Full Year Results 2014
Press Release
0700 hours, 26 February 2015
STV Group plc Full Year Results 2014
Commercially focused
Creatively led
|
Financial Highlights |
2014 |
2013 |
Year on year |
|
Revenue |
£120.4m |
£112.1m |
+7% |
|
EBITDA |
£21.5m |
£20.1m |
+7% |
|
Operating profit |
£19.5m |
£18.0m |
+8% |
|
Pre-tax profit* |
£17.3m |
£15.2m |
+14% |
|
EPS* |
38.7 pence |
34.4 pence |
+13% |
|
Statutory EPS |
38.7 pence |
32.2 pence |
+20% |
|
Net debt |
£29.4m |
£35.7m |
-18% |
|
Dividends per share |
8.0 pence |
2.0 pence |
+300% |
*Pre-IAS19 interest
Highlights
· Revenue up 7% to £120.4 million
· Operating profit up 8% at £19.5 million
· EPS* up 13% to 38.7p per share
· Net debt down 18% to £29.4 million (1.4x Net Debt/EBITDA)
· Strong KPI performance against refreshed targets with 6 of 8 KPIs with 2014 targets met or exceeded
· Digital revenues up 23% at £5.3m and digital margins maintained above target level
· Dividend payment increased by 300% year on year with total 2014 dividend payment of 8.0 pence per share
Strategic Developments
· Licence renewal for maximum 10 year term to end of 2024
· From 1 January 2015, our biggest cost, network programming, moves in line with national revenues resulting in a significant de-risking of the Group's business model
· Introduction of the STV Family of consumer services and creation of new consumer services through launch of two City TV channels serving Glasgow and Edinburgh
· Bank facility amended and extended to June 2019 on significantly improved terms
· Additional growth target of a normalised EPS CAGR of 10% across 2014-2017 announced
Rob Woodward, Chief Executive Officer, said:"These are another strong set of results that show good progress against our strategic aims and growth KPIs across our consumer business. Our focus on our consumers, who we are serving with new and enhanced services, is enabling us to grow our commercial market share as we provide our advertisers with an increased range of ways of reaching their target markets.
STV Productions continues to make progress in building a strong pipeline through securing returning formats.
Today we also confirm a new strategic aim of achieving 10% CAGR in EPS over the next three years as we continue to deliver sustainable growth for shareholders."
There will be a presentation for analysts at the offices of Peel Hunt, Moor House, 120 London Wall, London EC2Y 5ET today, 26 February 2015, at 1.00pm. Should you wish to attend the presentation, please contact Katie Martin, STV: katie.martin@stv.tv or telephone: 0141 300 3000.
Enquiries:
STV Group plc
George Watt, Chief Financial Officer Tel: 0141 300 3049
Eleanor Marshall, PR & Communications Manager Tel: 0141 300 3670
Charlotte Street Partners
Chris Sibbald Tel: 0131 516 5310
Operational Review
Introduction
Strong financial results have been delivered during 2014 demonstrating the underlying profitability and growth momentum of the consumer business. As the STV Family of consumer services has been extended this year through the launch of new City TV services and further enhancements to the digital portfolio of consumer services have been introduced, market share has continued to increase as the reach of the STV Family has grown. 92% of Scots interact with STV every month and over half use at least three STV services.
The growth of non-broadcast earnings continued during the period, however, due to a stronger core broadcast market, reflected in increased television advertising revenues, this remained at just over one fifth (21%) of total Group earnings.
STV Productions delivered further success against the aim of securing returning formats but overall revenues were broadly flat year on year.
At the start of the year refreshed KPI targets, including new indicators focused on monitoring consumer reach and engagement, were announced. The strong operational performance of the business is reflected in six of those eight KPIs with 2014 targets achieved or exceeded, particularly the key targets for the consumer business of consumer division margin, digital margin and the attainment of consumer insights to support the company's data strategy. The data strategy is key to deepening relationships with consumers and creating additional value for advertisers and commercial partners.
STV Consumer
Core channel, STV, continues to command the position as Scotland's most watched commercial channel and for the fifth consecutive year achieved a peak-time audience share in excess of the Network, tracking 0.3 share points ahead and reaching 3.6m viewers per month.
