Interim Results

RNS Number : 9974M

STV Group PLC

25 August 2011

 



0700 hours, 25 August 2011   

STV Group plc Interim Results 2011

Interim Results for the six months ended 30 June 2011

STV, Scotland's leading digital media business, announces its Interim financial results for the half year ended 30 June 2011 which are in line with expectations:

	STV(£m)
	H1 2011	H1 2010
Revenue	£47.2m	£49.7m
EBITDA*	£8.1m	£8.3m
Operating profit*	£7.0m	£6.9m
Pre-tax profit*	£6.5m	£6.0m
EPS*	16.8 pence	16.0 pence
Net debt	£57.5m	£60.7m

*Pre-exceptionals

Financial Highlights

·      Revenue down 5% at £47.2m, however, digital revenues up 53% at £2.7m

·      Operating profit pre-exceptionals up 1% at £7.0m

·      Pre-tax profit pre-exceptionals up 8% at £6.5m

·      Earnings per Share pre-exceptionals up 5% at 16.8 pence

·      Net debt down 5% to £57.5m

·      Dividend policy reviewed with an intention to resume payments at year end

Strategic Developments

·      Wide ranging legal settlement agreed between STV and ITV

·      Digital business shows strong revenue growth in H1

·      Launch of new digital consumer services: STV Holidays and STV Daily Deals

·      STV Local successfully building traffic, bringing new advertisers to STV and extending our reach across platforms

·      Strengthening audience relationship through innovative delivery of PSB content, via localised news programme and STV Local

·      Strong performance against KPIs including previously up-graded digital traffic KPIs

·      Launch of online research panel, ScotPulse, delivering consumer intelligence for STV and external clients

·      STV delivered average peak time share ahead of the network from January to June

Richard Findlay, Chairman, said: "Trading is in line with expectations and I am pleased to report that we continue to see encouraging growth in our digital business.  The wide ranging settlement agreed with ITV removes significant uncertainty and we look forward to a new and constructive relationship.  The various legacy issues have now been closed out, resulting in a cash positive operating structure going forward.  Whilst we remain cautious about the near-term TV advertising market, we have complete confidence that our strategy will continue to deliver growth with a resumption of dividends at the end of the year barring unforeseen circumstances."

Rob Woodward, Chief Executive Officer, said: "We have transformed STV from a traditional broadcaster to a digital media company that engages with consumers across multiple platforms offering a compelling range of must-have digital services. We are excited by new technological developments that allow us to significantly extend our reach, and allow us to work with partners to deliver our unique, compelling content that can be accessed anywhere, anytime."  

25 August 2011

There will be a presentation for analysts at the offices of Peel Hunt, 111 Old Broad Street, London, EC2N 1PH today at 12.30pm.

Enquiries:

STV Group plc
George Watt, Chief Financial Officer	Tel: [phone]
Kirstin Stevenson, PR Manager	Tel: [phone]
College Hill
James Hogan	Tel: [phone]
Jamie Ramsay

Strategic Update

As an innovative creator of relevant and unique content, delivered across multi-platforms, STV continues to engage with consumers by offering a compelling array of must-have digital services.  We will continue to extend and amplify this mission as part of our strategy for growth.

Following the successful transformation of STV and the consistent achievement of its growth KPIs, STV today sets out its strategic aims to grow non-broadcast earnings from 7% in 2010 to represent 33% of Group earnings in 2015.  This will involve:-

-     Doubling STV Productions' revenues;

-     Becoming the most used digital service in Scotland;

-     Launching two new market-leading consumer propositions.

Operational Review

Introduction

STV is encouraged by progress to date and the continued strong performance against KPIs.  Average peak time audience share is ahead of the network for H1; our schedule is strong; and we continue to explore and launch additional revenue generating ventures.  Our digital business, including the pioneering STV Local initiative, is showing great progress and is connecting us to consumers in new ways, allowing us to compete in new advertising markets.  STV is not the traditional broadcaster of the past; it is an innovative, customer focused digital media company with unrivalled reach across its territory.

