REG - STV Group PLC - Half Year Results
06/09/2022 07:17
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RNS Number : 3499Y STV Group PLC 06 September 2022
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Press Release 0700 hours, 6 September 2022
STV Group plc Half Year Results to 30 June 2022
Diversification strategy delivers continued growth
· Strong financial performance, with revenue and profit both up on
record 2021
· Diversification strategy continues to deliver, with Studios revenue
+16%, VOD advertising revenue +16% and regional advertising revenue +11%
· Shape of advertising performance broadly as expected in H1, despite
ongoing economic uncertainty, with Total Advertising Revenue (TAR) + 4% (+9%
vs 2019)
· STV had a higher audience reach in Scotland than all subscription
(SVOD) services combined in the first half
· STV remains Scotland's most popular peak time channel for the 4(th)
year in a row
· STV Player active users +7% and VIP users +37%
· STV Studios continues to scale rapidly, with a record 25 new
commissions in H1
· Board proposes interim dividend of 3.9p, +5% on 2021
Financial Summary - 6 months to 30 June 2022 2021 vs 2021
Revenue £62.1m £60.3m +3%
Total advertising revenue £53.2m £51.4m +4%
Operating profit £11.9m £9.7m +22%
Operating margin 19% 16% +3pps
Adjusted profit before tax* £11.2m £10.6m +6%
Profit before tax £10.6m £8.5m +25%
Adjusted basic EPS* 20.0p 19.2p +4%
Statutory basic EPS 18.7p 15.4p +21%
Net debt(+) £6.6m £17.6m +63%
Dividend per share 3.9p 3.7p +5%
* Before exceptional items (2021 only) and IAS19 interest (both periods)
(+) Excluding lease liabilities; net funds at 31 December 2021 of £0.3m
( ) Refer to note 23 to the condensed interim financial statements for a
reconciliation of the adjusted to statutory numbers
Financial highlights - continued revenue and profit growth
· Total revenue of £62.1m, +3% on 2021 and +13% on 2019; excluding ELM
in 2021 total revenue +4% year on year
· Operating profit of £11.9m, +22% on 2021 and +8% on 2019
· STV-controlled advertising continued to deliver strong revenue growth,
with VOD advertising on the STV Player +16% (+109% on 2019) and regional
advertising +11% (+15% on 2019)
· Studios revenue +16% reflects ongoing commissioning momentum
· Operating margin of 19%, broadly back to pre-Covid levels
· Adjusted EPS of 20.0p, +4%
· Net debt of £6.6m, up £6.9m since December 2021 due to expected
short term funding of increased productions activity; significant headroom
maintained
Good audience performance despite tough H1 2021 comparators
· STV is the most watched peak time TV channel in Scotland for the 4(th)
year in succession, with a share of 22.2%:
o Commercial viewing share of 29%, with peak time audience higher than the
next 9 commercial channels combined
o 99% of all commercial audiences over 500k viewers in Scotland on STV in H1
o STV News at Six Scotland's number 1 news programme since 2019
o Average Scot spends more than 6x longer watching broadcast content each
day than SVOD services such as Netflix
o 64% of Scots say they either already have or intend to cancel paid-for
streaming services according to new research from Scotpulse
· STV Player grew users and ad impressions in H1, although total online
streams and viewing were down 13% and 11% respectively (reflecting strong 2021
comparators including lockdown and Euros football):
o Total digital ad impressions up 21%
o VOD streams up 6% on rolling 12-month basis
o Monthly active users up 7%
o STV Player VIP users up 37%
Continued strategic momentum
· Studios:
o 25 new commissions so far in 2022 (FY 2021:15) and now 9 returning series
o Major streaming commissions (Criminal Record for Apple TV+, Written in the
Stars for discovery+) currently in production
o A record 20 series in production in 2022, including two further premium
dramas Blue Lights (BBC) and Screw season 2 (C4)
o Further large-scale commissions secured since capital markets event, for
BBC and Discovery across quiz, reality, and factual entertainment
o On track to exceed targets and contribute materially to STV's planned
diversification
· Digital:
o STV Player content proposition continues to scale to 5,500+ hours, with
drama hours doubling again to over 2,000 across 150+ drama boxsets
o 10 new content deals so far in 2022, including All3Media, Banijay and EOne
o Player-only content streams up 13% in last 12 months and contributed 37%
of all VOD streams in H1 (compared to 6% in 2019); ex-Scotland streams holding
at c.20% of total
o Innovative AVOD-SVOD collaboration with Acorn TV brings more premium
original drama to STV Player
o Strengthened platform partnerships with Virgin, Amazon, and Samsung
· Scottish advertising:
o Continues to show resilience and growth, driven by the return of larger
advertising clients
o Balance across SME and Government spend now back towards pre-Covid levels
o In addition, STV Growth Fund attracted a further 43 new advertisers in H1
o 350+ new Scottish advertisers since launch of fund, with over 70% of 2022
advertisers rebooking from prior year
Outlook
· Strong H2 content line-up on TV and online
o c.60 hours of new network drama, the return of I'm a Celebrity and the
football World Cup
o STV's free-to-air proposition a significant competitive advantage vs
subscription services
· Shape of advertising performance across the year so far broadly as
expected, although TV advertising not immune from ongoing macro uncertainty:
o 9-month TAR expected to be slightly down year on year
o 9-month regional and VOD advertising both expected to be up
o Stronger commercial and viewing performance expected in Q4, driven by
World Cup
· Studios building momentum and profitability with previous guidance
confirmed
· On track to hit or exceed 3-year growth targets by the end of 2023 to
o Double digital viewing, users, and revenue (to £20m)
o Quadruple Studios revenue (to £40m)
o Achieve at least 50% of operating profit from outside traditional
broadcasting
Dividend
· The Board proposes an interim dividend of 3.9p per share, +5% on 2021,
after considering all relevant factors including the ongoing macroeconomic and
geopolitical uncertainty.
