TIDMSTVG
RNS Number : 3420L
STV Group PLC
05 September 2023
Press Release 0700 hours, 5 September 2023
STV Group plc Interim Results for the 6 months ended 30 June
2023
Diversification strategy accelerates: revenue from growth areas
more than offsets expected linear advertising declines
Highlights
-- Diversification strategy accelerates delivering total revenue growth of 21%
-- Studios revenue nearly quadruples even before benefit of Greenbird acquisition in H2
-- Strong Digital growth; STV Player streams +25% and new registrations +65%
-- Adjusted operating profit down 33% with wider economic
uncertainty impacting linear advertising revenue and cost
inflation, as expected
-- STV is Scotland's most watched peak time channel for 6(th) year in a row across H1
-- First half total advertising revenue down 14%, with Q3
expected to grow by 3-5% driven by major sporting events including
Rugby World Cup
-- STV expects over 60% of 2023 earnings to come from outside
broadcasting, comfortably exceeding 50% diversification target
-- Board proposes interim dividend of 3.9p, in line with 2022
Financial Summary - 6 months to 2023 2022 vs 2022
30 June
================================== ======================= ==================== ===================
Revenue GBP75.3m GBP62.1m +21%
================================== ======================= ==================== ===================
Total advertising revenue GBP45.8m GBP53.2m -14%
================================== ======================= ==================== ===================
Adjusted operating profit* GBP8.0m GBP11.9m -33%
================================== ======================= ==================== ===================
Adjusted operating margin* 11% 19% -8pps
================================== ======================= ==================== ===================
Operating profit GBPnil GBP11.9m -100%
================================== ======================= ==================== ===================
Profit for the period GBP3.3m GBP8.4m -61%
================================== ======================= ==================== ===================
Adjusted basic EPS** 14.8p 20.0p -26%
================================== ======================= ==================== ===================
Statutory basic EPS 7.2p 18.7p -61%
================================== ======================= ==================== ===================
Net debt (+) GBP16.3m GBP6.6m -GBP9.7m
================================== ======================= ==================== ===================
Dividend per share 3.9p 3.9p flat
================================== ======================= ==================== ===================
* Before exceptional items and including HETV tax credits
** (2023 only)
Before exceptional items (2023 only) and IAS 19 finance
costs (both periods)
(+) Excluding lease liabilities; net debt at 31 December 2022
of GBP15.1m
Refer to notes 8, 10 & 19 to the condensed interim financial
statements for a reconciliation of the adjusted to statutory
numbers
Financial highlights
-- Total revenue of GBP75.3m, +21% on 2022, driven by organic
growth in Studios and Digital, more than offsetting expected linear
advertising revenue declines
-- Studios revenue of GBP27.2m, +294% due to increased drama
deliveries, with division profitable (GBP0.1m; 2022 loss of
GBP1.0m) and strong H2 profitability coming through with expected
seasonal second half weighting
-- Regional advertising revenue down 14% to GBP7.3m (excluding
Scottish Government spend, regional down only 2%)
-- Digital revenue +9% to GBP10.1m (VOD revenue +14%), with
adjusted operating profit up 26% to GBP5.0m
-- Group adjusted operating profit GBP8.0m, -33% on 2022,
reflecting expected impact of declines in higher margin linear
advertising revenue and inflationary cost pressure
o Savings realised to offset broadly half the inflationary
increases, as guided
-- Exceptional costs of GBP2.8m incurred in the period relating
to the new agreement with ITV for digital content and national VOD
sales representation (2022: nil)
-- Net debt of GBP16.3m, up only GBP1.2m since December 2022
despite reduced profits, with working capital outflow of 2022
partially unwinding in the period; significant facility and
covenant headroom maintained
Good audience performance
-- STV Player's strengthened content line-up drove excellent streaming growth in H1:
o Online viewing (consumption) +25%, streams +25%
o Registered users up 18% to 5.3m, well ahead of 5m target
o New registrations +65% driven by new STV Player content
o VIP users up 24%
-- Enduring appeal of linear TV: STV's peaktime viewing share of
22.5% grew year on year (+1%), with the lead over BBC1 the highest
in 15 years:
o Most watched peaktime channel in Scotland for 6(th) year in a
row across H1
o H1 all-time audience higher than any other commercial channel
on 180 of 181 days
o Average Scot spent over 5x longer with broadcast content than
SVOD services on the TV set in H1
Continued strategic momentum and execution
-- Studios : Scaling rapidly and profitably even before benefit
of post period end Greenbird deal
o 12 returning series (2022:9)
o Drama business accelerating, with series 2 of Blue Lights
confirmed, and Screw season 2 (for C4) and Criminal Record (for
Apple TV+) delivering in H1
o Greenbird acquisition transformative:
-- Enlarged Studios group now has 39 returning series
-- 29 new commissions across Studios in H1
-- 7 new commissions announced since acquisition, including
major new ITV reality format, The Fortune Hotel, showing immediate
impact of Greenbird deal
-- Digital : STV's new streaming partnership with ITV driving viewing and commercial growth:
o 30 new series premiered in H1 under new deal, driving 11% of
VOD viewing
o Benefitting from increased scale and targeting capability:
-- STV digital brand count up 50% in H1
-- STV average price (cost per thousand) up 55% in H1
o Long-term partnership in place with ITV until 2029, on a
variable cost basis
o Continued strong performance of STV 3rd party content, with
c.8m Brookside streams
o UK Government draft Media Bill (published March) will
guarantee prominence for STV Player on all digital platforms
-- Scottish advertising :
o Further 180 deals secured under the STV Growth Fund so far in
2023, with over 70% of clients rebooking from 2022.
