REG - STV Group PLC - STV Group Full Year Results to 31 December 2023
05/03/2024 07:15
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RNS Number : 5668F STV Group PLC 05 March 2024
Press Release 0700 hours, 5 March 2024
STV Group plc Full Year Results to 31 December 2023
Diversification targets exceeded; profit in line with guidance; new 3-year
growth plan; CEO succession
Highlights
· Diversification strategy continues to accelerate:
o Group revenue growth of 22%
o Studios revenue and adjusted operating profit trebles
o Digital revenue +6% and operating profit +16%
o 75% of Group adj. operating profit outside broadcasting, well ahead of 50%
target
· Adjusted Group operating profit of £20.1m down 22%, impacted by
linear advertising revenue and cost inflation and related to broader UK macro
uncertainty, as expected
· Strong on-screen performance, with STV Player streams + 28% and STV
the most-watched peak time TV channel in Scotland for the 5th year in a row
· Advertising outlook improving; Q1 total advertising revenue expected
to be up around 5%
· Board proposes final dividend of 7.4p and a full year dividend of
11.3p, in line with 2022
· New 3-year targets set to drive STV's profitable growth
· CEO Simon Pitts to step down over the next 12 months to take up a new
appointment beginning in Q1 2025
Financial Summary 2023 2022 Change
Revenue £168.4m £137.8m +22%
Total advertising revenue £97.3m £110.0m -12%
Adjusted operating profit* £20.1m £25.8m -22%
Adjusted operating margin* 11.9% 18.7% -680bps
Statutory operating profit £6.4m £25.3m -75%
Profit for the year £5.3m £17.3m -69%
Adjusted basic EPS* 28.2p 42.3p -33%
Statutory basic EPS 9.7p 38.3p -75%
Net debt(+) £32.3m £15.1m £17.2m
Dividend per share (full year) 11.3p 11.3p flat
* For reconciliation of adjusted to statutory measures see note 6
(+) Excluding lease liabilities
Greenbird Group contribution post acquisition (from 6 July 2023) was revenue
£15.0m, operating profit £3.2m. Greenbird Group proforma full year FY23
result was revenue £27.4m, operating profit £3.2m
Financial highlights
· Total revenue of £168.4m, +22% on 2022: Studios and Digital growth
more than offset expected linear advertising revenue declines
· Studios revenue of £66.8m, +182% and adjusted operating profit of
£5.2m, +280%, due to organic growth and H2 impact of Greenbird acquisition
· Digital revenue of £20.2m, +6% (VOD revenue +7%), with digital
operating profit up 16% to £9.9m
· Regional advertising revenue down 9% to £15.1m (excluding Scottish
Government spend, regional down only 1%)
· Group adjusted operating profit £20.1m, down 22% 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
· Total advertising revenue of £97.3m, down 12%
· Non-recurring costs (included within adjusting items) of £5.5m
incurred in the period relating to the new agreement with ITV for digital
content and national VOD sales representation (2023: £3.1m; 2022: £0.5m) and
Greenbird acquisition and integration costs (2023: £2.4m; 2022: £nil)
· Net debt of £32.3m, up £17.2m on 2022 and reflecting the
consideration paid to date for Greenbird of £21.9m. Leverage of 1.2x at
year end, in line with guidance (2022: 0.5x)
Another year of strong audience performance
· STV & STV Player combined still the clear number 1 for commercial
audiences in Scotland
· 20% share of total peak audience in 2023 (vs Netflix 12%, C4 11% and
Sky 9%)
· 486 of top 500 commercial audiences were on STV in 2023 (97%)
· STV was the most watched peaktime TV channel in Scotland for the
5(th) year in a row with a viewing share of 21.8%
· STV's lead over BBC1 in peak widened to nearly 3 share points
· Highest lead over ITV Network (2.3 share points) since records began
· Most watched commercial TV channel on 361 days out of 365 in 2023
· STV Player delivered another record streaming performance, with
growth across all key metrics:
· Online streams +28% and online consumption +25%
· Registered users up 17% to 5.7m, beating 5m target
· Active registered users +20% and STV Player VIP users +33%
Continued strategic momentum and new targets
· Studios: STV Studios now a leading UK production group:
· 58 new commissions in 2023, up 28 on 2022
· 68 series produced in 2023 delivering 620 hours of new television,
+154%
· Transformative Greenbird acquisition delivered £15.0m revenue and
£3.2m operating profit post acquisition on 6 July 2023