The development of the STV Family has enabled the creation of a recognisable brand family of services: STV; STV Player; City TV; digital city services; and stv.tv. In addition to increasing market share and reach, with over 55% of Scots interacting with at least three STV services every month, new services are complementing STV's on air audience profile by bringing a younger audience with a higher proportion of males and ABC1s.
As the STV Family of services has become the focus of the consumer division, operating profit has increased to £19.1m (2013: £17.6m) and underlying profitability has been maintained with a margin of 17.8% achieved, exceeding the target of 16.5%. Going forward the Network Affiliate Agreement with ITV will provide the business with increased profit protection in the event of a weak advertising revenue market.
Strong growth in the digital business continued with digital revenues increasing significantly, up 23% at £5.3m (2013: £4.3m) and the digital margin target of 30% being exceeded at 32% (2013: 33%).
The reach of the STV Player has increased during the year as the availability of the Player across a wider range of platforms continues and the STV Player app has been downloaded 1.2 million times. Engagement levels on the STV Player have increased during the year as average time spent per user per day has increased by 21% to 46 minutes per day.
To coincide with 2014 Fifa World Cup Brazil, STV Live was launched and 480,000 streams were viewed during the four week tournament. Since the introduction of STV Live, (STV Player simulcast service), live streams accounted for 28% of total long form streams.
Deepening consumer engagement and creating innovative opportunities for advertisers to reach their target markets is at the heart of our data and insights strategy. Significant progress has been made in acquiring consumer insights during 2014 with an 85% increase year on year and the KPI target of 0.8m registrations exceeded with one million registrations achieved, equivalent to 1 in 5 of the Scottish population.
The first of the City TV services, STV Glasgow, was successfully launched in June followed by the launch of STV Edinburgh in January 2015. In January 2015, the total reach of both channels was over one million viewers.
The launch of the City TV services has created a corresponding increase in browser traffic to the City Apps for Glasgow and Edinburgh.
The early response from advertisers has been positive with over 100 new advertisers and many clients increasing spend with STV and marketing their brands and services across a number of assets in the STV Family.
STV provided a platform for debate throughout the referendum on Scottish independence in the run up to the vote on 18 September. Our commitment to public service broadcasting was evident throughout with a series of high profile debates and quality programming to engage viewers. The team delivered on air and online with coverage culminating in STV's most ambitious live, overnight programme with reports from all 32 declarations across Scotland. This programme was carried across the ITV network.
STV Productions
STV Productions has continued to develop and secure returning formats during 2014. The level of deliveries was below target in the second half of the year and as a result the business achieved revenues of £13.3m, short of the target of £16.8m for the year, and broadly flat year on year. The business achieved a margin of 3%, behind the target of 5%. In 2014, the number of hours produced totalled 164, including in-house STV commissions.
During 2014 a number of returning series commissions were secured for Catchphrase (ITV), The Link (BBC One), Antiques Road Trip (BBC One) and Celebrity Antiques Road Trip (BBC Two) and The Lie (TV3).
Catchphrase was commissioned for a further 13 episodes, including three celebrity versions. The Link aired for an initial run of 25 episodes and a second series of 40 episodes were ordered for BBC One daytime. Antiques Road Trip and Celebrity Antiques Road Trip also returned to BBC One and BBC Two following a March announcement for four new series of Antiques Road Trip and one new series of the celebrity version. This takes the total number of series to 12 Antiques Road Trip and four Celebrity Antiques Road Trip. A further fifth series of Celebrity Antiques Road Trip was commissioned in November and is expected to air in 2015.
The Lie, was re-commissioned for TV3 in Ireland and STV in Scotland. A format deal was also agreed with S4C / Cwmni Da for eight episodes for Welsh audiences to air in 2015. The second run of The Lie totals 60 episodes across the three broadcasters.
Two successful specialist factual documentaries aired on BBC One and BBC Two attracting high levels of interest. Tutankhamun: The Truth Uncovered was an international co-production with STV Productions and Cream Productions, Canada for BBC One, Discovery Canada and Smithsonian Channel. Swallowed by the Sea: Ancient Egypt's Greatest Lost City aired on BBC Two.
In addition to focusing on securing returning commissions, a priority for the business is to secure success in the drama genre. During 2014, a newly appointed head of drama was announced in a bid to bring renewed focus and success in this area.
The business also continued to work with GroupM on a number of co-development projects, including a documentary for Channel 5, Britain's Worst Roads, and the ITV entertainment series Let Me Entertain You.
