Earnings Call: H1 2018

Jul 25, 2018

Pippa, shall I start? Good. Hello, everyone. Good morning. Hopefully, it's cool enough in this room. Thank you for joining us for ITV's 2018 interim results. In terms of the format of this morning, I just want to say a few words upfront before Iain presents our operational and financial performance for the first half of the year. I'm going to then take you through ITV's refreshed strategy, obviously, a key focus of today. We'll then have time for questions. And Ian and I are joined here today by, I think, virtually all of our senior management teams. There's Kelly, Williams from Commercial Kevin, of course, LIGO David Osborne, Julian Bellamy, Rufus Radcliffe, virtually all. So I hope I haven't missed anyone out. As you know, we've been undertaking a strategic refresh over the last few months to help us highlight the opportunities for ITV and also the challenges we need to address. This is very much a refresh, not a reboot, as ITV is a strong business, no longer solely reliant on U. K. Advertising. The Broadcast business remains robust despite the current market uncertainty, and ITV Studios is a strong and scaled international production business. The linkage between the two, the integrated producer broadcaster or IPB, by which I mean our Broadcast business having access to the best talent and owning its key content and studios having access to our broadcast shop window is a significant competitive advantage. However, the market is clearly changing, as you all know. And to reflect this, we have developed a clear vision and initiatives to drive growth to ensure ITV remains a structurally sound business. We have a solid balance sheet, which underpins our foundations. We believe that with our refreshed strategy, we will continue to generate significant cash with a strengthened high margin IPB, a growing Studios business with a stable market leading margin, and we will create a new scaled and profitable direct to consumer business, which will give us further growth. As these highlights show, we've continued to deliver a strong operating performance in the first half, and we are executing the refreshed strategy from a position of strength. I'm going to now hand you over to Iain, who will go through this in much more detail. Thanks, Carol. Good morning, everyone. As you've just heard, the most important part of this session is the strategy update. So I'll quickly run through the review of the last six months, which should be quite straightforward as we're very much on track to deliver what we committed to at the start of the year, which was a strong viewing performance, double digit revenue growth in VOD, a return to organic growth in Studios and continued strong cash generation. You've already seen the financial headlines, so let's look at Broadcast in more detail. The first thing to say is we're now reporting performance differently, aligned to our refresh strategy. Our reporting will now focus on total advertising, which includes NAH, VOD and sponsorship. We've also split out our direct to consumer revenue, where we get paid by our viewers. And Carolyn will cover the rationale for this later. On the cost side, we're providing a bit more detail. And this is mainly being done to highlight the variable areas of our cost base, especially as we build our new revenue streams. I know everyone hates having to change their models, but in the appendix, we've restated the last three years along the new reporting lines. Looking at performance and focusing on the revenues first, we delivered 2% growth in total advertising as expected. Within this spot, revenues were broadly flat and with strong growth in VOD, which is up 48%. This is not just Love Island and the football. Our VOD revenues have been growing over 40% all year, and strong growth is continuing into the second half. Our direct to consumer revenues are relatively small, but this is a real growth opportunity. In here today, we're voting, competitions, live events, Hub plus subscriptions and revenue from our pay per view boxing trial, all of which are up in the first half. Other revenues now include payment from platforms such as Sky and Virgin and third party commissions for services we provide to other broadcasters. In total, Broadcasting Online revenues were up 3% in the first half to $1,045,000,000 pounds On the cost side, our spend on screen was weighted to the first half as planned with the World Cup costs being mainly in June. This has meant a bit less drama in entertainment, but that's not impacted our viewing, which has been strong all year. And our guidance for full year schedule spend remains unchanged at $1,055,000,000 to $1,060,000,000 pounds Marketing, competition prices and online rights were included within the variable costs as are the increasing bandwidth costs of our online business. Add to this the investments we've made in pay per view and in rights for the Hub, you can see why these costs have increased. Our infrastructure and overhead costs have also increased, partly driven by currency on our euro denominated transmission contracts and partly increase in property costs for our new London buildings, as we previously flagged. There's also some phasing here, which will unwind in H2. So for the full year, other than for the currency and property, these costs will be back in line with prior years. In the round, Broadcast has delivered GBP $257,000,000 of profit at a 25% margin. Profits are down 12% in the first half due to this phasing of schedule and overhead costs. However, the operational highlight of our first half has been our viewing, both on screen and online. Our objective is to deliver the audiences demanded by advertisers, both in terms of scale and targeted demographics. The first chart shows that all of our channels have had a strong six months. We continue to be the home of scaled mass audiences. We've delivered 99% of all shows with a 5,000,000 audience, driven by sports, drama, entertainment and the soaps. And once again, with over 400 shows, we've delivered more 5,000,000 audiences than the previous year. But just as importantly, we're delivering a targeted demographic, whether that's Sov on the main channel, which is up 11%, 1634s on ITV2, which is up 19%, or a male audience on ITV4, which is up 5%. All of these channels have increased share and Socky for their key demographics. And at a family level, our overall share of viewing at 23.5% is now back to levels we last saw in 02/2005, with the main channel share of 17.2% higher than any time since 02/2009. The main channels also delivered a higher viewing share than BBC across peak. And this will be the third year in a row we've grown share, and the 9% increase is the biggest gain we've ever delivered. And we're not just growing share, we're also growing our hours watched, which across the IT family are up 5%, with 7% growth on the main channel. This strong performance comes right across the schedule. Our daytime shows from Good Morning Britain through to The Chase, our new and returning dramas such as Trauma, Innocent, Vadira and Endeavour, the big entertainment shows and, of course, the phenomenal viewing on the football where we averaged 7,300,000 across all our games higher than the BBC and any recent World Cup. And it's the same great content that's driven the viewing on the Hub where our consumption is up 33%. Most of this viewing is catch up, but increasingly, especially for younger viewers, it's simulcast, and our simulcast requests are up 40%. We're averaging nearly 300,000 simulcast views for every episode of Love Island, and the England Croatia game had just under a million viewers, which is nearly three times higher than our previous peak. Across any device or screen, our viewing performance for the last six months has been strong. However, the advertising environment has remained pretty lackluster. The shape of the year has followed every other year where there's a big sporting event. And with June revenues up 22%, that's helped us deliver 2% growth in total advertising compared to an overall market, which we think is pretty flat. Against this context, we've gained share in spots and are growing VOD faster than any of our competitors. By category, we're seeing a continuation of the trends we've discussed before. The High Street, Food and FMCG companies remain under pressure and are spending less. The tech driven businesses and digital brands are spending more. And we estimate that online brand advertising was up 15% in the six months. Our outlook across Q3 is for these trends to continue, and that may remain the case until confidence returns to UK business. However, if we keep delivering great audiences, we'll keep gaining share, and the business will remain in robust health. Moving on to Studios. We said that this year, Studios will return to good organic revenue growth, and we're well on track to deliver that. With 16% growth in total revenues, 11% organic, with growth across all of our production areas in The UK, U. S. And Rest of the World. There's been some helpful phasing in the first half, which is why we should not carry this level of growth forward, but we're confident we'll deliver good revenue growth for the full year. We delivered 6% growth in Internal Supply, I. E, to our own Broadcast business, helped by the return of Dancing on Ice and an extra episode of Coronation Street. Off ITV in The UK, we grew at 22%, helped by drama sales such