· Jan 2024 consolidation of Two Cities further evidence of successful
investment model:
§ £55m+ future revenues secured; acquisition is materially
earnings-enhancing
§ 3 new drama series commissions confirmed last month
· Major Apple drama Criminal Record launched in 100+ countries to
widespread acclaim
· Digital: STV Player continuing to deliver strong viewing and
commercial growth:
· Digital targets all exceeded for users, streams and revenues
· Year 1 of new ITV digital deal has driven increased viewing and
advertising yield
· Long-term partnership in place until 2029 on a variable cost basis
· 18 programmes delivered 1m+ streams, up from 12 in 2022
· Continued strong performance of STV 3rd party content, with over 14m
Brookside streams since launch
· UK Government Media Bill continues to progress through Parliament and
should guarantee prominence for STV Player on all major digital platforms
· New 3 Year strategy and targets: Next-phase plan announced to drive
STV's profitable growth; strategic objectives will focus on four key areas:
· CONTENT: Accelerate UK and international Studios growth
· AUDIENCE: Drive streaming growth and maximise total STV viewing
· MONETISATION: Maintain advertising leadership and grow new revenues
· ORGANISATION: Modernise and simplify business for digital-first world
· In terms of financial targets, by the end of 2026 STV will:
· Double Studios revenues to £140m with a target to achieve a 10%
margin
· Grow Digital revenues by a further 50% to £30m* at a margin of at
least 40%
· Increase international revenues to 15% of Group / 25% of Studios
· Achieve a further £5m p.a. savings in STV's cost base
* before commission
Improving outlook
· Advertising market showing resilience and growth so far in 2024
· Total advertising revenue (TAR) expected to be up around 5% in Q1
year on year
· Digital VOD advertising, before commission, expected to be +12% in Q1
· Scottish advertising down 4% in Q1 reflecting Scottish Government
declines (underlying SME advertising +6-8%)
· Q2 will include live coverage of UEFA Euro 2024
· Studios forward order book stronger than ever
· £87m secured future revenue as at March 2024, £30m+ ahead of a year
ago
· Multiple new drama commissions secured for Sky, BBC and others
· 2024 will see full year of Greenbird consolidated performance and 11
months of Two Cities Television
· 3-year cost savings plan in place with £1.5m identified for delivery
in 2024 and £5m p.a. expected by end of 2026
· As in previous years, revenue and operating profit expected to be H2
weighted reflecting Studios delivery schedules
Dividend
· The Board proposes a final dividend of 7.4p per share for 2023,
giving a full year dividend of 11.3p per share, in line with 2022, after
considering all relevant factors including 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 dividend to shareholders.
Simon Pitts, Chief Executive, said:
"2023 was another year of strong strategic progress for STV as we delivered
revenue growth of 22% and exceeded the stretching 3-year diversification
targets we set ourselves to double the size of our digital business and
quadruple our Studios business, ending the year with 75% of our profit coming
from outside traditional broadcasting, well ahead of our 50% target.
Despite the challenging commissioning environment, STV Studios had a standout
2023, with revenues almost trebling and operating profit up 280%, propelled by
fantastic dramas like Criminal Record for AppleTV+ and Screw for C4 and the
transformative acquisition of Greenbird.
Our audience position remains unrivalled, with STV the most-watched peaktime
TV channel in Scotland for the 5(th) year in a row in 2023, ahead of BBC1, and
nearly double the commercial audience of Netflix. STV Player growth also
continued to accelerate, with streams up a further 28%, driving digital profit
up 16%.
Our overall financial performance was impacted by weak linear advertising and
cost inflation, as expected and related to the challenging UK macro
environment, although the start of 2024 has been more encouraging. Q1 total
advertising is expected to be up around 5% and we have a strong H1 schedule to
come, culminating in live coverage of UEFA Euro 2024 featuring both Scotland
and England. In January we also increased our stake to a majority in leading
drama producer Two Cities, who have already secured £55m of future revenues
across 3 high-end drama series.