Outlook
The outlook for national airtime revenues in Q1 is +11% with the favourable timing of Easter benefitting this quarter. We expect Q2 revenues to decline year on year as the World Cup is included in the comparative period and the General Election is likely to have an impact during the quarter. Scottish airtime revenues are down 3% in the first quarter and we expect them to be flat to 5% down in Q2 due to the earlier Easter and General Election effects.
Digital revenues continue to perform strongly, up 30% in Q1, and this positive trend is expected to continue into April.
Financial Performance Review
Revenue
Total revenue increased to £120.4m (2013: £112.1m). Reflective of a strong airtime performance, which outperformed the TV market, consumer revenues were up at £107.1m (2013: £98.6m) with national airtime revenue up 8% at £77.8m and the Scottish advertising revenue up 3% at £12.6m. The first of the City TV services, STV Glasgow, was launched in June and achieved target revenue of £0.6m during H2. STV Edinburgh launched on schedule in January 2015 and it is expected STV Glasgow will achieve a breakeven run rate in H2 of 2015.
Digital revenues continued to grow year on year, up 23% to £5.3m (2013: £4.3m)
STV Productions' revenues were marginally down at £13.3m (2013: £13.5m).
Operating profit continued to increase up 8% to £19.5m (2013: £18.0m). Consumer division operating profit improved to £19.1m (2013: £17.6m) maintaining a margin of 17.8%, ahead of the KPI target of 16.5% reflecting continued focus on the operational cost base, a strong airtime market whilst continued investment was made in the business.
Reflecting the stable revenues achieved by STV Productions, operating profit was maintained at £0.4m with a margin of 3% achieved.
Finance Costs
Net finance costs reduced by £0.6m to £2.2m (2013: £2.8m) principally due to the impact of improved interest margins in the amendment and extension of the existing bank facility to 2019.
Profit Before Tax
Profit before tax and IAS 19 interest increased by 14% to £17.3m (2013: £15.2m).
Statutory Result
The statutory result for the year after tax amounted to a profit of £14.7m (2013: £12.2m) with EPS of
38.7 pence (2013: 32.2 pence).
Balance Sheet
The principal balance sheet movements over the last 12 months were a reduction in net debt and movement from a pension surplus to deficit on an IAS 19 basis. The prior year surplus of £1.3m (net of deferred tax) moved to a deficit of £14.9m.
Cash Flow
Net debt fell by 18% to £29.4m (2013: £35.7m) resulting in a reduction of 35% over the last two years. The further reduction was due to the strong cash generation of the core operating business and a conversion rate of operating profit to free cash flow of 79% (2013: 94%).
The net debt:EBITDA ratio for the period reduced to 1.4x EBITDA (2013:1.9x), ahead of the Group's target level for 2014.
The principal cash outflows during the period arose from pension deficit funding of £5.5m, interest payments of £1.8m and capital expenditure of £5.3m.
Dividends
The Board has declared the payment of a final dividend of 6.0 pence per share in respect of 2014, (8.0 pence for the full year), up 300% on 2013. Subject to achievement of 2015 financial targets, a payment of 10.0 pence per share for 2015 is planned and it remains the intention of the board to continue the progressive dividend policy in future years.
Board Change
It is announced today that Jamie Matheson will retire from the Board at the forthcoming Annual General Meeting after eight years valued service and wise counsel to the Group.
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 2013 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. The 2014 Annual Report is scheduled to be circulated to shareholders on 27 March 2015.
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 as follows:-
Regulatory environment
Our broadcast business is operated under licences, regulated by Ofcom, which contain conditions that must be adhered to and although measures have been put in place internally to ensure that this occurs, it is possible that these terms may inadvertently be breached and sanctions imposed by Ofcom, the most serious of which could be the withdrawal of the licences.
The renewal of the current licences was confirmed in February 2014. The new licences will apply for a 10 year term from 1 January 2015.
Dependence on advertising
STV's results could vary from period to period as a result of a variety of factors, some of which are outside STV's control, including general economic conditions. In response to the operating and competitive environment, STV may elect to make certain decisions that could have a material adverse effect on sales, results of operations and financial conditions.
Performance of the ITV Network
The significant amount of STV Consumer's programming content is provided by the ITV Network. Therefore, its ability to attract and retain audiences and the advertising airtime sales performance of ITV's sales house - which is responsible for the sale of STV's UK national airtime to advertisers - are factors that affect the performance of STV Consumer and, therefore, the Group as a whole.
