when you do your projections forward, what's the first quarter where you think you'll revert to advertising growth? The easy comp is obviously Q2 twenty twenty one. Do you think you might get back into advertising growth, before that? The second is about the PSB review. What do you expect to happen in that? And is there any connection with the junk food, issue and potentially a change in your way of selling, moving off station average price for instance? And would moving off station average price be regarded by you as a positive or a negative? And then thirdly, you talked about going back to a more normal schedule cost in 2021, but could you define a more normal schedule cost? Because obviously, you're going to have a bit of bunching of sports costs because of the euros and presumably a bit of drama coming back on in Love Island and so on. So perhaps you could put that in the context of the sort of, I don't know, $1,000,000,000.05 which I would consider to be the sort of normal scheduled cost? Okay. Look, I think with advertising, I mean, there's no question. As I said, we've seen significant improvements in August over July. But it's we would have given you August, but it's only the August. So it's too early. And it's what is happening in the market at the moment, for obvious reasons, is there are a lot of late bookings, much, much more late bookings than there's ever been before. And so the visibility forward is not good. I mean clearly, we have hope that this is a continuing trend and that Q4 will obviously be better than Q3. We hope that, but we're not giving guidance precisely because we can't say definitively what is going to happen because I think advertisers are just like you and me. They don't know whether there's going to be other clouds on the horizon in terms of second wave. I mean you can't open a newspaper or listen to the radio or watch a telly without someone talking about a second wave at the moment. So people are obviously a bit more cautious than they might be. So it's difficult, Patrick, to tell you the Q4 versus Q3 because we don't even know where we will go on Q3 other than that the trends are definitely positive for advertising. And actually, as importantly, anecdotally, and I've sat in on some of these meetings, the whole tone and kind of conversation with advertisers is positive about the autumn. They're already planning Christmas campaigns. They're already talking about how they do good over that period in terms of their campaigns. So their social purpose being blended into their thinking, their creative thinking on that. And they're doing that now. And I think that is a whole world away from conversations we were having in April and May, which were much more tactical and topical, I suppose. And I think also on advertising, I think what we've seen through COVID and we'll see through the upward trajectory, as we say, is the benefit of having invested in that in the creative partnerships team and having a much more active dialogue with brands. As Carolyn said in the presentation, the commercial team have talked to over 3,000 people during lockdown, and that is as a result of having built those teams up over the last eighteen months. And I think we're still starting to really see the benefit now. On the PSP review question, Patrick, I think that what we I would say is that we've made, as an industry of PSBs, strong progress with Ofcom and DCMS actually on particularly the issue of prominence. I think they really understand that if you're not included on platforms, you can't have prominence. And if you don't have prominence, then people can't find PSP content. So never mind the 16, but actually, it will become increasingly difficult in an online world for anyone to find anything other than Netflix and Amazon and Disney plus So I think they've really got that point, and I think that they are aware of the implications of that to PSB. So let's wait and see what the review comes up with, the Ofcom review, which we're anticipating at the end of this year. But I think that's what we are hoping for, that actually the principles of prominence and inclusion that you have in the linear world are taken into the online world and that there is a level playing field in addition to that amongst the online platforms and us so that we are able to get fair value for our content. I think on the other questions you asked, I think what HFSS will do, I don't think there's a there's not a direct connection between the PSB review and HFSS. I think what it does do, though, is it brings into sharp focus the position of a commercial PSB and what its obligations are. So there are big obligations on you being a PSB that if you're not a PSB, you don't have to adhere to. And I think the compact, the modernization of that 2003 Communications Act is going to be imperative to ensure that the compact going forward for commercial PSPs reflects the value of being a PSB, if that makes sense. On CRR, clearly, think, yes, HFSS also brings that into sharp focus. So I think that it could be an opportunity. We've done a huge amount of work on it already, as you'd expect. And we will go forward and see how that goes. It's too early to say, I think, on that. And the last one was scheduled cost. And scheduled cost, I mean we guided at the beginning of the year £1,100,000,000 for this year. So that's what I would sort of regard as a normal number. And you're right, I mean there will be drama being delivered next year that we would have otherwise been delivered this year and we've got certainly the move of the Euros into next year to accommodate. But Kevin and team have done again as you'd expect, they've done an awful lot of planning there and they think they can absorb those within that budget. Great. Thank you. The next question comes from Julian Brock from Barclays. Julian, please