STV Group plc Half Year Results 2020
Press Release
0700 hours, 1 September 2020
STV Group plc Half Year Results to 30 June 2020
Strongly positioned to resume successful growth strategy
· Proactive steps taken to mitigate the impact of Covid-19 and support STV colleagues and partners
· Continued record viewing growth on TV and online as STV's public service broadcaster role is reinforced
· Total advertising revenue trends improving materially: June -33%; July -7%; August +1%
· Digital business accelerating rapidly with online viewing +86%
· Significant new commissions secured by STV Studios, including new returnable drama series for C4
Proactive steps to mitigate the impact of Covid-19
· Balance sheet significantly strengthened to enable ongoing investment in STV's successful growth strategy:
o Completion of share placing in July raising net proceeds of £15.5m
o Extension of bank facilities from £60m to £80m
· Swift implementation of full year cost and cash savings of £7m and £11m respectively, as well as postponement of pension contributions from Q2 to December
· Focus in H1 has been on the safety of our colleagues and supporting our partners: all furloughed colleagues have been topped up to 100% of salary and we have reinforced our social purpose through the STV Children's Appeal, public health messaging, new diversity commitments and support for local advertisers
Financial Performance
· Total advertising revenue down 20%, with national down 23% and regional impacted to a lesser extent, down 18%
· Digital revenues up 5%, illustrating the growing strength of STV's digital business, with VOD revenue from STV Player +13%
· Studios revenue down 17% reflecting the pause in filming in Q2, but profit impact wholly mitigated by strong secondary sales and cost savings
· Savings and variable broadcast cost model mitigated nearly half of the revenue decline, with operating profit of £5.2m, down 52%
· Interim dividend declared of 3p per share to be satisfied by way of a bonus issue of new ordinary shares
|
|
2020 |
2019 |
Change |
|
Revenue |
£44.7m |
£54.9m |
(19%) |
|
EBITDA* |
£8.0m |
£13.4m |
(40%) |
|
Operating profit |
£5.2m |
£11.0m |
(52%) |
|
Operating margin |
12% |
20% |
(8pps) |
|
Adjusted profit before tax** |
£4.4m |
£10.1m |
(56%) |
|
(Loss)/profit before tax |
£(4.9)m |
£9.1m |
(154%) |
|
Adjusted basic EPS** |
10.8p |
21.8p |
(50%) |
|
Statutory basic EPS |
(9.2)p |
19.7p |
(147%) |
|
Net debt |
£33.5m |
£42.0m |
20% |
|
Dividend per share*** |
3.0p |
6.3p |
(52%) |
|
* |
Earnings before interest, tax, depreciation & amortisation and share based payments |
|
** |
Before exceptional items and IAS19 interest |
|
*** |
It is proposed that the interim dividend in respect of the current financial year will be satisfied through a bonus issue of new ordinary shares |
Record viewing growth on TV and online
· Highest audience growth ever, +12%, with all time viewing share of 19.2%, and growth continuing post lockdown
· Lockdown viewing +24%, with daytime +48% and STV News +40%
· STV still Scotland's most popular peaktime channel, with 22.0% viewing share
o Gap to BBC1 widening, gap to rest of ITV Network at an 18 year high
· 97% of commercial audiences of over 500k viewers in Scotland delivered by STV
· Online viewing +86% and VOD stream starts +72%, with STV Player reaching 1 billion minutes viewed in half the time vs 2019
· Successful digital content strategy sees 1,500 hours of STV Player-exclusive programming account for 30% of viewing in H1, and 5 of top 10 most popular digital shows
Strong strategic momentum with diversification plan accelerating
· Despite Covid-19 disruption, STV's Growth Fund attracted 55 new advertisers between April and September, with fund doubled to £20m to drive recovery
· STV's Digital business continues to scale rapidly:
o STV Player content proposition boosted by a further 10 content deals so far in 2020 including drama, sport and true crime, and 5 new simulcast channels
o UK-wide launch of STV Player increases its addressable market tenfold. Recent pan-UK launches on Virgin Media and Freeview Play boost distribution by 13 million+ devices
o STV Player now pre-installed on around half of the UK's 40m+ connected devices, with potential for further growth
· STV's production business is now starting to realise its growth potential following a creative overhaul:
o All STV programmes now back in production under new safety protocols
o 7 new commissions and 4 recommissions so far in 2020, with STV currently producing shows for 9 different networks
o New 6x60 drama series, Screw, commissioned by Channel 4 on back of BAFTA- winning Elizabeth is Missing and The Victim
o New 8x60 series, Landmark, commissioned by Sky from STV majority-owned Primal Media
o New wholly-owned creative label, Barefaced TV, added to portfolio with strong track record of creating younger-skewing entertainment formats
o STV Productions rebranded as STV Studios to better reflect its status as a house of creative brands, with 7 production labels now operating under STV ownership
· Lottery divestment process ongoing, albeit timing impacted by Covid-19; net debtor now fully provided for as an exceptional finance charge in the first half.
Improving outlook
· Focus continues on accelerating successful growth strategy to diversify STV
· Given the continued market uncertainty, it is still not possible to provide guidance for the remainder of the year, however the fundamentals of STV's business are strong and improving:
o Continued excellent viewing performance, even post lockdown, with strong H2 schedule to come
o Advertising trends have improved materially over the summer, with total advertising revenue -7% in July and +1% in August
o Regional revenue returned to growth in July and August, with VOD also growing again in August
o STV's digital business is expected to continue to grow strongly
o Production hiatus caused by Covid-19 will impact revenue rather than profitability in 2020, with £15 to £20m of commissions already secured for 2021
· We will continue to manage cash and costs carefully, with our variable broadcast cost base offering ongoing protection
Board update
· The Board proposes an interim dividend for FY20 payable by way of a bonus issue equivalent to 3p per share and is committed to reintroducing a cash dividend at the earliest opportunity
· The Company today also announces that Baroness Ford will not seek re-election at next year's AGM. Baroness Ford will have served for eight years as Chairman at that point and, in line with planned succession, will retire from the Board
Simon Pitts, STV Chief Executive, said:
"I am extremely proud of how everyone at STV has responded to the Covid-19 pandemic. Our record audience growth in the first half, up 12% on TV and 86% online, illustrates the enduring power and relevance of public service broadcasting, particularly STV's local news which has been a vital lifeline for millions of Scots during this crisis. As well as keeping our viewers informed and entertained, our priority has been to protect our colleagues, support local business through our Growth Fund and £1m Local Lifeline campaign, and help our local communities by distributing over £1.5m to over 300 Scottish charities hit hardest by this pandemic.
"While our advertising and production revenues have been significantly impacted by Covid-19, we have been able to mitigate nearly half of the impact thanks to the proactive steps we have taken and our variable cost model. The successful share placing in July has also significantly strengthened the balance sheet and given us the confidence to continue to invest behind our growth strategy.