STV Consumer

STV has established itself as a digital media business, connecting with consumers in innovative ways across multi-platforms and extending our reach through increased choices to access our content and the creation of new consumer services. 

Consumer division revenues are down 2% at £45.0m, principally due to a challenging regional airtime market which is down 17% year on year at £6.2m, albeit versus a strong comparator with 2010 due to the World Cup.  The regional market reflects the slower pace of recovery in the Scottish economy and the impact of a reduction in spending by the Scottish Government partly due to the Scottish election in Q2.  National airtime revenues are flat year on year at £33.7m.

On Outlook: While comparatives remain tough for the rest of the year and we remain cautious on the economic outlook given continuing macro-economic uncertainty and the effect on the TV advertising market, we expect our national advertising revenues to perform broadly in line with the ITV Network for the year as a whole.

STV national airtime revenue was down 16% in July and we expect August to be down 5% with September up 4%.  The regional airtime market remains challenging and we expect Q3 to be down 18%, however, the outlook for October is much improved up 17% and we now expect regional revenues to be down 5% across the whole year.

Digital revenues continue to achieve significant growth and are up 53% year on year at £2.7m, and over 50% of our broadcast audience now accesses STV online.  The growth in digital revenues has accelerated as we improve our presence in the London market and we are confident this trend will continue in H2.

Our sponsorship team creates opportunities for advertisers to promote their brands and in H1 have secured deals with a number of high profile companies such as Scottish Power, Weatherseal, Belhaven and William Hill, securing revenues of £1.7m so far. 

We are exploring additional revenue generating ventures and to this end, launched STV Holidays in conjunction with Barrhead Travel, Scotland's largest independent travel group, in May; STV Daily Deals in August, providing locally targeted deals for consumers, in conjunction with US technology partner, Analog Analytics; and STV Live Casino, a brand new online casino service, which was launched in June together with technical partner, VueTec.  Using the latest technology, STV Live Casino brings live gaming action straight from the casino floor in real time.

STV Local

We continue the roll-out of our new initiative, STV Local, which enables us to leverage our investment in content across multi platforms.  This network of hyper-local websites, available online and via mobile devices, has created a new platform for audience engagement and the opportunity for our advertisers to geo-target their marketplace. STV Local has shown a rapid build up of traffic from its launch a year ago, including a doubling of unique users from Q1 to Q2 to a run rate of some 300,000 in June.    

To date, 22 sites have been launched in local authority areas covering a third of the Scottish population, including cities such as Edinburgh and Aberdeen plus other areas such as Peterhead, Hamilton and Elgin.  We will continue the roll-out of STV Local over the next 18 months, with Glasgow planned as the next area to launch in Q4 2011.

Through H1 we have developed a successful advertising strategy for STV Local, specifically targeting and engaging with local businesses, attracting new advertisers to STV, and developing bespoke advertising on the site.

Channels

STV provides a schedule comprising a mix of network material and home grown productions, alongside our dedicated and localised popular news service.  This strategy has proven successful, with our monthly peak share performance from January to June 2011 averaging 0.9 share points ahead of the ITV Network.

In June, we announced that we would be moving our daily live show, The Hour, into a weekly primetime slot, which is testament to the success of the series to date.  Additional original programming, in the form of programmes such as our exclusive Walter Smith documentary and The Football Years, has proven to be popular and illustrates our commitment to home-grown production.

PSB programming remains essential to our schedule and we continually seek innovative ways to deliver this. Today we have announced a new 30-minute news, sport, politics and current affairs programme - Scotland Tonight -  which will run from Monday to Thursdays at 10.30pm, delivering an engaging and accessible style current affairs content.  In May this year, we launched  our new locally focused news programme for Edinburgh and the east, and tailored the news programme for the west, offering a more localised service for this audience.  The two enhanced news programmes, alongside our STV North service, offer a unique mix of Scotland's top stories combined with regional and local material and collectively reach over 1.4million viewers per week.

Following a successful launch of the STV News application for iPhone, consumers can now also access STV News via Android smart phones. Providing content via mobile platforms is a key component of our STV Anywhere strategy, with over 114,000 downloads of our apps to date.