as Bodyguard and Age Before Beauty to the BBC. The US grew 2%, 11% at constant currency, driven by the production of Fox's new entertainment show, The Four, the launch of a U. S. Version of this time next year, plus the return of Alone and Queer Eye, which we make for Netflix. The full year out term for The U. S. Will depend on the timings of health kitchen deliveries in the second half. The rest of the world continues to grow as we get better at monetizing our formats. We now produce six versions of The Voice, having added France and Australia and seven Love Islands. We sold 34 other formats to the overseas markets, nine of which we'll be producing in our international businesses. GE was down 2% year on year. However, it's flat if you exclude currency. But there's some healthy good drama to come such as Snowpierce and Vanity Fair, so we do expect growth over the full year. All of this adds up to GBP $8.00 3,000,000 of revenue, which at 15% margin comes through to GBP 180,000,000 of profit, up 7%. Looking at revenues in more detail, the first chart tracks the movement in revenue from last year to this. This 16% growth in revenue comes from over four thousand hours of content, up 10% across drama, entertainment and factual. Within these hours, the business has to manage churn. And to do this, you need scale and a healthy pipeline of new shows. In the last six months, we had to replace non returning or phasing differences of GBP 138,000,000 or around seven hundred hours of content. The growth we delivered is then on top of that. The prior year acquisitions have helped, but it's healthy to see the organic growth split equally between returning and new shows. This business may not fit neatly into a quarterly reporting timetable, but with good visibility on our revenues. And we do not invest capital in any production until we have a firm commission or a confirmed buyer, regardless of genre or whether we're selling to a broadcaster or an OTT platform. With nearly 90% of our 2018 target revenue secured, and that represents just under GBP 100,000,000 more revenue. Within this, we're two sixty three new or recommissioned shows, 36 more than we had this time last year, all of which gives us comfort that the pipeline is in good shape and will deliver the good revenue growth we committed to for 2018. When we do the Capital Markets Day, we'll give more detail on the Studios business. As part of that, we'll go through our revenues, explain the geographic mix, which is important now that 50 of the revenue is outside The UK. And we'll talk a bit more about the returns we expect from different genre. This chart is a bit of a teaser. As you can see, the business is predominantly unscripted in terms of scale, but the scripted area, especially driven by demand from OTT platforms, is likely to be the area of higher growth over the medium term. We'll go into more detail on this in September. Adding Broadcast and Studios EBITDA together gets us to $375,000,000, which is down 7%. Our financing costs are broadly flat, and the tax rate has remained at 19%. So this profit performance flows all the way down the results to adjusted EPS, which is down 8% of 7.1p. On a statutory basis, our EPS is actually up 4% year on year. It's because our exceptional costs and amortization charges are lower, primarily less P and L impact from earnouts, though our expectations of future cash payments have not changed. As Carolyn will outline, even though headline EPS is down and we plan to invest, the Board is confident in strengthening the underlying business, and as a result, is committing to a full year dividend of at least 8p for both this year and next. And to follow the theme of strong underlying operational performance, our cash generation continues to be a real strength. Profit to cash conversion after CapEx was 94%, with operating cash generated actually up year on year. And free cash flow after tax and interest was GBP 184,000,000, which is GBP 33,000,000 more cash generated in the period. Our net debt is just over GBP 1,000,000,000 at $1,034,000,000 pounds with net debt to EBITDA of 1.2x. This still provides good flexibility against our investment grade credit rating. The balance sheet remains healthy with good access to liquidity through our facilities, of which GBP $770,000,000 were undrawn. And finally, our pension schemes are reporting an accounting surplus of GBP 86,000,000, though we're still in deficit on a funding basis. So actual cash contributions this year will be consistent with prior year's GBP 80,000,000, reducing to around £75,000,000 next year. Taking pensions and leases into account, our adjusted net debt to EBITDA is 1.7x compared to 2.4x this time last year. So overall, the balance sheet is in good shape with a fair degree of flexibility, underpinned by continued strong cash generation. And finally, the outlook and planning assumptions, which for the rest of the year are in the appendix. And the reason I'm not running through them in detail is that there's no change from the guidance we provided at the start of the year. Even our 15,000,000 to £20,000,000 investment is not changing as we believe we can get real momentum behind our new plans by reprioritizing our investment around data, technology and our advertising proposition. As far as trading is concerned, we're well set to deliver good organic revenue growth from Studios. We see continued strong growth in VOD, which will mean Q3 total advertising is likely to be broadly flat. That means for the nine months year to date, total advertising will be up around 1%. And our viewing performance on screen and online has continued to be very strong, which, as this may be my last set of results at ITV, is not a bad note to end on. Thank you. Now back to Carolyn. And of course, it may not be his last set of results. And of course, we're very, very we're very sorry to see Iain go, but of course, he's going to be with us as long as we need him. Aren't you? So thanks, Ian. This slide outlines what I'm going to talk you through today. I'm going to just spend a few minutes talking about what I found when I joined ITV and the market context. I'll then take you through our refreshed strategy in response to that and how we will measure our success. Before I joined ITV, I heard an awful lot about the state of TV, that no one watches live TV anymore, that young people aren't watching TV, that advertisers are moving all their spend to the tech giants, that TV can't compete with the huge budgets of Netflix and Amazon. There is, of course, no doubt that the media market is changing and how people choose to watch is changing. Viewing is evolving and the pace of change is rapid. But what I have found very striking is just how resilient ITV is. Viewers in The UK watched two zero three minutes of TV per day. And while it's down on the previous year, it's a significant number. And this is despite all the new and disruptive launches over a five- to ten year period. Live TV remains the preferred way of watching content even for younger audiences. In fact, over 70% of all TV is still watched live. And while 16 are watching less TV, our performance clearly demonstrates that if you deliver great content, programs and it's not just Love Island, but of course Love Island, I'm a Celebrity, Survival of the Fittest, that's the night takeaway. Young audiences watch it and they watch it in droves. And there are millions across linear and online. Around 2,000,000 1634s are currently watching Love Island Six Nights at Weeks. That's one in two 1634s. And TV is a bigger platform for 1634s as YouTube is. I bet most of you in this room didn't know that. Those are amazing stats. No one talks about them and the media certainly doesn't. We have to more than ever keep delivering the great content that really engages them, and this is a key element of our refresh strategy. Advertising on the tech giants continues to grow, but it is slowing and brand owners are challenging what some online advertising actually delivers. And we are now starting to see many more questions being asked about unacceptable content, measurability and there has been a breakdown in trust. Having met with over 50 advertisers and media buyers since I started six months ago, TV is, and I believe will continue to be a key part of their marketing campaigns. And later in the presentation, I will demonstrate why. We should also not forget that ITV is taking more than its share from the growth in online advertising with the ITV Hub delivering a high quality, trusted and very transparent environment. Now on to Netflix and Amazon. They are global players and their budgets reflect this. ITV broadcasts only in The UK, as you all know. And our £1,100,000,000 program budget does an amazing job at delivering mass quality audiences with a reach well in excess of what anyone else can deliver. I know Kevin would always like more money, but we do not believe that we need to increase this to support the Broadcast business over the next three years. We are competing with these OTT players, but our integrated producer broadcaster model is, as I said, a strategic advantage backed by our strong creative pipeline of content, which we own and we control. In The UK, the demand remains overwhelmingly for British content as that is what continues to drive very significant audiences, which are so valued by advertisers. In fact, 92 of the top 100 program titles broadcast here all originated