REG - STV Group PLC - Interim Results for 6 months ended 30 June 2023
05/09/2023 07:00
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RNS Number : 3420L STV Group PLC 05 September 2023
Press Release 0700 hours, 5 September 2023
STV Group plc Interim Results for the 6 months ended 30 June 2023
Diversification strategy accelerates: revenue from growth areas more than
offsets expected linear advertising declines
Highlights
· Diversification strategy accelerates delivering total revenue growth
of 21%
· Studios revenue nearly quadruples even before benefit of Greenbird
acquisition in H2
· Strong Digital growth; STV Player streams +25% and new registrations
+65%
· Adjusted operating profit down 33% with wider economic uncertainty
impacting linear advertising revenue and cost inflation, as expected
· STV is Scotland's most watched peak time channel for 6(th) year in a
row across H1
· First half total advertising revenue down 14%, with Q3 expected to
grow by 3-5% driven by major sporting events including Rugby World Cup
· STV expects over 60% of 2023 earnings to come from outside
broadcasting, comfortably exceeding 50% diversification target
· Board proposes interim dividend of 3.9p, in line with 2022
Financial Summary - 6 months to 30 June 2023 2022 vs 2022
Revenue £75.3m £62.1m +21%
Total advertising revenue £45.8m £53.2m -14%
Adjusted operating profit* £8.0m £11.9m -33%
Adjusted operating margin* 11% 19% -8pps
Operating profit £nil £11.9m -100%
Profit for the period £3.3m £8.4m -61%
Adjusted basic EPS** 14.8p 20.0p -26%
Statutory basic EPS 7.2p 18.7p -61%
Net debt(+) £16.3m £6.6m -£9.7m
Dividend per share 3.9p 3.9p flat
* Before exceptional items and including HETV tax credits (2023 only)
** Before exceptional items (2023 only) and IAS 19 finance costs (both periods)
(+) Excluding lease liabilities; net debt at 31 December 2022 of £15.1m
( ) Refer to notes 8, 10 & 19 to the condensed interim financial statements
for a reconciliation of the adjusted to statutory numbers
Financial highlights
· Total revenue of £75.3m, +21% on 2022, driven by organic growth in
Studios and Digital, more than offsetting expected linear advertising revenue
declines
· Studios revenue of £27.2m, +294% due to increased drama deliveries,
with division profitable (£0.1m; 2022 loss of £1.0m) and strong H2
profitability coming through with expected seasonal second half weighting
· Regional advertising revenue down 14% to £7.3m (excluding Scottish
Government spend, regional down only 2%)
· Digital revenue +9% to £10.1m (VOD revenue +14%), with adjusted
operating profit up 26% to £5.0m
· Group adjusted operating profit £8.0m, -33% on 2022, reflecting
expected impact of declines in higher margin linear advertising revenue and
inflationary cost pressure
o Savings realised to offset broadly half the inflationary increases, as
guided
· Exceptional costs of £2.8m incurred in the period relating to the
new agreement with ITV for digital content and national VOD sales
representation (2022: nil)
· Net debt of £16.3m, up only £1.2m since December 2022 despite
reduced profits, with working capital outflow of 2022 partially unwinding in
the period; significant facility and covenant headroom maintained
Good audience performance
· STV Player's strengthened content line-up drove excellent streaming
growth in H1:
o Online viewing (consumption) +25%, streams +25%
o Registered users up 18% to 5.3m, well ahead of 5m target
o New registrations +65% driven by new STV Player content
o VIP users up 24%
· Enduring appeal of linear TV: STV's peaktime viewing share of 22.5%
grew year on year (+1%), with the lead over BBC1 the highest in 15 years:
o Most watched peaktime channel in Scotland for 6(th) year in a row across
H1
o H1 all-time audience higher than any other commercial channel on 180 of
181 days
o Average Scot spent over 5x longer with broadcast content than SVOD
services on the TV set in H1
Continued strategic momentum and execution
· Studios: Scaling rapidly and profitably even before benefit of post
period end Greenbird deal
o 12 returning series (2022:9)
o Drama business accelerating, with series 2 of Blue Lights confirmed, and
Screw season 2 (for C4) and Criminal Record (for Apple TV+) delivering in H1
o Greenbird acquisition transformative:
§ Enlarged Studios group now has 39 returning series
§ 29 new commissions across Studios in H1
§ 7 new commissions announced since acquisition, including major new ITV
reality format, The Fortune Hotel, showing immediate impact of Greenbird deal
· Digital: STV's new streaming partnership with ITV driving viewing and
commercial growth:
o 30 new series premiered in H1 under new deal, driving 11% of VOD viewing
o Benefitting from increased scale and targeting capability:
§ STV digital brand count up 50% in H1
§ STV average price (cost per thousand) up 55% in H1
o Long-term partnership in place with ITV until 2029, on a variable cost basis
o Continued strong performance of STV 3rd party content, with c.8m Brookside
streams
o UK Government draft Media Bill (published March) will guarantee prominence
for STV Player on all digital platforms
· Scottish advertising:
o Further 180 deals secured under the STV Growth Fund so far in 2023, with
over 70% of clients rebooking from 2022.
o Split of SME/Scottish Government spend back at pre-Covid levels of 85%/15%
o STV will now offer addressable regional VOD advertising through Planet V,
further enhancing market positioning
Improving 2023 outlook
Revenue
· Expecting at least 25% increase in total revenue for FY 2023
· Total advertising revenue expected to be up 3-5% in Q3 driven by
strong sporting events, but down for the full year
· July TAR +1%, August +4% and September forecast to be up 5-7%
· On track to hit target of £20m Digital revenues in 2023
· Organic Studios revenues will be £50m+ in 2023 (£70m+ with
Greenbird), well ahead of £40m target
Adjusted operating profit
· Linear advertising decline will mean full year adjusted operating
profit lower than FY22
· Strong profit growth in Digital and Studios, and cost mitigations
of £2.5m in 2023, offset by impact of linear advertising decline and cost
inflation
· Confirming previous Studios guidance of £6-6.5m of adjusted
operating profit in 2023, boosted by post period end Greenbird acquisition
· H2 performance more positive on back of improving TAR and Studios
profits
Net debt
· Net debt immediately following completion of Greenbird investment
c.£32m, including c.£6m of cash balances in Greenbird entities
· Expect net debt to reduce towards year end, with leverage (ratio of
net debt to EBITDA) around 1 times for full year and at lower end of
self-imposed target range of 1-1.5 times
· Revolving credit facility increased by £10m to £70m as part of
acquisition through partial exercise of accordion to provide additional
liquidity headroom
Diversification targets
· STV expects to deliver at least 60% of earnings from outside
broadcasting in 2023, comfortably ahead of 50% target
· New targets for the next phase of STV's diversification and
growth strategy will be confirmed in due course.
