Earnings Call: H1 2021

Jul 28, 2021

Good morning, everyone. Thank you for watching ITV's interim results. In a moment, Chris will take you through our operational and financial performance. I will then update you on our strategic progress and our priorities going forward. At 9:30 A.M., we will be holding a live Q&A, and I really hope many of you will be able to join us for that. ITV delivered a strong performance in H1 as we continue to manage and mitigate the challenges presented by COVID. The vast majority of our programs remained in production, and our advertising revenues have rebounded strongly, up 29% compared to 2020. Within that, AVOD revenues were up 55%. If we look through two years to 2019, TAR was up 2% over H1. Throughout the pandemic, we have protected investment in our strategic priorities as we have continued to manage our costs tightly. In H1, we delivered GBP 21 million of savings, GBP 15 million of which are permanent. We are making really good progress in executing our strategy. ITV Studios continues to grow as we strengthen our creative talents and diversify our customer base. We've accelerated the transformation of the hub and successfully rolled out Planet V. Our SVOD propositions continue to grow strongly, and we now have over 3 million global subscriptions with BritBox UK up over 10% in 6 months. We emerged stronger from the pandemic, but there remain risks, of course, associated with it. Our financial position is robust. We are confident about the future, and the board recognizes the importance of the dividend for ITV shareholders. Assuming the economy continues to recover, the board intends to resume the dividend with a notional GBP 0.05 full-year dividend. Given the current uncertainty, the board will not pay an interim dividend, but intends to propose the final dividend of GBP 0.033 for the full year 2021. This is based on two-thirds of the notional full-year dividend. The board intends to grow the ordinary dividend over time whilst balancing further investment behind our strategy and our commitment to investment-grade metrics. On the slide are the highlights of our financial results, which demonstrate the progress we're making in transforming ITV into a digitally led media and entertainment company, the innovation and agility our studios teams have shown in keeping productions running, how our commercial teams are deepening relationships with advertisers with innovative partnerships and agreements, and the strong recovery in the ad market. I'm now going to hand you over to Chris to go through the performance in more detail. Thanks, Carolyn. Good morning, everyone. I'll start with the performance of ITV Studios. ITV Studios maintained good momentum throughout H1 and had a strong end to the period, with a number of productions and licenses being delivered earlier than expected. As a result, total revenues were up 26%. There was good growth across the business, but particularly from the U.S. and Global Formats and Distribution. ITV Studios U.S. benefited from a number of significant drama deliveries in the first half, and Global Formats and Distribution has taken advantage of both the continuing demand for archive content and of the strong set of U.K. drama deliveries in H1. Percentage of revenue outside the U.K. rose from 55%-58% as we continue to diversify the business. Adjusted EBITAR was up 53% at GBP 95 million, with an adjusted EBITAR margin of 12%, helped by high-margin license deals and GBP 9 million of cost savings, which partly offset the increased costs associated with COVID restrictions and investments in the period. GBP 5 million of those cost savings are permanent. While Studios has had a great start to the year and remains on track for the full year, we expect there to be continued challenges from COVID, especially affecting dramas, shows with audiences, and multi-location filming. Moving on to media and entertainment. As Carolyn said, we've seen a very strong recovery in the ad market, up 29% compared to 2020. June performed better than we expected, largely driven by the Euros, and in fact, it was the largest June in ITV's history. Across June and July together, TAR is expected to be over GBP 45 million higher than in the same period in 2018 when we had the football World Cup. This exceptional performance is driven by the quality of our schedule, pent-up demand from advertisers, and the relative weakness of cinema, outdoor, and print media. It's also a confirmation of the continued demand for TV advertising and the unique impact it can generate for advertisers. It will create challenging comparatives for the same period next year, given the football World Cup next year is in H2. Within this, VOD advertising has been very strong, up 55% compared to the same period in 2020. Planet V continues to be well-received by agencies and advertisers who welcome the opportunity to run data-driven campaigns in a brand-safe environment. It also enables ITV to attract brands that have never used TV before. Direct-to-consumer revenue was down slightly as a result of a decrease in competitions revenues. The first half of 2020 was particularly strong, as viewing of daytime increased in lockdown. ITV Win, our