· The Board remains committed to a balanced approach to capital
allocation across investing for growth, fulfilling our pension obligations,
and paying a sustainable, progressive dividend to shareholders.
Simon Pitts, Chief Executive Officer, said:
"STV has had a strong first half of the year, with revenue and profit up on
our record performance in 2021.
Our strategy of creating a more diversified business through a relentless
focus on production growth, digital streaming and local advertising continues
to deliver, with STV Studios revenue up 16%, VOD advertising on STV Player up
16% and regional advertising up 11%.
STV Studios is accelerating rapidly, winning a record 25 new commissions so
far this year from a range of networks and global streamers as we aim to
become the UK's no.1 nations and regions producer. We're currently in
production on over 20 new series, including our major new drama for Apple,
Criminal Record, which will debut next year in over 100 countries, and two
further premium dramas Blue Lights for BBC1 and Screw series 2 for C4.
Our audience position is strong on TV and online, with STV's daily, weekly,
and monthly reach in H1 higher than all subscription streaming services
combined. STV remains the most popular peak time TV channel in Scotland for
the 4(th) year in a row, boosted by dramas like Trigger Point and Our House,
and active users on STV Player were up 7% in H1 despite tough comparators in
the first half of last year with a lockdown and the Euros football.
Our free streaming service STV Player is well positioned to meet the needs of
a more cost-conscious audience, with content hours increasing to over 5500,
including a further doubling of premium drama hours to 2000+ across more than
150 free boxsets.
The advertising market is clearly not going to be immune from the ongoing
economic uncertainty, with total advertising up 4% in H1 and forecast to be
slightly down for the 9 months to September, but we are expecting a stronger
Q4, boosted by the first ever winter football World Cup.
With a robust financial position, the Board has proposed an interim dividend
of 3.9p per share, up 5% on 2021.
There will be a presentation for analysts today, 6 September 2022, at 12.30
pm, via Zoom. Should you wish to attend the presentation, please contact
Angela Wilson, angela.wilson@stv.tv (mailto:angela.wilson@stv.tv) or
telephone: 0141 300 3000.
Enquiries:
STV Group plc: Kirstin Stevenson, Head of Communications
Tel: 07803 970 106
Camarco: Geoffrey Pelham-Lane, Partner
Tel: 07733 124 226
Ben Woodford, Partner Tel: 07790 653
341
Financial and operating review
Group overview
Total revenue increased by 3% to £62.1m (2021: £60.3m), reflecting growth
across each of Broadcast, Digital and Studios. Total advertising revenues of
£53.2m were up 4% on the same period in the prior year, which was one of the
strongest trading performances on record. The other key contributor to Group
revenues is the Studios division, which generated a 16% increase year on year
in the first half.
Operating profit of £11.9m was up 22% on the first half of 2021. There were
no exceptional items in the current period; the prior year amount of £1.7m
was the repayment of furlough grants received in 2020. On an adjusted basis,
operating profit was 4% up year on year.
Total finance costs were £1.3m (2021: £1.2m). These comprised interest on
the Group's borrowings of £0.4m (2021: £0.7m) with the balance being
non-cash costs in relation to the Group's defined benefit pension schemes of
£0.6m (2021: £0.4m) and interest on lease liabilities of £0.3m (2021:
£0.1m).
The Group generated adjusted profit before tax (before exceptional items and
IAS19 interest) of £11.2m (2021: £10.6m), an increase of 6% on the prior
year, with adjusted earnings per share increasing by 4% to 20.0p (2021:
19.2p).
The statutory result for the year was a profit before tax of £10.6m (2021:
£8.5m). The effective tax rate (ETR) on the profit before tax is 20.2%,
slightly higher than the standard rate in the UK of 19% and mainly driven by
the difference between the rate at which current and deferred tax has been
recognised.
The Group's key leverage covenant (ratio of net debt to EBITDA) at the end of
the period was 0.2 times, (December 2021: nil), with significant headroom
against the covenant maximum of 3 times. In February 2022, the Group
exercised its first option to extend its revolving credit facility by one year
to March 2025.
Across the Group's two defined benefit pension schemes, the accounting deficit
before tax decreased to £42.3m at the half year (31 December 2021: £79.4m).
This was largely driven by an increase in the discount rate due to a rise in
corporate bond yields.
Broadcast
STV's broadcast channel continues to have unrivalled reach in Scotland (3 in 4
adults every month), and has a higher daily, weekly, and monthly reach than
all subscription (SVOD) services combined.
STV is the most watched commercial channel in Scotland and is the only PSB in
Scotland to outperform its Network equivalent, by 8% in all time share in H1.
It has the biggest share of all commercial channels across Scotland - more
than three times larger than the next biggest competitor, Channel 4 - and
delivered 99% of commercial programmes with audiences over 500k in the first
half of 2022.