"The outlook is much more positive in H2, with advertising trends improving materially in July and August, and a strong schedule to look forward to on TV and online including the return of a full complement of weekly soap episodes from later this month, new drama like Des starring David Tennant, and entertainment juggernauts like the rescheduled BGT live finals and I'm a Celebrity.
"We have also successfully accelerated our diversification strategy during lockdown. Our digital business reported continued revenue growth in H1, with the increasing popularity of our digital-only content (now 30% of viewing) and the recent UK-wide launch of STV Player on Virgin Media and Freeview Play illustrating our future growth potential.
"In the production business we are busier than ever and have secured 7 new commissions and 4 recommissions so far this year, including new 6-part returnable drama series Screw for Channel 4 and 8-part Sky series Landmark. I was delighted that Catchphrase was the first entertainment show in the UK to resume filming, and all of our shows are now back in production under new safety protocols.
"Our new creative partnership with Barefaced TV will target younger-skewing factual entertainment formats and establishes a 7th creative label within the newly rebranded STV Studios, which aims to become the UK's leading nations and regions producer."
------------
There will be a presentation for analysts today, Tuesday 1 September 2020, at 12.30 pm, via Zoom, followed by a Q&A session. Should you wish to join the presentation, please contact Angela Wilson, angela.wilson@stv.tv to obtain dial-in details.
Enquiries:
STV Group plc: Kirstin Stevenson, Head of Communications Tel: 07803 970106
Camarco: Geoffrey Pelham-Lane, Partner Tel: 020 3757 4985
Ben Woodford, Partner Tel: 020 3781 8333
Financial and operational review
Group overview
The results of the Group for the first half of the year have clearly been significantly impacted by the Covid-19 pandemic, and the consequences of the resultant lockdown restrictions on the economy, specifically advertising markets and programme production. Against the backdrop of a 19% reduction in revenues (from £54.9m in the first half of 2019 to £44.7m in the current period), the Group mitigated nearly half of the profit impact through decisive actions and its variable cost arrangement with ITV, recording an operating profit of £5.2m for H1 (2019: £11.0m).
From a cash perspective, the Group generated a cash inflow of £4.0m over the period with net debt of £33.5m as at 30 June 2020 (31 December 2019: £37.5m). Strong working capital cash inflows supported an operating cash conversion of 202% (2019: 76%), and non-operating cash outflows were significantly reduced following cancellation of the final dividend in respect of FY19 and deferral of pension contributions from Q2 to the end of the year.
Total advertising revenues of £39.1m were 20% down on the prior year, driven by national advertising down 23% and regional advertising down 18%.
Digital revenues were impacted to a lesser extent, and buoyed by a strong performance in Q1 2020, returning 5% growth year on year and H1 revenues of £5.9m. Within that VOD advertising revenues on the STV Player were up 13%.
Programme deliveries in the Studios division were always expected to be second half weighted, in line with historic norms, and while H1 performance was impacted by the broader environment, the revenue reduction of £0.4m to £1.6m for the first half was less significant in the context of the overall Group.
Operating profit of £5.2m was 52% down on the prior year. Of the revenue reduction of £10.2m, £4.4m of this was mitigated through a combination of the variable cost arrangement with ITV for Channel 3 programming (benefit of £3.5m) and further cost savings of £1.5m.
Total finance costs (before exceptional items) were £1.4m (2019: £1.9m). Cash finance costs on the Group's borrowings totalled £0.7m (2019: £0.7m) with the balance being non-cash costs in relation to the Group's defined benefit pension schemes (£0.6m; 2019: £1.0m) and interest on the lease liability of £0.1m (2019: £0.2m).
In light of the ongoing disposal of the STV ELM (the Group's external lottery management company), an exceptional finance cost of £8.7m has been recognised in the period reflecting an increase to full provision for the debtor due from the Scottish Children's Lottery (SCL) at the end of the period. A corresponding exceptional tax credit of £1.6m has also been recognised.
Before exceptional items, the Group realised a profit before tax of £3.8m (2019: £9.1m). The statutory result for the year was a loss before tax of £4.9m (2019: profit of £9.1m). The effective tax rate (ETR) on the profit before exceptional items is 9.3%, lower than the standard rate in the UK of 19% and driven by the impact of restating the opening deferred tax asset from 17% to 19% following the passing of legislation confirming that the rate of UK corporation tax would no longer reduce to the lower rate. The tax credit on exceptional items represents an ETR of 18.5%, broadly in line with the UK standard rate.
Adjusted earnings per share (before exceptional items and IAS19 interest) was down 50% to 10.8p, as a result of lower profit in the period. On a statutory basis, the Group returned a loss per share of 9.2p as a result of the exceptional item charged.
The net debt to EBITDA ratio at the end of the period was 1.47 times (December 2019: 1.28 times), helped by cash generation which partly offset profit declines. In June, the Group increased its bank facilities from £60 million to £80 million, coterminous with the existing facility maturing in June 2022, with a step down of £10 million in March 2022. The net debt to EBITDA ratio covenant will be replaced with a minimum liquidity threshold test in the event that the Group's leverage ratio were to rise above 3x. Further details are included in note 2 to the condensed interim financial statements.
Across the Group's two defined benefit pension schemes, the accounting deficit before tax increased to £76.9m at the half year (31 December 2019: £64.0m). This is a direct result of the lower discount rate, which was driven by falling corporate bond yields as a result of the Covid-19 economic backdrop. Returns on assets were higher than expected due to the hedging strategies of the schemes which saw the value of liability-driven investments increase over the period.
Broadcast
The strategy to maximise the value of the profitable broadcast business through delivery of high quality, cost-effective news and entertainment on STV has secured record audiences and viewing performances during H1.
STV's sustained increase in audience share growth over the past three years and the decade-high viewing share achieved in 2019 have been exceeded during a period of exceptional viewing growth in 2020. While there has been an inevitable increase in viewing enjoyed by all broadcasters during Q2 during lockdown, STV has out-performed other broadcasters with audience growth of 12%, twice the rate of growth of ITV and four times that of BBC1 in Scotland. Whilst audience levels on other channels are returning to pre-lockdown levels, STV's audience has continued to grow. In July, STV's audience grew by 21%, exceeding BBC One in all time, peak time and daytime for the first time ever, and STV News recorded its highest average audience ever, +58% year on year.
Peak time audiences continue to be larger than any other channel in Scotland with STV's viewing share achieving an 18-year high against the ITV Network, with the gap to the next largest channel, BBC1, also continuing to widen. Daytime audiences grew by 25% in H1 (+48% during lockdown) reflecting changing viewing patterns during lockdown.
STV News has maintained its leading position as Scotland's most watched news programme. Average audiences for STV News at Six have increased by 25% year on year (+40% during lockdown) and Scotland Tonight, Scotland's leading Scottish current affairs programme, has doubled its average audience since moving into a peak time slot in January.
Demand for digital news has increased significantly with a trebling in user numbers accessing the digital news service following the launch of a refreshed digital news website and app at the end of 2019.