rebranded competitions portal, continues to see a good uplift in traffic, which has helped to offset the impact of the decline of daytime viewing as the COVID restrictions were loosened this year. STNs revenue increased marginally in the period due to the sale of increased capacity. However, we continue to expect revenue to be under pressure in the medium term as older contracts are renewed at the new lower market price for DTT capacity. Other revenue increased by 16%, largely due to BritBox UK. Total costs were up 11%, primarily as a result of increased schedule costs due to a return to a more normal schedule and the Euros. We continue to expect schedule costs to be around GBP 1.1 billion over the full year. Variable costs were also up 11%, mainly driven by increased marketing costs compared to last year and content costs for BritBox UK. Infrastructure and overhead costs increased by 6% due to additional overhead costs in 2021 for staff bonuses, which were canceled in 2020, and investments of GBP 4 million in data, the Hub+, and technology, in line with our strategic priorities. This was partly offset by GBP 12 million of cost savings, GBP 10 million of which are permanent. Net investment in BritBox UK was GBP 22 million, with venture losses of GBP 31 million, in line with expectations. We expect venture losses for the full year to be at a similar level to 2020 and decline thereafter. Adjusted EBITDA, excluding BritBox UK, was up 109% to GBP 263 million, with a margin of 26%. Adjusted EBITDA, including BritBox UK, was up 125% to GBP 232 million, with a 23% margin. Turning to viewing. We had a strong schedule of drama, entertainment, and sport in H1. Share of viewing on the main channel and for the ITV family both grew in the period, but total viewing was down 6% against last year's tough comparator when viewing rose due to the pandemic. ITV's peak schedule continued to be impacted by COVID, with the loss of key programs such as Britain's Got Talent and some dramas being delayed. Online viewing on the ITV Hub was up 6% year-on-year as more people engaged with the Hub and for longer periods. Monthly active users were up 7% and dwell time was up 4%. Finally, simulcast viewing hours were up 20% as viewers used the ITV Hub as a destination for live viewing via connected TVs and streaming devices, particularly for sport. We've seen a strong recovery in total advertising spend since March, as lockdown restrictions have eased, with advertisers across the majority of categories increasing spend year-on-year in Q2. Retail, entertainment and leisure, and car categories have been particularly strong due to both the return to TV of advertisers who virtually stopped advertising last year and others attracted by the huge audiences around the Euros. Despite an uplift in Q2, airlines and travel has remained weak due to the continued uncertainty around travel restrictions. E-commerce companies, excluding gambling, continue to spend heavily, with TAR up 37% in H1. Comps get tougher into H2, but we are seeing momentum continuing into Q3, with July up 68%, August up 17%-20%, and very early indications are that September will be another positive month. On to adjusted and statutory results. Adjusted EBITDA increased by 98% to GBP 327 million, and adjusted EPS increased by 103% to GBP 0.059. This compares to GBP 0.062 in 2019. Adjusted financing costs were broadly in line with last year, and over the full year, we expect them to be around the same level as 2020. Our adjusted tax rate was 20%, and we expect it to remain around 18%-19% in 2021 and 2022, and then move to around 25% over the medium term, in line with increases in U.K. corporation tax. Statutory EPS rose from GBP 0.005 to GBP 0.024, and exceptional items were GBP 136 million. Exceptional items are above our original guidance due to an increase in the final Talpa earn-out payment of GBP 108 million following the expert determination. As we disclosed in the annual report, there was a wide range of possible outcomes, and this outcome is within that range. It's the final payment in respect of Talpa, and going forward, acquisition-related expenses will be at a much lower level. The other significant exceptional item is a GBP 16 million onerous contract provision. Last year, we began a review of the efficiency of our satellite transponder usage, enabling us to reorganize and clear all channels from one transponder in 2020. This year, we've cleared a second transponder. Over the full year, we expect exceptional costs to be around GBP 150 million. Looking at the balance sheet, profit to cash on a rolling 12-month basis is lower than in previous years at 72%, as expected, due to the reversal of the working capital benefits in 2020. As we previously guided, we expect profit to cash to be around 30% over the full year, but taking 2020 and 2021 together, we expect cash conversion to be 80%-85% over that two-year period, which is in line with historic levels. Our objective remains to manage our capital structure over the medium term to be consistent with investment-grade metrics. Our reported net debt at the end of the period was GBP 467 million. This is before the Talpa earn-out payment, which will be made in