Pension scheme shortfalls
The STV pension schemes are relatively strong and the investment strategy is calculated to reduce any material market movement impacts, however, it is possible that the Group may be required to increase its contributions which could have an adverse impact on results and cash flow.
Financial risk
STV may be constrained by the Group's leverage and other debt arrangements. An increase in LIBOR interest rates would have an adverse impact on the financial position and business results. STV is exposed to currency risk, credit risk, liquidity risk and cash flow interest rate risk.
Rob Woodward
CEO, STV Group plc
Appendix 1 - 2014 KPI Update
|
|
2014 Actual |
2014 Target |
|
|
Consumer |
|||
|
1 Non broadcast EBIT share |
21%
|
Target of 33% by end 2015 |
Ongoing |
|
2 Peak time audience v ITV Network
|
+0.3 share points
|
To exceed the Network |
Exceeded |
|
3 Consumer division margin |
17.8% |
16.5% |
Exceeded |
|
4 Consumer reach |
Targets to end of 2016 |
All on track |
|
|
5 Consumer engagement |
|||
|
6 Consumer insights |
1.0m |
0.8m |
Exceeded |
|
7 Long form video streams |
14m |
14m |
Met |
|
8 Digital revenues |
£5.3m |
£5.3m |
Met |
|
9 Digital margin |
32% |
30% |
Exceeded |
|
STV Productions |
|||
|
10 Production revenue |
£13.3m |
£16.8m |
Not met |
|
11 Production margin |
3% |
5% |
Not met |
Consolidated income statementSYear ended 31 December 2014 |
||||
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
Note
|
£m |
£m |
|
|
|
|
|
|
|
|
Revenue |
6 |
120.4 |
112.1 |
|
|
|
|
|
|
|
|
Net operating expenses |
|
(100.9) |
(94.1) |
|
|
Operating profit |
|
19.5 |
18.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
- borrowings |
7 |
(2.2) |
(2.8) |
|
|
- IAS 19 pension |
7 |
- |
(0.9) |
|
|
|
(2.2) |
(3.7) |
|
|
|
|
|
|
|
|
Profit before tax |
|
17.3 |
14.3 |
|
|
Tax charge |
8 |
(2.6) |
(2.1) |
|
|
Profit for the year |
|
14.7 |
12.2 |
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
Basic earnings per share |
10 |
38.7p |
32.2p |
|
|
|
|
|
|
|
|
Diluted earnings per share |
10 |
37.6p |
31.2p |
|
A reconciliation of the statutory results to the adjusted results is included at note 18.
|
Consolidated statement of comprehensive income SYear ended 31 December 2014 |
||
|
|
|
|
|
|
2014 |
2013 |
|
|
£m |
£m |
|
|
|
|
|
Profit for the year |
14.7 |
12.2 |
|
|
|
|
|
Items that will not be reclassified to profit or loss: |
|
|
|
Re-measurement (losses)/gains on defined benefit pension schemes |
(22.1) |
21.2 |
|
Deferred tax credit/(charge) |
4.4 |
(4.9) |
|
Other comprehensive (expense)/income for the year |
(17.7) |
16.3 |
|
|
|
|
|
Total comprehensive (expense)/income for the year |
(3.0) |
28.5 |
|
Consolidated balance sheet |
|||
|
At 31 December 2014 |
|||
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
Note |
£m |
£m |
|
Non-current assets |
|
|
|
|
Goodwill |
11 |
7.9 |
7.9 |
|
Other intangible assets |
12 |
1.6 |
0.7 |
|
Property, plant and equipment |
13 |
8.8 |
6.7 |
|
Investments |
14 |
1.2 |
0.9 |
|
Deferred tax asset |
|
7.4 |
5.1 |
|
Retirement benefit asset |
17 |
- |
1.3 |
|
|
|
26.9 |
22.6 |
|
Current assets |
|
|
|
|
Inventories |
|
18.3 |
17.6 |
|
Trade and other receivables |
|
23.1 |
21.4 |
|
Cash and cash equivalents |
|
19.8 |
8.8 |
|
|
|
61.2 |
47.8 |
|
|
|
|
|
|
Total assets |
|
88.1 |
70.4 |
|
|
|
|
|
|
Equity attributable to owners of the parent |
|
|
|
|
Ordinary shares |
15 |
19.6 |
19.5 |
|
Share premium |
15 |
101.2 |
112.0 |
|