Following a positive start to 2020 with total advertising revenue in Q1 down only 1%, the immediacy of lockdown restrictions caused a significant decline in demand for advertising and total advertising revenues were down 38% in Q2 (April -42%, May -39%, June -33%) with most categories deferring or cancelling their spend both nationally and regionally. Overall, regional advertising revenue was impacted to a slightly lesser extent than national (down 18% in H1 vs -23% for national), supported by increased spending by the Scottish Government who chose STV as one of their key routes to communicating with mass audiences. Overall, revenues in the division were down 22%, at £35.0m (2019: £45.0m). Operating profit was £5.4m, down 50% (2019: £11.0m).
In July the UK Government announced a package of measures to combat obesity including a ban on the advertising of food and drink high in fat, sugar or salt (HFSS) on both TV and online before 9pm, with a consultation on a total ban on this advertising online. Clearly this could have an impact on STV's advertising revenues but we cannot quantify this at this stage as there is much we do not know about how the Government's plans will work in practice. We do not expect any new rules to be introduced until 2023 at the earliest.
Digital
The strategy for the digital business is to drive growth by creating an STV for everyone with the STV Player becoming a content destination across the UK rather than simply a catch up and live simulcast service in Scotland. The growth plan is based on three strategic priorities: an enhanced content offering; increased distribution; and an improved product, all of which will secure more people on the STV Player, watching more often, and for longer.
The positive growth trajectory of the digital business has continued despite the competition presented by increased levels of broadcast viewing and viewing to streaming services during this period.
Despite the Covid disruption, digital revenues were up 5% to £5.9m (2019: £5.6m), with strong growth in Q1 more than offsetting the declines of Q2 on the back of very strong digital viewing growth. The largest revenue stream, VOD revenue, was up 13% on the same period last year. Operating profit was £2.8m, down 11% on last year as investment in the digital strategy continued throughout the first half.
Across H1, total time spent watching the STV Player increased by 86% to over one billion minutes of viewing. VOD stream starts were up 72%, significantly higher than the growth achieved by the other UK broadcast VOD services during lockdown, and evidence of the effectiveness of the digital content strategy with Player-exclusive content now accounting for 30% of all viewing on the Player.
In April, nearly 300 additional hours of content were added through deals with Endemol Shine, Stingray Qello, DUST, Flame and Konnect Digital, taking the total number of Player-exclusive hours to over 1,500. The expanding content strategy has added five new live channels to the STV Player in H1, taking the portfolio to 8 channels. New additions include Stingray Qello (music documentaries and concerts) and EDGESport (24/7 free access to live and recorded premium action global sport content). As the popularity of this content increases, in June 2020 streams viewed from this catalogue of acquired and archive content overtook streams of STV content for the first time, with 5 of the top 10 best watched digital shows from January to July being Player-exclusive programmes.
A significant milestone in the distribution strategy was the launch of the STV Player on Sky in Q4 of 2019 providing access to over 800,000 Scottish homes and positioning STV as the first UK PSB to broadcast all of its regional variants in HD on satellite. Sky is now the most popular platform, accounting for 23% of all streams in H1.
With universal availability on all platforms in all homes in Scotland, the horizons of the distribution strategy have extended to target new audiences UK-wide and thereby significantly increase the addressable market of the STV Player. Substantial progress has been achieved in H1 with the UK-wide launch of the STV Player on Virgin Media (+c.3 million devices) and Freeview Play (+10 million devices). Freeview Play is the UK's fastest-growing TV platform and the STV Player has become the eighth player on its UK-wide line up. The STV Player is already automatically installed on YouView and Freesat on a UK-wide basis with other platform launches targeted.
STV Studios
STV Productions was rebranded as STV Studios in August to reflect its evolved status as the home of a diverse range of creative labels across the genres. Our vision remains the same: to build a world class production business which takes full advantage of the growing local and global demand for high quality content.
Commissioning success heralded a positive start to 2020 with the BBC placing its largest order to date for Antiques Road Trip (100 episodes for BBC One), and 40 episodes of sister version, Celebrity Antiques Road Trip, for delivery in 2020 and 2021. This was swiftly followed by further success for the factual team with a commission for a new factual entertainment format for Discovery-owned reality channel, Really, and STV, Yorkshire Auction House / Clear Out Cash In (10 episodes).
Undeterred by the almost complete shutdown of the UK production sector in March, the factual and entertainment teams applied innovative approaches to development through use of existing IP and were each commissioned to produce new series, by Channel 5 and ITV respectively (The Royals vs the Tabloids and Catchphrase Catchiest Moments), both of which were delivered during lockdown. As sector wide guidance to ensure the safe return to production was implemented in early Q3, the entertainment team led the first big entertainment show in the UK to return to studio, safely filming 10 episodes of Catchphrase for ITV's autumn schedule. Additionally, a feature documentary for Channel 4, Is COVID racist?, was announced last month.
With growing credentials and a track record of success in drama, including BAFTA success for Elizabeth is Missing with the award of the BAFTA for Leading Actress to Glenda Jackson, a significant new drama series commission for Channel 4 was confirmed in August. SCREW, a six-part returnable prison drama will go into pre-production in Q4 with filming beginning in early 2021.
As the creative pipeline in STV Studios continues to strengthen, we now have 68 scripted projects in active development across 3 drama labels, 35 of which are in funded development, with 39 scripts. In unscripted c.75 projects are in active development across STV Entertainment, STV Factual and Primal Media, of which 15 are in advanced discussions with commissioners.
The organic growth strategy based on investment in key talent and development is being augmented as new creative partnerships are secured. Following the acquisition in 2019 of a majority stake in unscripted production company, Primal Media, last month Primal announced that it had been commissioned by Sky Arts to produce an ambitious eight-part series, Landmark, for delivery in 2021. A second investment, this time of an initial minority stake in high-end nations drama producer Two Cities Television, was announced in January. Two Cities has a strong pipeline of projects, many of which are at an advanced stage of development.
The most recent addition to the portfolio is announced today. Barefaced TV will become a wholly-owned creative label within STV Studios. The creative partnership behind the label have a strong track record of success in developing factual entertainment formats targeted at a younger skewing audience and will complement our existing factual and entertainment labels.
As a result of the near shutdown of the UK production sector, revenue in H1 was £1.6m, down 17% on the same period last year (2019: £2.0m), although the division has mitigated the impact on the bottom line with an operating loss of £1.5m being slightly ahead of the prior half year loss of £1.6m.
COVID-19 response to support our people and partners
In addition to the financial measures taken to mitigate the impact of Covid-19, a comprehensive programme of action to support our colleagues, partners and local communities has been co-ordinated in response to the unprecedented challenges presented by the pandemic.
Our people
The health and safety of our people has been the number one priority as we have initiated a wide-ranging response to manage the impact of Covid-19. As a public service broadcaster, the contribution of many of our colleagues designated as 'key workers' has been crucial in serving our audiences by providing a trusted source of essential news and information, and much needed entertainment, whilst maintaining our services without interruption. An agile response to the adoption of new working practices, investment in technology and the impact of the recent transformation programme in STV News have all served to secure connectivity and provide operational and editorial resilience over the past 5 months. This has been achieved despite over 95% of colleagues working remotely since lockdown restrictions were introduced.