H2. Reported net debt to adjusted EBITDA is 0.6 times, and our covenant leverage is 0.5 times. On a pro forma basis, including the earn-out payment, net debt to adjusted EBITDA would be 0.9 times. We have good access to liquidity with GBP 778 million of undrawn facilities, which together with GBP 704 million of gross cash, gives us total liquidity of GBP 1.5 billion. Our pension schemes are reporting a deficit of GBP 10 million, and we continue to reduce the volatility of the pensions obligations through a combination of inflation and longevity hedging and the cash matching of investments in future liabilities. Finally, planning assumptions, which are based on our current best view, but of course, will depend on how events unfold over the rest of the year. In terms of cost savings, we are on track to deliver our GBP 30 million target, and in addition, we expect GBP 8 million of temporary savings. This will more than fund the GBP 25 million of investment that we're making this year in our strategic priorities. In terms of cash, we've now paid the GBP 75 million of VAT deferred from 2020. CapEx for the full year will be around GBP 75 million, as we further invest in our digital transformation. The cash cost of exceptionals is expected to be around GBP 310 million. Finally, pension deficit funding is expected to be GBP 74 million. I'll now hand you back to Carolyn. Thanks, Chris. As I said, we have made significant progress in delivering our strategy focused on our 3 priorities: growing our U.K. and global production business, creating our media and entertainment business, and accelerating transformation, and thirdly, expanding our now established direct consumer businesses and relationships. I'm going to now take you through that progress shortly, firstly, I wanted to remind you why being an integrated producer broadcaster gives us real competitive advantage. Number 1, it provides a base of core commissions and a significant promotional engine. 2, it enables 360-degree monetization of studios' content across our pillars of value. 3, it secures great content for ITV channels and platforms and enables us to be more innovative in how we window our content across linear and streaming. 4, it provides content pricing protection for the broadcaster. Five, it helps us attract and retain talent, which is, of course, key in a creative business like ours. Our ESG strategy is, as you know, an integral part of delivering our purpose and our strategy. In fact, it adds value to every aspect of our business. Through the significant reach of our platforms, we have a really unique ability to inspire meaningful change and help shape culture for good. ITV does much more than entertain. Our social purpose strategy is driven by our four priorities. First, better physical and mental health. Our flagship mental health campaign, Britain Get Talking, encourages audiences to keep in touch with others and to speak up and support their mental health. 56 million actions have now been taken since the launch of this campaign. We've also launched a new partnership between ITV2 and CALM, aimed specifically at younger people. Our healthy eating campaign, Eat Them to Defeat Them, ran for a third year, with 500,000 children participating in schools and millions more reached by the on-air campaign. Our second pillar is diversity and inclusion. Earlier this month, we published a review of our diversity acceleration plan 1 year after launch, and we've made good progress, including a 33% increase in diversity in lead roles on screen. We've created 62 opportunities in production for underrepresented groups. We've hired over 40 apprentices, and we've launched a production training scheme. Improving disability representation will be a particular focus going forward. Thirdly, Climate Action. In 2020, we set our ambitious target to be a net zero carbon emissions business by 2030. Teams across ITV are now implementing carbon reduction strategies to achieve that goal. Finally, giving back. We've launched a new mentoring scheme focused on encouraging emerging talent from underrepresented backgrounds. 150 ITV mentors have been paired with mentees. We are enabling ITV colleagues to go to schools to inspire teenagers to think about a career in TV and video. I'm now going to take you through the progress we're making in each of our strategic priorities. First, ITV Studios, where we have four priorities to create a stronger and more diversified business. Number 1, growing our scripted business. Number 2, creating more global formats. Number 3, diversifying our customer base. Number 4, strengthening our talent. We've made good progress on scripted, which is an area of high growth, driven by the demand from streamers. In the U.K., we have a large portfolio of long-running dramas, and we've produced six of the top 10 rating dramas in the first half, including Pembrokeshire Murders and Line of Duty. In the U.S., we're establishing ourselves as a leading independent scripted TV studio. We have a strong pipeline, including Snowpiercer, Physical, Cowboy Bebop, and Ten Year Old Tom. Our international scripted businesses, which create and produce critically acclaimed dramas, including Paris Police 