o Split of SME/Scottish Government spend back at pre-Covid
levels of 85%/15%
o STV will now offer addressable regional VOD advertising
through Planet V, further enhancing market positioning
Improving 2023 outlook
Revenue
-- Expecting at least 25% increase in total revenue for FY 2023
-- Total advertising revenue expected to be up 3-5% in Q3 driven
by strong sporting events, but down for the full year
-- July TAR +1%, August +4% and September forecast to be up 5-7%
-- On track to hit target of GBP20m Digital revenues in 2023
-- Organic Studios revenues will be GBP50m+ in 2023 (GBP70m+
with Greenbird), well ahead of GBP40m target
Adjusted operating profit
-- Linear advertising decline will mean full year adjusted operating profit lower than FY22
-- Strong profit growth in Digital and Studios, and cost
mitigations of GBP2.5m in 2023, offset by impact of linear
advertising decline and cost inflation
-- Confirming previous Studios guidance of GBP6-6.5m of adjusted
operating profit in 2023, boosted by post period end Greenbird
acquisition
-- H2 performance more positive on back of improving TAR and Studios profits
Net debt
-- Net debt immediately following completion of Greenbird
investment c.GBP32m, including c.GBP6m of cash balances in
Greenbird entities
-- Expect net debt to reduce towards year end, with leverage
(ratio of net debt to EBITDA) around 1 times for full year and at
lower end of self-imposed target range of 1-1.5 times
-- Revolving credit facility increased by GBP10m to GBP70m as
part of acquisition through partial exercise of accordion to
provide additional liquidity headroom
Diversification targets
-- STV expects to deliver at least 60% of earnings from outside
broadcasting in 2023, comfortably ahead of 50% target
-- New targets for the next phase of STV's diversification and
growth strategy will be confirmed in due course.
Dividend
-- The Board proposes an interim dividend of 3.9p per share, in
line with H1 2022, after considering all relevant factors including
the ongoing macroeconomic 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's diversification continues to accelerate, with strong
growth in Studios and Digital revenues in the first half more than
offsetting the expected weakness in the UK linear advertising
market, and delivering total revenue growth of over 20%.
Studios revenues almost quadrupled and VOD revenues on the STV
Player grew by 14% as we continue to execute our strategic plan and
reduce our reliance on traditional broadcasting. We now expect over
60% of our total 2023 earnings to come from these new growth areas,
well ahead of our 50% diversification target.
Our audience position remains unrivalled, with STV again
Scotland's most popular peaktime TV channel, stretching its lead
over BBC1. We delivered the largest commercial audience on 180 of
the 181 days of the first half of the year, with the England vs
Scotland Calcutta Cup match our biggest audience of the year so
far.
Our streaming service STV Player continues to grow strongly and
profitably with online consumption and streams both up by 25% and
digital profit up by 26%, as our new long-term content and
advertising partnership with ITV bears fruit.
The transformative acquisition of Greenbird Media represents a
major step towards our goal of STV Studios becoming the UK's #1
nations and regions production company and adds significant scale
and creative firepower to the group, illustrated by the recently
announced major reality format The Fortune Hotel which will debut
on ITV in 2024, produced by Tuesday's Child.
Our overall financial performance in H1 was impacted by a
challenging advertising market and cost inflation, as expected,
although looking forward we see a more encouraging outlook. Q3
total advertising is expected to be up 3-5% driven by the Women's
Football World Cup and the Men's Rugby World Cup which starts next
week, exclusively on STV. Our business is well positioned to
benefit when the advertising market improves and we also see strong
profit growth coming through in STV Studios in the second half of
2023."
There will be a presentation for analysts today, 5 September
2023, at 12.30 pm, via Zoom. Should you wish to attend the
presentation, please contact Angela Wilson, 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 financial overview
Total revenue increased by 21% to GBP75.3m (2022: GBP62.1m),
with growth driven primarily by the Studios division, which saw an
increase in revenue of GBP20.3m due to two significant drama
productions partially delivering in the period. Total advertising
revenues of GBP45.8m were down 14% on H1 2022, which reflects the
challenging and well-documented macro-economic conditions impacting
the linear advertising market.
Adjusted operating profit of GBP8.0m was down 33% on the first
half of 2022, impacted by the softness in linear advertising
markets combined with inflationary cost pressures. The Group
realised cost savings to offset roughly half of the inflationary
increases, as guided at the start of the year. The adjusted
operating profit performance is before exceptional items of GBP2.8m
for one-off costs relating to the extended partnership with ITV for
digital content and national VOD advertising sales representation.
The adjusted operating profit also includes GBP5.2m for High-End
Television (HETV) tax credits which are due in relation to the
drama commissions that have been partially delivered in the period,
which aligns with the revised approach to these credits to be
implemented from 1 January 2024 following HMRC consultation. There
were no exceptional items or HETV tax credits in the prior period.
On a statutory basis, the Group generated a nil operating profit in
the period (2022: GBP11.9m).
Total finance costs were GBP2.3m (2022: GBP1.3m), comprising
interest on the Group's borrowings of GBP0.8m (2022: GBP0.4m), and
non-cash costs in relation to the Group's defined benefit pension
schemes of GBP1.3m (2022: GBP0.6m) and interest on lease
liabilities of GBP0.2m (2022: GBP0.3m). The higher interest payable
on the Group's borrowings was driven by the higher base rate in the
period, with the margin payable under the Group's bank facility
remaining constant year on year.
The Group generated adjusted profit before tax (before
exceptional items and IAS19 interest, and including HETV tax
credits) of GBP6.9m (2022: GBP11.2m), a decrease of 38% on the
prior period, with adjusted basic earnings per share decreasing by
26% to 14.8p (2022: 20.0p).
