STV Strategic Plan delivers profitable growth 2019 Interim Results - 3 September 2019 Agenda

Introduction Simon Pitts

Financial Results Lindsay Dixon

Strategic Update & Outlook Simon Pitts

Q&A

2 Key Messages

• Delivered double digit operating profit growth despite national advertising weakness • New team executing well on the strategy • Excellent viewing performance maintained on TV and online • Uniquely strong position in Scotland, outperforming wider UK advertising market • Increasingly high margin digital business with significant scope for growth • Investing in STV’s creative pipeline to meet local and global demand for content • Growing progressive dividend • Good momentum into H2 despite Brexit uncertainty

3 2019 H1 Highlights

Total Total Regional Digital Production Advertising Revenue Revenue Revenue Revenue Revenue £54.9m £48.8m £7.3m £5.6m £2.0m -5% -0.6% +19% +19% -46%

Operating Operating Interim EPS Exceptionals Profit Margin Dividend £11.0m 20% 21.8p 6.3p Nil +10% +270 bps +9% +5%

4 Financial Review Lindsay Dixon Group Results Strong performance in an uncertain advertising market

H1 2019 H1 2018 £m £m Change Revenue 54.9 57.7 (5%) • Revenue down 5% reflecting national advertising market and phasing of deliveries in Operating profit pre Productions exceptionals 11.0 10.0 +10% • Strong growth in adjusted operating profit, up Exceptional items - (8.6) 10% Operating profit 11.0 1.4 • Operating margin at 20%; highest H1 margin for Finance costs at least 10 years - Funding (0.7) (0.6) • No exceptional items in the period - Other (1.2) (0.9) • Cash finance costs in line with last year - Exceptional • Other finance costs are non-cash and relate to provision - ELM - (4.2) pensions and introduction of IFRS16, Leases Profit/(loss) before tax 9.1 (4.3) • Operating performance converted to 9% increase in adjusted EPS EPS pre exceptionals 21.8p 20.0p +9%

6 Broadcast Good growth in regional, benefit of news restructure & closure of STV2

H1 2019 H1 2018 £m £m Change Revenue • National advertising decline includes impact of - National airtime 34.4 36.6 (6%) FIFA World Cup in comparator - Regional airtime 7.3 6.1 +19% • Strong growth in regional advertising at the top - Sponsorship 3.0 3.0 - end of expectations - STV2 - 0.7 (100%) - Other 1.1 1.4 (21%) • Impact of STV2 closure is £0.5m benefit to - Internal supply (0.8) (1.3) (38%) profit (removal of £0.7m revenue and £1.2m 45.0 46.5 (3%) costs) • Operating costs tightly controlled; 60% of costs Operating costs (35.3) (37.4) +6% are with ITV which reduce in line with any national advertising decline Operating profit 9.7 9.1 +7% • Operating margin reflects STV’s unique variable cost model, the strength of regional advertising, STV News restructure and closure of STV2 Operating margin 21.6% 19.6% +200bps

7 Digital Revenue growth delivers increased profitability

H1 2019 H1 2018 £m £m Change Revenue 5.6 4.7 +19% • Strong revenue growth driven by - increased distribution, new features and Operating costs (2.6) (2.6) - improved reliability of STV Player - enhanced content offer Operating profit 3.0 2.1 +43% • Viewing up 13%, and ad impressions up 20%, even with FIFA World Cup in the comparator Operating margin 53.6% 44.7% +890bps • Carriage on Virgin delivering in line with plan; contributing 15-20% of all VOD views • Operating costs flat - additional content charges offset by tight cost control • Strong flow through to operating profit

8 Productions Impacted by programme deliveries strongly weighted to second half

H1 2019 H1 2018 £m £m Change Revenue 2.0 3.7 (46%) • Significant revenue and profit impact from phasing of deliveries Operating costs (3.7) (4.9) +24% • Total revenue of £13m secured for 2019 as at end July, similar to last year (c.£14m) Operating loss (1.7) (1.2) (42%) • Further series of Antiques Road Trip (ART), CART and Celebrity Catchphrase all confirmed for H2 Operating margin (85.0%) (32.4%) • Secondary sales growth year on year illustrating the value of returning franchises • Additional capability in Factual & Entertainment to supplement already strong genre teams • Primal integration progressing to plan - £0.5m of full year synergies identified and in delivery