Our relationship with our audience is evolving and deepening as they move to becoming consumers of other STV services.  Management and innovative use of customer data is therefore increasingly important and we are working with the market leaders in this area, Experian, to build our customer database capability.

STV Productions

Content is at the heart of the business and our production business continues to develop programming across a range of genres for various broadcasters, with a strong delivery schedule for H2.

Antiques Road Trip continues to be a huge success for BBC2 and they have commissioned a prime time celebrity special series for transmission later this year.  With names such as Terry Wogan, Caroline Quentin and Ann Widdecombe, we are confident that this, alongside the third 60-part series, will continue to deliver the strong ratings of the first two series.

Our 90 minute drama, Fast Freddie, The Widow and Me, has been produced for ITV and is due to air in December.

Five episodes of new daytime factual entertainment show, Quiz Trippers, were delivered to Channel 4, with the series achieving a healthy 10% audience share during its transmission in July.

Our work with Kinetic Content continues and we are pleased to announce that we have developed a pilot entitled The Kids Aren't Alright for a US broadcaster.

ITV 

On 27 April STV agreed a wide ranging settlement with ITV plc and ITV Network over various long standing legal disputes.  Under the terms of the settlement, both parties immediately dropped their respective claims and are now focused on working together on a new, collaborative and productive relationship which will strengthen the Channel 3 Network.  Under the terms of the settlement, totalling £18.0m, STV has paid £7.2m in cash ahead of the scheduled payment date and, depending on the outcome of ongoing discussions with ITV, STV will pay a further £10.8m in programming rights or cash by June 2013.  These cash payments will be met from STV's existing bank facilities and the value of programming rights transferred is capped at a maximum of £15.0m.  Additionally, STV will receive £2.4m of credit for programme opt outs in 2011 giving a net cash impact of the settlement of £4.8m. 

Regulatory

We are proactively engaging with the Government as it determines the future regulatory landscape.  We recognise the opportunities for a digital media business with regards the creation of a new Communications Bill and are confident of an early decision regarding licence renewal. 

As the distinctive political landscape in Scotland changes, we continue to engage with the Scottish Government regarding all broadcasting matters, including the prospect of broadcasting becoming a devolved policy matter.

Dividend

The Board has reviewed its position and confirms its intention to reinstate dividend payments to shareholders. Further details will be confirmed at the year end.

Pensions

Reducing our pension liabilities and associated risks is a key corporate priority.  The net deficit has continued to reduce and amounted to £8.9m at 30 June 2011, down from £16.2m at 31 December 2010.

Over the past 4 years we have adopted a proactive and innovative approach to reducing our pension liabilities. This has  included introducing a cap on increases to pensionable salary levels; offering pensioner members of the schemes exchanges of non-statutory annual increases in lieu of higher pension payments; undertaking a targeted transfer value exercise with deferred members of the schemes; and, more recently undertaking a mortality research exercise of the Caledonian Publishing Pension Scheme to obtain a fuller understanding of the actual scheme to enable the current mortality funding assumptions to be challenged.  This exercise has now concluded and the findings support a reduction in the liabilities of this scheme by £5m. 

An on-going programme of risk and liability reduction measures is being planned in conjunction with our advisors and in discussions with the scheme trustees.

The next actuarial valuation is due on 1 January 2012 with the outcome of this process expected in Q4 2012/Q1 2013.

Principal Risks and Uncertainties

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of STV Group plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

The group set out in its 2010 Annual Report and Financial Statements the principal risks and uncertainties that could impact its performance.  These remain largely unchanged since the Annual Report was published, with the exception of the negotiated litigation settlement with ITV plc and ITV Network.

The group has rigorous internal systems to identify, monitor and manage any risks to the business.

The main areas of potential risk and uncertainty are in relation to the regulatory environment, dependence on advertising, performance of the ITV Network and shortfalls within the pension schemes.

These risks, together with examples of mitigating activity, are set out in more detail on pages 27 and 28 of the 2010 Annual Report which is available on the STV Group plc website: www.stvplc.tv

A copy of this statement is being sent to all shareholders on 6 September 2011.