The statutory result for the period was a loss before tax of
GBP2.4m (2022: profit of GBP10.6m), with the presentation of HETV
tax credits within the tax line for statutory purposes. The
effective tax rate (ETR) on the profit before tax, before
exceptional items and excluding HETV tax credits, has been charged
at 23.7%, which is in line with the pro-rated standard rate of
23.5%. The ETR on exceptional items in the period was a credit of
23.5%.
The Group was in a net debt position (excluding lease
liabilities) of GBP16.3m (December 2022: GBP15.1m) comprising
drawdowns under its banking facility of GBP20.3m (December 2022:
GBP26.4m) partially offset by a gross cash balance of GBP4.0m
(December 2022: GBP11.3m).
The Group's key financial covenants are leverage (ratio of net
debt to EBITDA), which must be no higher than 3 times, and interest
cover, which must be at least 4 times. At the end of the period,
leverage was 0.6 times, (December 2022: 0.5 times) and interest
cover was 24.3 times (December 2022: 42.8 times), with significant
headroom against covenant thresholds for both. In March 2023, the
Group exercised its second option to extend its revolving credit
facility by one year with the facility now maturing in March
2026.
Across the Group's two defined benefit pension schemes, the
accounting deficit before tax decreased to GBP55.0m at the half
year (31 December 2022: GBP63.1m). This was largely driven by an
increase in the discount rate due to a rise in corporate bond
yields, partially offset by the reduction in the market value of
scheme assets.
Broadcast
Total advertising revenue (TAR) for the first half of the year
was down 14% year on year. Regional advertising revenue at -14% for
the period performed better than national advertising at -19%, and
within the regional number the core SME advertiser base declined by
only 2%. The majority of the regional decline came from Scottish
Government spend, which was down c.55% with no covid-related public
health spending since Q1 2022. This advertising market performance
is driven by the challenging macro backdrop as a result of high
inflation and interest rates, and we expect markets to continue to
be cautious as those broader conditions persist. That said, there
has been some improvement in Q3, boosted by large scale sporting
events like the Women's Football World Cup and Men's Rugby World
Cup.
For the sixth first half year running, STV is the most watched
peak time channel in Scotland, with our viewing share up 1% year on
year (22.5%), and considerably ahead of BBC One. We delivered the
largest commercial audience on 180 of the 181 days of H1, with the
England vs Scotland Calcutta Cup match delivering our biggest
audience of the year so far. Soap giants, Coronation Street and
Emmerdale, continue to be schedule favourites. Other top 10
programmes for the first half of the year include dramas
Unforgotten and Vera; Harry: The Interview, which drew in a linear
audience of over half a million; and entertainment juggernaut, The
Masked Singer proving itself our most popular show, with the top
rating episode attracting over 600k viewers.
STV News has held its position as the most-watched news
programme in Scotland - tracking 7 share points ahead of Reporting
Scotland - and our current affairs programme, Scotland Tonight,
continues to provide debate and analysis four times a week
including one evening in peak. STV was the first channel to air an
SNP leadership debate, with STV's Political Editor putting
candidates through their paces. The 1-hour Special attracted the
highest audience of all SNP leadership debates to air that month,
which is testament to the skill and professionalism of our highly
experienced team.
In H1, we celebrated two years of Expert Voices, our media
workshop initiative designed to increase diversity of contributors
in our news and current affairs programmes. Established in 2021 to
expand our network of subject matter spokespeople, our news team
have now trained almost 1000 individuals from under-represented
groups, with around 10% already using their skills on air. Year to
date, 11% of our news contributors have come from ethnically
diverse backgrounds (target 8%); and 52% were female (target
50%).
STV's Growth Fund , which makes advertising more affordable and
accessible for SMEs, goes from strength to strength. A further 180
deals have been secured so far in 2023, and importantly over 70%
have returned from 2022. This Spring saw four businesses awarded
GBP25k of commercial airtime from our dedicated Inclusion Fund,
which targets diversity-championing businesses across Scotland.
Their campaigns will air on STV and STV Player in 2024.
In March, we welcomed the announcement from the Secretary of
State that Channel 3 licences can be renewed for a further ten-year
period from January 2025, thus securing the future provision of
public service obligations, including the country's highest
performing news and current affairs programmes. STV also welcomed
the publication of the Draft Media Bill and in particular the
Government's recognition that the new legislation is urgently
required to make Public Service Media as prominent on digital
platforms as they are today on broadcast. We look forward to the
swift passage of the Bill through Parliament to ensure STV remains
discoverable for viewers.
This summer , STV launched its first ever Sustainable Scotland
Week, using our privileged position to convey accurate
climate-related information to our viewers in an accessible way.
This seven-day, cross-platform mission - including specially
commissioned research, programming and promos - saw the channel
raising awareness of how climate change is impacting Scotland's
communities and inspiring viewers to live more sustainably. This
activity is part of our overall commitment to sustainability across
our organisation through STV Zero, and we are currently measuring
the impact of this dedicated week, with a view to further
progressing our work in this area.
Digital
We have delivered strong growth across our Digital division in
the first half of the year, with STV Player streams and online
consumption both up 25%, new registrations up 65% and VIP users up
24%. Digital VOD revenues are up 14% compared with H1 2022.
Following an agreement with ITV in December 2022, STV Player has
exclusive Scottish rights for a range of original and premiere
content, encompassing at least 100 hours of new box sets per year.
Thirty new series have premiered in H1 under this new deal already,
driving 11% of VOD viewing in H1. Four of these titles are in the
top 15 best-watched VOD shows of the first half, including Scottish
dramas Crime and Six Four, starring Scots Dougray Scott and Kevin
McKidd respectively.