Dividend
· The Board proposes an interim dividend of 3.9p per share, in line
with H1 2022, after considering all relevant factors including the ongoing
macroeconomic uncertainty
· The Board remains committed to a balanced approach to capital
allocation across investing for growth, fulfilling our pension obligations,
and paying a sustainable, progressive dividend to shareholders.
Simon Pitts, Chief Executive Officer, said:
"STV's diversification continues to accelerate, with strong growth in Studios
and Digital revenues in the first half more than offsetting the expected
weakness in the UK linear advertising market, and delivering total revenue
growth of over 20%.
Studios revenues almost quadrupled and VOD revenues on the STV Player grew by
14% as we continue to execute our strategic plan and reduce our reliance on
traditional broadcasting. We now expect over 60% of our total 2023 earnings to
come from these new growth areas, well ahead of our 50% diversification
target.
Our audience position remains unrivalled, with STV again Scotland's most
popular peaktime TV channel, stretching its lead over BBC1. We delivered the
largest commercial audience on 180 of the 181 days of the first half of the
year, with the England vs Scotland Calcutta Cup match our biggest audience of
the year so far.
Our streaming service STV Player continues to grow strongly and profitably
with online consumption and streams both up by 25% and digital profit up by
26%, as our new long-term content and advertising partnership with ITV bears
fruit.
The transformative acquisition of Greenbird Media represents a major step
towards our goal of STV Studios becoming the UK's #1 nations and regions
production company and adds significant scale and creative firepower to the
group, illustrated by the recently announced major reality format The Fortune
Hotel which will debut on ITV in 2024, produced by Tuesday's Child.
Our overall financial performance in H1 was impacted by a challenging
advertising market and cost inflation, as expected, although looking forward
we see a more encouraging outlook. Q3 total advertising is expected to be up
3-5% driven by the Women's Football World Cup and the Men's Rugby World Cup
which starts next week, exclusively on STV. Our business is well positioned to
benefit when the advertising market improves and we also see strong profit
growth coming through in STV Studios in the second half of 2023."
There will be a presentation for analysts today, 5 September 2023, at 12.30
pm, via Zoom. Should you wish to attend the presentation, please contact
Angela Wilson, angela.wilson@stv.tv (mailto:angela.wilson@stv.tv) or
telephone: 0141 300 3000.
Enquiries:
STV Group plc: Kirstin Stevenson, Head of Communications
Tel: 07803 970 106
Camarco: Geoffrey Pelham-Lane, Partner
Tel: 07733 124 226
Ben Woodford, Partner
Tel: 07790 653 341
Financial and operating review
Group financial overview
Total revenue increased by 21% to £75.3m (2022: £62.1m), with growth driven
primarily by the Studios division, which saw an increase in revenue of £20.3m
due to two significant drama productions partially delivering in the period.
Total advertising revenues of £45.8m were down 14% on H1 2022, which reflects
the challenging and well-documented macro-economic conditions impacting the
linear advertising market.
Adjusted operating profit of £8.0m was down 33% on the first half of 2022,
impacted by the softness in linear advertising markets combined with
inflationary cost pressures. The Group realised cost savings to offset
roughly half of the inflationary increases, as guided at the start of the
year. The adjusted operating profit performance is before exceptional items
of £2.8m for one-off costs relating to the extended partnership with ITV for
digital content and national VOD advertising sales representation. The
adjusted operating profit also includes £5.2m for High-End Television (HETV)
tax credits which are due in relation to the drama commissions that have been
partially delivered in the period, which aligns with the revised approach to
these credits to be implemented from 1 January 2024 following HMRC
consultation. There were no exceptional items or HETV tax credits in the prior
period. On a statutory basis, the Group generated a nil operating profit in
the period (2022: £11.9m).
Total finance costs were £2.3m (2022: £1.3m), comprising interest on the
Group's borrowings of £0.8m (2022: £0.4m), and non-cash costs in relation to
the Group's defined benefit pension schemes of £1.3m (2022: £0.6m) and
interest on lease liabilities of £0.2m (2022: £0.3m). The higher interest
payable on the Group's borrowings was driven by the higher base rate in the
period, with the margin payable under the Group's bank facility remaining
constant year on year.
The Group generated adjusted profit before tax (before exceptional items and
IAS19 interest, and including HETV tax credits) of £6.9m (2022: £11.2m), a
decrease of 38% on the prior period, with adjusted basic earnings per share
decreasing by 26% to 14.8p (2022: 20.0p).
The statutory result for the period was a loss before tax of £2.4m (2022:
profit of £10.6m), with the presentation of HETV tax credits within the tax
line for statutory purposes. The effective tax rate (ETR) on the profit
before tax, before exceptional items and excluding HETV tax credits, has been
charged at 23.7%, which is in line with the pro-rated standard rate of 23.5%.
The ETR on exceptional items in the period was a credit of 23.5%.
The Group was in a net debt position (excluding lease liabilities) of £16.3m
(December 2022: £15.1m) comprising drawdowns under its banking facility of
£20.3m (December 2022: £26.4m) partially offset by a gross cash balance of
£4.0m (December 2022: £11.3m).
The Group's key financial covenants are leverage (ratio of net debt to
EBITDA), which must be no higher than 3 times, and interest cover, which must
be at least 4 times. At the end of the period, leverage was 0.6 times,
(December 2022: 0.5 times) and interest cover was 24.3 times (December 2022:
42.8 times), with significant headroom against covenant thresholds for both.
In March 2023, the Group exercised its second option to extend its revolving
credit facility by one year with the facility now maturing in March 2026.
Across the Group's two defined benefit pension schemes, the accounting deficit
before tax decreased to £55.0m at the half year (31 December 2022: £63.1m).
This was largely driven by an increase in the discount rate due to a rise in
corporate bond yields, partially offset by the reduction in the market value
of scheme assets.