In a number of areas of the business where activity had to be scaled back, we accessed the Government's Job Retention Scheme and colleagues were placed on furlough. All salaries have been topped up to 100% of full pay to ensure no financial detriment and this approach was extended to all of our freelance colleagues impacted by the immediate cessation of production activity and who are vital to the future growth and success of STV Studios.
We have supported colleagues as they adapted to the challenges of lockdown and new ways of working through regular internal communications and engagement activity, combined with an increased focus on our employee wellbeing programme. As lockdown restrictions are gradually eased, Covid-19 safety protocols have been implemented across all areas of the business and the phased return of a limited number colleagues to our offices and studios will commence from early September, in line with Government guidance.
Our advertisers
STV Commercial responded immediately to support advertisers and commercial partners, including the announcement of a doubling of the STV Growth Fund to £20m to make advertising even more affordable and accessible for Scottish SMEs as they responded to the impact of lockdown restrictions on their businesses.
This additional investment in the STV Growth Fund included gifting almost £1m from the Fund to support businesses and charities helping the most vulnerable in our local communities at their most difficult time. A total of 105 Scottish businesses and charities were celebrated on air during lockdown as part of STV's Local Lifeline campaign.
Our unrivalled audience reach as Scotland's leading and most trusted advertising platform has been used extensively by the Scottish Government to deliver its public health information campaigns throughout the pandemic. This has been followed in Q2 by a number of high profile Scotland-wide advertising campaigns being bought by national bodies, including VisitScotland and Scotland's Towns Partnership, as part of their Covid-19 recovery marketing strategies.
Our impact on society
Our firm commitment to create a lasting social impact in our communities by using the power of TV to do good and effect change has taken on heightened importance since lockdown.
The STV Children's Appeal team has distributed more than £1.5m to over 300 Scottish charities to help children and young people living in poverty who have been hit hardest by the pandemic.
We have also set out a renewed commitment to positive change in response to the Black Lives Matter movement that will see us use our position as an employer, producer and public service broadcaster to address issues of racism and improve the representation of Black, Asian and Minority Ethnic people both on and off screen. STV had already embarked on a comprehensive diversity and inclusion strategy, however, we recognise we can and must go faster. In July we announced new targets to double the number of colleagues from a Black, Asian and Minority Ethnic background by 2023 and also launched the Black Voices on screen diversity campaign.
Principal risks and uncertainties
The Board considers that the principal risks and uncertainties with the most potential to adversely impact the results of the Group are:
· Covid-19 pandemic (new)
· Regulatory environment
· Market volatility and advertising spend
· Performance of the ITV network
· Brexit
· Cyber security
· Defined benefit pension scheme shortfalls
· Reputational and financial risk of lottery operation
· Group funding
With the exception of the risk in relation to the Covid-19 pandemic, full details of these principal risks, their potential impact and the mitigating actions that have been taken, are disclosed in the 2019 Annual Report and Accounts.
It is worth noting under the Regulatory Environment risk above the Government's announcement in July of a ban on HFSS food and drink advertising on TV before 9pm, as well as a potential ban on all HFSS advertising online. This is covered in more detail on page 7.
The 2019 Annual Report and Accounts was filed at Companies House on 10 March 2020, at which time there had been little effect on the business from the Coronavirus pandemic. Therefore, the risk associated with Covid-19 has been defined subsequently and is set out below, along with a summary of mitigating actions taken:
Risk area: Covid-19 pandemic | |
Potential impact | Mitigation |
Covid-19 is impacting our colleagues, operations, suppliers, customers and viewers, with the extent dependent on factors including, but not limited to, length of UK lockdown periods, levels of employee absence, virus recurrence, nature and extent of any government interventions, severity of economic effects and the speed and nature of the recovery.
Covid-19 could impact our strategy or business model through a number of potential routes, including: · Adverse impacts on the advertising market through reduced activity and demand · Changes to viewing habits leading to more viewing to streaming services and lower linear viewing levels · Disruption to our ability to deliver products and services · Prolonged economic downturn could materially increase our pension deficit and associated contributions · Material bad debts if a significant number of our customers experience financial distress or insolvency · Potential for an increase in malicious cyber activity · Increased costs associated with programme production could impact the viability of many projects · Adverse impacts on our cash position and ability to fund investment underpinning our future growth strategy | The Management Board meet every day to identify emerging exposures and review our ability to manage them, defining and agreeing actions as required. Furthermore, throughout the initial months of the pandemic, the Board met weekly to support the Executive Directors and guide the Company's strategic response to the pandemic.
Introduction of various measures to protect the health and safety of our colleagues and contributors, ensuring continuity of service both online and on TV. These measures are under continual review and regularly adjusted to reflect the current guidance from both the UK and Scottish Governments.
Changing viewing habits also bring opportunity and would help STV's diversification strategy which involves driving digital and production growth
Extensive dialogue with advertisers to support their businesses and demonstrate the ongoing effectiveness of TV and VOD advertising, including through STV Local Lifeline and the STV Growth Fund
Development of new production protocols, working with other broadcasters and industry bodies, to enable STV Studios to recommence production of key shows
Cost and cash savings alongside extension of bank facilities (and related relaxation of covenants) combined with equity placing to increase short-term liquidity and strengthen the balance sheet for the medium term, thereby giving the Board confidence to continue to deliver the successful growth strategy, even during a severe downside scenario |
Simon Pitts
Chief Executive, STV Group plc
Condensed interim income statement
Six months ended 30 June 2020
|
| 2020 | 2019 | ||
|
| Before | Exceptional |
|
|
|
| exceptional | items | Results | Results |
|
| items | (note 8) | for period | for period |
|
| Unaudited | Unaudited | Unaudited | Unaudited |
| Note | £m | £m | £m | £m |
|
|
|
|
|
|
Revenue | 7 | 44.7 | - | 44.7 | 54.9 |
|
|
|
|
|
|
Net operating expenses |
| (39.5) | - | (39.5) | (43.9) |
|
|
|
|
|
|
Operating profit |
| 5.2 | - | 5.2 | 11.0 |
Finance costs |
|
|
|
|
|
- borrowings |
| (0.7) | - | (0.7) | (0.7) |
- defined benefit pension schemes |
| (0.6) | - | (0.6) | (1.0) |
- lease interest |
| (0.1) | - | (0.1) | (0.2) |
Provision for impairment losses - ELM debtor |
| - | (8.7) | (8.7) | - |
|
| (1.4) | (8.7) | (10.1) | (1.9) |
|
|
|
|
|
|
Profit/(loss) before tax |
| 3.8 | (8.7) | (4.9) | 9.1 |
Tax (charge)/credit |
9 | (0.4) | 1.6 | 1.2 | (1.6) |
|
|
|
|
|
|
Profit/(loss) for the period |
| 3.4 | (7.1) | (3.7) | 7.5 |
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Equity holders of the company |
| 3.5 | (7.1) | (3.6) | 7.5 |
Non-controlling interests |
| (0.1) | - | (0.1) | - |
|
| 3.4 | (7.1) | (3.7) | 7.5 |
|
|
|
|
|
|
Earnings/(loss) per share | 10 |
|
|
|
|
Basic |
| 9.4p |
| (9.2)p | 19.7p |
Diluted |
| 9.1p |
| (9.2)p | 19.1p |
Condensed interim statement of comprehensive income
Six months ended 30 June 2020
|
|
|
| 2020 | 2019 |
|
|
|
| Unaudited | Unaudited |
|
|
|
| £m | £m |
(Loss)/profit for the year |
|
|
| (3.7) | 7.5 |
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or loss: |
|
| |||
Re-measurement of defined benefit pension schemes |
|
| (15.2) | (0.7) | |
Deferred tax credit |
|
|
| 2.9 | 0.1 |
Listed investment adjusted to market value |
|
|
| 0.1 | - |
Other comprehensive expense for the period |
| (12.2) | (0.6) | ||
|
|
|
|
|
|
Total comprehensive (expense)/income for the period |
|
|
| (15.9) | 6.9 |
A reconciliation of the statutory results to the adjusted results is included at note 21. The above condensed interim income statements should be read in conjunction with the accompanying notes.