Over the last 6 years STV has been successfully transformed into a
digital-first media company with a high-growth streaming service and one of
the UK's leading production groups, and we have today set out further
ambitious targets for the next phase of profitable growth. With STV's latest
diversification targets fully achieved, now is the right time to plan a smooth
and orderly succession. As such I have informed the Board that I will step
down as CEO over the next 12 months to take up a new appointment beginning in
Q1 2025.
The Board has proposed a final dividend of 7.4p per share, giving a full year
dividend of 11.3p, in line with 2022."
There will be a presentation for analysts today, 5 March 2024, 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
Group overview
Total revenue grew by 22% to £168.4m (2022: £137.8m). This was primarily
related to growth in Studios revenue, which reached £66.8m in the year, up
from £23.7m in 2022, with a contribution of £15.0m from Greenbird Media
Limited ("Greenbird") in the period since acquisition. Digital revenues also
continued to grow and were up 6% on the prior year.
Total advertising revenue (TAR) for the year was £97.3m (2022: £110.0m), a
decrease of 12% on the 2022 performance, with linear advertising revenues
being heavily impacted by the challenging macro-economic environment. Within
this, national advertising revenue was down 16% with regional continuing to
out-perform at -9% year on year.
Adjusted operating profit of £20.1m was down 22% on the record set in 2022 of
£25.8m, equivalent to an adjusted operating margin of 11.9% (2022: 18.7%).
On a statutory basis, operating profit was £6.4m (2022: £25.3m). The
proportion of Group adjusted operating profit derived from non-broadcast
earnings was 75%, compared to 38% achieved in 2022. This increase is in part
due to the absolute quantum of Digital and Studios adjusted operating profit
increasing year on year (£5.2m equivalent to 53%) but it is also impacted by
the declines in high margin linear advertising revenues that have resulted in
a 53% reduction in Broadcast operating profit year on year.
Adjusted profit for the year was £13.8m (2022: £19.1m), which includes a net
tax credit of £4.5m (2022: charge of £5.0m), primarily in relation to
High-End Television (HETV) tax credits receivable, and is after charging
finance costs of £2.9m (2022: £1.6m). The finance costs comprised interest
on the Group's borrowings of £2.4m (2022: £1.1m) with the balance being
non-cash costs in relation to the Group's lease liabilities. These adjusted
results are before finance costs in relation to the Group's defined benefit
pension schemes (2023: £2.8m; 2022: £1.4m), finance costs being the unwind
of discount in relation to put options recognised in a business combination
(2023: £0.5m, 2022: nil) and adjusting items in operating profit (2023: cost
of £6.0m; 2022: cost of £0.5m). Statutory profit after tax was £5.3m (2022:
£17.3m).
Adjusted earnings per share at 28.2p was down 33% on the prior year, driven by
lower operating profit and higher interest costs. On a statutory basis EPS
was 9.7p (2022: 38.3p).
At the balance sheet date, the Group had net debt of £32.3m compared to
£15.1m at the start of the year. The increase is principally driven by the
acquisition of Greenbird Media, which was a net cash outflow of £15m on
acquisition. Initial cash consideration of £21.4m was paid on completion with
a further £0.5m paid in December 2023 as surplus cash was paid via a dividend
to Greenbird from one of its subsidiaries. Operating cash conversion in the
year improved on 2022, as expected, and was 169% (2022: 45%).
The Group has in place a £70m revolving credit facility, with £10m
accordion, maturing in March 2026. The Group also has a production financing
facility relating to commissioned programme production, of which £3.3m was
drawn at the end of the year. This facility will mature when the programme is
delivered to the commissioner in H1 2024. At the end of the year, the
Group's leverage (calculated on a covenant basis) was 1.2 times (2022: 0.5
times) and interest cover was 12.9 times (2022: 42.8 times), both metrics well
within the covenant limits.
The IAS 19 accounting deficit across the Group's two defined benefit pension
schemes was £54.8m at the end of the year (2022: £63.1m). The decrease in
the liability is primarily driven by updated mortality assumptions that reduce
life expectancies.