go ahead. Your line is open. Yes, good morning. Thank you for taking the question. My first question is on Planet V. Are you will be will you be subject to the usual tech tax, which has come down from 60% to 40% according to the latest research from ISA and PWC I. E. Media owners only get 60% of the money invested by advertisers. So will that be the same on Planet V? We'll pay for all the cost, DSP, DNP, SSP, all of that. So basically, it's Planet V, because it's gone programmatic, have an impact on your revenue. So that's my first question. On the second question is, if you look at, for instance, the barb data, which they publish every Monday on what people watch during the lockdown, consumption of TV went up dramatically, same for SVOD. But since then, consumption of TV has come down back to previous level while of of SVOD has stayed up. So I don't know whether you could give us your view on that. And the last question is coming back on CRL. I know you kind of answer Patrick's question that you've it was also in focus and you've done a lot of work on it, but it was too early to say about how actively are you lobbying the government? Is that a priority for you? Because unless you change the way you sell advertising, create and sell inventory, I don't see how you can have meaningful targeted advertising and linear or at least on linear. These are my third question. Thank you. So on Planet V, I think you said Tech Tags. Think you're talking about just the sort of this all the research that's been done online where less than 50¢ on the dollar gets back to the publisher. I mean that's the whole point about doing Planet V is it's our platform. It's it is a soup to nuts. It is from the demand side all the way to the supply side and the ad insertion. So that's why we're doing it. So the money will go from the advertiser to ITV and to anyone else who puts their inventory on Planet V. And it's premium inventory, okay? And it's a different product. It's premium board inventory. So I hope that answers the I hope I understood the question correctly. Second one was on the Does that answer you, Julian? Yes. So you're not going pay any DHP? No. No. It's No. No. We have a Yes. We've got a perpetual exclusive license in The UK on the tech. So and and that's the very reason we did it. So we control that value chain in our own destiny within it. And on the barb data, I mean, you're right that those highs of viewing have come down, but they've not gone back to where they were. So I think people have discovered content that they like. There have been habits formed over COVID. And I mean I heard Reid Hastings on his call actually saying that they don't expect to keep all the subscriptions they got through COVID. So I think it's the same across the board, which is you've seen a rising tide. It floated everybody up. But actually, that will come down as people are returning to work because they just don't have as much time to view, to be honest. So I think our main thing is we focus on the 16 to 34s that we have attracted. For instance, two point one million sixteen to 34s were watching ITV News at 06:00, and that's fantastic. And they liked it because it was informative but accurate and trusted. It was not fake news. It was not misinformation, and that was that's very valuable. And now that we've got even more 1634s registered on Hub, what we have to make sure we do, I think, is make sure we're doing relevant content for them to keep them coming back to ITV. And we have some plans in that area. And I think when we do the full year results, we'll have more to talk to you, I think, about what we're doing specifically to engage and retain 16 to 34s into ITV. And then I think the third was CRR and is it a lobbying priority? I think as Carolyn said, really the priority is PSP right now. Yes. It's PSP review. Mean, I think the thing to make sure is understood is that actually CRR is a CMA decision. It's not actually government. I mean government, DCMS will have a view, obviously, but it's a CMA decision because it was set up for competition reasons, not for any other reason. So just so you know that, Julian. No, I knew that, but I was wondering whether you were intensely lobbying the CMA to get CR removed. Not at the moment. As Chris said, I think PSB is our key focus at the moment, and we have a lot of work done on CRR, as you'd expect, but it's not something we are pushing currently. Very good. Thank you very much. Thanks, Julian. The next question comes from Lisa Yang from Goldman Sachs. Lisa, please go ahead. Your line is open. Good morning. I have three questions if possible. The first question is on advertising. I'm just wondering if you can comment on your advertising share going to H2. It looks like in Q2 based on the Nielsen number that you lost a bit of share, which potentially is due to Love Island and it's a lack of sports. Just wondering to what extent that could maybe reverse into H2? And can I just follow-up as well on your August comment? I mean, you said it's significantly better based on the data you have so far in the first week. And I know you don't you wouldn't want to comment on weekly data, but given how the market is nervous about the broadcasters in general, just wondering if you can confirm whether August is close to flat. That's the first question. The second question is on cost. I think you've retreated your overhead cost savings of €60,000,000 for the year, which implies basically only have been for the second half. So I'm just wondering why wouldn't you be able to do more in the second half, especially given all the additional costs you might have on studios or the investments you're making elsewhere as well? Any comments on that would be helpful. And the third question is on the design on joint fluid advertising. I know there's a very