TIDMSTVG
RNS Number : 5533X
STV Group PLC
01 September 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
GBP15.5m
o Extension of bank facilities from GBP60m to GBP80m
-- Swift implementation of full year cost and cash savings of
GBP7m and GBP11m 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 GBP5.2m, 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 GBP44.7m GBP54.9m (19%)
========================== ========== ========= ===========
EBITDA* GBP8.0m GBP13.4m (40%)
========================== ========== ========= ===========
Operating profit GBP5.2m GBP11.0m (52%)
========================== ========== ========= ===========
Operating margin 12% 20% (8pps)
========================== ========== ========= ===========
Adjusted profit before
tax** GBP4.4m GBP10.1m (56%)
========================== ========== ========= ===========
(Loss)/profit before tax GBP(4.9)m GBP9.1m (154%)
========================== ========== ========= ===========
Adjusted basic EPS** 10.8p 21.8p (50%)
========================== ========== ========= ===========
Statutory basic EPS (9.2)p 19.7p (147%)
========================== ========== ========= ===========
Net debt GBP33.5m GBP42.0m 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
GBP20m 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 GBP15 to GBP20m 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 GBP1m Local
Lifeline campaign, and help our local communities by distributing
over GBP1.5m 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
7(th) 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 GBP54.9m
in the first half of 2019 to GBP44.7m 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 GBP5.2m for H1 (2019: GBP11.0m).
From a cash perspective, the Group generated a cash inflow of
GBP4.0m over the period with net debt of GBP33.5m as at 30 June
2020 (31 December 2019: GBP37.5m). 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 GBP39.1m 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 GBP5.9m. 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 GBP0.4m to GBP1.6m for the first half was
less significant in the context of the overall Group.
Operating profit of GBP5.2m was 52% down on the prior year. Of
the revenue reduction of GBP10.2m, GBP4.4m of this was mitigated
through a combination of the variable cost arrangement with ITV for
Channel 3 programming (benefit of GBP3.5m) and further cost savings
of GBP1.5m.
Total finance costs (before exceptional items) were GBP1.4m
(2019: GBP1.9m). Cash finance costs on the Group's borrowings
totalled GBP0.7m (2019: GBP0.7m) with the balance being non-cash
costs in relation to the Group's defined benefit pension schemes
(GBP0.6m; 2019: GBP1.0m) and interest on the lease liability of
GBP0.1m (2019: GBP0.2m).
In light of the ongoing disposal of the STV ELM (the Group's
external lottery management company), an exceptional finance cost
of GBP8.7m 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 GBP1.6m has also been recognised.
Before exceptional items, the Group realised a profit before tax
of GBP3.8m (2019: GBP9.1m). The statutory result for the year was a
loss before tax of GBP4.9m (2019: profit of GBP9.1m). 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 GBP60 million to GBP80 million, coterminous
with the existing facility maturing in June 2022, with a step down
of GBP10 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 GBP76.9m at the half
year (31 December 2019: GBP64.0m). 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 GBP35.0m (2019: GBP45.0m).
Operating profit was GBP5.4m, down 50% (2019: GBP11.0m).
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
GBP5.9m (2019: GBP5.6m), 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 GBP2.8m, 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 GBP1.6m, down 17% on the same period last year
(2019: GBP2.0m), although the division has mitigated the impact on
the bottom line with an operating loss of GBP1.5m being slightly
ahead of the prior half year loss of GBP1.6m.
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 GBP20m 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 GBP1m 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 GBP1.5m
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, The Management Board meet every
operations, suppliers, customers day to identify emerging exposures
and viewers, with the extent and review our ability to manage
dependent on factors including, them, defining and agreeing
but not limited to, length of actions as required. Furthermore,
UK lockdown periods, levels throughout the initial months
of employee absence, virus recurrence, of the pandemic, the Board met
nature and extent of any government weekly to support the Executive
interventions, severity of economic Directors and guide the Company's
effects and the speed and nature strategic response to the pandemic.
of the recovery.