1900 and Sentinelles from Tetra Media in France, and Gomorrah and Summertime by Cattleya in Italy. Since 2018, our H1 scripted revenues have grown 75%. Second priority, creating more global formats. We have a large portfolio of some of the world's most successful entertainment and factual entertainment brands, many of which are made globally through ITV Studios production bases. We continue to protect, strengthen, and exploit our established brands, selling them to more countries internationally, such as The Voice, which has now been sold in 70 countries, Love Island in about 21 countries, and Let Love Rule, our newest format, in 6 countries. We also have The Chase in 17 countries, including Beat the Chasers, which won Format Spin-off of the Year. We also have a good pipeline of new formats in the UK with the potential to be global hits. These include The Void, Moneyball, Ready to Mingle, and Rat in the Kitchen, which has already been commissioned in the US. Our third priority, diversifying our customer base. We are on track to double our revenues from streamers in 2021 compared to last year. Particularly driven by America, we have over 20 projects now in production or in development with all the major OTT platforms. We're harnessing the strength and position of the ITV Studios group, and our key creative talent, to develop relationships with all of these platforms. In H1, original hours delivered to streaming platforms increased by 84%. Recent deliveries include The Serpent, Snowpiercer, Generation 56K to Netflix, Physical to Apple TV+, and Love Island, Netherlands to Videoland. We have a good pipeline of future deliveries, including A Spy Among Friends for BritBox UK, Why Didn't They Ask Evans? for BritBox US, Queer Eye for Netflix in the U.S., and The Offenders for BBC and Amazon. In addition, global distribution's two largest customers of library content are OTT platforms. Finally, we have strengthened our creative talent, which remains so critical to continuing to build a successful studios business. We have three new talent deals in the first half, scripted labels in Cattleya Producciones in Spain, and Windlight Pictures in Germany, and a new scripted label, Rollercoaster Television, in the U.K. We are also seeing real progress in the recent talent deals we've done. Dominic Treadwell-Collins is already starting to win commissions, such as Holding and You & Me. Nicola Shindler, after just a few months, has a significant number of programs in development. We look forward to seeing those. Our new labels in the U.S., Work Friends, which is a prime-time animation label, and Bedrock, are both developing projects with global streamers as we speak. In total, we now have 25 scripted labels, up from 19 in 2018, and 35 unscripted labels. I'd now like to show you a tape which demonstrates the strength of our scripted and formats business, and of course, key parts of the ITV schedule, from soaps to daytime, to dramas, to entertainment. I got the rhythm. I got the rhythm. Let's start the show. I got the rhythm. Citizens of Snowpiercer. Are you ready? We are. You're really asking, bro? We got the rhythm. We got the rhythm. We got the rhythm. We got the rhythm. We treat this as a crime scene. Cool. We got the. Hey. We got the rhythm. I want to thank our distributor, ITV. Everything's going to be okay. Baby, I'm back. Oh my God. I thought I had smashed it. I got the rhythm. I got the rhythm. I got the rhythm. Go. I got the rhythm. Turning now to M&E. We announced the restructure of broadcast last year to create M&E with two business units, broadcast and streaming, to help us better serve changing viewer habits. Each unit's priorities are clear. Broadcast is focused on delivering mass live audiences with high reach, and streaming is focused on driving digital viewing, both advertiser funded on ITV Hub, ITV2, ITVBe, and CITV, and direct to consumer through AVOD, as well as supporting our interactive business. We completed this in March and can already see the benefits. It's enabling us to be more agile and flexible in decision-making, it's further developing all our digital capabilities in the business, and it's also streamlining the ways we work, so making us much more productive and efficient. I'm now going to show you some of the highlights from the first half across our platforms, including some of our innovative advertising campaigns, which we're really pleased with, and partnerships, and a preview of our exciting slate of programs to come. I can't wait to get going. That is great stuff. You like what you see? Roll the titles. It's a journey of discovery. You think one man did all four murders? He is the Serial Killer. Who is that? Your task is to get the IDs of the VIs. I thought this was about preservation of life. You don't want me here. I did nothing wrong. Derek Sickest person the team of doctors have treated that's lived. This is exactly what we feared. Lots of questions to ask, lots of questions to answer. I'm getting excited just thinking about it. You're in for a real treat. It just grabbed me like spirit. It was nice. Do you think your head could be turned still? You are jealous. There is one bit of me wants to punish them. Boy, have