Other streaming highlights include Emmerdale and Coronation
Street at positions 2 and 3, with returning stalwart dramas The Bay
and Unforgotten at 4 and 5.
An important contributor to the growth of our digital division
in H1 2023 has been our involvement with ITV's addressable
advertising platform, Planet V. This has seen the level of
targeted, programmatic advertising on our streaming service
increase from 40% to 90% across the period, with our digital brand
count increasing by 50% in H1 and the STV average price (cost per
thousand) increasing by 55%. This partnership has also created a
genuine one-stop-shop for Scottish advertising across linear, VOD
and programmatic, with the aim of attracting new, digital-only
advertisers who haven't advertised on TV before.
In April, the STV Player app launched on Sky Q. This was an
important step in our long-term partnership with Sky, making our
service easy to find verbally via remote control or on the Sky Q
apps rail. Although STV Player content has featured throughout Sky
Q's user interface across the UK since January 2021, this is the
first time the dedicated app has been available, enabling customers
to easily browse our extensive catalogue of content, access our
ad-free tier, STV Player+, and become STV Player VIP members (with
the reward of fewer adverts and prize draw entries).
We continue with our digital content acquisition strategy,
ensuring visitors to STV Player, across the whole of the UK, have
access to a wide range of high-quality content from around the
world. Acquired titles include high performing shows such as Irish
crime thriller Redemption and Australian police procedural Rush.
However, a key acquisition for H1 2023 was iconic soap, Brookside,
achieving 1m streams in its first week and significantly raising
the profile of STV Player across the UK. Brookside is our top
performing VOD programme in 2023, with c.8m streams in H1 of which
65% came from outside Scotland.
STV Studios
Our production business continues its strong growth trajectory,
with revenues nearly quadrupling year on year in H1. This is a good
performance set against a difficult commissioning backdrop, with
many UK broadcasters slowing their rate of new programme
commissions in the current economic climate, and actions by global
streaming services to cut costs impacting the rate and number of
new commissions awarded.
Commissions for H1 2023 include two new series of hit gameshow
Bridge of Lies with Ross Kemp. BBC One commissioned a further 8
episodes of the celebrity version for primetime, and a third series
of the regular version (25 episodes) for BBC Daytime. The wider
appeal of this format was demonstrated by its first major
international format sale to Spanish public broadcaster Televisión
Espanola's free to air channel, La 1.
BBC One confirmed a second six-part series of police drama, Blue
Lights, which is now currently in production in Belfast.
Co-produced by STV Studios production label, Two Cities, series 1
of Blue Lights launched on the BBC in March to five-star reviews.
One of the BBC's biggest new dramas of the year, it delivered an
average audience of 5.7m (consolidated), reaching 12.5m across all
episodes. We now have three major dramas in play, with a second of
series of Screw recently launched on Channel 4; and Criminal
Record, a co-production with our label, TOD Productions, set to air
soon on Apple TV+.
Production is ongoing on returning series such as Antiques Road
Trip and a new series of The Travelling Auctioneers for BBC, as
well as new observational documentary, The Firm, for BBC
Scotland.
Primal Media have completed production of innovative reality
format, Alan Must Win for Channel 4, and Mighty Scotland attracted
significant press attention via their Channel 4 you-tube
documentary, The Black Alien Project.
In July 2023, we announced our acquisition of Greenbird Media,
which has significantly increased the number of production labels
under the STV Studios umbrella, more than trebled our portfolio of
returning series and expanded our forward pipeline of new programme
ideas. This transformative acquisition represents a major step
towards our goal of becoming the UK's number 1 nations and regions
producer and has immediately accelerated STV's overall
diversification strategy in terms of both revenue and profit.
We recently announced the first major commission from one of the
new labels joining the STV Studios family through Greenbird, new
reality format The Fortune Hotel for ITV, from Tuesday's Child
Television, along with a further 6 new programme commissions by
Tuesday's Child, Interstellar and Rumpus Media.
STV Studios was named Production Group of the Year at the
prestigious Edinburgh Festival Awards in August 2023.
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 impact on 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 2022 Annual Report,
a copy of which is available at www.stvplc.tv .
Unaudited condensed interim income statement
Six months ended 30 June 2023
2023 2022
Note GBPm GBPm
Revenue 7 75.3 62.1
Net operating expenses (72.5) (50.2)
Exceptional items* 8 (2.8) -
-------- -------
Operating profit - 11.9
Finance costs
* borrowings (0.8) (0.4)
- defined benefit pension schemes* (1.3) (0.6)
* lease interest (0.2) (0.3)
(2.3) (1.3)
-------- -------
Share of loss of an associate (0.1) -
(Loss)/profit before tax (2.4) 10.6
Tax credit/(charge)* 9 5.7 (2.2)
-------- -------
Profit for the period 3.3 8.4
Attributable to:
Owners of the parent 3.3 8.5
Non-controlling interests - (0.1)
-------- -------
3.3 8.4
-------- -------
Earnings per share
Basic 10 7.2p 18.7p
Diluted 10 7.0p 18.2p
* Items marked thus are adjusted in the Group's alternative
performance measures. A reconciliation of the statutory results to
the adjusted results is included at note 8.