from The U. K. And globally, the demand for great content has never been higher, both from established broadcasters and increasingly from OTT platforms. We expect this to continue with the global content market growing at around 5% per year over the medium term. So there's no doubt in my mind that ITV has the resources and foundations to succeed and win in this changing environment. We have developed our new vision, More Than TV, in response to these changes and to build upon ITV's unique and winning combination of creativity and commercial strength. This video, I hope, brings that to to 're We're that. And every day, we create new ways to engage them. We are ITV, and we are not what you thought we were. What followed was an extraordinary investigation. We got the nation's favorite street and more love than any island could hold. More snogging and less pie. We've got a voice in every continent. And in the serious world of drama, we are serious players. Already. You'll find out soon, you know. But we create much more than that. Now they know. We create stories. We create suspense. Hello, babe. Sympathy. And laughter. We create Woah. Did you see the ITV thing? We create crowds. Just perfection. We create conversation. No. Here we are. You won't miss a thing here on ITV. ITV is changing. It is amazing to see. And ITV is changing things. ITV is all of us. ITV is just getting started. Yes. Entertaining millions, growing brands, shaping culture. Not just here, everywhere. More than sorrow, more than joy, more than anyone saw coming. More than TV, ITV. So, iTV will be more than TV. It will be a structurally sound integrated producer broadcaster where our ambition is to maintain total viewing and increase total advertising revenue. It will be a growing and profitable content business, which drives returns, and it will create value by developing and nurturing strong direct consumer relationships where people want to spend money on a range of content and experiences with a really trusted brand. We will continue to be a cash generative and growing business, delivering value for our shareholders. This is all about writing the next exciting chapter in ITV's story. We will compete where we can win: domestically, where we intend to lead in broadcasting and in on demand and globally, a world class studios business. So in the future, we'll focus on three key areas: strengthening the integrated producer broadcaster growing U. K. And global production and creating a scaled direct to consumer business. What does this mean? How will this be different? We will deliver content to people however they want to watch it, making the hub central to ITV and increasing its users and dwell time. We'll invest in marketing to drive viewing particularly among live viewers and extend reach for advertisers. We will continue to grow our Studios business building on the success of the past but with more focus on driving value from the IPB and improving monetization of our IP. We will be investing in data and tech across the business and leveraging this to drive new revenue streams from addressable advertising on Hub and directly from the consumer. Our commercial strategy will be more client facing, and we will augment our potential for creative brand partnerships. It is totally deliberate in this chart here that ITV is at the center. These are not independent silos. They work together, reinforcing each other, creating synergies and creating value. What sits at the core is best in class content, driving viewers and profit in every part of ITV. So to our first strategic priority. As I've said, we'll strengthen our core U. K. Integrated producer broadcaster business to ensure we can address the opportunities and challenges of structural change and provide strong branded and data rich relationships with our viewers and our advertisers. We're going to extend the benefits of the IPB and expand our leadership as the best partner for brands. Our plans for the IPB have five key components, as I said, investing in the hub. We want to make it a destination for viewers, not just a catch up service, which it is today. We're investing in the ITV brand to broaden the appeal of ITV to attract those like viewers, those who watch limited ITV content. We're going to invest in data, analytics, insight and technology, and we'll ensure we understand and serve our viewers better with further engagement, viewing and monetization. This will also help us serve our advertisers better, of course, driving effectiveness and expanding our portfolio of data driven marketing solutions. The IPB will work more closely with studios, maximizing the value of our investment in content. Each of these initiatives is about growing total ad revenue, maintaining total viewing regardless of the changes in the market and driving the economics of our business. The hub is going to be managed as a core part of our offering. Historically, within ITV, the hub has been run as a stand alone separate business. And as a result, we were not getting the full value from it. It was not integrated into programming, for instance, or marketing, and it was out of those decisions. And going forward, it'd be integrated into that. Our Director of Programming for Digital Channels, for instance, will lead on programming for the hub as well. He will look at augmenting the programs already on our channels with premium short form video content, for example. We are focused on improving the user experience with more personalization, evolving the product and content offering and making it consistent no matter where you watch it. This will deliver more engagement and viewing, particularly with younger demographics. Over the next three years, our goal is to increase registered users from 25,000,000 to 30,000,000. We are also going to be increasing our monthly active users. Registration is not enough. We need to increase reach, engagement and frequency. The fantastic success of the World Cup in Love Island is what we will be building on here. This video shows how the hub will work in future. It gives you an idea of the look and feel. Since the ITV Hub launched do business. Be And do opportunity to to we're opportunity the that. And And And relationship with our audience. We're And the second part of our strategy to strengthen the Broadcast business is to reposition the brand. Research shows that we are credit not really credited for the amazing creativity and energy we have. We are seen as cozy and traditional by many people. We need to ensure we appeal across all platforms and demographics. There are many viewers who only watch a limited amount of ITV content a week, as I said. Advertisers want us to deliver mass audiences and grow reach, and therefore, it's important we increase our engagement with these light viewers. Our analysis indicates that there is an opportunity of targeting 15,000,000 people who we believe we can win back more often. Through increased marketing investment off screen, we can target them consistently, drive brand reappraisal, increase viewing of our content across platforms and build deeper and better relationships. This will improve our reach, of course, and that is a key commercial benefit. ITV's overall proposition to advertisers remains strong, as I've already said. It's about to get stronger as we're in a position to offer advertisers the best of both worlds. ITV gives immediate scale, reach and fame for advertisers that just can't be achieved anywhere else. It is a brilliant brand building platform. It provides a safe, trusted and transparent environment in which to advertise and generates the highest return on investment of any media. On the hub, our focus will be on delivering a sophisticated addressable advertising proposition. And we are prioritizing this over addressable and linear because we believe this is where we will get better returns. Going forward, we will focus on advertising total, so ITV total advertising, which includes our spot advertising revenues, VOD and sponsorship. In addition, we will evolve our partnerships with agencies. We will create a client team to strengthen our direct relationship with advertisers. That's very important. They want that. They need us to understand their businesses and help them in a much tougher economy. And we will expand our creative team in commercial to fully leverage our creative power from right across ITV to deliver an innovative portfolio of marketing solutions across all our platforms. Now of course, the effective use of data is a key part of our commercial strategy, and I wanted to give you a great example of the power of our creativity for advertisers and how we will do more of this going forward. We all know by now that Love Island was created by us, by our Studios division. We now drive significant value through advertising and sponsorship, but also actually through licensing and merchandising partnerships in The U. K. That is quite different. This has been really successful for our partners. For example, the Ministry of Sound Love Island album went straight to number one. And the Chief Customer Officer of Misguided said, like literally two weeks ago, there's nothing that exists outside of the Instagram platform that touches on a daily basis our core customer with the depth, frequency and level of engagement like Love Island. It's worked brilliantly. Even on the first day the show aired, our trade saw an increase of around 40% week on week, and its