we got a lot to talk about. Introducing Planet V, advertising in your hands. We can all do our bit for our environment. Co-op, it's what we do. Cooking with the Stars, brought to you by M&S Select Farms. Looking for romance? Dive in this summer to Swipe Island. Not everyone likes to talk about their feelings. It's always just a little bit easier when it's not face-to-face. You guys have been brilliant. Eat Them to Defeat Them. Well, you've waited a long time. We found new evidence implicating several other suspects. The press called him The Night Stalker, and he's recently become active again. Marking by name, marking by nature. You don't know your husband. He's dangerous, and you need to do something. I need to know why my boy died in a game of football. No witnesses, no forensics, no motive. Mike up to Newshaw. What a goal. Take a sip. You must decide who you think is the best. Breathtaking. It starts celebrating families. Half these boys are only in it for the money and are already in relationships. You are going to love it. Pure artistry. To linear broadcast. ITV continues to be the home of mass simultaneous reach, this is becoming increasingly valuable, as you'd expect, to advertisers, as viewing becomes more fragmented. There are few platforms that can deliver anything like our scale in such a brand-safe way, that's a critical differentiation for us. England v Scotland peaked at 19.9 million viewers, of course, the England semifinal against Denmark in July was even bigger, peaking at over 26 million viewers. The Pembrokeshire Murders was the most-watched new drama of the first half, with 9.6 million viewers. In entertainment, we aired the two largest entertainment shows, The Masked Singer, which averaged 10.6 million viewers, and Saturday Night Takeaway, which averaged 7.4 million. Across the half, we delivered 92% of commercial audiences over 3 million, 93% of commercial audiences over 5 million, and 100% of commercial audiences over 7 million. Now, onto streaming. Our investment has been focused on continuing to improve the ITV Hub and drive viewing, which is up 6%, and increase AVOD revenue, which as I said, has grown 55% in the first half. This includes improving the user experience with increased personalization, recommendations, and curatable rails using our data and insight. Rolling out the redesign of the new Hub interface with around 70% of months now viewing the new design, and strengthening the content offering with a 12-month extended catch-up window, short-form content, and trialing different windowing strategies. We've done a number of full series drops which have been very successful, and which will help inform our content strategy going forward. We've also improved our news site, which drives significant traffic and is now on Facebook News. We're working with other platforms to integrate ITV News as well. We have 34.6 million registered users now, which is up 7%, and have delivered very significant audiences on the hub for programs such as the Euros and Love Island, and delivered 139 million drama streams in H1, up 26% on last year. We've continued, as I said, to successfully roll out Planet V, our scaled programmatic addressable advertising platform, to a really positive response from agencies and advertisers. 90% of all hub inventory is now executed through Planet V, with 650 people fully trained. 65% of all campaign bookings are now self-serve. Planet V is now the second-largest programmatic video advertising platform in the UK, behind Google. Planet V enables advertisers to buy ITV Hub premium inventory seamlessly and cost-effectively from their own terminals. Using over 10,000 data points within the platform, they can build their own audiences and monitor their own campaigns. This has driven a 250% increase in VOD-only advertisers in H1. As William Purcell at Seven Stars said, Planet V has opened up a whole wealth of new and improved targeting opportunities for advertisers, enabling them to harness ITV Hub's large audience in a much more efficient way. Enabling access to both first and third-party data has brought broadcast to VOD more in line with digital targeting. We are also piloting data match campaigns through our tech partnership with InfoSum, which allows advertisers to use their own first-party data in their campaigns in a secure and compliant way. We are also, of course, continuing to deepen our strategic relationships with our existing clients, and we're working more creatively and collaboratively with them to support their businesses and create value for them. This includes product placement, ad-funded programming, and commercial partnerships, where we can use the power of our brands to help advertisers engage with audiences in different ways. This is made possible and more valuable by being an integrated producer broadcaster with editorial, commercial, creative, and production working really closely together to provide unique opportunities for advertisers. Just an example, but a big example, M&S and Cooking With the Stars. It's an ad-funded program with promotion right across ITV and throughout the M&S retail and online estate, including new ready meals and ingredients, and even a Percy Pig