Merger reserve |
|
173.4 |
173.4 |
|
Other reserve |
|
0.6 |
0.3 |
|
Accumulated losses |
|
(291.3) |
(297.6) |
|
Total equity |
|
3.5 |
7.6 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
|
49.2 |
- |
|
Provisions |
|
0.6 |
0.8 |
|
Retirement benefit obligations |
17 |
14.9 |
- |
|
Derivative financial instruments |
|
0.2 |
- |
|
|
|
64.9 |
0.8 |
|
Current liabilities |
|
|
|
|
Borrowings |
|
- |
44.5 |
|
Trade and other payables |
|
19.3 |
16.9 |
|
Provisions |
|
0.4 |
0.6 |
|
|
|
19.7 |
62.0 |
|
|
|
|
|
|
Total liabilities |
|
84.6 |
62.8 |
|
|
|
|
|
|
Total equity and liabilities |
|
88.1 |
70.4 |
|
Consolidated statement of changes in equity Year ended 31 December 2014 |
|
|
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 2014 |
19.5 |
112.0 |
173.4 |
0.3 |
(297.6) |
7.6 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
14.7 |
14.7 |
|
|
Re-measurement loss |
- |
- |
- |
- |
(22.1) |
(22.1) |
|
|
Deferred tax thereon |
- |
- |
- |
- |
4.4 |
4.4 |
|
|
Total comprehensive expense for the year |
- |
- |
- |
- |
(3.0) |
(3.0) |
|
|
|
|
|
|
|
|
|
|
|
Share premium reduction |
- |
(11.0) |
- |
- |
11.0 |
- |
|
|
Issue of share capital |
0.1 |
0.8 |
- |
- |
- |
0.9 |
|
|
Own shares acquired |
- |
- |
- |
- |
(0.9) |
(0.9) |
|
|
Value of employee services |
- |
(0.6) |
- |
- |
0.8 |
0.2 |
|
|
Equity-settled share based payments |
- |
- |
- |
0.3 |
- |
0.3 |
|
|
Dividends |
- |
- |
- |
- |
(1.6) |
(1.6) |
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2014 |
19.6 |
101.2 |
173.4 |
0.6 |
(291.3) |
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2013 |
19.5 |
112.0 |
173.4 |
0.4 |
(326.2) |
(20.9) |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
12.2 |
12.2 |
|
|
Re-measurement gain |
- |
- |
- |
- |
21.2 |
21.2 |
|
|
Deferred tax thereon |
- |
- |
- |
- |
(4.9) |
(4.9) |
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
28.5 |
28.5 |
|
|
|
|
|
|
|
|
|
|
|
Equity-settled share based payments |
- |
- |
- |
(0.1) |
0.1 |
- |
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2013 |
19.5 |
112.0 |
173.4 |
0.3 |
(297.6) |
7.6 |
|
|
Statement of consolidated cash flows |
|
|
|
|
|
Year ended 31 December 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
|
|
Note |
£m |
£m |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
Cash generated by operations |
16 |
20.9 |
18.3 |
|
|
Interest paid |
|
(1.8) |
(2.5) |
|
|
Pension deficit funding |
- recovery plan payment |
|
(5.5) |
(4.2) |
|
|
|
|
|
|
|
Net cash generated by operating activities |
|
13.6 |
11.6 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
Purchase of investment |
|
(0.3) |
(0.3) |
|
|
Capitalised web development and branding spend |
|
(1.0) |
(0.7) |
|
|
Purchase of property, plant and equipment |
|
(4.0) |
(0.7) |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(5.3) |
(1.7) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Net borrowings drawn/(repaid) |
|
4.3 |
(5.0) |
|
|
Dividends paid |
|
(1.6) |
- |
|
|
|
|
|
|
|
|
Net cash generated from/(used by) financing activities |
|
2.7 |
(5.0) |
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
11.0 |
4.9 |
|
|
|
|
|
|
|
|
Net cash and cash equivalents at beginning of year |
|
8.8 |
3.9 |
|
|
|
|
|
|
|
|
Net cash and cash equivalents at end of year |
16 |
19.8 |
8.8 |
|
Although not required under IFRS the directors have provided the following reconciliation of net debt for further clarity. Net debt represents Group borrowing less cash and cash equivalents.