This success is down to our content and for the fourth consecutive year, STV
was the most popular peak time channel in Scotland. High quality programmes
including The Masked Singer, Ant & Dec's Saturday Night Takeaway; soap
favourites, Coronation Street and Emmerdale; and top dramas The Bay and Our
House, were in the top 10, commanding significant audiences.
We continue to work closely with Scotland's business community and recognise
the key role our advertising platform plays in the growth of businesses across
Scotland. Over the first half of the year, our STV-controlled regional
advertising grew by 11% year on year, driven by the return of larger clients
across a range of sectors. The STV Growth Fund continues to attract more new
advertisers to TV, adding 43 in the first half of the year. The re-booking
rate is also high with over 70% of 2022 Growth Fund members returning from the
prior year. The STV Green Fund and the STV Inclusion Fund welcome
environmentally conscious and socially inclusive businesses to work with us,
and both are important parts of our Social Impact strategy.
Overall, total advertising revenue (TAR) comprising national, regional, and
digital advertising was up 4% on the first half of 2021, despite ongoing
economic uncertainty.
Our regional productions remain hugely popular and relevant for our audiences.
Flagship news programme, STV News at Six, has been Scotland's most watched
news programme since 2019, reaching 2.1m viewers per month. Ofcom's latest
Nations and Regions report revealed that nearly one third of people in
Scotland use STV News for news about their own nation, higher than any of our
rivals. Our local programming remains popular, with recent antiques series,
Clear Out, Cash In achieving a higher average audience in Scotland than Love
Island; and we continue to hold politicians to account and interrogate the
pressing issues in our current affairs programme, Scotland Tonight, which airs
four times a week.
We continue to use our platforms to make a positive social impact. Through
STV News we are educating and informing audiences about the need for climate
action and promoting positive mental wellbeing by supporting the Britain Get
Talking campaign, tailoring the messaging for our audiences using familiar
local faces.
Overall, the financial performance of the division was strong in H1 2021 with
revenues of £46.0m up 2% on the prior half year period, driven by regional
advertising, and operating profit of £10.7m also up 2% year on year.
Operating margins have been maintained at the highs of last year, at 23% for
H1.
Digital
Registrations to STV Player continue to grow, increasing by 13% year on year,
and within that our monthly active user base also grew by 7%, with STV Player
VIP users growing by 37%. VOD viewing increased year on year in 4 out of the
6 months of H1, even with the tough comparators of lockdown and the Euros.
STV Player viewers spend an average of just over an hour a day with the
service, and research shows we have the most loyal viewers of all the
commercial PSB streaming services.
We continue our strategy of adding high-quality, wide-ranging Player-only
content to complement our Network offering. Ten new content deals were
secured in H1, adding 96 new titles totalling an additional 825 hours; deals
were completed with Sony Pictures, Banijay and All3Media which have boosted
our total hours to over 5,500. We expect to add approximately 500 hours of
new STV Player-only content in H2, offering constantly refreshed programming
for our users.
The top 20 programmes in H1 on STV Player included 8 STV Player acquisitions,
including new box sets City Homicide and The Commons as well as STV archive
favourite, Taggart. STV Player-only content generated more than 15m VOD
streams in H1, accounting for 37% of total VOD streams. Our STV Player
Presents initiative sees us leverage our broadcast channel to premiere the
first episode of new Player-only content, from which we drive viewers to the
STV Player to watch the rest of the series.
In H1, we signed a unique new partnership with Acorn TV, which enables us to
showcase premium Acorn TV original dramas to viewers across the UK on STV
Player for free. The first AVOD-SVOD endeavour of its kind in the UK, the
collaboration adds more high-end drama to STV Player, whilst simultaneously
introducing STV viewers to the SVOD, as key Acorn titles will form part of our
STV Player Presents initiative.
We also agreed a new multi-year deal with Virgin Media to extend our strategic
partnership. In Scotland, Virgin Media's fully regionalised HD version of the
STV broadcast channel will continue as part of the agreement. Across the rest
of the UK, Virgin Media set-top boxes (STBs), including the new Stream device,
will continue to carry all our drama box sets.
In addition to appealing new content, we have made several enhancements to the
user experience, including personalised recommendations and an improved
homepage; and mandatory registrations mean we know more about our users and
can serve them targeted advertising.
Commercial VOD delivery grew across the first half of the year, with total ad
impressions up 21% year on year, driving a 16% increase in VOD revenues.
Total revenue for the division was £9.2m in the first half, up 8% on the
prior year. Operating profit also grew year on year, up 1% to £4.0m (2021:
£3.9m), with a slight first-half weighting for some costs reducing the flow
through of incremental revenue to profit.
STV Player has also begun to win recognition across the industry, winning Best
Programme Acquisition for gripping drama, The Commons, at the Broadcast
Digital Awards; and was shortlisted at the Edinburgh TV Festival for Best
Streaming Service.
Studios
STV Studios continues to win new business across drama, factual and
entertainment, with a record 25 commissions in 2022 to date for the main UK
broadcasters and two global streamers.
Our continuing commissioning success means that we are now in a very busy
period of programme production activity meaning that we are set to exceed our
target to quadruple revenues to at least £40m by 2023 (from the baseline of
£8.7m in 2020).
Our team is delivering high volume returning series, which are significant
contributors to our business growth and are also important for the growth of
the creative industry and talent base in Scotland. Highlights in H1 2022
include:
· A second series of our prison drama, Screw, was confirmed after the
first series was Channel 4's most successful drama launch since It's A Sin.