9 Group Revenue Strong total advertising revenue performance down only 0.6%

H1 2019 H1 2018 £m £m Change Broadcast 45.0 46.5 (3%) Digital 5.6 4.7 +19% • Digital and regional revenues now 27% of total Productions 2.0 3.7 (46%) advertising revenue, up from 21% in FY 2017: ELM 2.3 2.8 - Regional airtime (including sponsorship) has Total revenue 54.9 57.7 (5%) grown from 13% to 16% due to the strength of our broadcast channel in Scotland and the Total ad revenue 48.8 49.1 (1%) success of The Growth Fund - Digital has grown from 8% to 11%, with strong flow through to profit • ELM revenue represents costs charged to the Scottish Children’s Lottery (SCL); revenue reduction reflects lower operating costs so is a positive

10 Group Operating Profit Strategic growth drivers more than offset national advertising weakness

Operating profit pre exceptionals

12.0

10.0

8.0

6.0

4.0

2.0

0.0 H1 2018 National airtime Regional Digital revenue News STV2 closure STV Other H1 2019 airtime flow through restructure Productions

• Additional profit from regional airtime offsets impact of national airtime decline and FIFA World Cup • Digital revenue growth at high margin benefiting bottom line • News restructure commenced in Q2 2018 generating efficiency savings in current year • Benefit from closure of STV2 • Phasing of deliveries in Productions; more weighted to H2 in 2019 11 Cash Flow

H1 2019 H1 2018 £m £m

Operating profit 11.0 10.0 • £0.9m additional depreciation due to new lease Depreciation/amortisation 2.3 1.2 standard Share based payments 0.1 0.2 EBITDA 13.4 11.4 • Working capital driven by Productions Working capital movements (2.9) 0.3 - increase in stock - EIM/ART in production Capital expenditure (2.4) (0.8) - lower deferred income due to timing of deliveries Operating cash flow 8.1 10.9 - tax credit received re The Victim Cash conversion 74% 109% • Capital investment in News infrastructure, STV Player Pension deficit payments (5.9) (4.4) development and Sky integration Interest paid (0.5) (0.4) • Pension payments include £1.4m additional contribution Reorganisation costs (0.8) (0.6) Dividends (5.3) (4.6) in line with agreement to share cash outperformance SCL funding (0.6) (1.1) with the schemes Share purchases (0.9) (2.0) Tax paid 0.2 (0.3) • Final dividend of 14p per share (2018: 12p per share) Sale of investments - 0.2 (5.7) (2.3) • Net debt expected to reduce by year end as Productions deliveries are realised, and in line with normal seasonal Net debt (42.0) (37.8) trends Net debt: EBITDA (covenant basis) 1.49x 1.46x Covenant 3.0x 3.0x • Share buy-back completed in July; cash outflow of £1.3m bringing total to £7m 12 Pensions Triennial valuation concluded on same terms, providing certainty

Accounting valuation H1 2019 H1 2018 FY 2018

Assets (£m) 375.9 358.1 343.4 • Triennial valuation process (as at 1 January Liabilities (£m) (450.3) (417.4) (421.9) 2018) completed in April 2019 Deficit (£m) (74.4) (59.3) (78.5) • Deficit funding recovery plan of 12 years agreed for pre-tax deficit of £127m, representing a Key assumptions: continuation of the previous plan: Discount rate 2.20% 2.80% 2.75% - Base contribution of £9m p.a., paid monthly, RPI 3.25% 3.15% 3.30% increasing by 2% p.a., plus - 20% contingent funding of any outperformance over an agreed cash generation target, stated after all funding needs of the business (e.g., capex, tax, interest, loyalty and incentive plan awards, working capital) and prior to pension funding payments and shareholder returns