Rob Woodward

CEO, STV plc

Appendix

KPI Update

    Appendix 1 - KPI UPDATE

	2011 target	Position at Interim
1. Increase regional advertising market share	26% share	On track
2. Peak time audience v ITV Network	To be in line with the Network	Tracking ahead
3. Increase broadcast margin	15%	On track
4. Production hours	130 hours	Tracking below
5. Value of external commissions	£16.8m	Tracking below
6. Content margin	10.0% (min)	On track
7. Unique users per month (Q4 monthly average)	2.5m	On track
8. Page impressions per month (Q4 monthly average)	14.0m	On track
9. Digital revenue value	£7.3m	On track
10. Video streams per month (Q4 monthly average)	2.7m	On track
11. Digital margin	30%	Will be missed due to investment

Condensed consolidated income statement Six months ended 30 June 2011
				Six months 2011			Six months 2010
				Underlying results	Exceptional items	Results for period	Underlying results	Exceptional items	Results for period
				£m	£m	£m	£m	£m	£m
	Note			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	Continuing operations
	Revenue		3	47.2	-	47.2	49.7	-	49.7
	Net operating expenses before exceptional costs			(40.2)	-	(40.2)	(42.8)	-	(42.8)
	Litigation matters		5	-	(13.0)	(13.0)	-	(1.0)	(1.0)
	Net operating expenses			(40.2)	(13.0)	(53.2)	(42.8)	(1.0)	(43.8)
	Operating profit/(loss)			7.0	(13.0)	(6.0)	6.9	(1.0)	5.9
	Finance income			0.2	-	0.2	0.2	-	0.2
	Finance costs	- borrowings	5,6	(1.3)	-	(1.3)	(1.3)	(1.5)	(2.8)
		- IAS 19 pension	6	0.6	-	0.6	0.2	-	0.2
				(0.5)	-	(0.5)	(0.9)	(1.5)	(2.4)
	Profit/(loss) before tax			6.5	(13.0)	(6.5)	6.0	(2.5)	3.5
	Tax charge		7	-	-	-	-	-	-
	Profit/(loss) for the period from continuing operations			6.5	(13.0)	(6.5)	6.0	(2.5)	3.5
	Discontinued operations
	Loss for the period from discontinued operations		8	-	-	-	-	(1.5)	(1.5)
	Profit/(loss) for the period			6.5	(13.0)	(6.5)	6.0	(4.0)	2.0
	Earnings/(loss) per share
	From continuing operations
	-  basic and diluted		9	16.8p		(16.8p)	16.0p		5.3p
	From continuing and discontinued operations
	-  basic and diluted		9	16.8p		(16.8p)	16.0p		9.3p

Condensed consolidated statement of comprehensive income Six months ended 30 June 2011	Six months 2011	Six months 2010
	£m	£m
	(Unaudited)	(Unaudited)
(Loss)/profit for the period	(6.5)	2.0
Actuarial gain/(loss) on defined benefit pension schemes	5.3	(16.5)
Deferred tax (charge)/credit	(1.6)	4.6
Other comprehensive income/(expense) for the period	3.7	(11.9)
Total comprehensive expense for the period	(2.8)	(9.9)

The above condensed consolidated income statements should be read in conjunction with the accompanying notes.

Condensed consolidated balance sheet
As at 30 June 2011
		30 June	31 December	30 June
		2011	2010	2010
	Note	£m	£m	£m
		(Unaudited)	(Audited)	(Unaudited)
Non-current assets
Property, plant and equipment	10	9.6	10.1	10.7
Goodwill and other intangible assets		7.9	7.9	8.0
Deferred tax asset		9.5	11.1	16.4
		27.0	29.1	35.1
Current assets
Inventories		35.8	35.8	43.7
Trade and other receivables		22.4	26.4	25.9
Cash and cash equivalents		3.9	7.6	10.7
Short term bank deposits		-	0.1	0.3
		62.1	69.9	80.6
Total assets		89.1	99.0	115.7
Equity attributable to owners of the parent
Ordinary shares	12	19.5	19.2	19.2
Share premium	12	112.0	111.4	111.4
Merger reserve		173.4	173.4	173.4
Other reserve		0.5	0.8	0.6
Accumulated losses		(328.2)	(324.6)	(345.9)
Total equity		(22.8)	(19.8)	(41.3)
Non-current liabilities
Borrowings	11	56.4	54.9	63.8
Trade and other payables		1.0	2.5	1.2
Provisions		2.9	3.1	3.1
Retirement benefit obligation	14	12.6	22.9	48.6
		72.9	83.4	116.7
Current Liabilities
Borrowings	11	5.0	5.0	7.9
Trade and other payables		33.3	29.0	30.6
Current tax liabilities		-	-	0.7
Provisions		0.7	1.4	1.1
		39.0	35.4	40.3
Total liabilities		111.9	118.8	157.0
Total equity and liabilities		89.1	99.0	115.7