· A bumper order from Really for a further five new series - 58 episodes
in total - based on our popular format The Yorkshire Auction House. The show
is incredibly successful for Really, comprising 9 of the top 10 transmissions
in H1 for the channel.
· The recommission of quiz show Bridge of Lies with Ross Kemp, for BBC
One, including a primetime celebrity version and 25 x 45" episodes for
daytime.
· In addition to securing returning series, a significant commission of
80 x 1-hour episodes of a new returnable format, The Great Auction Showdown,
for Channel 5 was announced and will be delivered later this year.
Our strategy of acquiring stakes in partner production companies is starting
to pay off. In H1, we added a 9(th) label to the group, Mighty Productions -
the minds behind Tipping Point and Impossible - with the opportunity to
increase our position to a majority interest over time. All our labels share
our growth ambitions and have shown good progress in 2022 to date, with
several projects in advanced development and some key commissions and
productions underway:
· In June we announced drama, Criminal Record, for Apple TV+ which is a
co-production with our exclusive production partner, Tod Productions.
· New dating show format for global streamer, discovery+, Written in the
Stars, was won by our entertainment label Barefaced TV.
· A third series of award-winning, Jerk, was confirmed for Primal Media
with a further major commission yet to be announced.
· Hello Mary won a four-part series, One Night Stand, for E4.
· High end drama producer, Two Cities, will deliver their Belfast-based
cop drama, Blue Lights, to BBC One later this year.
Catalogue tape sales across our full range of programmes and format
relicensing remained strong in H1 with our distributor-neutral position
enabling us to work with multiple parties to match the most appropriate sales
agent to our content.
Studio revenues were £6.9m (2021: £6.0m) with an operating loss of £1.0m
(2021: loss of £0.9m). In line with historic norms, the phasing of
programme deliveries is weighted towards H2; the division has already secured
revenues of £20m - £25m this year and is expected to contribute of at least
£1m in profit for the second year in a row.
Principal risks and uncertainties
The Board considers the principal risks and uncertainties affecting the
business activities of the Group are:
· Regulatory environment
· Market volatility and advertising spend
· Reliance on ITV for quality network programming and effective
national sales
· Changing viewing habits
· Cyber attack or breach incident
· Defined benefit pension scheme shortfalls
· Recruitment and retention of people
Further details of the Group's policies on principal risks and uncertainties
are contained within the Group's 2021 Annual Report, a copy of which is
available at www.stvplc.tv (http://www.stvplc.tv/) .
Unaudited condensed interim income statement
Six months ended 30 June 2022
2022 2021
Before Exceptional
Results exceptional items Results
for period items (note 8) for period
Note £m £m £m £m
Revenue 7 62.1 60.3 - 60.3
Net operating expenses (50.2) (48.9) (1.7) (50.6)
Operating profit 11.9 11.4 (1.7) 9.7
Finance costs
- borrowings (0.4) (0.7) - (0.7)
- defined benefit pension schemes (0.6) (0.4) - (0.4)
- lease interest (0.3) (0.1) - (0.1)
(1.3) (1.2) - (1.2)
Profit before tax 10.6 10.2 (1.7) 8.5
Tax charge 9 (2.2) (1.8) 0.3 (1.5)
Profit for the period 8.4 8.4 (1.4) 7.0
Attributable to:
Owners of the parent 8.5 8.5 (1.4) 7.1
Non-controlling interests (0.1) (0.1) - (0.1)
8.4 8.4 (1.4) 7.0
Earnings per share
Basic 10 18.7p 18.4p 15.4p
Diluted 10 18.2p 17.9p 15.0p
A reconciliation of the statutory results to the adjusted results is included
at note 23. The above unaudited condensed interim income statement should be
read in conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of comprehensive income
Six months ended 30 June 2022
2022 2021
£m £m
Profit for the period 8.4 7.0
Items that will not be reclassified to profit or loss:
Gain on re-measurement of defined benefit pension schemes 30.9 24.0
Deferred tax charge (7.7) (3.9)
Revaluation loss on listed investment to market value (0.1) (2.2)
Other comprehensive income - net of tax 23.1 17.9
Total comprehensive income for the period 31.5 24.9
Attributable to:
Owners of the parent 31.6 25.0
Non-controlling interests (0.1) (0.1)
31.5 24.9
The above unaudited condensed interim statement of comprehensive income should
be read in conjunction with the accompanying unaudited notes.