limited visibility again on this, but you talked about having taken that into account in your financial scenario planning. So I'm just wondering if you think about a range of like advertising impact on the revenue, how should we think about the drop through? How are you thinking about potentially mitigating that impact on your EBITA? Like should we expect a 100% drop through? Or should we maybe offset half of that? I think we'll have to come back to you on the third because I wasn't quite sure. It's very it's quite hard to hear you, I'm afraid. So if we we'll need to clarify a couple of those questions. But do you want to start with advertising? I mean, revenue Just question on advertising? Just I think Nielsen data is showing that we've got a slight weakening of share of advertising Yes, in that's Love Island and Euros. And it's also Premier League Yes, yes. Coming back as So that's that. As you saw, our share of commercial impact is up in the half. Yes. And we can't tell you August, otherwise we would. I mean, if we were able to say it. I mean, the reason we're not doing that is we just want to wait and be absolutely sure. I've said it's a marked improvement on July, which is extremely good. But I think we're not giving guidance right now for August. But when we can, we will. Yes. And then on the cost saving, yes, we've delivered 51,000,000 of the 60,000,000 so far. I mean clearly that includes the hardest hit quarter when there was no travel and no discretionary spend whatsoever. So you wouldn't expect the same saving in the second half. But I think the thing I'd say in cost is we issue guidance, we set targets, but we will take cost out wherever we can, where it makes sense and so that we can continue to invest in the strategy for the medium term and create value. So we wouldn't get to 60% and stop. We would carry on. Financial scenario planning. Do you want to repeat the third question, please? Because I think neither of us really heard it, Yes. Did No, I wasn't clear. Yes. No worries. I'm sorry about the bad line. Yes, was just wondering, as you think about the potential the junk food advertising ban, how are you thinking about mitigating that potential impact? Or should we assume 100% drop through to your EBITDA if you were to lose that advertising money? Or you feel like you have enough time to potentially adjust your cost base or do other things to reduce that impact? And a quick follow-up on the first question, I was also wondering if you can comment on your thoughts about evolution of your share in the second half. Lisa, I think I'll just go back to the it's really uncertain on the ad front, so we give you any guidance on our share of advertising. And on HFSS, we don't have the information yet. I mean you all keep calling it junk advertising. That's come up four or five times. HFSS as a category is a very, very broad category of things that PHE, Public Health England, would list. And we don't yet know which products they're including and which are not included. And therefore, we cannot quantify it. Otherwise, we would have told you what that was. So until we know, we can't do that. Clearly, as I said earlier, we are we have already forecast some of this, and we have already got it in our financial scenarios going forward. So we it's not like we are preparing our financial scenarios with this in mind, but we do have to get there are so many unknowns just now that we can't really be clear about it. The next question comes from Matti Litzenen from AllianceBernstein. Matti, please go ahead. Your line is open. Good morning. The first one on working capital. You had a very large inflow in H1. I know you gave cash conversion guidance for H2, but could you just say specifically how much of that inflow will unwind in H2? And the second one on ITV Hub, the viewing growth there seems to have been well below that for non broadcaster SVOD and YouTube in Q2. Are you happy with the audience development for ITV Hub? Thank you. On working capital, we've given the guidance, which is that cash conversion for the full year will be 75%. So you can see that pretty much all of that working capital inflow will go out in the second half. On Hub, I would say that, that if YouTube is growing faster, that's just what has always been the case, and that tends to be very young people going to YouTube. So it's under-35s going to YouTube. And that has been the case, and that's why I made the point about 16 to 34. I mean we've been focusing on that. We've been thinking about that. We are going to take we're going to do more to make sure that we think a bit differently about what content we do and how we attract, retain and engage that audience. But that's not surprising to us that Hub is doing well. It has put on a lot of hours, dwell time is up, registered users are up. All the metrics are going in the right direction for Harm. And it is an improving experience all the time. And I think the content window being extended is going to help it quite a lot because at the moment, there isn't as much on it. I mean if you compare YouTube to Hub, I mean the wealth of content of YouTube, of tiny little snippets of things that people just go in and out of, that's what they do. So it's not comparing like with like really. So no, we're not disappointed that YouTube has gone up disproportionately. A lot of kids have been at home. And within with the hub viewing, particularly in this Q2, it is impacted by Love Island not being around the age of 10. And have Euros been in Europe. The next question comes from Richard Ehry from UBS. Richard, go ahead. Yes. Good morning, everyone. A couple of questions, please. Just one is on studios. Obviously, we've got production coming back on stream. Drama is obviously being more lagged. But when we look at Q3 in terms of growth rates, is Q3, do you