Introduction of various measures
Covid-19 could impact our strategy to protect the health and safety
or business model through a of our colleagues and contributors,
number of potential routes, ensuring continuity of service
including: both online and on TV. These
* Adverse impacts on the advertising market through measures are under continual
reduced activity and demand review and regularly adjusted
to reflect the current guidance
from both the UK and Scottish
* Changes to viewing habits leading to more viewing to Governments.
streaming services and lower linear viewing levels
Changing viewing habits also
bring opportunity and would
* Disruption to our ability to deliver products and help STV's diversification strategy
services which involves driving digital
and production growth
* Prolonged economic downturn could materially increase Extensive dialogue with advertisers
our pension deficit and associated contributions to support their businesses
and demonstrate the ongoing
effectiveness of TV and VOD
* Material bad debts if a significant number of our advertising, including through
customers experience financial distress or insolvency STV Local Lifeline and the STV
Growth Fund
* Potential for an increase in malicious cyber activity Development of new production
protocols, working with other
broadcasters and industry bodies,
* Increased costs associated with programme production to enable STV Studios to recommence
could impact the viability of many projects production of key shows
Cost and cash savings alongside
* Adverse impacts on our cash position and ability to extension of bank facilities
fund investment underpinning our future growth (and related relaxation of covenants)
strategy 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 GBPm GBPm GBPm GBPm
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
GBPm GBPm
(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
GBPm GBPm
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 interest equity
parent
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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
GBPm GBPm
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 GBP3.5m.
-- 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 GBP60 million
to GBP80 million, coterminous with the existing facility maturing
in June 2022, with a step down of GBP10 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 GBP15.5m 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 GBP12.9m to GBP76.9m 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 GBP8.7m 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 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
30 June
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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
GBPm GBPm GBPm GBPm
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 GBP8.7m being recognised as an
exceptional finance cost in the period. A related exceptional tax
credit has also been recognised, totalling GBP1.6m.
There were no exceptional items recognised in the six months
ended 30 June 2019.
9. Tax
Six months Six months
2020 2019
GBPm GBPm
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
GBPm GBPm
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 GBP0.5m on web development (GBP1.6m in the year to
31 December 2019; GBP0.5m in the six months ended 30 June 2019).
The net disposals amounted to GBPnil 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 GBP0.9m on property, plant and equipment (GBP2.9m in
the year ended 31 December 2019; GBP1.9m in the six months ended 30
June 2019). The net disposals amounted to GBPnil 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 GBP0.2m on right-of-use assets (GBP0.3m in the year
ended 31 December 2019; GBPnil in the six months ended 30 June
2019). The net disposals amounted to GBPnil 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 GBP1.1m.
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 GBP5.8m (31 December 2019:
GBP5.2m). 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 GBP14.6m (31 December 2019:
GBP10.9m).
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 GBP80.0m (31 December
2019: GBP60.0m). At 30 June 2020, GBP46.0m of the facility was
drawn down (31 December 2019: GBP44.0m). The amount of borrowings
is net of GBP0.5m of unamortised borrowing costs (31 December 2019:
GBP0.3m).
The GBP80.0m revolving credit and overdraft facility has a
maturity date of June 2022, with a GBP10m 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 GBP19.6m (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 GBP16.2m (gross of fees).
18. Notes to the condensed interim statement of cash flows
Cash generated by operations Six months Six months
2020 2019
GBPm GBPm
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
Exceptional reorganisation
costs - (0.8)
----------- -----------
Cash generated by operations 12.1 10.1
----------- -----------
Net debt reconciliation
At 1 January Cash Non-cash At 30
June
2020 flows changes 2020
(i)
GBPm GBPm GBPm GBPm
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:
At 30 June At 31 December
2020 2019
GBPm GBPm
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 GBP14.6m (31
December 2019: GBP10.9m) is included in non-current assets.
Therefore the net pension scheme deficit is GBP62.3m at 30 June
2020 (31 December 2019: GBP53.1m).
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 Basic Diluted Profit Basic Diluted
before tax EPS EPS before EPS EPS
tax
GBPm pence pence GBPm pence pence
Post exceptional items (4.9) (9.2)p (9.2)p 9.1 19.7p 19.1p
Impact of loss reported - (0.3)p - - -
in period -
Add back: exceptional
items 8.7 18.6p 18.6p - - -
-------------- ------- -------- -------- ------ --------
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 GBP16.2m (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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