trajectory has been rushing up ever since. Superdrug reported profits about 16% up, and they directly attributed that to Love Island. So through its great engagement and our relationships with viewers, we are also driving more value directly from the consumer through games, voting, competitions and merchandising. Its success in The UK has helped us to sell the program internationally. Love Island this year has delivered a £10,000,000 incremental non spot revenue on last year, and we will be implementing this structured three sixty approach to monetization using this framework. And we will select the right program brands going forward to be able to maximize the commercial potential of that. And I think something like I'm a Celebrity or The Voice would lend itself very well to this. Gathering and using data will be a key focus of our IPB, as I've said, and direct to consumer business, too. We already have a technology platform, which we are developing, but we have large amounts of data sitting in many different parts of ITV. In order to be able to gain insight and value from this data, we need to bring it together into what we're calling a center of data excellence. This will create a richer view of consumers and viewers and enable us to segment and slice the data to drive more value for advertisers with targeted and addressable advertising and also through the direct to consumer proposition. But we need the right skills We're in the process of appointing a Chief Technology Officer, who, for the first time ever in ITV, will be sitting on the management board, so on the top team. And we are also very close to appointing a Chief Data Officer, who will lead a team of analysts and data scientists. So just a couple of examples to demonstrate the value that this will bring. On the hub, data will enable us to increase personalization of the content and experiences you saw from the video, program recommendations, onward journey recommendations, that dwell time of people on there is really, really important to us and to advertisers. It will enable more efficient reengagement of inactive users and give marketing a laser focused targeting ability to support the drive to get those light viewers. Data enables improved ad monetization, of course, delivering advertisers more tailored audiences, for example, creating audience segments for advertisers around viewing behavior around the hub. The capture and analysis of data will also help us build a scaled B2C direct to consumer business with cross promotion and direct marketing, for example. So if we know someone watches the chase on the hub, we can recommend they play the game through the app or potentially in the future attend a live chase quiz event. So we're going to be investing an additional £40,000,000 in our integrated producer broadcaster over the next three years across advertising, as I've outlined, marketing and the hub. Overall, our KPIs will be looking at total viewing and advertising across all our platforms, so ITV total advertising and total ITV viewing. On viewing, we have an ambitious aim to maintain our total viewing across all our platforms. We'll be tracking this going forward. It's not possible to provide guidance for advertising given its cyclical nature. It is our strategic intention, however, that we will grow our total ad revenue when NAAR is broadly flat. We will also measure and manage the business with specific KPIs for our viewing, the hub and improving our brand health and live viewer engagement. These are all set out on this slide over here. Our viewing metrics will evolve with the completion of Barb's project Dovetail. We've established a number of targets over the next three years to ensure we deliver the value from the investments we are making. We'll deliver 30,000,000 registered users on the hub. We'll deliver double digit online revenue growth per year and we will grow our brand consideration score to 60%. So that's the IPB. The second strategic focus is Studios. Our aim here, as you know, is to be a leading creative force in global content production. ITB has grown its Studios business very successfully over the last seven years. It's in good shape. It's a scaled business delivering good growth at a stable margin and needs only modest organic investment over the next three years. It is forecast to produce over nine thousand hours of content this year across 11 countries. It produces scripted and non scripted content with over two hundred hours of drama produced in twenty seventeen and sixty two different formats. So using our competitive advantage as an IPB, we will work more closely with the Broadcast business. You've probably all heard about three sixty degree commissioning. It's been discussed an awful lot in the past. But this time, we're putting some structure in place to support this and make sure it happens effectively. A three sixty forum to facilitate easier and quicker decision making on commissioning a joint entertainment pilot scheme a drama investment fund, which we've talked to you about in the past, to invest in new ideas in which we own all the rights. The business has grown both organically and through acquisitions, as you know, and the portfolio of acquisitions continues to deliver a double digit return on invested capital. As I said, diversifying into studios was the right strategy for ITV, and we'll continue to do this. As I mentioned earlier as well, the demand for great content has never been stronger, so it's a growth opportunity. The core drivers of this business are creative talent, creating hits, monetizing them effectively and being disciplined and efficient. We are really focused on developing more hits, as you'd expect. And to do this, we need to keep attracting and retaining our great talent. And we will ensure we have the right creative and commercial environment to do this. Sounds easy. It's not that easy. Not many people do it well. And whilst we are happy with our current geographical portfolio, we will also consider selective value creating M and A and talent deals in both scripted and unscripted to obtain creative talent and IP. We have, however, eliminated the option of doing any scaled U. S. Scripted acquisitions for the foreseeable future. Now many of you have highlighted your concerns about the scale of the risks involved, particularly in The U. S. And I heard that from quite a number of you as I came around, actually when I first started. I just then just want to give you a bit of further insight into our U. S. Business to just reassure you that we are, in fact, taking limited risk. We were giving you we as Ian said, I think, we will give you much greater insight into this at the CMD in September, at the Capital Markets Day in September. ITV America is primarily an unscripted volume business. It's a profitable business producing content, but we don't tend to own the rights, as is usual, in The U. S. Production market. Now that we have full ownership of our U. S. Acquisitions, we're able to integrate them and restructure our U. S. Unscripted business to be more agile to respond to the challenges and opportunities in The U. S. Market, and that is going on now. We are also delivering efficiencies through relocating teams using shared functions across all our portfolio of labels in The U. S. In the unscripted business. Our scripted U. S. Business is very different. It's innovative and entrepreneurial. A great deal has been learned in this market already. And as a result of that, we are backing talent and IP for which the risks are minimal but with attractive rewards. So an example of that is Marty Adelstein of Tomorrow Studios, who's producing Snowpiercer for us, a very significant drama for TNT Jason Bloom, who is producing Sharp Objects for HBO and David Collins and Michael Williams, whom we are producing Queer Eye, which with and that runs on Netflix. Going forward, we'll be increasingly commercial in the way we monetize our performance and IP. So that's kind of The U. S. So I'm going to move off The U. S. Now. We're looking at further opportunities to license our brands and library, just generally through the Studios business and drive value through merchandising. We also see good opportunities for European scripted content with strong demand from broadcasters and OTT platforms for local content with global appeal. We strengthened our portfolio in this area with last year's acquisitions of Tetra and Cataleya. We have a strong pipeline of new and returning shows, and this slide gives you a sense of some of the fantastic scripted and unscripted content we create and own: The Chase, I'm a Celebrity Cory, Victoria, Paul Dark from Mammoth Sabura and Gamora from Catalea and The Voice from Talpa. We will invest about £10,000,000 in the Studios business over the next three years, building our creative talent, investing in our creative pipeline and our monetization capabilities. And this could include new revenue streams. We've been very transparent, and I think this is the first time we've given you clear targets to show how we will measure the success of this business. They are there. Overall, we expect our Studios business to deliver revenue growth of over 5% average CAGR over the next three years, with our hours increasing to at least ten thousand hours organically by 2021. The margin will be between 1416% depending on the genre mix. We expect growth in both scripted and unscripted, as I said, but that growth will be