Condensed interim balance sheet
As at 30 June 2020
|
|
| 30 June 2020 | 31 December 2019 |
|
|
| £m | £m |
|
| Note | Unaudited | Audited |
|
|
|
|
|
Non-current assets |
|
|
| |
Intangible assets |
| 12 | 2.5 | 2.6 |
Property, plant and equipment | 13 | 10.4 | 10.7 | |
Right-of-use assets |
| 13 | 11.6 | 12.2 |
Investments |
| 14 | 2.1 | 0.9 |
Deferred tax asset | 15 | 20.4 | 16.1 | |
Trade and other receivables |
| 1.1 | 9.5 | |
|
|
| 48.1 | 52.0 |
|
|
|
|
|
Current assets |
|
|
| |
Inventories |
| 14.2 | 13.2 | |
Trade and other receivables |
| 17.9 | 21.6 | |
Cash and cash equivalents | 18 | 12.0 | 6.2 | |
|
|
| 44.1 | 41.0 |
|
|
|
|
|
Total assets |
| 92.2 | 93.0 | |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
| |
Ordinary shares | 17 | 19.6 | 19.6 | |
Share premium |
| 102.0 | 102.0 | |
Capital redemption reserve |
| 0.2 | 0.2 | |
Merger reserve |
| 173.4 | 173.4 | |
Other reserve |
| 1.1 | 0.9 | |
Accumulated losses |
| (359.0) | (343.2) | |
Shareholders' equity |
| (62.7) | (47.1) | |
Non-controlling interests |
| (0.3) | (0.2) | |
Total equity |
| (63.0) | (47.3) | |
|
|
|
| |
Non-current liabilities |
|
|
| |
Borrowings | 16 | 45.5 | 43.7 | |
Lease liabilities |
|
| 9.6 | 10.6 |
Retirement benefit obligations | 19 | 76.9 | 64.0 | |
|
|
| 132.0 | 118.3 |
Current liabilities |
|
|
| |
Trade and other payables |
| 21.1 | 19.9 | |
Lease liabilities |
|
| 2.1 | 1.8 |
Current tax liabilities |
|
| - | 0.3 |
|
|
| 23.2 | 22.0 |
|
|
|
|
|
Total liabilities |
|
| 155.2 | 140.3 |
|
|
|
|
|
Total equity and liabilities |
| 92.2 | 93.0 | |
The above condensed interim balance sheet should be read in conjunction with the accompanying notes.
Condensed interim statement of changes in equity
Six months ended 30 June 2020
|
|
|
|
|
|
|
Capital |
|
|
|
Attributable |
Non- |
|
|
|
|
|
|
Share |
Share |
redemption |
Merger |
Other |
Accumulated |
to owners |
controlling |
Total |
|
|
|
|
capital |
premium |
reserve |
reserve |
reserve |
(losses)/profit |
of the parent |
interest |
equity |
|
|
|
|
|
|
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
Unaudited |
|
|
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2019 |
19.6 |
102.0 |
0.2 |
173.4 |
0.9 |
(343.2) |
(47.1) |
(0.2) |
(47.3) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
- |
(3.6) |
(3.6) |
(0.1) |
(3.7) |
|||
|
Other comprehensive expense |
- |
- |
- |
- |
- |
(12.2) |
(12.2) |
- |
(12.2) |
|||
|
Total comprehensive expense for the period |
- |
- |
- |
- |
- |
(15.8) |
(15.8) |
(0.1) |
(15.9) |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Share based compensation |
- |
- |
- |
- |
0.2 |
- |
0.2 |
- |
0.2 |
|||
|
At 30 June 2020 |
19.6 |
102.0 |
0.2 |
173.4 |
1.1 |
(359.0) |
(62.7) |
(0.3) |
(63.0) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2019 |
19.6 |
101.9 |
0.2 |
173.4 |
0.8 |
(355.1) |
(59.2) |
- |
(59.2) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
- |
- |
- |
7.5 |
7.5 |
- |
7.5 |
|||
|
Other comprehensive expense |
- |
- |
- |
- |
- |
(0.6) |
(0.6) |
- |
(0.6) |
|||
|
Total comprehensive income for the period |
- |
- |
- |
- |
- |
6.9 |
6.9 |
- |
6.9 |
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Acquisition of treasury shares |
- |
- |
- |
- |
- |
(0.9) |
(0.9) |
- |
(0.9) |
|||
|
Share based compensation |
- |
- |
- |
- |
0.1 |
- |
0.1 |
- |
0.1 |
|||
|
Dividends paid |
- |
- |
- |
- |
- |
(5.3) |
(5.3) |
- |
(5.3) |
|||
|
At 30 June 2019 |
19.6 |
101.9 |
0.2 |
173.4 |
0.9 |
(354.4) |
(58.4) |
- |
(58.4) |
|||
The above condensed interim statement of changes in equity should be read in conjunction with the accompanying notes.