The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.

Condensed consolidated statement of changes in equity Six months ended 30 June 2011
	Equity attributable to owners of the parent
	Ordinary shares	Share premium	Merger reserve	Other reserve	Accumulated losses	Total equity
	£m	£m	£m	£m	£m	£m
Balance at 1 January 2011	19.2	111.4	173.4	0.8	(324.6)	(19.8)
Net loss for the period	-	-	-	-	(6.5)	(6.5)
Actuarial gain	-	-	-	-	5.3	5.3
Deferred tax thereon	-	-	-	-	(1.6)	(1.6)
Total comprehensive expense for the period	-	-	-	-	(2.8)	(2.8)
Own shares issued and acquired	0.3	0.6	-	-	(0.9)	-
Own shares awarded	-	-	-	-	0.1	0.1
Equity settled share based payments	-	-	-	(0.3)	-	(0.3)
Balance at 30 June 2011 (unaudited)	19.5	112.0	173.4	0.5	(328.2)	(22.8)
Balance at 1 January 2010	18.3	111.3	173.4	0.5	(335.4)	(31.9)
Net profit for the period	-	-	-	-	2.0	2.0
Actuarial loss	-	-	-	-	(16.5)	(16.5)
Deferred tax thereon	-	-	-	-	4.6	4.6
Total comprehensive expense for the period	-	-	-	-	(9.9)	(9.9)
Own shares issued and acquired	0.9	0.1	-	-	(1.0)	-
Own shares awarded	-	-	-	-	0.4	0.4
Equity settled share based payments	-	-	-	0.1	-	0.1
Balance at 30 June 2010 (unaudited)	19.2	111.4	173.4	0.6	(345.9)	(41.3)

The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Condensed statement of consolidated cash flows
Six months ended 30 June 2011
				Six months	Six months
				2011	2010
			Note	£m	£m
				(Unaudited)	(Unaudited)
Operating activities
Cash generated/(used) by operations			13	0.8	(3.5)
Interest paid				(1.0)	(2.3)
Pension deficit funding	- 18 year recovery plan payment			(4.2)	(3.7)
Net used by operating activities				(4.4)	(9.5)
Investing activities
Interest received				-	0.1
Purchase of property, plant and equipment				(0.6)	(0.4)
Net cash used by investing activities				(0.6)	(0.3)
Financing activities
Release of cash on deposit				0.1	-
Net borrowings drawn				1.2	2.9
Net cash generated by financing activities				1.3	2.9
Net decrease in cash and cash equivalents				(3.7)	(6.9)
Net cash and cash equivalents at beginning of period				7.6	17.6
Net cash and cash equivalents at end of period				3.9	10.7

Although not required under IFRS the directors have provided the following reconciliation of net debt for further clarity.  The net debt represents Group borrowings less cash and cash equivalents and short term deposits.

Reconciliation of movement in net debt
Six months ended 30 June 2011
		Six months	Six months
		2011	2010
		£m	£m
Opening net debt		(52.2)	(49.4)
Net decrease in cash and cash equivalents in the period		(3.7)	(6.9)
Net movement in debt financing		(1.5)	(4.2)
Net movement in escrow cash		(0.1)	(0.2)
Closing net debt		(57.5)	(60.7)

Notes to the condensed set of financial statements

Six months ended 30 June 2011

1.   Basis of preparation

This condensed consolidated interim financial information comprises the unaudited interim results for the six months to 30 June 2011 and 30 June 2010, together with the audited consolidated balance sheet as at 31 December 2010 (hereinafter referred to as "financial information"). 

This financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard (IAS) 34, 'Interim financial reporting' as adopted by the European Union. 

The Group meets its day-to-day working capital requirements through its bank facilities.  The Group's forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.  The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.

The condensed consolidated interim financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2010 which have been prepared in accordance with International Financial Reporting Standards (IFRS's) as adopted by the European Union.

This financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 24 February 2011 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.   Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2010.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards, amendments to standards or interpretations are mandatory for the first time for accounting periods beginning on or after 1 January 2011.  They either were not relevant for the Group or had no material impact on the financial statements of the Group.

		Effective date
IAS 24 (amendment)	Related party disclosures	1 January 2011
IAS 1 (amendment)	Presentation of financial statements	1 January 2011
IAS 34 (amendment)	Interim financial reporting	1 January 2011
IFRS 1 (amendment)	First time adoption - interim information, deemed cost exemption and rate-regulated entities	1 January 2011
IFRS 7 (amendment)	Financial instruments: disclosures	1 January 2011
IFRIC 13 (amendment)	Customer loyalty programmes - fair value	1 January 2011
IFRIC 14 (amendment)	IAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction	1 January 2011

3.   Business segments

The Group's Chief Executive, the chief operating decision maker, considers the business primarily from a product perspective. Under IFRS 8, the reportable segments are therefore Consumer (previously Broadcasting and Ventures), Productions (previously Content) and Cinema advertising (Cinema).  The Group sold its Cinema business on 14 May 2010.

The performance of the segments is assessed based on a measure of adjusted operating profit.  This measurement basis excludes the effects of exceptional items.

					External sales
Segment revenues					Six months 2011	Six months 2010
					£m	£m
Continuing operations
Consumer					45.0	46.1
Productions					2.2	3.6
					47.2	49.7
Discontinued operations
Cinema					-	6.9
					47.2	56.6

Segment result						Six months 2011	Six months 2010
						£m	£m
Continuing operations
Consumer						8.2	7.9
Productions						(1.2)	(1.0)
						7.0	6.9
Exceptional claim and legal costs incurred in litigation with ITV Network plc and ITV plc						(13.0)	(1.0)
Operating (loss)/profit						(6.0)	5.9
Financing						(0.5)	(0.9)
Exceptional financing costs						-	(1.5)
(Loss)/profit before tax						(6.5)	3.5
Tax charge						-	-
(Loss)/profit for the period from continuing operations						(6.5)	3.5
Discontinued operations
Cinema						-	-
Loss on disposal of discontinued operations						-	(1.5)
Loss for the period from discontinued operations						-	(1.5)
(Loss)/profit attributable to owners of the parent						(6.5)	2.0

4.   Operations in the interim period

In line with the UK advertising market as a whole, the autumn season provides the Group with the highest level of revenues. 

5.   Exceptional items

Litigation matters

As was disclosed in our 2009 and 2010 Annual Reports, ITV plc ("ITV") and other ITV entities launched a claim against STV Group and subsidiaries ("STV") for £15-20m (net) primarily in relation to opt-out programming. STV vigorously defended this claim and in addition launched further counter claims.

On 27 April 2011, the Group agreed a wide ranging settlement with ITV and ITV Network over the various legal actions which will result in the Group paying ITV £18.0m consisting of £7.2m in cash payable this year and £10.8m either in programme rights as at 31 December 2011 or cash, as adjusted, depending on further discussions with ITV. The cash payments will be made in agreed instalments and met from STV's existing bank facilities and the programming rights value is capped at a maximum of £15.0m.  In addition, STV will receive £2.4m of credit for programme opt outs in 2011 giving a net cash impact of the settlement of £4.8m. 

The settlement has been recognised as follows:

·  The exceptional write off of legal and other costs incurred by the Group in relation to the claims of £3.5m;

·  The recognition of an exceptional charge of £9.5m.