Unaudited condensed interim balance sheet
As at 30 June 2022
30 June 31 December
2022 2021
Note £m £m
Non-current assets
Intangible assets 12 1.4 1.6
Property, plant and equipment 13 10.4 9.8
Right-of-use assets 13 19.2 19.9
Investments 14 2.6 1.9
Deferred tax asset 15 17.5 26.5
Trade and other receivables 17 0.5 0.4
51.6 60.1
Current assets
Inventories 16 22.4 17.7
Trade and other receivables 17 29.2 30.1
Cash and cash equivalents 14.7 14.7
66.3 62.5
Total assets 117.9 122.6
Equity
Ordinary shares 19 23.3 23.3
Share premium 115.1 115.1
Capital redemption reserve 0.2 0.2
Merger reserve 173.4 173.4
Other reserve 1.5 1.4
Accumulated losses (310.9) (339.2)
Shareholders' equity 2.6 (25.8)
Non-controlling interests (0.2) (0.1)
Total equity 2.4 (25.9)
Non-current liabilities
Borrowings 18 21.3 14.4
Lease liabilities 19.0 19.7
Retirement benefit obligations 21 42.3 79.4
82.6 113.5
Current liabilities
Trade and other payables 31.8 33.8
Lease liabilities 1.1 1.2
32.9 35.0
Total liabilities 115.5 148.5
Total equity and liabilities 117.9 122.6
The above unaudited condensed interim balance sheet should be read in
conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of changes in equity
Six months ended 30 June 2022
Capital redemption reserve Attributable to owners of the parent
Share capital Share premium Merger reserve Accumulated losses Non-controlling interest
Other reserve Total equity
£m £m £m £m £m £m £m £m £m
At 1 January 2022 23.3 115.1 0.2 173.4 1.4 (339.2) (25.8) (0.1) (25.9)
Profit for the period - - - - - 8.5 8.5 (0.1) 8.4
Other comprehensive income - - - - - 23.1 23.1 - 23.1
Total comprehensive income for the period
- - - - - 31.6 31.6 (0.1) 31.5
Share based compensation - - - - 0.1 - 0.1 - 0.1
Dividends paid (note 11) - - - - - (3.3) (3.3) - (3.3)
At 30 June 2022 23.3 115.1 0.2 173.4 1.5 (310.9) 2.6 (0.2) 2.4
At 1 January 2021 23.3 115.1 0.2 173.4 1.0 (342.8) (29.8) (0.1) (29.9)
Profit for the period - - - - - 7.1 7.1 (0.1) 7.0
Other comprehensive income - - - - - 17.9 17.9 - 17.9
Total comprehensive income for the period
- - - - - 25.0 25.0 (0.1) 24.9
Share based compensation - - - - 0.1 - 0.1 - 0.1
Dividends paid (note 11) - - - - - (2.7) (2.7) - (2.7)
At 30 June 2021 23.3 115.1 0.2 173.4 1.1 (320.5) (7.4) (0.2) (7.6)
The above unaudited condensed interim statement of changes in equity should be
read in conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of cash flows
Six months ended 30 June 2022
2022 2021
Note £m £m
Operating activities
Cash generated by operations 20 10.7 7.9
Interest and fees in relation to banking facilities paid (0.6) (1.1)
Corporation tax paid (0.1) (0.4)
Pension deficit funding - recovery plan payment (4.7) (4.6)
Contingent cash payment to pension schemes (2.4) (0.3)
Net cash generated by operating activities 2.9 1.5
Investing activities
Proceeds from sale of investment - 3.3
Purchase of investment in associate 14 (0.9) -
Loan notes provided to associate - (0.4)
Production finance provided to associate (2.4) -
Purchase of intangible assets (0.3) (0.2)
Purchase of property, plant and equipment (1.9) (1.3)
Net cash (used in)/generated by investing activities (5.5) 1.4
Financing activities
Payment of obligations under leases (1.1) (0.8)
Borrowings drawn 17.0 3.1
Borrowings repaid (10.0) (0.1)
Dividends paid 11 (3.3) (2.7)
Net cash generated by/(used in) financing activities 2.6 (0.5)
Net movement in cash and cash equivalents - 2.4
Cash and cash equivalents at beginning of period 14.7 5.2
Cash and cash equivalents at end of period 14.7 7.6
Unaudited notes to the condensed interim financial statements
Six months ended 30 June 2022
1. General information
STV Group plc (the "Company") is a public limited company incorporated and
domiciled in Scotland and listed on the London Stock Exchange. The address
of the registered office is Pacific Quay, Glasgow, G51 1PQ.
The principal activities of the Company and its subsidiaries (together "the
Group") are the production and broadcasting of television programmes,
provision of internet services and the sale of advertising airtime and space
in these media.
These condensed interim financial statements were approved for issue on 6
September 2022 and have been reviewed, not audited. They do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2021 were approved
by the Board of Directors on 9 March 2022 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
2. Basis of preparation
These unaudited condensed interim financial statements for the six months
ended 30 June 2022 have been prepared based on the policies set out in the
2021 annual financial statements and in accordance with UK adopted IAS 34 and
the Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority. These should be read in conjunction with the
annual consolidated financial statements for the year ended 31 December 2021
which were prepared in accordance with IFRS as adopted by the UK Endorsement
Board.
The year to 31 December 2022 annual financial statements will be prepared in
accordance with IFRS as adopted by the UK Endorsement Board.
Going concern
At 30 June 2022, the Group was in a net debt position of £6.6m (31 December
2021: net cash of £0.3m). The Group is in a net current asset position and
generates cash from operations that enables the Group to meet its operating
liabilities as they fall due.
The Group has in place a £60m revolving credit facility, with £20m
accordion, maturing in March 2025 and with the option to extend by one-year in
February 2023. The covenants in place relate to leverage (namely net debt to
EBITDA), which must be less than 3 times, and interest cover, which must be
greater than 4 times. At 30 June 2022, the Group's leverage was 0.2 times
and interest cover was 61.6 times, both well within covenant limits. £38m of
the facility plus the £20m accordion remained available at the balance sheet
date (31 December 2021: £45m).
As part of the going concern review, the Group considers forecasts of the
advertising market, from which the Group generates the majority of its cash
inflows, as well as its prospects in the programme production market, to
determine the impact on liquidity. The Group's forecasts and projections,
taking account of reasonably possible changes in trading performance, show
that the Group will be able to operate within the level of its current
available funding and financial covenants.