Broadcast
Total advertising revenue (TAR) for the first half of the year was down 14%
year on year. Regional advertising revenue at -14% for the period performed
better than national advertising at -19%, and within the regional number the
core SME advertiser base declined by only 2%. The majority of the regional
decline came from Scottish Government spend, which was down c.55% with no
covid-related public health spending since Q1 2022. This advertising market
performance is driven by the challenging macro backdrop as a result of high
inflation and interest rates, and we expect markets to continue to be cautious
as those broader conditions persist. That said, there has been some
improvement in Q3, boosted by large scale sporting events like the Women's
Football World Cup and Men's Rugby World Cup.
For the sixth first half year running, STV is the most watched peak time
channel in Scotland, with our viewing share up 1% year on year (22.5%), and
considerably ahead of BBC One. We delivered the largest commercial audience on
180 of the 181 days of H1, with the England vs Scotland Calcutta Cup match
delivering our biggest audience of the year so far. Soap giants, Coronation
Street and Emmerdale, continue to be schedule favourites. Other top 10
programmes for the first half of the year include dramas Unforgotten and Vera;
Harry: The Interview, which drew in a linear audience of over half a million;
and entertainment juggernaut, The Masked Singer proving itself our most
popular show, with the top rating episode attracting over 600k viewers.
STV News has held its position as the most-watched news programme in Scotland
- tracking 7 share points ahead of Reporting Scotland - and our current
affairs programme, Scotland Tonight, continues to provide debate and analysis
four times a week including one evening in peak. STV was the first channel
to air an SNP leadership debate, with STV's Political Editor putting
candidates through their paces. The 1-hour Special attracted the highest
audience of all SNP leadership debates to air that month, which is testament
to the skill and professionalism of our highly experienced team.
In H1, we celebrated two years of Expert Voices, our media workshop initiative
designed to increase diversity of contributors in our news and current affairs
programmes. Established in 2021 to expand our network of subject matter
spokespeople, our news team have now trained almost 1000 individuals from
under-represented groups, with around 10% already using their skills on air.
Year to date, 11% of our news contributors have come from ethnically diverse
backgrounds (target 8%); and 52% were female (target 50%).
STV's Growth Fund, which makes advertising more affordable and accessible for
SMEs, goes from strength to strength. A further 180 deals have been secured so
far in 2023, and importantly over 70% have returned from 2022. This Spring
saw four businesses awarded £25k of commercial airtime from our dedicated
Inclusion Fund, which targets diversity-championing businesses across
Scotland. Their campaigns will air on STV and STV Player in 2024.
In March, we welcomed the announcement from the Secretary of State that
Channel 3 licences can be renewed for a further ten-year period from January
2025, thus securing the future provision of public service obligations,
including the country's highest performing news and current affairs
programmes. STV also welcomed the publication of the Draft Media Bill and in
particular the Government's recognition that the new legislation is urgently
required to make Public Service Media as prominent on digital platforms as
they are today on broadcast. We look forward to the swift passage of the Bill
through Parliament to ensure STV remains discoverable for viewers.
This summer, STV launched its first ever Sustainable Scotland Week, using our
privileged position to convey accurate climate-related information to our
viewers in an accessible way. This seven-day, cross-platform mission -
including specially commissioned research, programming and promos - saw the
channel raising awareness of how climate change is impacting Scotland's
communities and inspiring viewers to live more sustainably. This activity is
part of our overall commitment to sustainability across our organisation
through STV Zero, and we are currently measuring the impact of this dedicated
week, with a view to further progressing our work in this area.
Digital
We have delivered strong growth across our Digital division in the first half
of the year, with STV Player streams and online consumption both up 25%, new
registrations up 65% and VIP users up 24%. Digital VOD revenues are up 14%
compared with H1 2022.
Following an agreement with ITV in December 2022, STV Player has exclusive
Scottish rights for a range of original and premiere content, encompassing at
least 100 hours of new box sets per year. Thirty new series have premiered
in H1 under this new deal already, driving 11% of VOD viewing in H1. Four of
these titles are in the top 15 best-watched VOD shows of the first half,
including Scottish dramas Crime and Six Four, starring Scots Dougray Scott and
Kevin McKidd respectively.
Other streaming highlights include Emmerdale and Coronation Street at
positions 2 and 3, with returning stalwart dramas The Bay and Unforgotten at 4
and 5.
An important contributor to the growth of our digital division in H1 2023 has
been our involvement with ITV's addressable advertising platform, Planet V.
This has seen the level of targeted, programmatic advertising on our streaming
service increase from 40% to 90% across the period, with our digital brand
count increasing by 50% in H1 and the STV average price (cost per thousand)
increasing by 55%. This partnership has also created a genuine one-stop-shop
for Scottish advertising across linear, VOD and programmatic, with the aim of
attracting new, digital-only advertisers who haven't advertised on TV before.
In April, the STV Player app launched on Sky Q. This was an important step in
our long-term partnership with Sky, making our service easy to find verbally
via remote control or on the Sky Q apps rail. Although STV Player content has
featured throughout Sky Q's user interface across the UK since January 2021,
this is the first time the dedicated app has been available, enabling
customers to easily browse our extensive catalogue of content, access our
ad-free tier, STV Player+, and become STV Player VIP members (with the reward
of fewer adverts and prize draw entries).
We continue with our digital content acquisition strategy, ensuring visitors
to STV Player, across the whole of the UK, have access to a wide range of
high-quality content from around the world. Acquired titles include high
performing shows such as Irish crime thriller Redemption and Australian police
procedural Rush. However, a key acquisition for H1 2023 was iconic soap,
Brookside, achieving 1m streams in its first week and significantly raising
the profile of STV Player across the UK. Brookside is our top performing VOD
programme in 2023, with c.8m streams in H1 of which 65% came from outside
Scotland.
STV Studios
Our production business continues its strong growth trajectory, with revenues
nearly quadrupling year on year in H1. This is a good performance set
against a difficult commissioning backdrop, with many UK broadcasters slowing
their rate of new programme commissions in the current economic climate, and
actions by global streaming services to cut costs impacting the rate and
number of new commissions awarded.
Commissions for H1 2023 include two new series of hit gameshow Bridge of Lies
with Ross Kemp. BBC One commissioned a further 8 episodes of the celebrity
version for primetime, and a third series of the regular version (25 episodes)
for BBC Daytime. The wider appeal of this format was demonstrated by its first
major international format sale to Spanish public broadcaster Televisión
Espanola's free to air channel, La 1.