STV Studios
2023 has been a standout year for STV Studios. The production business
continues its strong growth trajectory, with revenues almost trebling year on
year and profit growing nearly fourfold from a combination of organic growth
and the acquisition of Greenbird Media. It is scaling rapidly and
profitably, strengthening its position as the biggest production company in
Scotland and moving closer towards our core objective of becoming the UK's
number 1 nations and regions producer.
Over the past four years a key part of our expansion plan, alongside organic
growth, has been to invest in new production partners. In July 2023, we
accelerated this strategy through the acquisition of Greenbird Media,
significantly increasing the number of production labels under the STV Studios
umbrella (from 9 to 24), more than trebling our portfolio of returning series
and expanding our forward pipeline of new programme ideas. STV Studios now has
expanded bases in Glasgow and London, as well as offices in Cardiff, Belfast,
Brighton and Manchester, strengthening our ability to take advantage of the
continuing growth of production in the nations and regions.
The Studios business was already on track to exceed our 2023 target of £40m
of revenue, but this transformative acquisition has added significant scale
and creative firepower to the division and accelerated STV's overall
diversification strategy in terms of both revenue and profit. The
acquisition was materially earnings-enhancing from day one and was funded from
STV Group's existing financial resources.
STV Studios - including the Greenbird labels - has produced a record 68 series
in 2023 while securing more than 50 new commissions and recommissions. This is
a very strong performance set against a difficult global commissioning
backdrop, with many UK broadcasters and global streaming services slowing
their rate of new programme commissions in the current economic climate.
Programme highlights across Scripted and Unscripted for 2023 include:
· BBC One commissioned two new series of hit gameshow Bridge of Lies
with Ross Kemp, with the format also selling to Spain and the US.
· One of the BBC's biggest new dramas of the year, critically acclaimed
Belfast-based police drama, Blue Lights was recommissioned for a second
series. In Q1 2024, a further two series were ordered from our label, Two
Cities.
· Series 2 of prison drama, Screw, which aired on Channel 4 in the
autumn, attracted an average audience of 1.6m per episode.
· Thriller Criminal Record, a co-production with our exclusive partner,
Tod Productions, launched globally in January 2024 on Apple TV+ to a raft of
rave reviews.
· Antiques Road Trip (BBC), Travelling Auctioneers (BBC) and The
Yorkshire Auction House (Really, Discovery) are important returning series for
the business and continued to deliver strong ratings.
· Primal Media produced innovative new reality format, The Underdog:
Josh Must Win for Channel 4, airing in 2024; and a series development deal
with US media group, NBCUniversal, has been secured.
· Tuesday's Child won brand new entertainment format The Fortune Hotel
for ITV/STV and a recommission for BBC returner, The Hit List.
· Crackit Productions won and delivered a number of their successful
returning series in 2023, including titles such as Casualty 24/7 and Trucking
Hell for Channel 5, Deadliest Families for Discovery, and Social Media Murders
for ITV2.
As in 2022, tape sales of our extensive programme catalogue remain very
strong, proving to be a reliable and valuable income stream for the business.
Following the acquisition of Greenbird Media, we have significantly increased
the number of episodes in our distribution portfolio, including shows such as
Antiques Road Trip, The Travelling Auctioneers, Bridge of Lies, LEGO Masters
and A&E After Dark.
Testament to the tenacity, talent and creativity of our people, STV Studios
was named Production Group of the Year at the prestigious Edinburgh TV Awards
in August 2023.
We move into 2024 mindful of the ongoing uncertainty in the market. However,
not only do we have a strong stable of returning series, we have a compelling
pipeline of new programme ideas across the expanded STV Studios, and we're
excited about the year ahead for our newly enlarged creative powerhouse.
Digital
A combination of appealing and exclusive content, availability across all
major platforms in the UK, and a continuously improving user experience
ensured that STV Player continued its strong growth trajectory in 2023. The
migration of audiences from linear to VoD continues and viewing hours were up
25% at 71m compared with 2022, and streams increased by 28% at 149m.