faster in scripted. Our KPIs will measure the performance of both businesses by looking at the quantity and also the quality of what we produce. So that's the Studios business. I'm now going to move on to the third engine of future growth, and that is the consumer. And we are creating, as I said, a new direct to consumer business. We see a real opportunity to tap further into consumers' willingness to pay for relevant content and to engage with ITV as a trusted brand. Today, we have over 28,000,000 consumer relationships across our business, and around one in five of those are actually spending money with us already. Mostly, these transactional relationships. For example, a viewer entering one of our 130 competitions a year, making purchases in one of our show apps or actually attending live events. So we're doing a bit of DTC at the moment some of the time, but it's below its full potential. With the right focus and a data driven approach, we see bigger opportunities here to grow in large underlying markets. We have such a passionate fan base who love what we do, and they really want to engage with us beyond the screen. And here's what I mean by that. World. And very excited And we're the We about excited about We the business. We're about to I'm a Celebrity, business going to Love Island theme parties, or choosing to subscribe to Hub Plus to enjoy our brilliant content ad free anytime, anywhere are just the beginning. With smart use of data and technology and winning consumer propositions, we believe there are significant opportunities to grow new revenues, which will be exciting for IPV a at the the You'll see that clip quite a lot. Now the good news here is that opportunities to grow our consumer revenues will be strengthened by the same investments we are making in our IPB, in marketing, in data, with the establishment of that center of excellence. The expanded reach and engagement and insight interviewers allied to new online functionality and enhanced data analytics will serve to grow the number of consumer relationships we can monetize while also enhancing the average revenue per relationship. In events, we're creating a dedicated team to develop new ideas. We're also looking at opportunities to extend This Morning Live, which I actually went to in Birmingham, and it was visceral, the kind of engagement of consumers there. And you could see the potential to do that for other daytime shows like Lorraine, for instance, and also to extend that to regions. In our Interactive business, we've established a competition portal and we are starting to use data driven segmentation to increase our annual spend per user. And we're looking at opportunities to develop new content and experiences around gaming, pay per view and merchandising. We believe our investments in analytics will continue to drive insight, innovation and growth in all of these areas. Now in addition to all of this, we see an opportunity to create an SVOD service. You all know what that is, but I had to say this morning it was a subscription video on demand service, which is a bit of a mouthful. But we're going to do that in The UK on the back of our brand, our content and significant cross promotion capability. Independent research has shown that around 25% of people who already subscribed to a service are very likely to subscribe to more SVOD services in the next two years. Additionally, it has shown that of those willing to take a service, over half of those people are very likely to subscribe because of quality British content. And we are, of course, extremely well positioned to deliver that. We already have a nascent SVOD business in The U. K. With ITV Hub plus We're seeing subscriptions up significantly, up over 500% on last year. Going forward, we will be investing in distribution, functionality and the ability to segment pricing and propositions to drive this further. UK consumers are clearly willing to pay for high quality British content that they can watch on their terms, accessible anywhere, anytime without ads. We are actively reviewing what our SVOD proposition will be and we are obviously talking to potential partners. It's too early to give you any more details on that, and we will update you on that as soon as we can. Therefore, D2C investment is approximately £10,000,000 over three years. The reason this is a low figure is, as I've mentioned, much of the investment is already covered in hub, data and the brand, which will drive these revenues and profits in D2C. Our key target is to drive revenues to at least £100,000,000 over three years. Now you may think that's not an ambitious target, but it is at least £100,000,000 and we will obviously be going for more. We will also deliver £10,000,000 paying product relationships. We'll measure our performance through specific KPIs, including total relationships, our percentage increase in monthly active users, our conversion rate to paying relationships and our net promoter score. In time, when data systems allow, we will measure our number of unique customer relationships and our ARPU. We will give you more details on these and all our KPIs in this area at the Capital Markets Day. So finally, to deliver our strategy, we need to do three things really well. We need to communicate and market ourselves really effectively to grow Hub and maintain total viewers, and we need to also communicate to the advertisers, the marketeers because they need to also really understand what we're doing and believe. They believe already in the power of TV, and they want people to constantly tell them how good TV is. We need to be a lean and agile organization with a culture that can constantly adapt to change. This is all about our people. It goes hand in hand with redesigning our organization to be more creative, more digital and more commercial. We must, of course, ensure we continue to develop the skills and capabilities that we already have in Kevin and Julian's area to deliver world class content. And of course, again, we need to ensure that we embed data, analytics and technology right across the business. Bringing all of this together, in 2019, we will invest £40,000,000 And over the course of the three years, we will invest a total of £60,000,000 This will be offset by 35,000,000 to £40,000,000 of cost savings, which we will achieve without impacting the culture, the creative and commercial strength of the business. And as Iain said, we are already implementing the refresh strategy today with no change to guidance for 2018. The net impact of the plan is 20,000,000 to £25,000,000 which excludes any incremental revenue benefits. The revenue benefits we will deliver over the course of the plan are reflected in the targets we've set in online, the hub, studios and direct to consumer, and we will more than cover the net impact that will be backloaded. We also have group financial targets, which, as you would expect, are around cash and costs. It's essential that we maintain our financial discipline. And so as well as our cost savings, we will also maintain our profit to cash conversion at around 85%. In addition, we have a target which reflects our aim to continue to diversify the business by growing our non ad revenues by at least 5% CAGR to ensure ITV remains robust and resilient. We are now driving profit from three different pools: from advertisers, from broadcasters and platform owners and now also from consumers. Seven years ago, ITV was funded by advertisers. As part of our refresh strategy, we are investing to drive organic growth in the business. We will look at selective, value creating M and A in line with our strategic priorities. This will, of course, be disciplined, targeted M and A focused on value creation and returns above our cost of capital. The Board intends, as Iain has already said, to pay at least an 8p dividend per year for the period of investment in 2018 and 2019. This reflects the Board's confidence in the business and in the refreshed strategy as well as the continued strong cash generation. Over the medium term, the Board intends that the dividend will go broadly in line with earnings. Our objective as we allocate capital to invest in the business and deliver returns to shareholders is to maintain an investment grade credit, which remains important to us. So in summary, we have today announced a clear vision, More Than TV, and initiatives for how we can and will compete in a changing environment. Implementing the strategy and creating value requires a relentless focus on delivery. We are clear about what we need to do and how we will measure success, and ITV is strong on delivery. We have already started investing in technology and bringing in key capabilities to the business. Through the strategy, we will create a resilient and growing business. As I said, an integrated producer broadcaster where our ambition is to maintain total viewing despite changes in the market and increase total ad revenue to be a growing and profitable content business driving returns. We will create value by developing and nurturing strong direct consumer relationships. We will have a business that will deliver attractive, sustainable returns to shareholders. I am really confident that with the energy, enthusiasm and focus of all the people I've met at ITV and I've met numerous numbers of people, we can deliver on our refresh strategy. We have the Capital Markets Day planned for the September 19. We are really looking