The Directors performed a full review of principal risks and uncertainties
during 2021 as part of its process to review and approve the three-year plan
covering the period to 31 December 2024. A severe but plausible downside
scenario was identified that reflected crystallisation of a number of risks,
including a downturn in advertising markets and a hiatus in programme
production activity.
The Directors have assessed current trading relative to the budget for the
year and reconfirmed that the downside scenario previously identified
remains appropriate. Under this downside scenario, the Group generated
sufficient cash to enable it to continue in operation, pay its obligations as
they fall due and remain within its covenant levels.
Following completion of these activities, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operation for
at least 12 months from the date of this report. Accordingly, the Group
continues to adopt the going concern basis in preparing its consolidated
financial statements.
3. Accounting policies
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2021. There were no
changes to accounting standards in the period that had any material impact on
the financial statements.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profit or loss.
4. Judgements and estimates
Judgements
In the course of preparing the condensed interim financial statements, no
judgements have been made in applying the Group's accounting policies that
have had a significant effect on the amounts recognised in the condensed
interim financial statements, other than those involving estimation below.
Estimates
The preparation of the Group's condensed interim financial statements requires
management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the
accompanying disclosures and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the condensed interim financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.
Inventory
Deferred programme production stock forms part of inventory and is stated in
the financial statements at the lower of cost or net realisable value. The key
assumption is estimating the likely future revenues for which associated
programme costs are expensed in line with. A detailed forecast of future
secondary sales is prepared by management based on historic experience and
expected future trends. £0.5m was expensed through the income statement in
the period (2021: £0.5m).
Pension obligations
The present value of the pension obligations depends on a number of factors
that are determined on an actuarial basis using a number of key assumptions.
The assumptions used in determining the projected benefit obligation for
pensions include the discount rate and mortality rate. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each period.
This is the rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group
considers the interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have
terms to maturity approximating the terms of the related pension liability.
Regarding mortality, the base tables used are updated every three years (to
coincide with triennial valuations) or more frequently when there is evidence
of a change in experience. The CMI tables relating to future improvements in
mortality are updated when new information is available, usually annually.
Other key assumptions for pension obligations are based in part on current
market conditions. Refer to note 21 for further disclosure.
5. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks, to varying
degrees: currency risk, credit risk, liquidity risk and cash flow interest
rate risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Group's annual
financial statements for the year ended 31 December 2021.
There have been no changes in any risk management policies since the year end.
6. Seasonality of operations
In line with the UK advertising market, the autumn season provides the Group
with its highest level of revenues, as trading picks up from the quieter
summer months. The Studios business delivers the majority of its programmes
to broadcasters in the second half of the year which results in higher work in
progress inventory at the interim period end compared to the year end position
(see note 16). In the current year, guidance is for the Studios division to
generate revenues between £20m and £25m, of which £6.9m has been recognised
in the six months ended 30 June 2022.
7. Business segments
Information reported to the Group's Chief Executive for the purposes of
resource allocation and assessment of segment performance is by product. The
Group's reportable segments, which remain the same as the prior year, are
Broadcast, Digital and Studios. The trade of STV ELM, which was disposed of
in August 2021, is included within 'Other' in the prior year comparative.
Broadcast Digital Studios Other Total
Six months 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m £m £m
Revenue
Sales 50.8 50.2 9.2 8.5 7.0 6.2 - 0.9 67.0 65.8
Inter-segment sales (4.8) (5.3) - - (0.1) (0.2) - - (4.9) (5.5)
Segment revenue 46.0 44.9 9.2 8.5 6.9 6.0 - 0.9 62.1 60.3
Segment result
Operating profit 10.7 10.5 4.0 3.9 (1.0) (0.9) - - 13.7 13.5
Unallocated corporate expenses (1.8) (2.1)
Operating profit (excluding exceptional items) 11.9 11.4
Exceptional items - (1.7)
Finance costs (1.3) (1.2)
Profit before tax 10.6 8.5
Tax charge (2.2) (1.5)
Profit for the period 8.4 7.0
There has been no significant change in total assets from the amount disclosed
in the last annual financial statements.
8. Exceptional items
2022
The Group did not incur any material exceptional costs or generate exceptional
income in the interim
period.
2021
In May 2021, the Group repaid the full amount of furlough grants received in
2020 under the Government's Coronavirus Job Retention Scheme (£1.7m) before
resuming payment of cash dividends to shareholders. The Group presented the
cost of repayment as exceptional so as not to distort the underlying trading
results of the business.
9. Tax charge
Six months Six months
2022 2021
£m £m
The charge for taxation is as follows:
Charge for the period before exceptional items 2.2 1.8
Tax effect on exceptional items - (0.3)
Charge for the period 2.2 1.5
The tax on the results for the six month period is charged at the rate that
represents the best estimate of the average annual effective tax rate (ETR)
expected for the full year, applied to the pre-tax result for the six month
period.
The ETR on the results has been charged at 20.2% (30 June 2021: 17.7% before
exceptional items), which is higher than the standard rate of 19.0%, primarily
because of the increased rate at which deferred tax is recognised.
On 3 March 2021, the UK Government announced a change in the UK corporation
tax rate from 19% to 25% with effect from 1 April 2023. The 25% rate was
substantively enacted on 10 June 2021. The deferred tax assets at 30 June 2022
have been measured using the rates that apply in the periods when the
underlying timing differences, on which deferred tax is recognised, are
expected to unwind.