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 2023
2023 2022
GBPm GBPm
Profit for the period 3.3 8.4
Items that will not be reclassified to profit
or loss:
Gain on re-measurement of defined benefit
pension schemes 4.8 30.9
Deferred tax charge (1.2) (7.7)
Revaluation loss on listed investment to
market value - (0.1)
Other comprehensive income - net of tax 3.6 23.1
Total comprehensive income for the period 6.9 31.5
----- -----
Attributable to:
Owners of the parent 6.9 31.6
Non-controlling interests - (0.1)
----- -----
6.9 31.5
----- -----
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 2023
30 June 31 December
2023 2022
Note GBPm GBPm
Non-current assets
Intangible assets 12 1.0 1.2
Property, plant and equipment 13 9.8 10.6
Right-of-use assets 13 17.9 18.6
Investments 2.4 2.5
Deferred tax asset 14 20.6 21.9
Trade and other receivables 16 0.5 1.5
------- -----------
52.2 56.3
------- -----------
Current assets
Inventories 15 33.7 47.0
Trade and other receivables 16 37.1 39.9
Cash and cash equivalents 4.0 11.3
74.8 98.2
------- -----------
Total assets 127.0 154.5
------- -----------
Equity
Ordinary shares 18 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 2.1 1.8
Accumulated losses (318.3) (321.8)
------- -----------
Shareholders' equity (4.2) (8.0)
Non-controlling interests (0.3) (0.3)
------- -----------
Total equity (4.5) (8.3)
------- -----------
Non-current liabilities
Borrowings 17 20.3 26.4
Lease liabilities 17.9 18.7
Retirement benefit obligations 20 55.0 63.1
93.2 108.2
------- -----------
Current liabilities
Trade and other payables 37.4 53.7
Lease liabilities 0.9 0.9
38.3 54.6
------- -----------
Total liabilities 131.5 162.8
------- -----------
Total equity and liabilities 127.0 154.5
------- -----------
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 2023
Capital Attributable
Share Share redemption Merger Accumulated to owners Non-controlling
capital premium reserve reserve Other losses of the interest Total
reserve parent equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2023 23.3 115.1 0.2 173.4 1.8 (321.8) (8.0) (0.3) (8.3)
--------- --------- ----------- --------- --------- ------------- ------------- ----------------- --------
Profit for the
period - - - - - 3.3 3.3 - 3.3
Other
comprehensive
income - - - - - 3.6 3.6 - 3.6
--------- --------- ----------- --------- --------- ------------- ------------- ----------------- --------
Total
comprehensive
income for
the
period - - - - - 6.9 6.9 - 6.9
--------- --------- ----------- --------- --------- ------------- ------------- ----------------- --------
Share based
compensation - - - - 0.3 - 0.3 - 0.3
Dividends paid
(note 11) - - - - - (3.4) (3.4) - (3.4)
--------- --------- ----------- --------- --------- ------------- ------------- ----------------- --------
At 30 June
2023 23.3 115.1 0.2 173.4 2.1 (318.3) (4.2) (0.3) (4.5)
--------- --------- ----------- --------- --------- ------------- ------------- ----------------- --------
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
----- ------ ---- ------ ---- -------- ------- -------- -------
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 2023
2023 2022
Note GBPm GBPm
Operating activities
Cash generated by operations 19 6.4 10.7
Interest and fees paid in relation to
bank facilities (0.9) (0.6)
Corporation tax received/(paid) 0.5 (0.1)
Pension deficit funding - recovery plan
payment (4.8) (4.7)
Contingent cash payment to pension schemes - (2.4)
Net cash generated by operating activities 1.2 2.9
------ ------
Investing activities
Purchase of investment in associate - (0.9)
Production finance repayment from/(provided
to) associate 3.0 (2.4)
Loan provided to associate (0.6) -
Purchase of intangible assets (0.1) (0.3)
Purchase of property, plant and equipment (0.4) (1.9)
------ ------
Net cash generated by/(used in) investing
activities 1.9 (5.5)
------ ------
Financing activities
Payment of obligations under leases (1.0) (1.1)
Borrowings drawn 8.0 17.0
Borrowings repaid (14.0) (10.0)
Dividends paid 11 (3.4) (3.3)
Net cash (used in)/generated by financing
activities (10.4) 2.6
------ ------
Net movement in cash and cash equivalents (7.3) -
Cash and cash equivalents at beginning
of period 11.3 14.7
------ ------
Cash and cash equivalents at end of period 4.0 14.7
------ ------
Unaudited notes to the condensed interim financial
statements
Six months ended 30 June 2023
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 5 September 2023 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 2022 were approved by the Board of Directors on 7
March 2023 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 2023 have been prepared based on the
policies set out in the 2022 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
2022 which were prepared in accordance with United Kingdom adopted
international accounting standards. The condensed interim financial
statements and the annual report are available on the Group's
website at www.stv.plc/tv.
The annual financial statements for the year to 31 December 2023
will be prepared in accordance with United Kingdom adopted
international accounting standards.
Going concern
At 30 June 2023, the Group was in a net debt position (excluding
lease liabilities) of GBP16.3m comprising drawdowns under its
banking facility of GBP20.3m partially offset by gross cash
balances of GBP4.0m. The Group is in a net current asset position
and generates cash from operations that enables the Group to meet
its liabilities as they fall due, and other obligations.
The Group's banking facilities at the interim balance sheet date
comprised a GBP60m revolving credit facility, with a GBP20m
accordion, maturing in March 2026. The key financial covenants are
leverage (net debt to EBITDA), which must be less than 3 times, and
interest cover, which must be greater than 4 times. At 30 June
2023, the Group's leverage was 0.6 times and its interest cover was
24.3 times, both well within covenant limits. The facility that
remained available to the Group at 30 June 2023 was GBP34m plus the
GBP20m accordion (31 December 2022: GBP28m plus the GBP20m
accordion).
The acquisition of Greenbird Media in July 2023 will further
diversify the Group's earnings and materially enhance the future
growth prospects of STV Studios. The Group funded the acquisition
entirely from its existing banking arrangements, and to provide
additional liquidity headroom it accessed GBP10m from the
accordion, although the Group does not currently anticipate using
this incremental facility. The Group's forecasts have been updated
to include the payment of investment capital (which resulted in net
debt for the enlarged Group of c.GBP32m immediately on completion)
and the projected results of the acquired entities, which shows
that the Group will continue to be able to operate within the level
of its current available funding and financial covenants. Please
see note 22 for further details on this post balance sheet
event.