Condensed interim statement of cash flows
Six months ended 30 June 2020
|
|
|
2020 |
2019 |
|
|
|
£m |
£m |
|
|
Note |
Unaudited |
Unaudited |
|
|
|
|
|
|
Operating activities |
|
|
|
|
Cash generated by operations |
18 |
12.1 |
10.1 |
|
Interest paid |
|
(0.6) |
(0.5) |
|
Refinancing fees paid |
|
(0.3) |
- |
|
Net taxes (paid)/received |
|
(0.9) |
0.2 |
|
Pension deficit funding - recovery plan payment |
|
(3.0) |
(4.5) |
|
Pension deficit funding - contingent cash contribution |
|
- |
(1.4) |
|
|
|
|
|
|
Net cash generated by operating activities |
|
7.3 |
3.9 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Purchase of investment |
14 |
(1.1) |
- |
|
Capitalised web development spend |
|
(0.5) |
(0.5) |
|
Purchase of property, plant and equipment |
|
(0.9) |
(1.9) |
|
|
|
|
|
|
Net cash used in investing activities |
|
(2.5) |
(2.4) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Acquisition of treasury shares |
|
- |
(0.9) |
|
Payment of obligations under leases |
|
(1.0) |
(0.9) |
|
Borrowings drawn |
|
10.0 |
11.0 |
|
Borrowings repaid |
|
(8.0) |
(9.0) |
|
Dividends paid |
11 |
- |
(5.3) |
|
|
|
|
|
|
Net cash from/(used in) financing activities |
|
1.0 |
(5.1) |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
5.8 |
(3.6) |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
6.2 |
6.3 |
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
12.0 |
2.7 |
Notes to the condensed interim financial statements
Six months ended 30 June 2020
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. Outside the core business, the Group also operates an external lottery management company, the STV ELM Limited. The Group is currently in the process of disposing of this subsidiary.
These condensed interim financial statements were approved for issue on 1 September 2020 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 2019 were approved by the Board of Directors on 10 March 2020 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 condensed interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS34, 'Interim financial reporting', as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRS as adopted by the European Union.
Going concern basis
The Company's results for the year ended 31 December 2019 were announced on 10 March 2020 and at that time there had been little effect on the business from COVID-19. Since then the economic impact of the Government's lockdown measures has been significant and the Group modelled a range of potential scenarios regarding how its business might perform in different economic contexts. These economic contexts included the impact of various stages of lockdown measures and different paces of recovery of advertising markets in particular.
Whilst the Group believes the advertising market is starting to recover, the Group has modelled a severe but plausible downside scenario in addition to its 'base case'. This downside scenario assumes that the significant disruption seen in Q2 in particular persists to the end of 2020, possibly as a consequence of a second spike in the COVID-19 virus, and recovers more slowly in 2021. Both scenarios assume limited activity within the Group's Production business in 2020 and incorporate the benefit from all the previously identified cost and cash mitigations.
A package of measures were identified and action taken to ensure sufficient headroom would exist, even in the downside scenario, and these were announced in mid-June:
· A cost saving programme was implemented to realise reductions in the regional programme budget, in technology costs and across discretionary expenditure. In addition, the Management Board and the Company's directors all volunteered a 25% cut in remuneration. These cost savings are in addition to the benefit of the arrangements in place with ITV under which the Group's contribution to the Channel 3 programming budget is variable in line with movements in national advertising revenue. In the current period, the benefit of this arrangement was £3.5m.
· Actions were taken to deliver additional cash savings through reduced capital expenditure, the cancellation of the final dividend in respect of FY19, deferral of the Group's VAT payments, and other measures. The Group also agreed with the defined benefit pension scheme trustees to postpone contributions payable in Q2 2020 to the end of the year.
· The Company increased its bank facilities from £60 million to £80 million, coterminous with the existing facility maturing in June 2022, with a step down of £10 million in March 2022. The net debt to EBITDA ratio covenant has been replaced with a minimum liquidity threshold test at the point the Group's leverage ratio rises above 3x; at the most recent test date, 30 June 2020, the ratio was 1.47x. The interest margin ratchet on the Group's existing facility has been amended to include a 'top end' margin for leverage over 3x with all other existing margin levels remaining the same. Finally, the payment of dividends is restricted if leverage rises above 2.75x, although this is considered a technical restriction since the Board would not in any event be proposing payment of a cash dividend in these circumstances.
· An equity placing of 7 million new ordinary shares was approved at a General Meeting of the Company on 6 July 2020, and the shares admitted to the LSE for trading on 7 July. Net proceeds of £15.5m were realised.
The Board believes that the Placing together with the concurrent extensions to the Group's banking facilities, and execution of other cost and cash measures, has strengthened the balance sheet and ensure that the Group is in a strong position to continue to deliver its successful growth strategy in the medium term, even in its downside scenario.
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The directors therefore consider it appropriate to continue to adopt the going concern basis in preparing these condensed interim financial statements.
3. Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2019. 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
The preparation of interim 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 condensed interim financial statements, the basis of 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 2019.
The accounting deficit of the Group's defined benefit pension schemes has increased by £12.9m to £76.9m over the period, driven by the reduction in discount rate as a result of the fall in corporate bond yields experienced due to COVID-19.
In light of the ongoing disposal of the STV ELM, the provision in respect of the ELM debtor has been increased by £8.7m in the current period, with the result that the debtor is fully provided for as at 30 June 2020. This charge has been recognised as an exceptional finance cost in the condensed interim income statement for the current period.
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 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 as at 31 December 2019.
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 as a whole, the autumn season provides the Group with its highest level of revenues. The Studios business (recently rebranded from STV Productions) also delivers the majority of its programmes to broadcasters in the second half of the year. There has been an impact from COVID-19 on trading in Q2 2020 and into Q3, however the Group does not anticipate a permanent shift away from the traditional seasonality of its trading as a result.
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 were reassessed during the second half of 2019 and determined to be Broadcast, Digital and Studios. No changes have been made in the six months ended 30 June 2020. The disclosures presented below restate the segment performance for the six months ended 30 June 2019 to the new basis, and a reconciliation from the numbers presented in the prior interim period is also given. The performance of the segments is assessed based on a measure of adjusted operating profit (refer to note 21 for definition and reconciliation to the statutory measure).
| Broadcast | Digital | Studios | Other | Total | |||||
Six months ended 30 June | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
Revenue |
|
|
|
|
|
|
|
|
|
|
Sales | 35.8 | 45.8 | 5.9 | 5.6 | 1.7 | 2.0 | 2.2 | 2.3 | 45.6 | 55.7 |
Inter-segment sales | (0.8) | (0.8) | - | - | (0.1) | - | - | - | (0.9) | (0.8) |
Segment revenue | 35.0 | 45.0 | 5.9 | 5.6 | 1.6 | 2.0 | 2.2 | 2.3 | 44.7 | 54.9 |
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
|
|
|
|
|
|
|
|
Operating profit/(loss) | 5.4 | 11.0 | 2.8 | 3.1 | (1.5) | (1.6) | - | - | 6.7 | 12.5 |
|
|
|
|
|
|
|
|
|
|
|
Unallocated corporate expenses |
|
|
|
|
|
|
| (1.5) | (1.5) | |
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
|
|
|
|
|
|
|
| 5.2 | 11.0 |
Exceptional items (note 8) |
|
|
|
|
| (8.7) | - | |||
Finance costs (excluding exceptional items) |
|
|
|
|
|
| (1.4) | (1.9) | ||
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit before tax |
|
|
|
|
|
|
|
| (4.9) | 9.1 |
|
|
|
|
|
|
|
|
|
|
|
Tax credit/(charge) |
|
|
|
|
|
|
|
| 1.2 | (1.6) |
(Loss)/profit for the period |
|
|
|
| (3.7) | 7.5 | ||||
7. Business segments (continued)
Reconciliation of the segment result for the prior period
| As reported |
| Restated |
|
| 2019 | Reallocated | 2019 | 2020 |
| £m | £m | £m | £m |
|
|
|
|
|
Broadcast | 9.7 | 1.3 | 11.0 | 5.4 |
Digital | 3.0 | 0.1 | 3.1 | 2.8 |
Studios | (1.7) | 0.1 | (1.6) | (1.5) |
Unallocated corporate expenses | - | (1.5) | (1.5) | (1.5) |
|
|
|
|
|
Operating profit | 11.0 | - | 11.0 | 5.2 |
There has been no significant change in total assets from the amount disclosed in the last annual financial statements.