|
Reconciliation of movement in net debt |
|
|
|
|
Year ended 31 December 2014 |
|
|
|
|
|
|
2014 |
2013 |
|
|
Note |
£m |
£m |
|
|
|
|
|
|
Opening net debt |
|
(35.7) |
(45.3) |
|
Net increase in cash and cash equivalents |
|
11.0 |
4.9 |
|
Movement in debt financing |
|
(4.7) |
4.7 |
|
|
|
|
|
|
Closing net debt |
16 |
(29.4) |
(35.7) |
|
|
|
|
|
|
|
|
|
|
Notes to the preliminary announcement
Year ended 31 December 2014
1. General information
STV Group plc ("the Company") and its subsidiaries (together "the Group") is listed on the London Stock Exchange and incorporated and domiciled in the UK. The address of the registered office is Pacific Quay, Glasgow, G51 1PQ. The principal activities of the Group are the production and broadcasting of television programmes, internet services and the sale of advertising airtime and space in these media.
2. Basis of preparation
The financial information set out in the preliminary announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 in respect of the accounts for the year ended 31 December 2014. The statutory accounts for the year ended 31 December 2013, upon which the Company's auditors have given a report which was unqualified and did not contain a statement under the Companies Act 2006, have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2014 have yet to be signed. They will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.
Going concern basis
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 financial statements.
3. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2013.
4. Estimates
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2013.
5. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks: currency risk, credit risk, liquidity risk and cash flow interest rate risk.
The consolidated 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 as at 31 December 2013. There have been no changes in any risk management policies since the year end.
The carrying value of non-derivative financial assets and liabilities, comprising cash and cash equivalents, trade and other receivables, trade and other payables and borrowings is considered to materially equate to their fair value. Derivative financial instruments, which are measured at fair value, comprise interest rate swaps of £15.0m categorised as level 2. The fair value of interest rate swaps is calculated at the present value of the estimated future cash flows using market interest rates. The valuation techniques employed are consistent with the year end annual report. There are no financial instruments measured as level 3.
6. 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 and Productions.
The performance of the segments is assessed based on a measure of adjusted operating profit.
|
|
|
|
External sales |
|||
|
|
|
|
|
|
2014 |
2013 |
|
Segment revenues |
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
107.1 |
98.6 |
|
Productions |
|
|
|
|
13.3 |
13.5 |
|
|
|
|
|
|
120.4 |
112.1 |
Turnover in 2014 includes £0.8m of revenues from sources outside the UK (2013: £1.2m).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
2013 |
|
Segment result |
|
|
|
|
£m |
£m |
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
19.1 |
17.6 |
|
Productions |
|
|
|
|
0.4 |
0.4 |
|
Operating profit |
|
|
|
|
19.5 |
18.0 |
|
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
(2.2) |
(3.7) |
|
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
17.3 |
14.3 |
|
Tax charge |
|
|
|
|
(2.6) |
(2.1) |
|
Profit attributable to owners of the parent |
|
|
14.7 |
12.2 |
||
Operating profit in 2014 includes £0.4m arising outside the UK (2013: £0.6m).
7. Finance costs
|
|
|
|
|
|
2014 |
2013 |
|
|
£m |
£m |
|
|
|
|
|
Bank borrowings |
2.2 |
2.8 |
|
Pension finance charge |
- |
0.9 |
|
|
2.2 |
3.7 |
8. Tax charge
The effective tax rate for the Group is 15% (2013: 15%). The tax charge is lower than the standard rate of 21.5% due to adjustments for prior year provisions, utilisation of tax losses and certain tax planning initiatives.