BBC One confirmed a second six-part series of police drama, Blue Lights, which
is now currently in production in Belfast. Co-produced by STV Studios
production label, Two Cities, series 1 of Blue Lights launched on the BBC in
March to five-star reviews. One of the BBC's biggest new dramas of the year,
it delivered an average audience of 5.7m (consolidated), reaching 12.5m across
all episodes. We now have three major dramas in play, with a second of series
of Screw recently launched on Channel 4; and Criminal Record, a co-production
with our label, TOD Productions, set to air soon on Apple TV+.
Production is ongoing on returning series such as Antiques Road Trip and a new
series of The Travelling Auctioneers for BBC, as well as new observational
documentary, The Firm, for BBC Scotland.
Primal Media have completed production of innovative reality format, Alan Must
Win for Channel 4, and Mighty Scotland attracted significant press attention
via their Channel 4 you-tube documentary, The Black Alien Project.
In July 2023, we announced our acquisition of Greenbird Media, which has
significantly increased the number of production labels under the STV Studios
umbrella, more than trebled our portfolio of returning series and expanded our
forward pipeline of new programme ideas. This transformative acquisition
represents a major step towards our goal of becoming the UK's number 1 nations
and regions producer and has immediately accelerated STV's overall
diversification strategy in terms of both revenue and profit.
We recently announced the first major commission from one of the new labels
joining the STV Studios family through Greenbird, new reality format The
Fortune Hotel for ITV, from Tuesday's Child Television, along with a further 6
new programme commissions by Tuesday's Child, Interstellar and Rumpus Media.
STV Studios was named Production Group of the Year at the prestigious
Edinburgh Festival Awards in August 2023.
Principal risks and uncertainties
The Board considers the principal risks and uncertainties affecting the
business activities of the Group are:
· Regulatory environment
· Market volatility and impact on advertising spend
· Reliance on ITV for quality network programming and effective
national sales
· Changing viewing habits
· Cyber attack or breach incident
· Defined benefit pension scheme shortfalls
· Recruitment and retention of people
Further details of the Group's policies on principal risks and uncertainties
are contained within the Group's 2022 Annual Report, a copy of which is
available at www.stvplc.tv (http://www.stvplc.tv/) .
Unaudited condensed interim income statement
Six months ended 30 June 2023
2023 2022
Note £m £m
Revenue 7 75.3 62.1
Net operating expenses (72.5) (50.2)
Exceptional items* 8 (2.8) -
Operating profit - 11.9
Finance costs
- borrowings (0.8) (0.4)
- defined benefit pension schemes* (1.3) (0.6)
- lease interest (0.2) (0.3)
(2.3) (1.3)
Share of loss of an associate (0.1) -
(Loss)/profit before tax (2.4) 10.6
Tax credit/(charge)* 9 5.7 (2.2)
Profit for the period 3.3 8.4
Attributable to:
Owners of the parent 3.3 8.5
Non-controlling interests - (0.1)
3.3 8.4
Earnings per share
Basic 10 7.2p 18.7p
Diluted 10 7.0p 18.2p
* Items marked thus are adjusted in the Group's alternative performance
measures. A reconciliation of the statutory results to the adjusted results
is included at note 8.
The above unaudited condensed interim income statement should be read in
conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of comprehensive income
Six months ended 30 June 2023
2023 2022
£m £m
Profit for the period 3.3 8.4
Items that will not be reclassified to profit or loss:
Gain on re-measurement of defined benefit pension schemes 4.8 30.9
Deferred tax charge (1.2) (7.7)
Revaluation loss on listed investment to market value - (0.1)
Other comprehensive income - net of tax 3.6 23.1
Total comprehensive income for the period 6.9 31.5
Attributable to:
Owners of the parent 6.9 31.6
Non-controlling interests - (0.1)
6.9 31.5
The above unaudited condensed interim statement of comprehensive income should
be read in conjunction with the accompanying unaudited notes.
Unaudited condensed interim balance sheet
As at 30 June 2023
30 June 31 December
2023 2022
Note £m £m
Non-current assets
Intangible assets 12 1.0 1.2
Property, plant and equipment 13 9.8 10.6
Right-of-use assets 13 17.9 18.6
Investments 2.4 2.5
Deferred tax asset 14 20.6 21.9
Trade and other receivables 16 0.5 1.5
52.2 56.3
Current assets
Inventories 15 33.7 47.0
Trade and other receivables 16 37.1 39.9
Cash and cash equivalents 4.0 11.3
74.8 98.2
Total assets 127.0 154.5
Equity
Ordinary shares 18 23.3 23.3
Share premium 115.1 115.1
Capital redemption reserve 0.2 0.2
Merger reserve 173.4 173.4
Other reserve 2.1 1.8
Accumulated losses (318.3) (321.8)
Shareholders' equity (4.2) (8.0)
Non-controlling interests (0.3) (0.3)
Total equity (4.5) (8.3)
Non-current liabilities
Borrowings 17 20.3 26.4
Lease liabilities 17.9 18.7
Retirement benefit obligations 20 55.0 63.1
93.2 108.2
Current liabilities
Trade and other payables 37.4 53.7
Lease liabilities 0.9 0.9
38.3 54.6
Total liabilities 131.5 162.8
Total equity and liabilities 127.0 154.5
The above unaudited condensed interim balance sheet should be read in
conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of changes in equity
Six months ended 30 June 2023
Capital redemption reserve Attributable to owners of the parent
Share capital Share premium Merger reserve Accumulated losses Non-controlling interest
Other reserve Total equity
£m £m £m £m £m £m £m £m £m
At 1 January 2023 23.3 115.1 0.2 173.4 1.8 (321.8) (8.0) (0.3) (8.3)
Profit for the period - - - - - 3.3 3.3 - 3.3
Other comprehensive income - - - - - 3.6 3.6 - 3.6
Total comprehensive income for the period
- - - - - 6.9 6.9 - 6.9
Share based compensation - - - - 0.3 - 0.3 - 0.3
Dividends paid (note 11) - - - - - (3.4) (3.4) - (3.4)
At 30 June 2023 23.3 115.1 0.2 173.4 2.1 (318.3) (4.2) (0.3) (4.5)
At 1 January 2022 23.3 115.1 0.2 173.4 1.4 (339.2) (25.8) (0.1) (25.9)
Profit for the period - - - - - 8.5 8.5 (0.1) 8.4
Other comprehensive income - - - - - 23.1 23.1 - 23.1
Total comprehensive income for the period
- - - - - 31.6 31.6 (0.1) 31.5
Share based compensation - - - - 0.1 - 0.1 - 0.1
Dividends paid (note 11) - - - - - (3.3) (3.3) - (3.3)
At 30 June 2022 23.3 115.1 0.2 173.4 1.5 (310.9) 2.6 (0.2) 2.4
The above unaudited condensed interim statement of changes in equity should be
read in conjunction with the accompanying unaudited notes.