Finance costs

A loss on extinguishment of debt of £1.5m was recognised in the six months to June 2010.  On 3 February 2010, the Group renegotiated its banking facilities in part to enable a disposal of Pearl & Dean and the £1.5m loss represents the write off of unamortised fees in respect of the original debt obligations.

6.   Finance costs

	Six months	Six months
	2011	2010
	£m	£m
Bank borrowings	1.3	1.3
Pension finance credit	(0.6)	(0.2)
Finance costs excluding exceptional items	0.7	1.1
Exceptional finance costs (see note 5)	-	1.5
Finance costs	0.7	2.6

7.   Tax

	Six months	Six months
	2011	2010
	£m	£m
The charge for tax on continuing operations is as follows:
Tax on profit on ordinary activities excluding exceptional items at 0% (30 June 2010: 0%)	-	-

The effective tax rate for the Group excluding exceptional items is 0% (30 June 2010: 0%). The tax charge is lower than the standard rate of 26.5% due to adjustments for prior year provisions and certain tax planning initiatives.

The UK Government announced its intention in the 2010 Budget to reduce the UK Corporation Tax rate from 28% to 24% by 1% per annum over a four-year period. The 2011 Budget on 23 March 2011 then revised this to lower the UK Corporation Tax rate to 23% by 2014, and the Corporation Tax rate was reduced from 28% to 26% on 1 April 2011.  This rate change to 26% was enacted on 29 March 2011.  Deferred tax has therefore been provided at 26% at 30 June 2011 as this was the Corporation Tax rate enacted at the balance sheet date.

Had the change of rate to 23% been substantively enacted as at the balance sheet date, the deferred tax asset included within the accounts would have been reduced by approximately £1.1m.

8.   Discontinued operations

The disposal of the Group's cinema business, Pearl & Dean completed on 14 May 2010.

	Six months	Six months
	2011	2010
	£m	£m
Post tax results from discontinued operations (see note 3)	-	(1.5)

Exceptional items included within the results are as follows:

Loss on disposal of discontinued operations

Pearl & Dean Limited was sold to Image Ltd ("Image") for a gross cash consideration of £1 resulting in a loss on disposal of £1.5m. Pearl & Dean paid the 2010 minimum income guarantee of £17.6m to Vue Cinemas by way of an intercompany loan from STV.  As part of the deal agreed with Image, Pearl & Dean were to repay the portion of this loan relating to the period from 1 May 2010 to 31 December 2010 amounting to £9.1m. The first repayment of £2.5m was received upon completion, further payments of £5.1m were received to 31 December 2010 and the balance was fully repaid in January and February 2011.

Cash flows from discontinued operations

	Six months	Six months
	2011	2010
	£m	£m
Net cash flows from operating activities (note 13)	1.5	(13.9)

The net liabilities of Pearl & Dean at the date of disposal were as follows:

30 April 2010
	£m
Property, plant and equipment	0.5
Intangibles	0.2
Trade and other receivables	22.9
Trade and other payables	(4.3)
Working capital adjustment agreed as part of disposal	1.4
	20.7
Onerous contract provision released	(11.9)
Loan due to STV Group plc	(9.1)
	(21.0)
Net liabilities	(0.3)
Disposal expenses	1.8
Loss on disposal	(1.5)
Total consideration	-
Net cash flow arising on disposal:
Cash consideration	-

9.   Earnings per share

		Six months 2011	Six months 2010
		£m	£m
Underlying EPS:
	Basic EPS/EPS from continuing operations
	Earnings attributable to ordinary shareholders	6.5	6.0
	Weighted average number of shares in issue	38.6m	37.6m
	EPS	16.8p	16.0p
EPS including exceptional items:
	Basic EPS
	Earnings attributable to ordinary shareholders (including exceptional items)	(6.5)	2.0
	Weighted average number of shares in issue	38.6m	37.6m
	EPS	(16.8p)	5.3p
	EPS from continuing operations
	Basic earnings	(6.5)	2.0
	Pre-tax loss from discontinued operations	-	1.5
	Tax relating to discontinued operations	-	-
	Basic earnings from continuing operations	(6.5)	3.5
	Weighted average number of shares in issue	38.6m	37.6m
	EPS	(16.8p)	9.3p
EPS from discontinued operations:
	Basic EPS
	Pre-tax (loss)/profit from discontinued operations	-	(1.5)
	Tax relating to discontinued operations	-	-
	Basic earnings from discontinued operations	-	(1.5)
	Weighted average number of shares in issue	38.6m	37.6m
	EPS	-	(4.0p)

There is no difference between basic and diluted EPS as there is no material impact from dilutive share options.