8. Exceptional items
The exceptional item recognised in the first half of 2020 relates entirely to the increase in the provision for the debtor receivable from the Scottish Children's Lottery, recognised in the books of STV ELM, the Group's external lottery management company. The gross debtor has been provided for in full as at 30 June 2020, with an increase to the provision of £8.7m being recognised as an exceptional finance cost in the period. A related exceptional tax credit has also been recognised, totalling £1.6m.
There were no exceptional items recognised in the six months ended 30 June 2019.
9. Tax
|
|
|
|
|
|
| Six months | Six months |
|
|
|
|
|
|
| 2020 | 2019 |
|
|
|
|
|
|
| £m | £m |
|
|
|
|
| ||||
Charge for the period | 0.4 | 1.6 | ||||||
Tax credit on exceptional items | (1.6) | - | ||||||
|
|
|
|
|
|
|
|
|
Tax (credit)/charge for the period | (1.2) | 1.6 | ||||||
The tax on the results for the six month period is charged at the rate that represents the best estimate of the average annual effective tax rate (ETR) expected for the full year, applied to the pre-tax result for the six month period.
The ETR on the results before exceptional items has been charged at 9.3% (30 June 2019: 17.6%), which is lower than the standard rate of 19%, primarily as a result of the change in rate at which deferred tax is recognised. This change is required following the government's announcement that the UK corporation tax rate would not, as previously planned, reduce to 17% from 1 April 2020. Instead, legislation has been passed that maintains the corporation tax rate at its current rate of 19%. The recalculation of brought forward deferred tax balances at a higher rate produces a one-off tax credit in the financial statements which has the effect of reducing the overall ETR.
The ETR on exceptional items has been charged at 18.5%, broadly in line with the standard tax rate for the year.
10. Earnings per share
The calculation of earnings per share is based on earnings after tax and the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Company and held as treasury shares.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one type of dilutive potential ordinary shares namely share options granted to employees. In the current period, as the group has reported a basic loss per share, any potential ordinary shares are anti-dilutive and so have been excluded from the calculation of diluted loss per share. These share options could potentially dilute earnings per share in future periods.
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 are considered to be distortive. The adjusting items include the impact of operating and non-operating exceptional items and the net financing cost in relation to defined benefit pensions (IAS19); as well as the tax effect of these items. Adjusted earnings per share have been presented to provide shareholders with an additional measure of the Group's period-on-period performance.
|
|
|
|
|
|
| Six months | Six months |
|
|
| 2020 | 2019 | ||||
|
|
|
|
|
|
| pence | pence |
|
|
|
|
|
|
|
|
|
Basic loss per share |
| (9.2)p | 19.7p | |||||
Diluted loss per share |
| (9.2)p | 19.1p | |||||
|
|
|
|
|
|
|
|
|
Earnings per ordinary share (before exceptional items) |
| 9.4p | 19.7p | |||||
Diluted earnings per ordinary share (before exceptional items) |
| 9.1p | 19.1p | |||||
|
|
|
|
|
|
|
|
|
Adjusted basic earnings per share |
| 10.8p | 21.8p | |||||
Adjusted diluted earnings per share |
| 10.5p | 21.2p | |||||
The following sets out the earnings and share data used in the calculation of earnings per share. The adjustment for the IAS19 financing cost is made as it is a non-cash item that relates to historical defined benefit pension schemes.
Earnings |
|
| 2020 | 2019 | ||||
|
|
|
|
|
|
| m | m |
|
|
|
|
|
|
|
|
|
Profit for the period attributable to equity shareholders |
| (3.6) | 7.5 | |||||
Exceptional impairment losses (net of tax) (note 8) |
| 7.1 | - | |||||
Profit for the year before exceptional items |
| 3.5 | 7.5 | |||||
|
|
|
|
|
|
|
|
|
Adjustment for IAS 19 financing cost (net of tax) |
| 0.5 | 0.8 | |||||
Adjusted profit |
| 4.0 | 8.3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares |
|
| 2020 | 2019 | ||||
|
|
|
|
|
|
| million | million |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
| 37.9 | 38.0 | |||||
Dilution due to share options |
| 1.3 | 1.2 | |||||
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
| 39.2 | 39.2 | |||||
11. Dividends
An interim cash dividend of 6.3p per share was paid in November 2019 in respect of the year ended 31 December 2019.
As announced in March 2020, the final dividend in respect of the year ended 31 December 2019 was cancelled as one of a number of measures taken to maximise cash retention in the business in response to the severe market conditions brought on by the Covid-19 pandemic.
In June 2020, the Group announced its intention to issue bonus shares in lieu of cash dividends until market conditions stabilised. The Board has confirmed a bonus issue of shares equivalent to 3p per share as an interim dividend for the current financial year. This will be subject to approval at a General Meeting of the Company, with payment anticipated in December 2020.
12. Intangible assets
During the six months ended 30 June 2020, the Group incurred expenditure of £0.5m on web development (£1.6m in the year to 31 December 2019; £0.5m in the six months ended 30 June 2019). The net disposals amounted to £nil in the current period and for the year ended 31 December 2019.
13. Property, plant and equipment
During the six months ended 30 June 2020, the Group incurred expenditure of £0.9m on property, plant and equipment (£2.9m in the year ended 31 December 2019; £1.9m in the six months ended 30 June 2019). The net disposals amounted to £nil in the current period and for the year ended 31 December 2019.
During the six months ended 30 June 2020, the Group incurred additions of £0.2m on right-of-use assets (£0.3m in the year ended 31 December 2019; £nil in the six months ended 30 June 2019). The net disposals amounted to £nil in the current period and for the year ended 31 December 2019.
14. Investments
On 8 January 2020, the Group acquired a minority investment in drama producer Two Cities Television for an initial consideration of £1.1m.
15. Deferred tax asset
The deferred tax asset recognised (excluding the deferred tax asset in relation to the deficit on the Group's defined benefit pension schemes) at 30 June 2020 is £5.8m (31 December 2019: £5.2m). This relates to tax losses carried forward, accelerated capital allowances and short term timing differences.