chef. This is building on the success M&S saw with us with their fresh market update campaign last year. That saw sales for some featured products go up by 90%. Another example is Purplebricks and Coronation Street, how we have credibly tied products into future storylines, not simply placing them in shows. TikTok was the biggest single product placement deal we have ever done on Saturday Night Takeaway. This year, we've a record number of nine commercial partners for Love Island in program sponsorship, brand licenses, in-store branding, and product placement. Our commercial team has really created a number of initiatives to attract new advertisers to ITV and ITV Hub and to support businesses to recover. In H1 alone, we brought 160 new brands to TV, which is brilliant. These initiatives include, briefly, first, AdVentures Ignite, which works with digitally native brands, for example, Butternut Box, a subscription dog food brand. Secondly, through our media for equity fund, AdVentures Invest. We've already invested in two companies, Spoke and what3words. We have a number of other projects in the pipeline. Third, backing business, which supports British businesses with a number of initiatives, including incentives and rewards to support their media investment, as well as webinars and teach-ins to help advertisers stay close to their customers. We've also made it more flexible to advertise with ITV, removing all late booking penalties. Recent advertisers we have worked with include HiHi Phones and Weleda beauty products. Finally, ITV Home Planet is helping brands tell their environmental stories. It's informing and inspiring more sustainable habits in their consumers, and advertisers or sponsors like Quorn and the World Wildlife Fund are very much a part of that. We also did an ad break takeover for World Environment Day with brands such as VW, Inch's Cider, Ribena, and Sainsbury's. There is lots more to come around COP26 and Climate Action Week in the autumn. Turning now to our direct-to-consumer business. We've seen strong growth in our global subscriptions, as I said, up around 15% in the half to just over GBP 3 million. We're pleased to see BritBox UK continue to grow up over 10% in the half to 555,000 in spite of the tougher environment for streamers, many of whom have seen minimal growth as lockdown restrictions have loosened over the last few weeks. We've seen churn rates continuing to improve. App ratings for our products on Apple and Android both increased over 4 stars. During the first half, BritBox UK launched its first original scripted series, "The Beast Must Die." This saw higher free trial conversion rates than average conversion. We also ran our first original factual commission, "The Secret of the Krays," received critical acclaim. There's a strong pipeline of originals for H2 and throughout 2022 with the second series of "Spitting Image," "Magpie Murders," and "Wedding of the Century." Hub+ continues to perform well with 452,000 subs up on last year. Subscriptions for BritBox International have again grown strongly to 2 million, up around 18% in six months. BritBox US continues to perform really well, and it's profitable. BritBox Australia is ahead of plan following its successful launch in Q4 last year, and we are on track for a further rollout with South Africa launching in August. While Interactive's performance, as Chris said, has been impacted by strong comparatives in 2020, ITV Win, our competition portal, continues to do well with increasing traffic and revenue. This tape demonstrates the great progress we're making on BritBox in the U.K. and internationally. Oh my God. Oh, yes. It's hardcore. Perfect. How about a bit of Brit? You have to be careful making heroes of people who don't deserve it. I am going to kill a man. I know his name. I know what he looks like. The only thing I don't know is how. Am I interrupting anything? He is a serial killer. They always kill again. He has more of this than meets the eye. Come on, start looking. There was a motive. There is always a motive. You mean you know who did it? Of course I do. That's why I'm here. Crisis. Big crisis. Big, serious crisis. Kisses. We're gonna save the world. I'm police. When did we stop caring about honesty? There's no place on Earth like it. Careful. Once it gets in your bones, it's hard to get out. Another one. Fancy a trip in the box? Let's go. As you all know, an important part of our strategy is to create strong partnerships. Our aim here is to work with select partners to ensure our content is available, prominent, and we can monetize it wherever it is consumed. In the first half, we've continued to build those strong relationships. We've agreed a new partnership with Sky in the U.K., bringing many advantages for our advertisers by delivering addressable advertising through Planet V at scale on ITV Hub and homes with Sky. This is a big step in delivering on our objective of building a scale AVOD proposition across the U.K. market. We have executed our new distribution partnership with Amazon to make BritBox available on Amazon Prime Video channels, which makes it accessible now in over 90% of VOD homes. With the BBC and Channel 4, we've also successfully