think, going to be the worst quarter in the year? Or should Q2 be the worst in terms of overall growth? And to be clear on that, external sales rather than internal sales. That's the first question. The second question in terms of production costs, high production costs within COVID, I think everyone understands that. Is there any reason why that you can't pass any of those costs on to basically buyers within contracts and whether that's something that you can do given obviously demand for end content as you talked about earlier on the call? And then just the last question in terms of the Broadcast business. There was actually decent momentum in terms of growth rates, although small numbers on the DTC side and the other revenue numbers. Is there any reason why those growth rates shouldn't continue in the second half of year and whether there's any sort of one off issues in there, particularly in the other revenue number? I'll just we'll take it so I'll just do production costs and buyers, and then Chris can do the growth rate and the growth rate of both studios and D2C. I think you're absolutely right. We've never said that it will just be us absorbing production costs. I mean I think everyone in the industry understands that COVID is going to increase production costs, and it will depend on the production and on the relationship and the negotiations. So in most cases, it will be shared. But I suppose, overall, production costs are going up because of COVID. That's the point. It doesn't mean that we will absorb all of those costs at all. So Karen, just to be clear, there's no reason why margins shouldn't come back. Liz, our ambition is completely our aim, never mind ambition, is for margins to come back in studios as quickly as we can get them back. And we will do everything we can to make sure we get those margins back because they are actually good margins. They're the highest actually in the industry in terms of that range, and we intend to do that. And then I think on the performance in Q2 versus Q3, it's a really good question. And it's actually it very much depends on how quickly production ramps up. It's a very, very fast moving environment. I think Carolyn said earlier, just four weeks ago, the idea that we'd have 70% of our productions up and running would have been we'd have been very, very happy and we are happy. So because what you've got is the dynamic of in Q2, we were able to deliver quite a lot of productions that were had moved into post production, particularly in The U. S. So there was a sort of a bow wave of revenue that came into Q2. So I think Q3, it just will depend on how quickly we can finish the shows that are close to being able to be finished and deliver them in Q3. So I can't really answer that question right now. Q3 will still be a very sort of perturbed quarter for studios, if I could put it like that. And then on the D2C growth, there are quite a number of moving parts in that. So in terms of year on year, clearly, don't have the pay per view this year. I mean, had we without that comparative, we'd have seen double digit growth in the first half. But then again, Interactive was probably elevated because of the daytime viewing and now we'd hope that we'll hang on to a lot of those that engagement but I think our central assumption is that will come down a little bit. But D2C, the growth rates remain very good for us and we've got that number of initiatives Good to keep it Yes. And then the other piece in there is just the live tours and how quickly we may be able to get those up and running. But I wouldn't we're not thinking that, that will happen this year. Chris, just to follow-up on that. On the other revenue number, what was in there, the growth number? It was actually across the piece. So within that, you've got Pay TV, you've got SDN and you've got BritBox, and it was across all of those categories. Okay. Many thanks. The next question comes from Sarah Simon from Berenberg. Sarah, go ahead. Yes. Good morning. I've got the obligatory three as well, please. First one was, can you just sort of give us a bit more insight into what you're classifying as exceptional, COVID costs? Because we're seeing quite different treatments by the different broadcasters in terms of what they're accounting as exceptional. Second one was, can you just give us an idea of the percentage of revenue or of the external studios revenue that was coming from DTC in H1? And, Carolyn, you mentioned the hub extension in terms of the window. Can you talk about how you manage that against BritBox wanting to have as much content as possible? Because obviously, there's a bit of a conflict between boosting Hub and starving BritBox, if you like. Thanks. COVID exception, I'll start with that one. We've been very disciplined on that. The only costs in there are the sports rights impairment that is directly related to the, moving the schedules, and also the one off costs of closing down the studios productions in Q2 and then reopening them in Q2 and Q3. So for instance, that does not the exception would not include the incremental cost of production of working with encoded restrictions. It's purely the shutdown and the restart costs, so the sort of the cost that we've incurred twice. And you asked I think your second question, Sarah, was it the percentage of external studios revenue that is OTT in the first half? Is that what you were What you're getting from the Netflix and the Amazon. Yes, the OTTs, yes. So we don't break that down, to be honest with you. So we won't I won't give that to you for the first half, but I would just say to you that overall, the best way to look at it is to say that onethree comes from OTTs of overall external revenues for Studios, onethree comes from FTAs and onethree comes from ITV Network, roughly, just roughly. That's kind of a