STV Player marked its biggest ever month and quarter in terms of viewing
hours, contributing to a record-breaking year for the streamer. A strong
content line-up, including exclusives in Scotland like dramas Crime, Six Four
and The Long Shadow, alongside appealing acquired material, such as Brookside
and Suspects, helped make this our biggest year ever for Video on Demand.
Total active registered users - individuals who have signed up to the service,
provided their details and viewed content - were up 400,000 at 1.8m across
2023, with 1m users active every month across our STV owned and third-party
platforms. STV Player VIP users continued to grow, with new VIPs up by two
thirds year on year - that's 570,000 opted-in users by the end of 2023.
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 brand new and exclusive box sets per year. 58 new series
premiered in 2023 under this new deal, driving 28% of VOD viewing. Five of
these titles are in the top 15 best-watched VOD shows, including Irvine Welsh
drama Crime starring Dougray Scott; true crime drama, The Long Shadow; crime
thriller, Payback, along with Six Four and Malpractice. Favourites like The
Bay, Unforgotten and Vera also continue to drive strong viewing numbers for
STV Player. Drama remains a big driver of digital viewing, with almost four in
ten STV drama hours viewed via STV Player across 2023.
In addition to access to exclusive Network content in Scotland, this agreement
sees ITV's market leading sales team take on exclusive responsibility for
selling all national and digital VOD and simulcast advertising inventory on
STV Player from 2023, allowing STV to benefit from ITV's unrivalled scale in
the UK market. We joined ITV's addressable advertising platform, Planet V,
allowing advertisers to access STV's inventory alongside ITV's combination of
mass simultaneous reach and data-driven, targeted advertising.
This has seen the level of targeted, programmatic advertising on our streaming
service increase from 40% to 90% across the year, with our digital brand count
increasing by 25% across the year. 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.
Across all VOD programming, STV third-party acquired material features
strongly in our top 20 - a proven approach which helps us broaden our audience
outside of Scotland. Our strategic acquisition of iconic soap, Brookside,
delivered vast media profile for the series and it was our number two most
watched programme across the year, with c.13m streams in 2023, of which 69%
came from outside of Scotland.
Broadcast
STV reaches 2.8m adults each month, more than any other commercial channel,
making STV a unique commercial proposition for advertisers. STV also has a
higher daily, weekly and monthly reach than any of the subscription streaming
services.
Like all businesses, 2023 saw us operating against a very challenging
macro-economic backdrop due to high inflation and rising interest rates. This
impacted both the national linear advertising performance the most
significantly, down 16% year on year, with the Scottish regional ad market
continuing to outperform at -9% year on year. This is down to STV's Growth
Fund, which stands at £30m and makes advertising more affordable and
accessible for SMEs. Since launch in 2018 to the end of 2023, we have
allocated almost £28m across more than 1200 deals with Scottish companies.
245 deals were secured in 2023 and importantly, over 65% of advertisers have
returned from 2022. Within this, we have ring-fenced £1m for an Inclusion
Fund, for businesses who support diverse and inclusive practices; and a £1m
Green Fund, for businesses with a commitment to sustainability.
For the fifth consecutive year, STV is the most watched peak time channel in
Scotland, with our viewing share considerably ahead of BBC One; and the only
PSB in Scotland to outperform its UK Network equivalent, tracking ahead of
ITV1 in terms of viewing share across all time (1.4 percentage points) and
peak time (2.3 percentage points) in 2023.
STV delivered 97% of the top 500 commercial programme audiences last year and
was the most watched commercial channel on 361 days in 2023.
Coronation Street and Emmerdale, continue to be schedule favourites with loyal
viewers. Other programme highlights for 2023 included new dramas like The Long
Shadow, A Spy Among Friends and The Hunt for Raoul Moat; returning dramas,
Unforgotten and Vera; and entertainment shows The Masked Singer, Deal or No
Deal and The Chase. I'm A Celebrity… Get Me Out Of Here! again proved our
most popular show, with the top rating episode attracting over 800k linear
viewers.
Our audience was boosted significantly by large scale sporting events in 2023.
