By Richard Gill, CFA

Shares in factual TV production specialist Zinc Media (ZIN) were the best performing on the London market yesterday, rising by 30% to 0.65p, after the company announced a series of positive developments.

US agent deal catches the market’s attention

Firstly, Zinc has signed an exclusive representation deal with ICM Partners, one of the world’s largest talent and literary agencies, which has offices in New York, Los Angeles, and London. ICM represents creative and technical talent in the fields of motion picture, television, books, music, live performance, branded entertainment, and new media. 

According to ICM’s website, its TV clients have created many of the longest-running, critically acclaimed programming on television. ICM represents several noted executive producers and other showrunners and has successfully packaged hit shows such as Grey’s Anatomy, Dancing with the Stars, Modern Family, The Big Bang Theory, House, Breaking Bad, The Simpsons, America’s Next Top Model, Kitchen Nightmares and many more.  

Under the terms of the initial one year deal, ICM will work with Zinc to secure US commissions, working with all of the company’s TV brands. The tie up is in line with the company’s strategy to grow in the US TV market, with it believing that the best route to market is to enter into an exclusive representation agreement with a specialist US agent.  

Zinc Media is targeting growth in international markets, such as the US, due to increasing demand from consumers and increasingly lucrative commissions from international platforms, including the likes of Netflix and Amazon. According to the 2017 industry Census put together by Oliver & Ohlbaum for trade body PACT, UK TV producers’ revenue from international primary commissions rose from £430 million in 2015 to £468 million in 2016, driven largely by commissions from digital services.

Further commissions improve revenue visibility

In addition to the US deal, two new “significant” TV commissions have been awarded to two of Zinc’s production companies.

Tern Television, the regional television production company acquired in November last year, has been commissioned by Channel 4 for series three of Britain at Low Tide, a programme which explores the archaeology of Britain’s coastline. The show is made from Tern’s Belfast office, with the commission adding weight to Zinc strategy to focus on growth in regional programming, with UK broadcasters increasingly commissioning more content outside of London. 

Meanwhile, Reef Television has been commissioned to produce a new access led documentary series for BBC Daytime. The 10-part crime series is a first in the crime genre for Reef and the first crime commission won under the new Reef senior management team. This is a pleasing development for the division which had a disappointing first half of the year after several series were not recommissioned as expected.

Notably, Zinc Media also commented that it, “…expects to announce further significant commission wins across other of the TV subsidiaries in the near term.”

Assessment

Overall, we see this as a highly positive update from Zinc Media, with the news reigniting the market’s interest in the shares. We also note a number of director share purchases in the past few weeks/months including Chairman Peter Bertram buying £4,960 worth of shares on 11th May and CEO David Galan buying £7,979 worth on 19^th March and 10^th April combined. Simon Gerra, Head of Finance and Roy Ackerman, Managing Director of Films of Record and Director of International Strategy, have also been recent buyers.

With the current year end coming up at the end of June we would expect a full year trading update sometime in July, followed by full year results at the end of September, at which time we will look forward to revisiting our forecasts.

RISK WARNING & DISCLAIMER

Zinc Media is a research client of Align Research. Align Research holds an interest in the shares of Zinc Media. For full disclaimer & risk warning information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

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