forward to sharing a deeper dive into the strategy, our priorities and therefore, our businesses then. Thank you very much for listening, and we're now very happy to take your questions. Hi there. Thanks very much. It's Laurie here from Deutsche. The first question is just over is GBP 60,000,000 enough? We've seen peers like Time Warner spend GBP 200,000,000 on data analytics short form content. We've seen RTL spend GBP 700,000,000 on NCNs, Programmatic, we've seen ProSieben spend somewhere in the region of £200 to £300,000,000 on their ad tech stack. So you've talked about perpetual change. Is this going to be perpetual investment is the first question. No, don't think that's right, Laurie. I think the £60,000,000 as I said, it's kind of operational investment. So it's investment that we are putting into the business. It doesn't include acquisitions. I'm not saying we're to go on any kind of acquisition spree as Bruce even, I think, did in their time, and they focused on technology businesses. We're not doing that. But it doesn't, of course, exclude acquisitions. You will know that we bid for Videology, for instance. That's not included in the £60,000,000 and that was about addressable advertising and about Hub. So we believe the £60,000,000 for the next three years is the right level of investment for where we are today, for what we need to do today. Comparing us to AT and T and other massive conglomerate global companies, we are global in our Studios business. We are U. K. Provider of content to U. K. Viewers. So we're a domestic company when it comes to our channels. So it is comparing two quite different organizations when you talk about AT and T and us. And I'm not sure everyone actually thinks what ProSieben and RTL have done is absolutely the right thing. Don't know. Because I mean I don't know you would be in a better position to judge that. What I would say is we know that we will get returns on that £60,000,000 and that's the way we prefer to view it. Okay. And the second question is just over the cost save the offsetting cost savings. Where are those coming from? And to what extent can you continue to sort of grind out cost savings? Because you've been doing an awful lot for an awfully long time now. Yes. That's absolutely right. So ITV has taken over GBP 200,000,000 out of business in terms of cost, and Iain has driven that and has been very effective at doing that. And it's and I think the really important thing is the engagement is I've never seen engagement scores as high as ITV. They're at 90%, right, or thereabouts, between 8090%. So I actually think that every company today has to have a continuous cost program. I don't think it kind of stops. I think everybody is dealing with cyclical, tougher environments. So any company that I talk to, you talk to any CEO, they're all doing they're all looking at cost. And that's about efficiency. It can be about it's about it's a whole range of different things. So we are realigning our priorities around what you've heard today. And as a result of that, we are going to really have to look at where we put our resources and where we just do things well. But there are some things we want to be best in class in, in The UK and content is one of them. Data and analytics is one of them. And the how we do that, we've tried to explain, but we'll go into much more detail on in the future. And kind of communication is one of them. We are an entertainment and communication business. So it will be realigning around those priorities, but it will include process and efficiency and kind of reorganizing ourselves, redesigning ourselves to be future facing. It's Will Packer from Exane BNP Paribas. Three questions from me, please. Firstly, in terms of cooperation with some of your PSP peers, speculation in the press and trade press around, I suppose, more aggressive cooperation compared to what we heard about today. Is it right to think of the hub is going to be stand alone and maybe a bit of cooperation in SFOT, but beyond that, pretty limited based on today's presentation? Secondly, one thing we didn't hear about today was around your work with your pay TV stakeholders. Could you update us as to where you stand there? Retransmission fees has been a long term discussion. And then finally, on capital allocation, I think I'm right in understanding that you've ruled out U. S. Scripted acquisitions. You've said you only buy things where the ROIC is ahead of the WACC. Could you help us understand what kind of things you're looking at? Okay. So just on the PSB cooperation point that you've mentioned. Can I just be clear? Hub is being totally integrated into what we do. It's just part of what we do now. It's not a stand alone. It's not completely separate. The direct to consumer business of that will be a business, but that's a commercial business. But the programming, the marketing, everything else is totally integrated into the whole. That's one of the big differences of this strategy. And on the PSB cooperation, can't really be drawn on that. What we've just said is we are talking to a number of different partners, and we are not going to kind of disclose who we're talking to because it's premature, basically. But just to clarify, is that SVOD only? Or could that be a wider corporation? Yes. It's a good question, actually. I mean I think the focus in the media has definitely been on SVOD. But I think, actually, broadcasters will be cooperating more on many different levels. PSP broadcasters will definitely be cooperating more. And Kelly has done quite a lot of work in the advertising space, for instance, on that. So I think data, for instance, there's a whole range of things. Just actually making sure people realize the myths that abound around TV are kind of dispelled. I think we'll work together on that. So yes. Capital allocation, do you want to take Yes. I think we were very clear both in mine and Carol's presentation that we'll continue to look at ways of investing to strengthen, in particular, Studios business through the balance sheet. But we'll continue to do that, whether it's talent deals or M and A, in a very disciplined, very focused way that we see creating value and delivering good return on our capital. I'm sorry, just the Pay TV? Sorry? Oh, Pay TV. We are working well with Virgin, and we have a good relationship. And we are there's nothing more really to say about that, but actually, it's a very constructive good relationship with Virgin. You. It's Ian Widdicker from Liberum. Three questions, please. First of all, just in terms of VOD, just going back there. So previously, you had was revenue growth lagged audience growth. Now it's the complete opposite fact. Revenue growth there actually sort of significantly ahead of viewing growth. Could you just talk about what exactly is driving that in terms of the is it pricing? Is there something else that's particularly happening? And I guess sort of longer term, you've probably got around 6% share of the VOD market in The UK at the moment. So do you have a sort of view of where you'd like to be in a couple of years' time? Second thing is just in terms of addressable TV. Can you just talk about where you are in addressable TV at the moment, sort of any plans that you can share with us over the next what you plan to do there over the next twelve months? Third thing is just in terms of when we have, as it were, a steady state company, when we've got the investment out of the way and so forth, sort of what do you think the earnings growth could be sort of on a company that has flat TV now? Don't even have any view on that. He's not going to answer that, but he can try. I think the thing to say about the viewing and the revenue growth. So just remember, we don't put as many ads on Hub as we do on the channels. So therefore, it does sell at a premium because there's less inventory on Hub. I think the other thing is that increasingly, the agencies are seeing Hub as a real growth medium and a more targeted medium because of the demographic profile of Hub. And that has actually fueled some of the growth in VOD. And we have an internal target on share, but it's not one that we are disclosing at the moment. But I think increasingly, we will start talking to you more about that. And I think on addressable, it's probably best we can do some addressable on Hub today. We want to accelerate that. That's what this is all about. So we've run some campaigns, addressable campaigns on Hub already, but we want to do that at a more sophisticated level and a much more just a much more kind of augmented level. And I think perhaps the Capital Markets Day would be the best place to go into some detail on that. So we'll give you some more information on that there. Yes. And I think as we went through today, addressable on VOD is the immediate immediate priority. That's very clearly where we're putting some capital behind. In terms of the steady state earnings growth, as he runs spreadsheet through his head, I think we've been very clear how you can look at our Studios business going forward. We've given 5% compound revenue growth on average over the next three years, and we think the margin on that is going to be in the range of 14%, 16%. I don't think we could be clear on how that business is going to perform. Your assumption of a flat advertising or spot market, whatever you said, Ian, we've committed to double digit growth in our online Pay and Interactive