STV's Rugby World Cup coverage reached 2.5m Scots (53%) and attracted some of
the highest audiences of the year. Viewing to the England vs Scotland Calcutta
Cup match during the Six Nations peaked at 900k - our biggest audience of
2023. 1.3m Scots tuned in to watch the FIFA Women's World Cup.
STV News at Six has retained its position as the most-watched news programme
in Scotland, tracking 7 share points ahead of BBC Reporting Scotland (its
highest ever share lead). The STV News website has also had a strong year,
with 3.1m unique visitors to the site on average per month. Our Expert Voices
training scheme helps ensure we feature a diverse range of contributors on our
news and current affairs programmes and so far, 1000+ people have been trained
helping us to reach our on-air diversity targets.
In summer 2023, we launched our first ever Sustainable Scotland Week - a
seven-day, cross-platform mission which saw STV raising awareness of how
climate change is impacting Scotland's communities and inspiring viewers to
live more sustainably. Our dedicated TV content reached 1.5m viewers.
ScotPulse research revealed that 72% of those who saw Sustainable Scotland
Week activity said it made them more likely to make more environmentally
conscious choices. All STV productions are albert certified.
Regulatory update
In March 2024, we accepted terms from Ofcom to renew our Channel 3 licences
for a further ten-year period from January 2025, providing further long-term
certainty to our core business and securing the future provision of commercial
public service broadcasting in Scotland, including the country's highest
performing news and current affairs programmes.
STV also welcomed the introduction of the Media Bill at Westminster and its
subsequent parliamentary progress. This represents the first major update to
UK media legislation for over 20 years and is urgently required to make Public
Service Media as prominent on digital platforms as they are today on broadcast
platforms, and to ensure STV remains easily available and discoverable for
viewers. In late February, Ofcom published their roadmap to support full
implementation of the Bill. It's vital that the Bill now makes its way swiftly
through Parliament into law.
Consolidated income statement
Year ended 31 December 2023
2023 2022
Adjusted results Adjusting Statutory results Adjusted Adjusting Statutory
Continuing operations items results items results
(note 6) (note 6)
Note £m £m £m £m £m £m
Revenue 5 168.4 - 168.4 137.8 - 137.8
Operating expenses (156.0) (6.0) (162.0) (112.0) (0.5) (112.5)
Operating profit 12.4 (6.0) 6.4 25.8 (0.5) 25.3
Finance costs
- borrowings (2.4) - (2.4) (1.1) - (1.1)
- defined benefit pension schemes - (2.8) (2.8) - (1.4) (1.4)
- lease interest (0.5) - (0.5) (0.5) - (0.5)
- other finance costs - (0.5) (0.5) - - -
Total finance costs (2.9) (3.3) (6.2) (1.6) (1.4) (3.0)
Share of loss of associates (0.2) - (0.2) (0.1) - (0.1)
Profit before tax 9.3 (9.3) - 24.1 (1.9) 22.2
Tax credit/(charge) 7 4.5 0.8 5.3 (5.0) 0.1 (4.9)
Profit for the year 13.8 (8.5) 5.3 19.1 (1.8) 17.3
Attributable to:
Owners of the parent company 13.0 (8.5) 4.5 19.3 (1.8) 17.5
Non-controlling interests 0.8 - 0.8 (0.2) - (0.2)
13.8 (8.5) 5.3 19.1 (1.8) 17.3
Earnings per share
Basic 8 28.2p 9.7p 42.3p 38.3p
Diluted 8 27.2p 9.4p 40.4p 36.6p
A reconciliation of the statutory results to the adjusted results is included
at note 6. The above consolidated income statement should be read in
conjunction with the accompanying notes.