Unaudited condensed interim statement of cash flows
Six months ended 30 June 2023
2023 2022
Note £m £m
Operating activities
Cash generated by operations 19 6.4 10.7
Interest and fees paid in relation to bank facilities (0.9) (0.6)
Corporation tax received/(paid) 0.5 (0.1)
Pension deficit funding - recovery plan payment (4.8) (4.7)
Contingent cash payment to pension schemes - (2.4)
Net cash generated by operating activities 1.2 2.9
Investing activities
Purchase of investment in associate - (0.9)
Production finance repayment from/(provided to) associate 3.0 (2.4)
Loan provided to associate (0.6) -
Purchase of intangible assets (0.1) (0.3)
Purchase of property, plant and equipment (0.4) (1.9)
Net cash generated by/(used in) investing activities 1.9 (5.5)
Financing activities
Payment of obligations under leases (1.0) (1.1)
Borrowings drawn 8.0 17.0
Borrowings repaid (14.0) (10.0)
Dividends paid 11 (3.4) (3.3)
Net cash (used in)/generated by financing activities (10.4) 2.6
Net movement in cash and cash equivalents (7.3) -
Cash and cash equivalents at beginning of period 11.3 14.7
Cash and cash equivalents at end of period 4.0 14.7
Unaudited notes to the condensed interim financial statements
Six months ended 30 June 2023
1. General information
STV Group plc (the "Company") is a public limited company incorporated and
domiciled in Scotland and listed on the London Stock Exchange. The address
of the registered office is Pacific Quay, Glasgow, G51 1PQ.
The principal activities of the Company and its subsidiaries (together "the
Group") are the production and broadcasting of television programmes,
provision of internet services and the sale of advertising airtime and space
in these media.
These condensed interim financial statements were approved for issue on 5
September 2023 and have been reviewed, not audited. They do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2022 were approved
by the Board of Directors on 7 March 2023 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
2. Basis of preparation
These unaudited condensed interim financial statements for the six months
ended 30 June 2023 have been prepared based on the policies set out in the
2022 annual financial statements and in accordance with UK adopted IAS 34 and
the Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority. These should be read in conjunction with the
annual consolidated financial statements for the year ended 31 December 2022
which were prepared in accordance with United Kingdom adopted international
accounting standards. The condensed interim financial statements and the
annual report are available on the Group's website at www.stv.plc/tv.
The annual financial statements for the year to 31 December 2023 will be
prepared in accordance with United Kingdom adopted international accounting
standards.
Going concern
At 30 June 2023, the Group was in a net debt position (excluding lease
liabilities) of £16.3m comprising drawdowns under its banking facility of
£20.3m partially offset by gross cash balances of £4.0m. The Group is in a
net current asset position and generates cash from operations that enables the
Group to meet its liabilities as they fall due, and other obligations.
The Group's banking facilities at the interim balance sheet date comprised a
£60m revolving credit facility, with a £20m accordion, maturing in March
2026. The key financial covenants are leverage (net debt to EBITDA), which
must be less than 3 times, and interest cover, which must be greater than 4
times. At 30 June 2023, the Group's leverage was 0.6 times and its interest
cover was 24.3 times, both well within covenant limits. The facility that
remained available to the Group at 30 June 2023 was £34m plus the £20m
accordion (31 December 2022: £28m plus the £20m accordion).
The acquisition of Greenbird Media in July 2023 will further diversify the
Group's earnings and materially enhance the future growth prospects of STV
Studios. The Group funded the acquisition entirely from its existing banking
arrangements, and to provide additional liquidity headroom it accessed £10m
from the accordion, although the Group does not currently anticipate using
this incremental facility. The Group's forecasts have been updated to include
the payment of investment capital (which resulted in net debt for the enlarged
Group of c.£32m immediately on completion) and the projected results of the
acquired entities, which shows that the Group will continue to be able to
operate within the level of its current available funding and financial
covenants. Please see note 22 for further details on this post balance sheet
event.
As part of the going concern review, the Group considers forecasts of the
advertising market, from which the Group generates a material portion of its
cash inflows, as well as its prospects in the programme production market, to
determine the impact on liquidity. The Group's forecasts and projections,
taking account of reasonably possible changes in trading performance, and
including the impact of acquiring Greenbird Media, show that the Group will be
able to operate within the level of its current available funding and
financial covenants.
The Directors performed a full review of principal risks and uncertainties
during 2022 as part of its process to review and approve the three-year plan
covering the period to 31 December 2025. A severe but plausible downside
scenario was identified that reflected crystallisation of several risks,
principally in relation to advertising revenues and the number and scale of
programme commissions. The Group has updated its scenario modelling to
incorporate the Greenbird Media business and under this updated scenario, the
Group is projected to generate sufficient cash to enable it to continue in
operation and remain within covenant levels under the Group banking
arrangements. These forecasts also included pension contributions in line
with the Schedule of Contributions agreed with the trustees, and any
contingent cash payments that would be payable under that mechanism, based on
forecast cash flows.
Following completion of these activities, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operation for
at least 12 months from the date of this report. Accordingly, the Group
continues to adopt the going concern basis in preparing its consolidated
financial statements.
3. Accounting policies
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2022. There were no
changes to accounting standards in the period that had any material impact on
the financial statements.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profit or loss.
4. Judgements and estimates
Judgements
In the course of preparing the condensed interim financial statements, no
judgements have been made in applying the Group's accounting policies that
have had a significant effect on the amounts recognised in the condensed
interim financial statements, other than those involving estimation below.
Estimates
The preparation of the Group's condensed interim financial statements requires
management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the
accompanying disclosures and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the condensed interim financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.
Inventory
Deferred programme production stock forms part of inventory and is stated in
the financial statements at the lower of cost or net realisable value. The key
assumption is estimating the likely future revenues for which associated
programme costs are expensed in line with. A detailed forecast of future
secondary sales is prepared by management based on historic experience and
expected future trends. £0.6m was expensed through the income statement in
the period (30 June 2022: £0.5m).