The deferred tax asset recognised relating to the pension scheme deficit at 30 June 2020 is £14.6m (31 December 2019: £10.9m).
16. Borrowings
During the period, the Group extended its bank facilities with existing lenders and agreed certain covenant relaxations over the anticipated forecast period of increased leverage. The costs associated with this extension have been presented net of borrowings on the balance sheet and will be amortised over the remaining tenure of the facility (maturity in June 2022).
At the balance sheet date, the Group had revolving credit and overdraft bank facilities in place totalling £80.0m (31 December 2019: £60.0m). At 30 June 2020, £46.0m of the facility was drawn down (31 December 2019: £44.0m). The amount of borrowings is net of £0.5m of unamortised borrowing costs (31 December 2019: £0.3m).
The £80.0m revolving credit and overdraft facility has a maturity date of June 2022, with a £10m step down in March 2022. Security is provided to the debt providers by way of cross guarantees and a share pledge.
17. Share capital
Issued share capital as at 30 June 2020 and 31 December 2019 amounted to £19.6m (39,192,137 shares).
Subsequent to the interim balance sheet date, the shareholders of the Company approved a resolution to issue 7,050,665 new ordinary shares via an equity placing. These were admitted for trading on 7 July 2020, raising £16.2m (gross of fees).
18. Notes to the condensed interim statement of cash flows
Cash generated by operations |
| Six months | Six months | |||||
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|
|
|
| 2020 | 2019 |
|
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|
|
|
|
| £m | £m |
|
|
|
|
|
|
|
|
|
Operating profit |
|
| 5.2 | 11.0 | ||||
Adjustments for: |
|
|
|
|
| |||
Depreciation on property, plant & equipment |
| 1.1 | 1.0 | |||||
Amortisation on intangible assets |
|
|
| 0.6 | 0.4 | |||
Amortisation on right-of-use assets |
|
|
| 0.9 | 0.9 | |||
Share based payments |
|
| 0.2 | 0.1 | ||||
EBITDA |
|
|
|
| 8.0 | 13.4 | ||
|
|
|
|
|
|
|
|
|
Increase in inventories |
| (1.0) | (1.7) | |||||
Decrease in trade and other receivables (excluding ELM) | 4.4 | 5.4 | ||||||
Decrease/(increase) in trade and other payables (excluding ELM) | 1.4 | (5.3) | ||||||
Increase in ELM trade and other receivables |
| (0.6) | (0.6) | |||||
Decrease in ELM trade and other payables |
| (0.1) | (0.3) | |||||
Underlying cash generated by operations |
| 12.1 | 10.9 | |||||
|
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|
|
|
|
|
|
Exceptional reorganisation costs |
|
|
|
| - | (0.8) | ||
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|
|
|
|
|
|
Cash generated by operations |
|
|
| 12.1 | 10.1 | |||
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Net debt reconciliation |
|
| ||||||
|
|
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| At 1 January | Cash | Non-cash | At 30 June |
|
|
|
|
| 2020 | flows | changes (i) | 2020 |
|
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|
| £m | £m | £m | £m |
|
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|
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|
|
|
Long-term borrowings |
| (43.7) | (2.0) | 0.2 | (45.5) | |||
Cash and cash equivalents |
| 6.2 | 5.8 | - | 12.0 | |||
Net debt |
| (37.5) | 3.8 | 0.2 | (33.5) | |||
|
|
|
|
|
|
|
|
|
Lease liabilities |
| (12.4) | 1.0 | (0.3) | (11.7) | |||
Net debt including lease liabilities |
| (49.9) | 4.8 | (0.1) | (45.2) | |||
(i) Non cash changes for long-term borrowings relate to the capitalisation and amortisation of borrowing costs, and for lease liabilities the acquisition of right-of-use assets
19. 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:
|
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|
|
|
| At 30 June | At 31 December |
|
|
|
|
|
|
| 2020 | 2019 |
|
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|
|
| £m | £m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit scheme obligations |
|
| (479.8) | (445.9) | ||||
Defined benefit scheme assets |
|
|
| 402.9 | 381.9 | |||
Net pension deficit |
|
|
| (76.9) | (64.0) | |||
A related offsetting deferred tax credit of £14.6m (31 December 2019: £10.9m) is included in non-current assets. Therefore the net pension scheme deficit is £62.3m at 30 June 2020 (31 December 2019: £53.1m).
20. Transactions with related parties
There has been no change from the 2019 Annual Report and no transactions with any related parties in the period to 30 June 2020.
21. 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 in order to provide a more meaningful comparison of how the business is managed and measured on a day-to-day basis.
Below sets out a reconciliation of the statutory results to the adjusted results. As the Group has reported a loss during the current period, the diluted EPS measure is taken to be the same as basic EPS as any potential ordinary shares would be anti-dilutive and therefore an adjustment to recognise this treatment is required in the reconciliation below:
|
|
| 2020 | 2019 | |||||
|
|
|
| (Loss)/profit before tax | Basic EPS | Diluted EPS | Profit before tax | Basic EPS | Diluted EPS |
|
|
|
| £m | pence | pence | £m | pence | pence |
|
|
|
|
|
|
|
|
|
|
Post exceptional items | (4.9) | (9.2)p | (9.2)p | 9.1 | 19.7p | 19.1p | |||
Impact of loss reported in period |
| - | - | (0.3)p | - | - | - | ||
Add back: exceptional items | 8.7 | 18.6p | 18.6p | - | - | - | |||
|
|
|
|
|
|
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|
Pre-exceptional | 3.8 | 9.4p | 9.1p | 9.1 | 19.7p | 19.1p | |||
|
|
|
|
|
|
|
|
|
|
Add back: IAS19 finance costs | 0.6 | 1.4p | 1.4p | 1.0 | 2.1p | 2.1p | |||
|
|
|
|
|
|
|
|
|
|
Adjusted results | 4.4 | 10.8p | 10.5p | 10.1 | 21.8p | 21.2p | |||
22. Subsequent event
On 6 July 2020, a special resolution was passed at a General Meeting of the Company to raise £16.2m (gross) through the issue of new equity, and 7,050,665 new ordinary shares were admitted to the London Stock Exchange for trading on 7 July 2020.
Independent review report to STV Group plc
Report on the condensed interim financial statements
Our conclusion
We have reviewed STV Group plc's Condensed interim financial statements (the "interim financial statements") in the half year results to 30 June 2020 of STV Group plc for the 6 month period ended 30 June 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
· the Condensed interim balance sheet as at 30 June 2020;
· the Condensed interim income statement and Condensed interim statement of comprehensive income for the period then ended;
· the Condensed interim statement of cash flows for the period then ended;
· the Condensed interim statement of changes in equity for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the half year results to 30 June 2020 have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half year results to 30 June 2020, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year results to 30 June 2020 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the half year results to 30 June 2020 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
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, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half year results to 30 June 2020 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
1 September 2020
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