The ETR on exceptional items in the prior period was 19%. This related wholly
to the repayment of furlough monies received which were treated as taxable in
the prior year.
10. Earnings per share
The calculation of earnings per share is based on earnings after tax and the
weighted average number of ordinary shares in issue during the period,
excluding ordinary shares purchased by the Group and held for use by the STV
Employee Benefit Trust.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has one type of dilutive potential ordinary share namely
share options granted to employees.
The adjusted earnings per share figures have also been calculated based on
earnings before adjusting items that are significant in nature and/or quantum
and therefore considered to be distortive. The adjusting items include the
impact of operating and non-operating exceptional items and the IAS 19 net
financing cost; as well as the tax adjustments relating to these items.
Adjusted earnings per share have been presented to provide shareholders with
an additional measure of the Group's year-on-year performance.
Earnings per share Six months Six months
2022 2021
Pence Pence
Basic earnings per share 18.7p 15.4p
Diluted earnings per share 18.2p 15.0p
Basic earnings per share (before exceptional items) 18.7p 18.4p
Diluted earnings per share (before exceptional items) 18.2p 17.9p
Adjusted basic earnings per share 20.0p 19.2p
Adjusted diluted earnings per share 19.5p 18.6p
The following reflects the earnings and share data used in the calculation of
earnings per share:
Six months 2022 Six months 2021
Earnings £m £m
Profit for the period attributable to equity shareholders 8.5 7.1
Exceptional items (net of tax) - 1.4
Profit for the period before exceptional items 8.5 8.5
Excluding IAS 19 financing cost 0.6 0.3
Adjusted profit 9.1 8.8
Number of shares Million Million
Weighted average number of ordinary shares in issue 45.5 45.4
Dilution due to share options 1.1 1.3
Total weighted average number of ordinary shares in issue 46.6 46.7
11. Dividends
A dividend of £3.3m relating to the year ended 31 December 2021 was paid from
the parent company's accumulated realised profits in May 2022. (31 December
2021: final dividend of £2.7m paid in May 2021).
An interim dividend of 3.9p per share has been proposed and is subject to
approval by the Board of Directors. It is payable on 3 November 2022 to
shareholders who are on the register at 23 September 2022. This interim
dividend, amounting to £1.8m has not been recognised as a liability in this
interim financial information. It will be recognised in shareholders' equity
in the year ending 31 December 2022.
12. Intangible assets
During the six months ended 30 June 2022, the Group incurred expenditure of
£0.3m on web development (£0.4m in the year to 31 December 2021; £0.2m in
the six months ended 30 June 2021). The net disposals amounted to £nil in
the current period and for the year ended 31 December 2021.
13. Property, plant and equipment and right-of-use assets
During the six months ended 30 June 2022, the Group incurred expenditure of
£1.9m on property, plant and equipment (£2.5m in the year ended 31 December
2021; £1.3m in the six months ended 30 June 2021). The net disposals
amounted to £nil in the current period and for the year ended 31 December
2021.
During the six months ended 30 June 2022, the Group did not have any additions
of right-of-use assets (£11.1m in the year ended 31 December 2021; £0.1m in
the six months ended 30 June 2021). The net disposals amounted to £nil in the
current period and for the year ended 31 December 2021.
14. Investments
On 9 March 2022, the Group acquired a 25% stake in quiz show producer Mighty
Productions for consideration of £0.9m.
15. Deferred tax asset
At 30 June 2022, total deferred tax assets of £17.5m were recognised on the
balance sheet (31 December 2021: £26.5m). Of this, £10.6m relates to the
deficit on the Group's defined benefit pension schemes (31 December 2021:
£19.8m) and the balance of £6.9m relates to tax losses, accelerated capital
allowances and short-term timing differences (31 December 2021: £6.7m).
16. Inventory
30 June 31 December
2022 2021
£m £m
Deferred programme production 11.4 11.3
Programme production work in progress 10.6 5.9
Recorded programmes 0.4 0.5
22.4 17.7
17. Trade and other receivables
30 June 31 December
2022 2021
£m £m
Trade receivables 14.9 18.6
Prepayments and contract assets 8.2 8.0
Other receivables 4.8 1.4
Income tax recoverable 1.8 2.5
29.7 30.5
Amounts included in current assets 29.2 30.1
Amounts included in non-current assets 0.5 0.4
29.7 30.5
18. Borrowings
In March 2021, the Group refinanced its bank facilities, agreeing a new £60m
revolving credit facility, with £20m accordion, for a minimum tenor of 3
years with two one-year extension options available. One of the options was
exercised in February 2022, extending maturity to March 2025. The covenant
package is in line with the Group's previous facility, namely net debt to
EBITDA must be less than 3 times, and interest cover must be greater than 4
times.
19. Share capital
Issued
share capital at 30 June 2022 and 31 December 2021 amounted to £23.3m
(46,722,499 shares).