Pension obligations
The present value of the pension obligations depends on a number of factors
that are determined on an actuarial basis using a number of key assumptions.
The assumptions used in determining the projected benefit obligation for
pensions include the discount rate and mortality rate. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each period.
This is the rate that should be used to determine the present value of
estimated future cash outflows expected to be required to settle the pension
obligations. In determining the appropriate discount rate, the Group
considers the interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have
terms to maturity approximating the terms of the related pension liability.
Regarding mortality, the base tables used are updated every three years (to
coincide with triennial valuations) or more frequently when there is evidence
of a change in experience. The CMI tables relating to future improvements in
mortality are updated when new information is available, usually annually.
Other key assumptions for pension obligations are based in part on current
market conditions. Refer to note 20 for further disclosure.
5. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks, to varying
degrees: currency risk, credit risk, liquidity risk and cash flow interest
rate risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Group's annual
financial statements for the year ended 31 December 2022.
There have been no changes in any risk management policies since the year end.
6. Seasonality of operations
In line with the UK advertising market, the autumn season provides the Group
with its highest level of revenues, as trading picks up from the quieter
summer months. The Studios division delivers the majority of the volume of
its programmes to commissioners in the second half of the year. However, in
the current period, Studios partially delivered two significant drama series,
which has resulted in a material increase in revenue of £20.3m to £27.2m for
the division in the six months ended 30 June 2023 (£6.9m in the 6 month
period to June 2022). This is almost 70% of the original target revenues for
2023 of £40m for the Studios division. Following the Greenbird Media
acquisition in July 2023, the Group expects revenues for the Studios division
to be between £70m - £75m for the full financial year.
7. Business segments
Information reported to the Group's Chief Executive for the purposes of
resource allocation and assessment of segment performance is by product. The
Group's reportable segments, which remain the same as the prior year, are
Broadcast, Digital and Studios.
Broadcast Digital Studios Total
Six months 2023 2022 2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m £m £m
Revenue
Sales 42.4 50.8 10.1 9.2 27.3 7.0 79.8 67.0
Inter-segment sales (4.4) (4.8) - - (0.1) (0.1) (4.5) (4.9)
Segment revenue 38.0 46.0 10.1 9.2 27.2 6.9 75.3 62.1
Segment result
Adjusted operating profit 4.9 10.7 5.0 4.0 0.1 (1.0) 10.0 13.7
Unallocated corporate expenses (2.0) (1.8)
Adjusted operating profit 8.0 11.9
Exceptional items (note 8) (2.8) -
Finance costs (2.3) (1.3)
HETV tax credits (5.2) -
Share of loss in associate (0.1) -
(Loss)/profit before tax (2.4) 10.6
Tax credit/(charge) 5.7 (2.2)
Profit for the period 3.3 8.4
Adjusted operating profit (as shown above) is the statutory operating profit
before exceptional items and includes High-End Television (HETV) tax credits
receivable. The HETV tax credits relate solely to the Studios operating
segment.
The only significant changes in total assets from the amount disclosed in the
last annual financial statements are due to the seasonality of operations,
both in terms of the advertising market and delivery of programmes. Please see
note 6 for further details.
8. Exceptional items and reconciliation of statutory results to adjusted
results
In reporting financial information, the Group presents alternative performance
measures (APMs) which are not defined or specified under the requirements of
IFRS. The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business.
The Group makes certain adjustments to the statutory profit measures to
exclude the effects of exceptional items and adjust for other material amounts
that it believes are distortive to the underlying trading performance of the
Group.
By presenting these alternative performance measures, the Group believes it is
providing additional insight into the performance of the business that may be
useful to stakeholders.
Below sets out a reconciliation of the statutory results to the adjusted
results:
2023 2022
Operating profit Profit Basic Operating Profit Basic
before tax EPS Profit before tax EPS
£m £m pence £m £m pence
Statutory result - (2.4) 7.2p 11.9 10.6 18.7p
Exceptional items (see below) 2.8 2.8 - -
IAS 19 net finance costs - 1.3 - 0.6
High-End Television tax credit 5.2 5.2 - -
Adjusted results 8.0 6.9 14.8p 11.9 11.2 20.0p
Exceptional items
On 8 December 2022, the Group announced an extended partnership with ITV for
digital content and national VOD advertising sales representation. The
agreement is effective from 1 January 2023 and one-off costs incurred as part
of the agreement reached have been presented as exceptional in the current
year. The Group did not incur any material exceptional costs or generate
exceptional income in the prior year interim period.
IAS 19 net finance costs
IAS19 related items, principally the net interest expense included in the
income statement, are excluded from non-statutory measures as they are
non-cash items that relate to historical defined benefit pension schemes. The
increase in the net finance cost in the year is due to the increase in the
discount rate applied.
High-End Television tax credit
The Group meets the eligibility criteria to claim HETV tax relief through the
production of certain dramas created in its Studios division. This incentive
was introduced in the UK to support the creative industries and is a critical
factor when assessing the viability of investment decisions in the production
of high-end drama programmes. These production tax credits are reported within
the total tax charge in the condensed interim income statement in accordance
with IAS 12. However, STV considers the HETV tax credits to be a contribution
to production costs and therefore more aligned to working capital in nature.
Therefore, the adjusted results for the Group reflect these credits as a
contribution to operating cost and not a tax item. This presentation is also
consistent with the reform of HETV tax credits to Audio-Visual Expenditure
Credits which will be available for application from 1 January 2024. HETV
tax credits totalling £5.2m has been recognised in the period in regard to
two qualifying drama productions; Screw series 2 and Criminal Record. There
were no HETV tax credits claimed in the prior period.
The cash impact from the above adjusted items in the interim period, is an
operating cash outflow of £2.8m in relation to the exceptional items. This is
included within the operating profit in note 19. There was no cash impact from
the adjusted items in the prior period.
9. Tax credit/(charge)
Six months Six months
2023 2022
£m £m
The credit/(charge) for taxation is as follows:
Charge for the period before exceptional items (0.1) (2.2)
Tax effect on exceptional items 0.6 -
High-end television tax credit 5.2 -
Credit/(charge) for the period 5.7 (2.2)
The tax on the results for the six month period is charged at the rate that
represents the best estimate of the average annual effective tax rate (ETR)
expected for the full year, applied to the pre-tax result for the six month
period. This excludes any impact of the post period end acquisition of
Greenbird Media.