good way of looking at external revenues for studios. On the hub and the extension to hub, currently well, in the past, it's been one month. And the feeling is that one month is just not long enough as a window to really build Hub into a destination, and it needs to be more than a catch up service than a simulcast service. At the moment, it does catch up in simulcast very, very well, but it is not somewhere where we want to encourage people to stay and browse and increase their dwell time and find other things that they want to watch and hub. That's important to the VOD business. So extending the window is a way of doing that, but it's done in a very balanced way So the teams talk all the time, as you would expect. The key thing for BritBox is that it is the A to Z of multiseries box sets for British talent and for British content. And that's what it is. And that's from us, from the BBC, from Channel four, Channel five. So all British content you can find in one place whenever you want it. That's its distinctiveness. It's not so much about recency of programs. And then, of course, the originals that are coming through for BritBox, which Hub doesn't have, is all about freshness and attracting new people to evaluate BritBox, so you're drawing them in. But once they're in, actually, we find that about 70%, 80% of people are not watching the new, they're watching all the content that is already there. So for instance, at the moment, on BritBox, people through COVID have been looking at kind of comfort shows. They've been looking at Vera. They've been looking at all the BBC shows that Gavin and Stacey. They've just been going back to things that are familiar, but they've not seen all of, and they're watching them from the beginning. So it's a very different business to Hub, and we're learning more and more about that every day. And so we're evolving it and trialing and testing it as we go along. So at the moment, extending the window is fine, but we will keep that we will watch that. If it's going to be overly damaging, we will stop it. Okay. Very clear. Thanks very much. Okay. Our final question comes from Nisla Nisla from Deutsche Bank. Nisla, please go ahead. Great. Thank you very much. I have two remaining questions from my end. The first, is on BritBox. I know you can't mention too much about the KPIs, but, given how important the 16 to 34 year old age group seems to be, could you tell us, perhaps based on subscribers that you have seen, is it leaning towards that age group, or is it more diversified? Some color on the demographics would be great. And secondly, when you mentioned, the original content or the new content that you want to put on BRICK OFF, Who is that targeting? Is it targeting that younger age group? And is that a strategy that you want to pursue? Lastly, on BritBox, if you think of 2021, what sort of incremental investments would you need to make into the service? You quantified the 2020 number. Could you give us some color on 2021? And my last question is on the ITV studios. Given the traction, I guess, of the OTT, platforms have seen on the back of COVID nineteen, have you seen more commissions coming your way from these platforms which could make 2021 more interesting for ITV studios? Some color on how incremental demand, has the conversation leased, this year would be great. Thank you. Okay. So on BritBox, I think from a demographic point of view, it is actually quite broad and diversified. So the 16 to 34, I mean, subscription business, you don't really mind where your subscriptions are coming from. It's not like telly. And what has been encouraging is it's actually been quite diversified. So there are people in their 25, 30, 35 year old age range as well as all the other demographics that you'd expect. It is tilting slightly. If there was it started actually being more male and young male, and I think that's because we did quite a lot on Doctor Who. We did an event, a big event on Doctor popular. It launched in November, and we did the Doctor Who event in December. But actually, what's happened over time is it skewed slightly more to mid aged female. But actually, that's just a small spike compared to the fact that it is quite broadly diversified. I think in terms of the new content, there's a range of different content, as you've heard, and we will overemphasize to certain target audiences different types of content. So Crime with Erwin Welsh. Erwin Welsh has an incredibly yes, I mean, reads Erwin Welsh, but it's quite young in terms of people who would know who he was and really like his stuff. So that might be something that we target to 1634s more than we would do to anybody else. Spitting Image, I think, we're going to be introducing it as satire to a whole generation, which have who won't have seen it. So we will have to do something more for 16 to 34 on Spitting Image because we think they'll really, really like it, but they need to be introduced to that as satire. So it just varies, I think, on the program that we've got or the series we've got to in terms of our communication message. Chris, do you want to Mean about we haven't given guidance for 2021 on BritBox yet, but we'll continue to be investment phase for it clearly for a number of years. And I think your third question was about OTT commissions, and I think we did yes, definitely. We've had a lot of success with OTTs. I think I already kind of summarized quite a lot of programs like Queer Eye and the stuff we're doing for Quibi. So we're doing quite a lot for Netflix. We did our first scripted show, in fact, out of The U. K. For Netflix recently. Amazon, we've got Love Island in France on Amazon. So yes, we are definitely being commissioned more. And I think I said one of our priorities is to continue to expand doing business with OTTs worldwide out of studios.