10.  Property, plant and equipment

During the six months to 30 June 2011, the Group has incurred expenditure of £0.6m on property, plant and equipment (£0.8m to 31 December 2010; £0.4m to 30 June 2010).

11.  Borrowings and loans

At 30 June 2011, the Company had bank facilities in place totalling £70.0m consisting of a £55.0m term facility and a £15.0m revolving credit and overdraft facility (£55.0m and £15.0m respectively at 31 December 2010; £55.0m and £16.7m respectively at 30 June 2010).  The facilities expire on 31 December 2012 with the revolving credit facility amortising by £5.0m on 31 December 2011.  Security is provided to the debt provider by way of cross guarantees and a share pledge.

12.  Share capital

During the six months to 30 June 2011 the Group issued 713,784 of its new ordinary shares of 50p each which has resulted in a £0.3m increase in share capital and a £0.6m increase in share premium.  The shares were acquired by the employee share trust to meet future share awards under long term incentive plans.

13.  Notes to the condensed statement of consolidated cash flows

	Six months	Six months
	2011	2010
	£m	£m
Continuing operations
Operating profit  (before exceptional items)	7.0	6.9
Depreciation and other non-cash items	1.1	1.4
Operating cash flows before exceptional items and movements in working capital	8.1	8.3
Decrease in inventories	-	3.3
Decrease/(increase) in trade and other receivables	2.7	(1.2)
(Decrease)/increase in trade and other payables	(1.0)	1.5
	9.8	11.9
Litigation settlement and costs	(9.6)	(1.0)
Cost of change and onerous property costs	(0.9)	(0.5)
Cash (used)/generated by continuing operations	(0.7)	10.4
Cash generated/(used) by discontinued operations	1.5	(13.9)
Cash generated/(used) by operations	0.8	(3.5)

14.  Retirement benefit schemes

The fair value of the assets in the schemes, the present value of the liabilities in the schemes and the expected rate of return at each balance sheet date was:

	At 30 June 2011		At 31 December 2010		At 30 June 2010
		£m		£m		£m
Equities	8.0%	132.2	8.0%	132.7	8.0%	123.0
Bonds	4.2%-5.6%	132.2	4.2%-5.6%	129.6	4.5%-5.7%	121.1
Fair value of schemes' assets		264.4		262.3		244.1
Present value of defined benefit  obligations		(277.0)		(285.2)		(292.7)
Deficit in the schemes		(12.6)		(22.9)		(48.6)

A related offsetting deferred tax asset of £3.7m is shown under non-current assets.  Therefore the net pension scheme deficit amounts to £8.9m at 30 June 2011 (£16.2m at 31 December 2010; £34.3m at 30 June 2010).

15.  Transactions with related parties

There has been no change from the 2010 Annual Report and no transactions with any related parties in the period to 30 June 2011.

16.  Availability

A copy of this statement is being sent to all shareholders on 6 September 2011 and will be available for inspection by members of the public at the Company's registered office at Pacific Quay, Glasgow, G51 1PQ.

 

Statement of directors' responsibility

The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

·      an indication of important events that have occurred during the first six months of the financial year 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 of the financial year 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 STV Group plc Annual Report for 31 December 2010.

By order of the Board

Jane Tames

Company Secretary

25 August 2011

Independent review report to STV Group plc

Introduction

We have been engaged by the Company to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2011, which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed statement of consolidated cash flowsand related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS's as adopted by the European Union. The condensed consolidated set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

The maintenance and integrity of the STV group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board 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 Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow

25 August 2011

 

END

 

 

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