The ETR on the profit before exceptional items, has been charged at 23.7% (30
June 2022: 20.2%), which is in line with the pro-rated standard rate of 23.5%.
The ETR on exceptional items in the period was -23.5%.
On 3 March 2022, the UK Government announced a change in the UK corporation
tax rate from 19% to 25% with effect from 1 April 2023. The 25% rate was
substantively enacted on 10 June 2022. The deferred tax assets at 30 June 2023
have been measured using the rates that apply in the periods when the
underlying timing differences, on which deferred tax is recognised, are
expected to unwind.
10. Earnings per share
The calculation of earnings per share is based on earnings after tax and the
weighted average number of ordinary shares in issue during the period,
excluding ordinary shares purchased by the Group and held for use by the STV
Employee Benefit Trust.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of the weighted average of dilutive
potential ordinary shares. The Group has one type of dilutive potential
ordinary share namely share options granted to employees.
The adjusted earnings per share figures have also been calculated based on
earnings before adjusting items that are significant in nature and/or quantum
and therefore considered to be distortive. The adjusting items include the
impact of operating and non-operating exceptional items and the IAS 19 net
financing cost; as well as the tax adjustments relating to these items.
Adjusted earnings per share have been presented to provide shareholders with
an additional measure of the Group's year-on-year performance.
Earnings per share Six months Six months
2023 2022
Pence Pence
Basic earnings per share 7.2p 18.7p
Diluted earnings per share 7.0p 18.2p
Adjusted basic earnings per share 14.8p 20.0p
Adjusted diluted earnings per share 14.4p 19.5p
The following reflects the earnings and share data used in the
calculation of earnings per share:
Six months 2023 Six months 2022
Earnings £m £m
Profit for the period attributable to equity shareholders 3.3 8.5
Exceptional items (net of tax) 2.2 -
Excluding IAS 19 financing cost 1.3 0.6
Adjusted profit 6.8 9.1
Number of shares Million Million
Weighted average number of ordinary shares in issue 45.8 45.5
Dilution due to share options 1.5 1.1
Total weighted average number of ordinary shares in issue 47.3 46.6
11. Dividends
A dividend of £3.4m relating to the year ended 31 December 2022 was paid from
the parent company's accumulated realised profits in May 2023. (30 June 2022:
final dividend relating to the year ended 31 December 2021 of £3.3m, paid in
May 2022).
An interim dividend of 3.9p per share has been proposed and is subject to
approval by the Board of Directors. It is payable on 2 November 2023 to
shareholders who are on the register at 22 September 2023. This interim
dividend, amounting to £1.8m has not been recognised as a liability in this
interim financial information. It will be recognised in shareholders' equity
in the year ending 31 December 2023.
12. Intangible assets
During the six months ended 30 June 2023, the Group incurred expenditure of
£0.1m on web development (£0.5m in the year to 31 December 2022; £0.3m in
the six months ended 30 June 2022). There were no disposals in the current
period and in the year ended 31 December 2022.
13. Property, plant and equipment and right-of-use assets
During the six months ended 30 June 2023, the Group incurred expenditure of
£0.4m on property, plant and equipment (£3.4m in the year ended 31 December
2022; £1.9m in the six months ended 30 June 2022). There were no disposals
in the current period and for the year ended 31 December 2022.
During the six months ended 30 June 2023, the Group did not have any additions
of right-of-use assets (£nil in the year ended 31 December 2022; £nil in the
six months ended 30 June 2022). There were no disposals in the current period
and for the year ended 31 December 2022.
14. Deferred tax asset
At 30 June 2023, total deferred tax assets of £20.6m were recognised on the
balance sheet (31 December 2022: £21.9m). Of this, £13.8m relates to the
deficit on the Group's defined benefit pension schemes (31 December 2022:
£15.7m) and the balance of £6.8m relates to tax losses, accelerated capital
allowances and short-term timing differences (31 December 2022: £6.2m)
15. Inventory
30 June 31 December
2023 2022
£m £m
Deferred programme production stock 12.3 12.0
Programme production work in progress 21.4 35.0
33.7 47.0
16. Trade and other receivables
30 June 31 December
2023 2022
£m £m
Trade receivables 13.0 22.6
Prepayments and contract assets 11.9 12.8
Other receivables 6.9 5.5
Income tax recoverable 5.8 0.5
37.6 41.4
Amounts included in current assets 37.1 39.9
Amounts included in non-current assets 0.5 1.5
37.6 41.4
17. Borrowings
At the balance sheet date, the Group had a £60m revolving credit facility
(RCF) in place, with a £20m accordion, maturing in March 2026. Total gross
borrowings as at the balance sheet date were £20.3m (31 December 2022 -
£26.4m). The principle financial covenants are the ratio of net debt to
EBITDA (which must be below 3 times) and interest cover (which must be higher
than 4 times). Post period end, the Group increased its RCF facility by
£10m to £70m through accessing its accordion, to provide additional
liquidity headroom on completion of the Greenbird Media acquisition. Please
refer to note 22 for further information.
18. Share capital
Issued share capital at 30 June 2023 and 31 December 2022 amounted to £23.3m
relating to 46,722,499 ordinary shares with a par value of £0.50 per share.
All issued shares are fully paid.
19. Notes to the condensed interim statement of cash flows
Six months Six months
2023 2022
£m £m
Operating profit - 11.9
Adjustments for:
Depreciation on property, plant and equipment 1.2 1.3
Amortisation of intangible assets 0.3 0.5
Amortisation of right-of-use assets 0.7 0.7
Share based payments 0.3 0.1
Decrease/(increase) in inventories 13.3 (4.7)
Decrease in trade and other receivables 6.8 2.5
Decrease in trade and other payables (16.2) (1.6)
Cash generated by operations 6.4 10.7
Net debt reconciliation
Net debt including lease liabilities
Cash and cash equivalents
Long-term borrowings Net Lease liabilities
debt
£m £m £m £m £m
At 1 January 2023 (26.4) 11.3 (15.1) (19.6) (34.7)
Cash flows 6.2 (7.3) (1.1) 1.0 (0.1)
Non-cash movements (i) (0.1) - (0.1) (0.2) (0.3)
At 30 June 2023 (20.3) 4.0 (16.3) (18.8) (35.1)
(i) Non-cash movements relate to the amortisation of borrowing costs (for
long-term borrowings) and interest charged on lease liabilities.