business. We've committed to growing our direct to consumer revenues from GBP 65,000,000 last year to at least GBP 100,000,000. Karen has just pushed that one a bit more. And when you look at the cost side, yes, there's going be an increase in variable costs because some of these things directly have costs going to it. So the hub, as it grows, we have more bandwidth costs. But a lot of our broadcast costs, including transmission infrastructure, remain incredibly fixed. And we said we don't need to spend more on screen than the GBP 1,100,000,000.0 we guided to the last time we were here. So a large part of our cost base would stay incredibly fixed. And if you run all that through, you can work out what that does to the bottom line earnings. Joe Bonnetland from Credit Suisse. I'm going to go for two questions instead of three, break from tradition. So firstly, on direct to consumer. Obviously, that grew fairly substantially in H1 year on year. Can you talk a bit about what drove that in that period? I think you said there was the pay per view boxing. So will all of that recur going forward? And then also, with regards to incremental revenues there going forward, how should we think about margins for the growth that you are providing there? Then the second question, Studios, I suppose it is three in a veiled way, isn't it? Then on Studios, obviously, substantial growth in H1 and 11% underlying. You sort of touched on phasing but didn't really go into the detail of anything specific what was causing the phasing there. So could you give us a little bit more detail, please? Yes. D2C growth in H1. The two key drivers of that are composition entries. For those of you who are here this time last year, we had a relatively tough first half around our competitions last year, largely because there was a lot of live news that interrupted our calls to action. And those on screen moments really do drive engagement into our competitions. We've had a much more stable level of calls to action this year. And as a result, our competition has grown, also helped by the fact we've launched a Competitions Portal, which is also driving more traffic. So all of those, that's really good. The pay per view boxing is very much at this stage seen as a trial. We invested over the last twelve months in building this platform, Glidevi Box Office, which allows us to engage directly with viewers to pay to watch exclusive content. We have the rights to the World Boxing series. We've been through that. And one of the things we'll be looking at is evaluating whether that's something else we explore or can we use that platform for other ways of driving engagement directly with our viewers to bring in more revenues. So whether that recurs or not, I can't answer that question today. But it's certainly an area we'll be focusing on and looking at growth. The margins on these revenues, the margins on events and competitions are interactive will vary. And some of these, like the Boxing, there's virtually no margin on the Boxing at this stage because we deliberately took that as a decision to invest in this to see whether we could deliver something like because very new to ITV. We've never had that direct view of engagement. So the margin on there is very low. As we talked before, the margin on our compositions is high. So it will depend on exactly how the revenues evolve, but our objective is to create a fast growth, profitable and profit enhancing direct to consumer business. On the studios, phasing, as we've talked before, we recognize studios revenue when we deliver content to the customer, the broadcaster or the OTT platform. They are notorious, as is our in house team, Kevin, at changing their minds about when they want that content. And that does impact when we recognize revenues. And in the second half of this year, we've got some big shows, in particular in The U. S. Snowpiercer is the biggest drama we've ever done. But as I said, we know we'll make money on that because TNT are buying The U. S. Rights and Netflix are buying the global rights. But whether we get that delivered in the second half of the year today, we don't know. Hell's Kitchen, we don't know when Fox will want those shows. So there are some big things that in the second half of the year may impact the ultimate delivery of our results. In the round, we've got 90% of our target revenue secured. It's up GBP 100,000,000 on what we had this time last year. So we're very confident by the time we get to the end of the year, we will have delivered good organic growth in our Studios business for 2018. Behind you, Jo. Jo. Good morning. It's Lisa Yang from Goldman. My first question is regarding your relationship with Amazon Netflix. Just wondering how do you see that evolving going forward, given on one hand, they are a customer for studios, but on the other hand, they compete for potentially your viewers but also for your SVOD computer SVOD service? Secondly is regarding Wickbox. I'm just wondering when is the right time to roll it out internationally and what could be the magnitude of additional investments related to that? And the final question is regarding all the new KPIs that you laid out today and how is management going to be incentivized based on those KPIs and new targets? Okay. I mean I'll just, Ian and I both answer these because they're fairly generic in a way, except for the KPI question. On the Amazon Netflix relationship, I think the first thing to say is that we look at it in two completely different ways. One is if you're in the Studios business, they are our clients. They're big customers, and they will sell to them regardless of ITV. So they will sell content or they'll be commissioned for content by them, which they will be very happy to do. So that's fantastic. That's a really good thing for our Studios business. When it comes to ITV, the IPB, the broadcaster and the integrated producer, I think we are having one conversation with them now in a way we haven't had before. So we have a clear kind of strategic view of what we want to do with Netflix, what we want to sell to them out of the IPB and also with Amazon. So we're on the Amazon platform. We have a very good relationship with them as we do with Netflix. We just have to be clear about the rights that we might sell to them when they are big programs for ITV in The U. K, right? So it's about The U. K. Rights and how we would negotiate those going forward. I think that's quite a big shift for us. And all I would say is it's just a strategic approach to dealing with all the platforms, whether that's Netflix, Amazon, Sky, Virgin. We just have a much more strategic look at it and have one conversation with them because we have multilevel touch points with them because we do lots of different things with them. We sell to them. We buy from the e, etcetera. So that's Amazon and Netflix. BritBox, you want to say BritBox? Yes. BritBox in The U. S. Has gone exceptionally well. We've got over 250,000 paying subscribers in The U. S. In less than a year after launch, and we've achieved that with an investment of low single digit millions. And the momentum behind it, not least following the rollout into Canada, is really, really positive. So one of the things we'll be looking at in due course is what we what are the next steps for developing that outside of The U. S. And Canada. And as you can tell from the investment in The U. S, which is the biggest market we'd like to go into, it's not a massive use of our capital. So, we can do that in a low risk way. And it's really interesting to Carolyn's point, not just in The UK, the demand for British content is incredibly strong globally, and that puts us in a really good position. And on the KPIs, the share awards have been put in place already for the team to incentivize the team over the medium term. At this stage, don't have any targets and we've consulted with Shell saying we're going to do this and the Remco have been waiting the announcement of the strategy and the refresh to then put the targets around that. There's no doubt that our incentives will be aligned to what we are talking about today. Don't know exactly what that will look like, but we will work that through. But they will be aligned around the KPIs, which are the key drivers of the businesses. Think there's Gillian? Gillian Rock with Barclays. The first question is on Studio. Would it be possible to have an idea of how much the SVOD platforms for Netflix and Amazon are as a percentage of revenue? I think you're now saying that Netflix is your largest clients, but overall SVOD, are they 5%, 1015% of studio revenue? That's my first question. The second is going back on the relationship with the other PSV. So you unveil you're going to launch an SVOD service in The UK. So it seems you've decided to go along and that Marciu Bureau from Australia hasn't been resurrected. So why have you decided to go alone and not with the other PSB is my second question. And then the third one is, can we have some more color on sponsorship kind of growth in the first half? Is it a steady business? What's going on there? Thank you. Okay. So we've never actually disclosed who our largest customer is in studios. And we've always said Netflix will be in the top five. And we don't actually go down into that detail of what percentage of our revenue would be the FANGs, as we call them. Yes. But no. I mean if you look at what we've got coming up, we've got