As part of the going concern review, the Group considers
forecasts of the advertising market, from which the Group generates
a material portion 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, and including
the impact of acquiring Greenbird Media, 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 2022 as part of its process to review and
approve the three-year plan covering the period to 31 December
2025. A severe but plausible downside scenario was identified that
reflected crystallisation of several risks, principally in relation
to advertising revenues and the number and scale of programme
commissions. The Group has updated its scenario modelling to
incorporate the Greenbird Media business and under this updated
scenario, the Group is projected to generate sufficient cash to
enable it to continue in operation and remain within covenant
levels under the Group banking arrangements. These forecasts also
included pension contributions in line with the Schedule of
Contributions agreed with the trustees, and any contingent cash
payments that would be payable under that mechanism, based on
forecast cash flows.
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 2022.
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. GBP0.6m was expensed through the income statement in
the period (30 June 2022: GBP0.5m).
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 20 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 2022.
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 division
delivers the majority of the volume of its programmes to
commissioners in the second half of the year. However, in the
current period, Studios partially delivered two significant drama
series, which has resulted in a material increase in revenue of
GBP20.3m to GBP27.2m for the division in the six months ended 30
June 2023 (GBP6.9m in the 6 month period to June 2022). This is
almost 70% of the original target revenues for 2023 of GBP40m for
the Studios division. Following the Greenbird Media acquisition in
July 2023, the Group expects revenues for the Studios division to
be between GBP70m - GBP75m for the full financial year.
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.
Broadcast Digital Studios Total
Six months 2023 2022 2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Sales 42.4 50.8 10.1 9.2 27.3 7.0 79.8 67.0
Inter-segment
sales (4.4) (4.8) - - (0.1) (0.1) (4.5) (4.9)
------ ------ ----- ----- ------ ------ ------ ------
Segment revenue 38.0 46.0 10.1 9.2 27.2 6.9 75.3 62.1
------ ------ ----- ----- ------ ------ ------ ------
Segment result
Adjusted operating
profit 4.9 10.7 5.0 4.0 0.1 (1.0) 10.0 13.7
------ ------ ----- ----- ------ ------
Unallocated corporate expenses (2.0) (1.8)
------ ------
Adjusted operating profit 8.0 11.9
Exceptional items (2.8) -
(note 8)
Finance costs (2.3) (1.3)
HETV tax credits (5.2) -
Share of loss in associate (0.1) -
------ ------
(Loss)/profit before
tax (2.4) 10.6
Tax credit/(charge) 5.7 (2.2)
------ ------
Profit for the period 3.3 8.4
------ ------
Adjusted operating profit (as shown above) is the statutory
operating profit before exceptional items and includes High-End
Television (HETV) tax credits receivable. The HETV tax credits
relate solely to the Studios operating segment.
The only significant changes in total assets from the amount
disclosed in the last annual financial statements are due to the
seasonality of operations, both in terms of the advertising market
and delivery of programmes. Please see note 6 for further
details.
8. Exceptional items and 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:
2023 2022
Operating profit Profit Basic Operating Profit Basic
before tax EPS Profit before tax EPS
GBPm GBPm pence GBPm GBPm pence
Statutory result - (2.4) 7.2p 11.9 10.6 18.7p
Exceptional items (see below) 2.8 2.8 - -
IAS 19 net finance costs - 1.3 - 0.6
High-End Television tax credit 5.2 5.2 - -
Adjusted results 8.0 6.9 14.8p 11.9 11.2 20.0p
----------------- ------------ ------- ---------- ------------ -------
Exceptional items
On 8 December 2022, the Group announced an extended partnership
with ITV for digital content and national VOD advertising sales
representation. The agreement is effective from 1 January 2023 and
one-off costs incurred as part of the agreement reached have been
presented as exceptional in the current year. The Group did not
incur any material exceptional costs or generate exceptional income
in the prior year interim period.
IAS 19 net finance costs
IAS19 related items, principally the net interest expense
included in the income statement, are excluded from non-statutory
measures as they are non-cash items that relate to historical
defined benefit pension schemes. The increase in the net finance
cost in the year is due to the increase in the discount rate
applied.
High-End Television tax credit
The Group meets the eligibility criteria to claim HETV tax
relief through the production of certain dramas created in its
Studios division. This incentive was introduced in the UK to
support the creative industries and is a critical factor when
assessing the viability of investment decisions in the production
of high-end drama programmes. These production tax credits are
reported within the total tax charge in the condensed interim
income statement in accordance with IAS 12. However, STV considers
the HETV tax credits to be a contribution to production costs and
therefore more aligned to working capital in nature. Therefore, the
adjusted results for the Group reflect these credits as a
contribution to operating cost and not a tax item. This
presentation is also consistent with the reform of HETV tax credits
to Audio-Visual Expenditure Credits which will be available for
application from 1 January 2024. HETV tax credits totalling GBP5.2m
has been recognised in the period in regard to two qualifying drama
productions; Screw series 2 and Criminal Record. There were no HETV
tax credits claimed in the prior period.
The cash impact from the above adjusted items in the interim
period, is an operating cash outflow of GBP2.8m in relation to the
exceptional items. This is included within the operating profit in
note 19. There was no cash impact from the adjusted items in the
prior period.