20. Retirement benefit schemes
The fair value of the assets and the present value of the liabilities in the
Group's defined benefit pension schemes at each balance sheet date was:
At 30 June At 31 December
2023 2022
£m £m
Defined benefit scheme obligations (331.3) (352.9)
Defined benefit scheme assets 276.3 289.8
Net pension deficit (55.0) (63.1)
The reduction in the net pension deficit is largely driven by an increase in
the discount rate due to a rise in corporate bond yields over the period,
partly offset by the reduction in the market value of scheme assets. The
reduction in scheme assets was in part a result of the hedging strategies of
the scheme to hedge inflation and interest rate risk to protect the scheme's
funding positions and level of contributions due to the schemes.
Assumptions used to estimate the scheme obligations
The significant actuarial assumptions used for accounting purposes reflect
prevailing market conditions in the UK and are as follows:
At 30 June At 31 December
2023 2022
% %
Rate of increase in salaries nil nil
Rate of increase of pensions in payment 3.40 3.45
Discount rate 5.35 4.85
Rate of price inflation (RPI) 3.40 3.45
Assumptions regarding future mortality experience are set based on advice,
published statistics and experience in each scheme and are reflected in the
table below (average life expectations in years of a pensioner retiring at age
65).
At 30 June At 31 December
2023 2022
Retiring at balance sheet date:
Male 20.6 20.9
Female 22.8 23.1
Retiring in 25 years
Male 21.8 22.1
Female 24.1 24.4
The sensitivities regarding the principal assumptions used to measure the
defined benefit obligation are set out below:
Assumption Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease by 0.25% Decrease/increase by 3%
Rate of price inflation (RPI) Increase/decrease by 0.25% Increase/decrease by 1%
Rate of mortality Decrease by 1 year Decrease by 4%
These sensitivities have been calculated to show the movement in the defined
benefit obligations in isolation, and assuming no other changes in market
conditions at the balance sheet date.
Funding arrangements
Deficit recovery plans, which end on 31 October 2030, were agreed in 2022 with
aggregate monthly payments unchanged from the previous recovery plans. The
2023 deficit recovery payments will total £9.7m, with annual payments
increasing at the rate of 2% per annum over the term of the recovery plans. A
contingent cash mechanism is also in place, which triggers contingent funding
payments equivalent to 20% of any outperformance above a benchmark of
available cash to be paid to the schemes. There was no additional contingent
payment made to the schemes in the six month period to 30 June 2023 (£2.4m in
the six months ended 30 June 2022).
21. Transactions with related parties
As disclosed in the 2022 Annual report, the Group provided programme
production financing of £3.0m to Two Cities Television Limited to cash flow
the production of Blue Lights, a drama series commissioned by the BBC. The
full amount has been repaid in the period. A working capital loan of £0.2m
was also provided to the associate in 2022, with a further £0.6m provided in
the current interim period. The total outstanding balance owed to the Group,
including interest, is £0.9m at the balance sheet date.
The Group provided advertising with an estimated fair value of £0.2m (2022:
£0.1m) for nil consideration to the charity organisation STV Appeal.
22. Post balance sheet events
On 6 July 2023, the Group acquired 100% of the issued share capital of
unscripted television production network Greenbird Media Limited ("Greenbird")
for a total cash consideration of approximately £24m, of which £21.4m was
paid on completion. The initial payment made was allocated £9.9m for the
acquisition of shares, equivalent to 86% of the equity, and £11.5m invested
to settle convertible loan instruments provided by the previous majority
shareholder. Amounts deferred in relation to the balance of 14% of the equity,
estimated to be £1.6m, are payable to the founders based on agreed EBITDA
targets for the acquired businesses over the two years ending 31 December
2024, and will be recognised as remuneration over that period. The remaining
deferred amounts relate to consideration payable of £1.2m for surplus cash
balances held by the majority subsidiary companies acquired at completion.
This will be paid to the previous shareholders at the point in future when
STV, through Greenbird, owns 100% of their equity or when monies are
distributed via dividends by them to Greenbird. Acquisition related costs of
c.£1m were incurred in relation to the transaction and will be recognised in
H2.
The Group funded the acquisition entirely from its existing banking
arrangements, and to provide additional liquidity headroom it accessed £10m
from its accordion (bringing the total banking facility to £70m with a
further £10m accordion available), although the Group does not currently
anticipate using this incremental facility. The Group's net debt immediately
following completion of the acquisition was c.£32m, including c.£6m of cash
balances in the Greenbird entities.
Due to the recent timing of the acquisition, the Group is in the early stages
of its fair value assessment of the assets acquired and liabilities assumed
and has not yet finalised the accounting for the business combination. It
expects to complete its assessment in the second half of 2023. The carrying
value of the net assets acquired at the date of acquisition was £4.7m.
Goodwill represents the value placed on the opportunity to materially enhance
the future growth prospects of STV Studios creatively, commercially, and
internationally. This will be calculated as the fair value of the
consideration transferred, plus the amount of non-controlling interest, less
the net of the fair value of the identifiable assets acquired and liabilities
assumed. The value of goodwill will be adjusted by a corresponding amount
for the value of intangible assets identified and the difference between the
market and book values of the assets and liabilities.
Performance-based employment-linked earnouts will be accrued over the period
the founders are required to remain with the business.
In July 2023, the Group acquired a further 15% stake in quiz show producer
Mighty Productions for consideration of £0.3m to take the total investment
stake held by the Group to 40%.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge, these condensed consolidated
interim financial statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· An indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year and
· Material related party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report.
The directors of STV Group plc are listed in the Annual Report and Accounts
for 31 December 2022, with the exception of the following changes in the
period:
· Anne Marie Cannon (resigned 27 April 2023)
· Naomi Wendy Climer (appointed 30 May 2023)
A list of current directors is maintained on the STV plc website:
www.stvplc.tv (http://www.stvplc.tv)
For and on behalf of the Board:
Lindsay Dixon
Chief Financial Officer
Date: 5 September 2023
Independent review report to STV Group plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the income statement, the statement of comprehensive
income, the balance sheet, the statement of changes in equity, the cash flow
statement and related notes 1 to 22.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
Date: 5 September 2023
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