20. Notes to the condensed interim statement of cash flows
Six months Six months
2022 2021
£m £m
Operating profit 11.9 9.7
Adjustments for:
Depreciation on property, plant and equipment 1.3 1.1
Amortisation of intangible assets 0.5 0.5
Amortisation of right-of-use assets 0.7 0.9
Share based payments 0.1 0.1
Increase in inventories (4.7) (8.3)
Decrease/(increase) in trade and other receivables 2.5 (1.8)
(Decrease)/increase in trade and other payables (1.6) 5.4
Net decrease in STV ELM Ltd working capital - 0.3
Cash generated by operations 10.7 7.9
Net debt reconciliation
Net debt including lease liabilities
Cash and cash equivalents Net cash/
Long-term borrowings (debt) Lease liabilities
£m £m £m £m £m
At 1 January 2022 (14.4) 14.7 0.3 (20.9) (20.6)
Cash flows (6.8) - (6.8) 1.1 (5.7)
Non-cash flows (i) (0.1) - (0.1) (0.3) (0.4)
At 30 June 2022 (21.3) 14.7 (6.6) (20.1) (26.7)
(i) Non-cash movements relate to the amortisation of borrowing costs (for
long-term borrowings) and
interest charged on lease liabilities.
21. Retirement benefit schemes
The fair value of the assets and the present value of the liabilities in the
Group's defined benefit pension schemes at each balance sheet date was:
At 30 June At 31 December
2022 2021
£m £m
Defined benefit scheme obligations (393.1) (519.4)
Defined benefit scheme assets 350.8 440.0
Net pension deficit (42.3) (79.4)
The reduction in the net pension deficit is largely driven by an increase in
the discount rate due to a rise in corporate bond yields over the period,
partly offset by the reduction in the market value of scheme assets.
Assumptions used to estimate the scheme obligations
The significant actuarial assumptions used for accounting purposes reflect
prevailing market conditions in the UK and are as follows:
At 30 June At 31 December
2022 2021
% %
Rate of increase in salaries nil nil
Rate of increase of pensions in payment 3.35 3.55
Discount rate 3.85 1.90
Rate of price inflation (RPI) 3.35 3.55
Assumptions regarding future mortality experience are set based on advice,
published statistics and experience in each scheme and are reflected in the
table below (average life expectations of a pensioner retiring at age 65).
At 30 June At 31 December
2022 2021
Retiring at balance sheet date:
Male 20.9 21.0
Female 23.1 23.2
Retiring in 25 years
Male 22.1 22.3
Female 24.4 24.6
The sensitivities regarding the principal assumptions used to measure the
defined benefit obligation are set out below:
Assumption Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease by 0.25% Increase/decrease by 3%
Rate of price inflation (RPI) Increase/decrease by 0.25% Increase/decrease by 1%
Rate of mortality Decrease by 1 year Decrease by 4%
These sensitivities have been calculated to show the movement in the defined
benefit obligations in isolation, and assuming no other changes in market
conditions at the balance sheet date.
Funding arrangements
Deficit recovery plans, which end on 31 October 2030, were agreed in 2021 with
aggregate monthly payments unchanged from the previous recovery plans. The
2022 deficit recovery payments will total £9.5m, with annual payments
increasing at the rate of 2% per annum over the term of the recovery plans.
Contingent funding payments equivalent to 20% of any outperformance above a
benchmark of available cash will be paid to the schemes. This resulted in an
additional £2.4m payment to the schemes in the interim period in relation to
2021.
22. Transactions with related parties
As disclosed in the 2021 Annual report, the Group has agreed to provide
programme production financing to Two Cities Television Limited for the
production of Blue Lights, a drama series commissioned by the BBC and
scheduled for delivery in the second half of 2022. £3.0m was drawn down at
the balance sheet date, with the facility maturing at the end of May 2023 by
which time all monies will be repaid.
The Group provided advertising with an estimated fair value of £0.1m (2021:
£0.4m) for nil consideration to the charity organisation STV Appeal.
23. Reconciliation of statutory results to adjusted results
In reporting financial information, the Group presents alternative performance
measures (APMs) which are not defined or specified under the requirements of
IFRS. The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business.
The Group makes certain adjustments to the statutory profit measures to
exclude the effects of exceptional items and adjust for other material amounts
that it believes are distortive to the underlying trading performance of the
Group.
By presenting these alternative performance measures, the Group believes it is
providing additional insight into the performance of the business that may be
useful to stakeholders. Below sets out a reconciliation of the statutory
results to the adjusted results:
2022 2021
Operating profit Profit Basic Operating Profit Basic
before tax EPS Profit before tax EPS
£m £m pence £m £m pence
Statutory result 11.9 10.6 18.7p 9.7 8.5 15.4p
Exceptional items (note 8) - - - 1.7 1.7 3.0p
Result for the year before
exceptional items 11.9 10.6 18.7p 11.4 10.2 18.4p
IAS 19 net finance costs - 0.6 1.3p - 0.4 0.8p
Adjusted results 11.9 11.2 20.0p 11.4 10.6 19.2p
Independent review report to STV Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed STV Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the half year results to 30
June 2022 of STV Group plc for the 6 month period ended 30 June 2022 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed interim balance sheet as at 30 June 2022;
· the Condensed interim income statement and Condensed interim
statement of comprehensive income for the period then ended;
· the Condensed interim statement of cash flows for the period then
ended;
· the Condensed interim statement of changes in equity for the period
then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the half year results to 30 June
2022 of STV Group plc have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the half year results to 30
June 2022 and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half year results to 30 June 2022, including the interim financial
statements, is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the half year results to 30 June
2022 in accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In preparing
the half year results to 30 June 2022, including the interim financial
statements, the directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease operations, or have
no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the half year results to 30 June 2022 based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
6 September 2022
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