Snowpiercer, Bodyguard, somewhere between who Netflix are working with us on. We've got Vanity Fair, which is going to be coming up in the second half of the year, which we're really excited about. We will broadcast that in The UK. In The U. S, Amazon will have. And we've done Harlots with Hulu. So we will work with the OTT platforms, platforms, as as Karen Karen said, in particular outside of The UK. And they are driving the demand for that type of content, which is good for us as a producer of it. Yes. And I think on on SVOD, the what we said is we have that strategic intention because actually we know there is a gap in the market and there's demand for British content and that people are willing to pay. And Kangaroo was a long time ago and the world has changed. That's not to say that we're not talking to PSBs as well as other players. So we've just said we're talking to a range of players. I think what is encouraging is that the thing that stopped Kangaroo becoming a reality was regulation because we are highly regulated. And what's encouraging, I think, is Sharon White from Ofcom's comments recently that positively encouraged the PSBs to collaborate, cooperate and get together on certain aspects of their businesses. And I think that's really encouraging. I think that's a real step forward actually from a regulator, very enlightened. Do you want to do sponsorship growth? I will do sponsorship growth. June revenues, which I took on us going through, were up 22%. Spot revenues were strong, VOD revenue was strong, but also in there was World Cup sponsorship, which has helped push that up to the 22% number. Sponsorship is a big commitment for advertisers. But actually, we've got some very unique properties. So things like Coronation Street, purely sponsorship, but we've done deals with Kosta and Co op, which are probably the biggest product placement deals in The UK because they want to be in Coronation Street. We've got the big entertainment shows, which we can do things around. And Carolyn talked about Love Island, which is a combination of sponsorship and merchandising and licensing. To be honest, Julian, we don't really mind which line of our P and L accounts it comes in. It comes into our advertising line, and that's the number we're going to focus on going forward. Yes. There's a question I have. Yes. It's Richard Ehry from UBS. Just two questions. Just firstly, that you've obviously given a bit more color in terms of scripted and non scripted within the Studios business. Can you just talk about profitability between those two lines and how you think that's going to evolve going forward given that, obviously, it seems a decision still to invest heavily in that scripted line? The second thing is just on the cost savings and the investment that you've given, just whether you can give us some splits across the three units. You've given the investment, but obviously, on the cost savings would be helpful. Just in terms of the genre mix, this is something, as I said, we will come back to in terms of talking about the returns we expect from the different genre, at the Capital Markets Day because it is relatively complex and we haven't got time to go through the detail here. Scripted is it's interesting to use the phrase investment, and maybe I didn't get the point across when I was going through it. We do put capital behind scripted projects, but only when we've got someone to buy it. So it impacts our working capital because we make the show before we deliver it to the customer who then pays us for it. But we only start using our capital when we've got the risk taken away. So TNC and Netflix signed up Snowpiercer, which is the biggest thing we've ever done, then we started producing it. So we don't actually invest massive of our capital without knowing what risk we're taking in studios. And yes, the numbers on scripted can be big. You hear these stories of $25,000,000 pilots, but no one spends that amount of money unless they've got a view of the risks they're taking. And we do this, as Carolyn said in her script, in a very low risk rate way. You make your money unscripted when you have a returning series. So we will make money in year one on Snowpiercer because of the deal we've done with Netflix. If Snowpiercer is a success in t with TNC and it comes back for five series, we'll make a significant return. Unfortunately more. It will just the return step up as a show becomes more successful. On non scripted, it's it's it's it's and you can get into micro detail here. But very often, we will not make much of a margin in year one of a non scripted show on a new show because we will invest as much of the budget as possible to make the show as strong as possible to give it every chance of returning. So because when it returns, as we've seen with Love Island, you've then got a format. That format can travel. You can sell the finished tapes to different countries or you can sell a format and get it made locally. And both of those bring in incremental profit and returns. And that model, that process, how we manage the risk is something we want to go through in much more detail at Capital Markets Day in September. Patrick at the front. Hi. It's Patrick Wellington, Morgan Stanley. A couple of things. Firstly, on studios acquisitions. We were very careful about how you described what you weren't going to buy. I think it was U. S. Script scaled, scripted acquisitions. So Zendom all shine is still on the cards, and that's We never comment on specific We're excluded by that. And what we our focus really is very is on returns. So anything we might do in M and A will always be returns focused and value enhancing. I suppose my question was more about the scale. Would you consider something of that sort of size? I mean one of the targets of the previous management was moving to 50% non Gnar revenues, which was achieved, but arguably 75% of the profits are still Gnar. So do you, at all in your strategy, feel the need for a big step forward to sort of move away from NAAR based profitability? And I think it depends entirely on the acquisition and the whether if it's on strategy and whether it is going to be at the right value for us, the right price, the right value. It really will depend on the acquisition, whether it's small, medium or large. I think that's the key thing for us. It's not diversifying is important, I think. It remains important. And you can see that direct to consumer business is a further way of putting in a pillar, which is nothing to do with advertising revenues. It's entirely to do with a different profit pool, and that's an important step. But I think you wouldn't be going for an acquisition just simply to diversify. It would be about creating value. I mean many of us have come from the Informa meeting, which was a £3,000,000,000 business a few years ago, throw a lot of equity at it. It's now an £11,000,000,000 market cap business. I mean is there any and so you'd at least say of that management that they have sort of they're not afraid of scale and big acquisitions. Would you put yourself in that category? You don't need to do it, but you're not afraid of scaling up the whole of IT business? Honestly, I think for the right thing, we wouldn't fear it. For the right thing. But I would have to emphasize that we will be incredibly disciplined, and it will be for the right value, and it would have to create value for ITV. It's not just about scale for scale's sake. And then just quickly on retransmission. I know this is an odd one, but I think people have got the view that you've kind of given up on getting any money out of Virgin and it's all going to be a nice sort of cozy You said that then. Well, that's what we like to hear. Cosy, holistic relationship. I mean, in the context of what's happening with UKTV this week, does that tell us anything about Virgin's willingness to actually hand over money and, you know, your future negotiations? So no, look, I think the thing with Virgin and ITV is that, again, we it is important to both parties, I think, to have a commercial agreement. We believe utterly that we need to be paid fairly for our content, right? That is a fundamental principle for ITV. And we believe also that having that commercial agreement should remain confidential. And as long as both parties are happy, no one should really worry about the commercial agreement because actually, wouldn't do something that wasn't going to be good for ITV. They're not going to do something that they think is bad for Virgin. So my approach to this is very much do this behind closed doors. It's a commercial agreement. It is sensitive. But actually, we believe utterly in value for our content. They have their own principles. But we need to come to an agreement because actually, it doesn't benefit anybody. It doesn't benefit the viewer to have what happens with what's happened with The UK TV. There's been a huge amount of noise, but actually, the person poorest for it is the viewer. And I don't want that, and I hope Virgin wouldn't want that. So we're not anywhere we are, at the moment, in constructive talks. We remain completely open and I hope that will be that. So we shouldn't broaden a surge those unexplained surge in those other broadcast revenues. I really don't count your chickens. Just remain calm about that, would. Is there one more? Does it rest? I think we're done. Any other questions? No. Thank you all very much. Thanks for