13 ELM Progress impacted by slower retail roll-out & platform challenges

• Operational cashflow breakeven met briefly in January 2019; subsequent months impacted by slower than planned retail roll-out and platform issues impacting subscriber retention

• As a result net debtor increased to £7.0m at the half year being a gross debtor of £11.7m and a provision of £4.7m

• Focus for H2 2019: -continuation of retail rollout, and acceleration as far as possible -implementation of a number of initiatives to grow ticket sales through attracting new players - -and improving retention -ongoing cost management

14 Corporate items Interest, tax, dividends and covenants

Interest Tax • Cash interest up £0.1m to £0.7m • Effective tax rate for 2019 of 18% - higher average borrowings and LIBOR rates - lower than standard rate of 19% • No change to margin payable under facility - pension contributions and utilisation of losses

Dividends Covenants • Interim dividend of 6.3p per share • Net debt/EBITDA of 1.49x (2018: 1.46x) - up 5% on prior year - covenant test is 3.0x • Future increases aligned with earnings growth • Remains within target range of 1.0x - 1.5x • Expect to reduce at year end as Productions’ revenues come through, and in line with seasonality of the business

15 Strategic Update & Outlook Simon Pitts Our 3 strategic objectives remain unchanged

1. Maximise the value of our broadcast business

2. Drive digital growth by creating an STV for everyone

3. Build a world class production business

17 BROADCAST STV’s broadcast position remains uniquely strong

Broadcast STV’s best all 99.7% of all Biggest TV Most popular Continuing to content still time viewing large channel for source of outperform 70% of all share since audiences on 16-34s, Scottish rest of UK and video viewing 2009 STV 75% watch live news ITV

Average peak time audience in H1 In H1 STV was the biggest peak time 341 327 channel in Scotland

Bigger than 4x bigger than 96 91 60 5x bigger than 40 36 27 24 20 19 16

STV BBC 1 BBC 2 CH4 CH5 ITV3 ITV2 E4 BBC BBC 4 Film4 Sky1 Scotland Source: BARB Jan-Jun 2018. Peak time audience = (18:00-22:30), individuals; Mins per day = individuals, all day, Total TV 18 BGT’s performance bodes well for our autumn schedule

659K 39% Won its slot 614k 101k Live Audience Viewing 18 out of Catch-up +2% YoY share, +2 streams streams share points 19 times +58% YoY +31% YoY YoY

19 STV’s Growth Fund goes from strength to strength BROADCAST

Over 100 new TV advertisers since launch

20 BROADCAST Broad range of sectors underpinning 19% regional ad growth

Growth Fund deals by sector since launch in 2018

£5m+ allocated so far, vast majority “matched-funded”

200+ deals right across Scotland

Success of Growth Fund accelerating, 135 deals done this year alone

21 We continue to make good progress with our DIGITAL vision to become Scotland’s digital destination

Watching more More people content For longer

Monthly active VOD stream VOD VOD users starts consumption

+13% +36% +20%

22 DIGITAL Big screen is where the digital growth is

Coming Soon

• Already our 2nd biggest • STV’s fastest growing • UK’s largest VOD platform platform platform • Typically 50% of ads fast • 4 out of 5 Virgin customers • Usage doubled year on year forwarded have used STV Player since • Addressable market of • Freewheel deal means STV launch c.700k devices in Scotland retains 90%+ of revenues

STV Player connected TV streams were up 81% in H1 23 DIGITAL Ofcom’s stated position on PSB prominence will support our digital ambition

“New legislation is required to keep public service broadcasting prominent and ensure54% that viewers can continue to find and 49% access45% the PSBs’ linear and on-demand services across a range of connected devices”

“PSB content should also be given protected prominence with TV platforms’ recommendations and search results” Ofcom review of prominence for public service broadcasting, July 2019