9. Dividends
|
|
|
|
|
|
2014 |
2013 |
|
|
£m |
£m |
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
Final dividend for the year ended 31 December 2013 of 2.0p |
0.8 |
- |
|
(2012: nil) per share |
|
|
|
Interim dividend for the year ended 31 December 2014 of 2.0p |
0.8 |
- |
|
(2013: nil) per share |
|
|
|
|
1.6 |
- |
|
|
|
|
|
Proposed final dividend for the year ended 31 December 2014 of 6.0p (2013: 2.0p) per share |
2.4 |
0.8 |
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
10. Earnings per share
|
|
Earnings £m |
2014 Weighted average number of shares (m) |
Per share Pence |
Earnings £m |
2013 Weighted average number of shares (m) |
Per share Pence |
|
|
|
|
|
|
|
|
||
|
EPS: |
|
|
|
|
|
||
|
Earnings attributable to ordinary shareholders |
14.7 |
38.0 |
38.7p |
12.2 |
37.8 |
32.2p |
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
14.7 |
38.0 |
38.7p |
12.2 |
37.8 |
32.2p |
|
|
|
|
|
|
|
|
|
|
|
Potential dilutive ordinary shares |
|
1.1 |
|
|
1.3 |
|
|
|
Diluted EPS |
14.7 |
39.1 |
37.6p |
12.2 |
39.1 |
31.2p |
|
11. Goodwill
Goodwill at 1 January and 31 December 2014 was £7.9m (2013: £7.9m). It comprises capitalised goodwill on acquisitions completed since 1 January 1998 and the cost and impairment provision is split £10.6m and £2.7m respectively.
12. Other intangible assets
|
|
|
|
Web development and branding £m |
|
Cost |
|
|
|
|
At 1 January 2014 |
|
|
0.7 |
|
Additions |
|
|
1.0 |
|
At 31 December 2014 |
|
|
1.7 |
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
At 1 January 2014 |
|
|
- |
|
Depreciation |
|
|
0.1 |
|
At 31 December 2014 |
|
|
0.1 |
|
|
|
|
|
|
Net book value at 31 December 2014 |
|
|
1.6 |
|
|
|
|
|
|
Net book value at 31 December 2013 |
|
|
0.7 |
13. Property, plant and equipment
|
|
Leasehold buildings £m |
Plant, technical equipment and other £m |
Total £m |
|
Cost |
|
|
|
|
At 1 January 2014 |
0.1 |
24.8 |
24.9 |
|
Additions |
- |
4.0 |
4.0 |
|
Write offs |
- |
(1.6) |
(1.6) |
|
At 31 December 2014 |
0.1 |
27.2 |
27.3 |
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
At 1 January 2014 |
0.1 |
18.1 |
18.2 |
|
Charge for year |
- |
1.9 |
1.9 |
|
Write offs |
- |
(1.6) |
(1.6) |
|
At 31 December 2014 |
0.1 |
18.4 |
18.5 |
|
|
|
|
|
|
Net book value at 31 December 2014 |
- |
8.8 |
8.8 |
|
|
|
|
|
|
Net book value at 31 December 2013 |
- |
6.7 |
6.7 |
14. Investments
|
|
|
£m |
|
Cost |
|
|
|
At 1 January 2014 |
|
0.9 |
|
Additions |
|
0.3 |
|
At 31 December 2014 |
|
1.2 |
15. Share capital
|
|
Number of shares (thousands) |
Ordinary shares £m |
Share premium £m |
Total £m |
|
|
|
|
|
|
|
At 1 January 2014 |
39,050 |
19.5 |
112.0 |
131.5 |
|
|
|
|
|
|
|
Share premium reduction |
- |
- |
(11.0) |
(11.0) |
|
Issued during the year |
248 |
0.1 |
0.2 |
0.3 |
|
|
|
|
|
|
|
At 31 December 2014 |
39,298 |
19.6 |
101.2 |
120.8 |
On 20 February 2014, the Court of Session granted a reduction in the share premium account of £11.0m.
16. Notes to the consolidated statement of cash flows
|
|
2014 |
2013 |
|
|
£m |
£m |
|
|
|
|
|
Operating profit |
19.5 |
18.0 |
|
|
|
|
|
Adjustments for: |
|
|
|
Depreciation |
1.9 |
2.1 |
|
Depreciation of intangible assets |
0.1 |
- |
|
Share based payment expense |
0.3 |
- |
|
|
|
|
|
|
21.8 |
20.1 |
|
|
|
|
|
(Increase)/decrease in inventories |
(0.7) |
0.9 |
|
Increase in trade and other receivables |
(1.7) |
(2.5) |
|
Increase/(decrease) in trade and other payables |
1.5 |
(0.2) |
|
Cash generated by operations |
20.9 |
18.3 |
Analysis of movements in net debt
|
|
At 1 January 2014 |
Cash flow |
Non-cash movements |
At 31 December 2014 |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Cash and cash equivalents |
8.8 |
11.0 |
- |
19.8 |
|
Bank borrowings |
(44.5) |
(4.3) |
(0.4) |
(49.2) |
|
|
|
|
|
|
|
Net debt |
(35.7) |
6.7 |
(0.4) |
(29.4) |
At 31 December 2014, the Group had revolving credit and overdraft bank facilities in place totalling £60.0m. The facility previously consisted of a term facility and a revolving credit and overdraft facility (£25.0m and £32.5m respectively at 31 December 2013). At 31 December 2014 £50.0m of the facility was drawn down.