9. Tax credit/(charge)
Six months Six months
2023 2022
GBPm GBPm
The credit/(charge) for taxation
is as follows:
Charge for the period before exceptional
items (0.1) (2.2)
Tax effect on exceptional items 0.6 -
High-end television tax credit 5.2 -
--------------- ---------------
Credit/(charge) for the
period 5.7 (2.2)
--------------- ---------------
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. This excludes any impact
of the post period end acquisition of Greenbird Media.
The ETR on the profit before exceptional items, has been charged
at 23.7% (30 June 2022: 20.2%), which is in line with the pro-rated
standard rate of 23.5%. The ETR on exceptional items in the period
was -23.5%.
On 3 March 2022, 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 2022. The
deferred tax assets at 30 June 2023 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.
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 the
weighted average of 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
2023 2022
Pence Pence
Basic earnings per share 7.2p 18.7p
Diluted earnings per share 7.0p 18.2p
Adjusted basic earnings per share 14.8p 20.0p
Adjusted diluted earnings per share 14.4p 19.5p
The following reflects the earnings and share data used in the
calculation of earnings per share:
Six months Six months
2023 2022
Earnings GBPm GBPm
Profit for the period attributable to equity
shareholders 3.3 8.5
Exceptional items (net of tax) 2.2 -
Excluding IAS 19 financing cost 1.3 0.6
Adjusted profit 6.8 9.1
---------- -----------
Number of shares Million Million
Weighted average number of ordinary shares
in issue 45.8 45.5
Dilution due to share options 1.5 1.1
---------- -----------
Total weighted average number of ordinary
shares in issue 47.3 46.6
---------- -----------
11. Dividends
A dividend of GBP3.4m relating to the year ended 31 December
2022 was paid from the parent company's accumulated realised
profits in May 2023. (30 June 2022: final dividend relating to the
year ended 31 December 2021 of GBP3.3m, paid in May 2022).
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 2
November 2023 to shareholders who are on the register at 22
September 2023. This interim dividend, amounting to GBP1.8m 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 2023.
12. Intangible assets
During the six months ended 30 June 2023, the Group incurred
expenditure of GBP0.1m on web development (GBP0.5m in the year to
31 December 2022; GBP0.3m in the six months ended 30 June 2022).
There were no disposals in the current period and in the year ended
31 December 2022.
13. Property, plant and equipment and right-of-use assets
During the six months ended 30 June 2023, the Group incurred
expenditure of GBP0.4m on property, plant and equipment (GBP3.4m in
the year ended 31 December 2022; GBP1.9m in the six months ended 30
June 2022). There were no disposals in the current period and for
the year ended 31 December 2022.
During the six months ended 30 June 2023, the Group did not have
any additions of right-of-use assets (GBPnil in the year ended 31
December 2022; GBPnil in the six months ended 30 June 2022). There
were no disposals in the current period and for the year ended 31
December 2022.
14. Deferred tax asset
At 30 June 2023, total deferred tax assets of GBP20.6m were
recognised on the balance sheet (31 December 2022: GBP21.9m). Of
this, GBP13.8m relates to the deficit on the Group's defined
benefit pension schemes (31 December 2022: GBP15.7m) and the
balance of GBP6.8m relates to tax losses, accelerated capital
allowances and short-term timing differences (31 December 2022:
GBP6.2m)
15. Inventory
30 June 31 December
2023 2022
GBPm GBPm
Deferred programme production stock 12.3 12.0
Programme production work in progress 21.4 35.0
33.7 47.0
--------------- ---------------
16. Trade and other receivables
30 June 31 December
2023 2022
GBPm GBPm
Trade receivables 13.0 22.6
Prepayments and contract assets 11.9 12.8
Other receivables 6.9 5.5
Income tax recoverable 5.8 0.5
--------------- ---------------
37.6 41.4
--------------- ---------------
Amounts included in current assets 37.1 39.9
Amounts included in non-current
assets 0.5 1.5
---- ----
37.6 41.4
---- ----
17. Borrowings
At the balance sheet date, the Group had a GBP60m revolving
credit facility (RCF) in place, with a GBP20m accordion, maturing
in March 2026. Total gross borrowings as at the balance sheet date
were GBP20.3m (31 December 2022 - GBP26.4m). The principle
financial covenants are the ratio of net debt to EBITDA (which must
be below 3 times) and interest cover (which must be higher than 4
times). Post period end, the Group increased its RCF facility by
GBP10m to GBP70m through accessing its accordion, to provide
additional liquidity headroom on completion of the Greenbird Media
acquisition. Please refer to note 22 for further information.
18. Share capital
Issued share capital at 30 June 2023 and 31 December 2022
amounted to GBP23.3m relating to 46,722,499 ordinary shares with a
par value of GBP0.50 per share. All issued shares are fully
paid.
19. Notes to the condensed interim statement of cash flows
Six months Six months
2023 2022
GBPm GBPm
Operating profit - 11.9
Adjustments for:
Depreciation on property, plant and equipment 1.2 1.3
Amortisation of intangible assets 0.3 0.5
Amortisation of right-of-use assets 0.7 0.7
Share based payments 0.3 0.1
Decrease/(increase) in inventories 13.3 (4.7)
Decrease in trade and other receivables 6.8 2.5
Decrease in trade and other payables (16.2) (1.6)
Cash generated by operations 6.4 10.7
---------- ----------
Net debt reconciliation
Net debt
Cash and including
Long-term cash equivalents Net Lease lease liabilities
borrowings debt liabilities
GBPm GBPm GBPm GBPm GBPm
At 1 January 2023 (26.4) 11.3 (15.1) (19.6) (34.7)
Cash flows 6.2 (7.3) (1.1) 1.0 (0.1)
Non-cash movements
(i) (0.1) - (0.1) (0.2) (0.3)
At 30 June 2023 (20.3) 4.0 (16.3) (18.8) (35.1)
------------- ------------------- ------- -------------- -------------------
(i) Non-cash movements relate to the amortisation of borrowing
costs (for long-term borrowings) and interest charged on lease
liabilities.