24 DIGITAL New product features are extending Player dwell time, as expected

FEATURE INTRODUCED IMPACT

LIVE RESTART Q1 2019 Already used on 18% of live streams

END OF PLAY Q2 2019 1 in 3 stream starts watch next episode RECOMMENDATIONS

IOS streams up 33% since launch, ads per PICTURE IN PICTURE Q2 2019 stream +27%

Average streams per user +50% on standard STV PLAYER + Q1 2019 user

25 DIGITAL The best exclusive content now complemented by 500+ hours of 3rd party rights

STV EXCLUSIVE 1000+ HOURS 3RD PARTY NOW 500+ HOURS

SPORT ENTERTAINMENT DRAMA ACROSS 11 DEALS

Doc Martin 6 hours 8 hours

BGT The Champions Deep Water 12 hours 6 hours

X Factor Celebrity A confession 12 hours 6 hours COMING UP IN H2 IN UP COMING

Sanditon 23 hours 8 hours 26 DIGITAL Premier Sports deal enhances our digital advertising sell and sports proposition

• 3 year deal for STV to be exclusive advertising partner for Premier Sports 1 & 2, home of Pro14 rugby, Scottish Cup football and Serie A

• Covering all advertising and sponsorship revenues across all broadcast and digital platforms, UK-wide

• STV Player will also live stream the UK’s only free-to-air sports channel - Freesports - on a rev share basis

27 DIGITAL There is a clear timetable for future digital enhancements

Q2 2019 Q3 2019 Q4 2019 Q1 2020

New drama launches

New features Player marketing Freesports Player+ launched push begins launch roll-out

STV Player Start of RWC Sky Start of I’m a Live brand refresh launch Celebrity restart on TVs

28 DIGITAL As we said at the CMD, Digital is increasingly high margin with significant growth potential

Growing Margins Big Growth Opportunity

Currently only 54% 2.5% digital 49% 45% STV Advertising Impressions, c.18 billion p.a

97.5%

FY 2017 FY 2018 H1 2019 Digital Linear 29 2019 has seen a good mix of new and returning PRODUCTION series, but we need more The Victim on BBC1 Elizabeth is Missing on BBC1 Sex Tape on Channel 4 NEW

• 6.5m viewing average • In production now • 1m viewers in C4 peaktime • Sold to 30+ countries • Starring 2-time Oscar winner Glenda Jackson Antiques Road Trip on BBC2 Catchphrase on ITV ICS on BBC Scotland RETURNING • 27 series and 625 episodes • Regularly gets audience of 4m+ • Most popular commission on new BBC • Average audience of 2.1 million and 20% • 27% share of viewing in ITV peaktime Scotland Channel share 30 PRODUCTION We are investing in our creative pipeline to develop valuable IP DRAMA ENTERTAINMENT FACTUAL

New Creative Director 30+ projects in active Craig Hunter started development July 2019 3 shows already commissioned for BBC and C4 Priority is more long- 10+ commissioned scripts Strong pipeline with 20+ running formats shows in development

We will look to place more creative bets over time through partnerships and joint ventures 31 Our first STV format is on air now

• Returnable daily quiz is a key business target • Route to market is challenging unless you have access to a broadcast network • Launched on 1st September with 19% share, +3 on network and +30% on slot average

32 Coming up at STV in H2 2019 BROADCAST

• Maximise value of strong autumn schedule • Ongoing digital news transformation • STV Growth Fund next phase

DIGITAL

• Big marketing push • New features, personalisation and Sky launch • More content, including Freesports launch

PRODUCTION

• Continued focus on returning series • Fully integrate Primal • Identify next creative partnerships 33 Outlook Good momentum going into H2 despite Brexit uncertainty

• National advertising will continue to be impacted by Brexit, with the 9 months until the end of September expected to be 6% to 7% down • Regional advertising expected to be 10% to 15% up until the end of September • Digital advertising expected to be 20% to 25% up for the same period • Overall, that would see total STV advertising broadly flat for the first 9 months • Productions will have a stronger H2, with current secured revenues of £13m similar to last year

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