The amendment and extension to the bank facility was agreed on 4 June 2014 and the £60.0m revolving credit and overdraft facility has a maturity date of June 2019. Security is provided to the debt providers by way of cross guarantees and a share pledge.
17. Retirement benefit schemes
The Group operates two defined benefit pension schemes. The schemes are trustee administered and the schemes' assets are held independently of the Group's finances. Pension costs are assessed in accordance with the advice of an independent professionally qualified actuary.
The schemes are the Scottish and Grampian Television Retirement Benefit Scheme and the Caledonian Publishing Pension Scheme. They are closed schemes and therefore under the projected unit method the current service cost will increase as the members of the scheme approach retirement.
A full actuarial valuation of the schemes was carried out at 1 January 2012 and resulted in an actuarial deficit to be funded by the Group of £83.0m as at 31 March 2014. A recovery plan period of 11 years was agreed with payments of £5.5m in 2014 and between £7.0m and £7.75m from 2015 to 2025 inclusive. These payments are tax deductible.
The 1 January 2012 valuation has been updated to 31 December 2014 by a qualified independent actuary. The major assumptions used by the actuary were:
|
|
At 31 December 2014 |
At 31 December 2013 |
|
|
||
|
|
|
|
|
Rate of increase in salaries |
1.00% |
1.00% |
|
Rate of increase of pensions in payment |
2.90% |
3.35% |
|
Discount rate |
3.60% |
4.55% |
|
Rate of price inflation (RPI) |
2.90% |
3.35% |
Assumptions regarding future mortality experience are set based on advice, published statistics and experience in each scheme.
The average life expectancy in years of a pensioner retiring at age 65 is as follows:
|
|
At 31 December 2014 |
At 31 December 2013 |
|
|
||
|
|
Years |
Years |
|
|
|
|
|
Retiring at balance sheet date: |
|
|
|
Male |
15.5 |
14.3 |
|
Female |
18.0 |
17.1 |
|
|
|
|
|
Retiring in 25 years: |
|
|
|
Male |
18.6 |
16.6 |
|
Female |
21.4 |
19.5 |
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 31 December 2014 |
At 31 December 2013 |
|
|
£m |
£m |
|
|
|
|
|
Equities |
154.8 |
150.5 |
|
Bonds |
166.5 |
146.5 |
|
Fair value of schemes' assets |
321.3 |
297.0 |
|
|
|
|
|
Present value of defined benefit obligations |
(336.2) |
(295.7) |
|
|
|
|
|
(Deficit)/surplus in the schemes |
(14.9) |
1.3 |
A related offsetting deferred tax charge of £3.1m (2013: £0.2m) is shown under non-current assets. Therefore the net pension scheme deficit amounts to £11.8m at 31 December 2014 (£1.1m surplus at 31 December 2013).
18. Reconciliation of statutory results to adjusted results
|
|
2014 |
2013 |
||||
|
|
Profit before tax |
Basic EPS |
Diluted EPS |
Profit before tax |
Basic EPS |
Diluted EPS |
|
|
£m |
pence |
pence |
£m |
pence |
pence |
|
|
|
|
|
|
|
|
|
Results |
14.7 |
38.7p |
37.6p |
14.3 |
32.2p |
31.2p |
|
|
|
|
|
|
|
|
|
Add back: IAS 19 |
- |
- |
- |
0.9 |
2.2p |
2.0p |
|
|
|
|
|
|
|
|
|
Adjusted results |
14.7 |
37.6p |
37.6p |
15.2 |
34.4p |
33.2p |
19. Mailing
A copy of the annual report is being sent to all shareholders on 27 March 2015 and will be available for inspection by members of the public at the Company's registered office at Pacific Quay, Glasgow, G51 1PQ.
This information is provided by RNS
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