brought together Digital UK, which facilitates the provision of Freeview and Freesat into a single PSB-owned venture. This will benefit from a more streamlined approach to technological innovation and product development, and will help ensure viewers continue to have access to a range of high-quality, free-to-view TV services in the U.K. I think you also know that Ofcom recently reported on its review of the regulatory framework for the public service broadcasters. The report demonstrates the high value that audiences place on the whole range of PSB content, and concludes that current outdated legislation needs a radical update for the global online era. We're encouraged by this report and the fact that the government has said it will publish draft legislation this year to ensure the future of our thriving PSB system. We set out our More Than TV strategy in July 2018, and we have completed the first phase of this, delivering across our 4 pillars of value. Firstly, Studios, which is now a world-class international production and distribution company, and 1 of the largest independent producers globally. We have grown our scripted business, strengthened our talent, diversified our customer base, and created more international formats. Of course, we are always looking for 1 of our labels to create the next big global hit. Secondly, our linear broadcast channels, which have maintained their unique ability to drive live mass audiences in a trusted environment, which are an important part of many marketing campaigns. Our own marketing campaigns for our brands and our programs have attracted light viewers and acclaim for the impact they have had. Thirdly, streaming, where ITV Hub is capturing the shift to online viewing and the strong demand for online advertising. The rollout of Planet V provides advertisers with targeted advertising, as you know, in a brand-safe environment. We've built our data capabilities and are now in the process of implementing our full data strategy. Finally, direct-to-consumer, where our number of subscriptions is growing strongly as we monetize our best British content in the UK and internationally. In addition, we're driving revenues from our IP as consumers are increasingly willing to engage with a trusted brand and its contents. The development of gaming, licensing, and merchandising revenues, while a small part of our D2C business, has been harder, partly due to COVID. We will continue to trial, test, and learn in these areas as we go forward. Digital transformation is key to unlocking success in so many areas of our strategy. We are digitally transforming many of our products as you have seen. We are also making progress in digitally transforming the way we work, our internal systems, processes, ways of working, culture, and behaviors to support a digital business and be more agile, efficient, and productive. We are now entering the next phase of our strategy. We are positive about the future. Our goal remains to be a digitally led media and entertainment business that creates and brings our brilliant content to audiences wherever, whenever, and however they choose. We will continue to execute our strategy at pace, and we will further strengthen and diversify ITV Studios by genre and customer to take advantage of the strong demand for global content. In M&E, we will have one content budget across every platform, including BritBox UK, allowing us to optimize our windowing strategy to create the best experience for viewers and the best value for advertisers and for ITV. This will balance our ability to deliver mass audiences and increase on-demand viewing. Our streaming strategy will be AVOD-led with a compelling SVOD proposition, positioning us well to respond to the evolving viewing and advertising environments. We will continue to invest in data and analytics, technology, and skills to enable further platform integration and a more seamless viewer experience. We look forward to discussing this with you in much more detail, and we'll be holding two investor seminars in the autumn to do deeper dives into ITV Studios and into Media and Entertainment as a division. Pippa will be in touch with more information on this shortly. Turning to our outlook. We are encouraged by the positive trends we are seeing. ITV Studios is performing well as it continues to successfully manage the challenges presented by COVID. Advertising comparatives get tougher in H2, but the demand for advertising remains strong. July is expected to be up 68% and August up 17%-20% compared to the same period in 2020. It is too early to give a range for September given the current uncertainty, but we expect it to be positive. The pandemic continues to pose a potential risk to our advertising and Studios revenue. We will monitor this very closely and continue to tightly manage our cash and our costs. We are on track to deliver our target of £30 million cost savings this year. Finally, as I said at the start of the presentation, the board intends to reinstate the dividend at the full year. Thank you for your time. I hope you can join us for the live Q&A at 9:30 A.M. this morning. Details of how to join are in our announcement. Thanks very much.