20. 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
2023 2022
GBPm GBPm
Defined benefit scheme obligations (331.3) (352.9)
Defined benefit scheme assets 276.3 289.8
Net pension deficit (55.0) (63.1)
----------- --------------
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. The reduction in scheme assets was
in part a result of the hedging strategies of the scheme to hedge
inflation and interest rate risk to protect the scheme's funding
positions and level of contributions due to the schemes.
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
2023 2022
% %
Rate of increase in salaries nil nil
Rate of increase of pensions in payment 3.40 3.45
Discount rate 5.35 4.85
Rate of price inflation (RPI) 3.40 3.45
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 in
years of a pensioner retiring at age 65).
At 30 June At 31 December
2023 2022
Retiring at balance sheet date:
Male 20.6 20.9
Female 22.8 23.1
Retiring in 25 years
Male 21.8 22.1
Female 24.1 24.4
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 Decrease/increase by
by 0.25% 3%
Rate of price inflation Increase/decrease Increase/decrease by
(RPI) by 0.25% 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 2022 with aggregate monthly payments unchanged from the
previous recovery plans. The 2023 deficit recovery payments will
total GBP9.7m, with annual payments increasing at the rate of 2%
per annum over the term of the recovery plans. A contingent cash
mechanism is also in place, which triggers contingent funding
payments equivalent to 20% of any outperformance above a benchmark
of available cash to be paid to the schemes. There was no
additional contingent payment made to the schemes in the six month
period to 30 June 2023 (GBP2.4m in the six months ended 30 June
2022).
21. Transactions with related parties
As disclosed in the 2022 Annual report, the Group provided
programme production financing of GBP3.0m to Two Cities Television
Limited to cash flow the production of Blue Lights, a drama series
commissioned by the BBC. The full amount has been repaid in the
period. A working capital loan of GBP0.2m was also provided to the
associate in 2022, with a further GBP0.6m provided in the current
interim period. The total outstanding balance owed to the Group,
including interest, is GBP0.9m at the balance sheet date.
The Group provided advertising with an estimated fair value of
GBP0.2m (2022: GBP0.1m) for nil consideration to the charity
organisation STV Appeal.
22. Post balance sheet events
On 6 July 2023, the Group acquired 100% of the issued share
capital of unscripted television production network Greenbird Media
Limited ("Greenbird") for a total cash consideration of
approximately GBP24m, of which GBP21.4m was paid on completion. The
initial payment made was allocated GBP9.9m for the acquisition of
shares, equivalent to 86% of the equity, and GBP11.5m invested to
settle convertible loan instruments provided by the previous
majority shareholder. Amounts deferred in relation to the balance
of 14% of the equity, estimated to be GBP1.6m, are payable to the
founders based on agreed EBITDA targets for the acquired businesses
over the two years ending 31 December 2024, and will be recognised
as remuneration over that period. The remaining deferred amounts
relate to consideration payable of GBP1.2m for surplus cash
balances held by the majority subsidiary companies acquired at
completion. This will be paid to the previous shareholders at the
point in future when STV, through Greenbird, owns 100% of their
equity or when monies are distributed via dividends by them to
Greenbird. Acquisition related costs of c.GBP1m were incurred in
relation to the transaction and will be recognised in H2.
The Group funded the acquisition entirely from its existing
banking arrangements, and to provide additional liquidity headroom
it accessed GBP10m from its accordion (bringing the total banking
facility to GBP70m with a further GBP10m accordion available),
although the Group does not currently anticipate using this
incremental facility. The Group's net debt immediately following
completion of the acquisition was c.GBP32m, including c.GBP6m of
cash balances in the Greenbird entities.
Due to the recent timing of the acquisition, the Group is in the
early stages of its fair value assessment of the assets acquired
and liabilities assumed and has not yet finalised the accounting
for the business combination. It expects to complete its assessment
in the second half of 2023. The carrying value of the net assets
acquired at the date of acquisition was GBP4.7m.
Goodwill represents the value placed on the opportunity to
materially enhance the future growth prospects of STV Studios
creatively, commercially, and internationally. This will be
calculated as the fair value of the consideration transferred, plus
the amount of non-controlling interest, less the net of the fair
value of the identifiable assets acquired and liabilities assumed.
The value of goodwill will be adjusted by a corresponding amount
for the value of intangible assets identified and the difference
between the market and book values of the assets and
liabilities.
Performance-based employment-linked earnouts will be accrued
over the period the founders are required to remain with the
business.
In July 2023, the Group acquired a further 15% stake in quiz
show producer Mighty Productions for consideration of GBP0.3m to
take the total investment stake held by the Group to 40%.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge, these condensed
consolidated interim financial statements 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 and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year
and
-- Material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of STV Group plc are listed in the Annual Report
and Accounts for 31 December 2022, with the exception of the
following changes in the period:
-- Anne Marie Cannon (resigned 27 April 2023)
-- Naomi Wendy Climer (appointed 30 May 2023)
A list of current directors is maintained on the STV plc
website: www.stvplc.tv
For and on behalf of the Board:
Lindsay Dixon
Chief Financial Officer
Date: 5 September 2023
Independent review report to STV Group plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2023 which comprises the income statement,
the statement of comprehensive income, the balance sheet, the
statement of changes in equity, the cash flow statement and related
notes 1 to 22.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules 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 (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, 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.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusion 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 ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, 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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
Date: 5 September 2023
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END
IR LIMMTMTMMTAJ
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