Consolidated statement of comprehensive income
Year ended 31 December 2023
2023 2022
£m £m
Profit for the year from continuing operations 5.3 17.3
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes 2.0 6.5
Deferred tax charge (0.5) (1.5)
Revaluation loss on listed investment to market value - (0.3)
Other comprehensive expense - net of tax 1.5 4.7
Total comprehensive income for the year 6.8 22.0
Attributable to:
Owners of the parent company 6.0 22.2
Non-controlling interests 0.8 (0.2)
6.8 22.0
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated balance sheet
At 31 December 2023
2023 2022*
Note £m £m
Non-current assets
Intangible assets 10 25.0 1.2
Property, plant and equipment 11 8.9 10.6
Right-of-use assets 12 17.9 18.6
Investments 14 4.1 2.5
Deferred tax asset 15 19.8 21.9
Trade and other receivables 1.0 0.7
76.7 55.5
Current assets
Inventories 24.4 47.0
Trade and other receivables 38.9 39.8
Cash and cash equivalents 13.9 18.3
77.2 105.1
Total assets 153.9 160.6
Equity
Ordinary shares 17 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 2.4 1.8
Accumulated losses (321.9) (322.7)
Shareholders' equity (7.5) (8.9)
Non-controlling interests (5.1) (0.3)
Total equity (12.6) (9.2)
Non-current liabilities
Borrowings 16 41.6 26.4
Lease liabilities 17.9 18.7
Retirement benefit obligations 19 54.8 63.1
Deferred tax liabilities 15 2.6 -
Trade and other payables 5.9 -
122.8 108.2
Current liabilities
Borrowings 16 4.6 7.0
Trade and other payables 37.9 53.7
Lease liabilities 1.2 0.9
43.7 61.6
Total liabilities 166.5 169.8
Total equity and liabilities 153.9 160.6
The above consolidated balance sheet should be read in conjunction with the
accompanying notes.
*Details of restatements are disclosed in note 2
Consolidated statement of changes in equity
Year ended 31 December 2023
Capital redemption reserve Restated* 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 (322.7) (8.9) (0.3) (9.2)
Profit for the year - - - - - 4.5 4.5 0.8 5.3
Other comprehensive income - - - - - 1.5 1.5 - 1.5
Total comprehensive income for the year
- - - - - 6.0 6.0 0.8 6.8
Net share based compensation - - - - 0.6 - 0.6 - 0.6
Dividends paid (note 9) - - - - - (5.2) (5.2) (0.2) (5.4)
Changes in non-controlling interest (note 15) - - - - - - - (5.4) (5.4)
At 31 December 2023 23.3 115.1 0.2 173.4 2.4 (321.9) (7.5) (5.1) (12.6)
At 1 January 2022 - restated* 23.3 115.1 0.2 173.4 1.4 (340.1) (26.7) (0.1) (26.8)
Profit/(expense) for the year - - - - - 17.5 17.5 (0.2) 17.3
Other comprehensive income - - - - - 4.7 4.7 - 4.7
Total comprehensive income/(expense) for the year
- - - - - 22.2 22.2 (0.2) 22.0
Net share based compensation - - - - 0.4 0.3 0.7 - 0.7
Dividends paid (note 9) - - - - - (5.1) (5.1) - (5.1)
At 31 December 2022 - restated* 23.3 115.1 0.2 173.4 1.8 (322.7) (8.9) (0.3) (9.2)
*Details of restatements are disclosed in note 2
The above consolidated statement of changes in equity should be read in
conjunction with the accompanying notes.
Consolidated statement of cash flows
Year ended 31 December 2023
2023 2022
Note £m £m
Operating activities
Cash generated by operations 18 10.8 11.5
Interest and fees paid in relation to banking facilities (2.3) (1.1)
Corporation tax received 5.0 0.2
Pension deficit funding - recovery plan payment (9.7) (9.5)
Contingent cash payment to pension schemes - (2.4)
Net cash generated by/(used in) operating activities 3.8 (1.3)
Investing activities
Acquisition of subsidiary undertakings, net of cash acquired 13 (15.0) -
Purchase of investment in associate (0.3) (0.9)
Production finance provided to associate (0.4) (2.4)
Production finance repaid from associate 3.0 -
Purchase of intangible assets (0.4) (0.5)
Purchase of property, plant and equipment (0.8) (3.4)
Net cash used in investing activities (13.9) (7.2)
Financing activities
Payment of obligations under leases (1.8) (1.8)
Borrowings drawn 36.3 38.0
Borrowings repaid (21.0) (26.0)
Dividends paid to non-controlling interests (0.2) -
Dividends paid to equity holders (5.2) (5.1)
Net cash generated by financing activities 8.1 5.1
Net decrease in cash and cash equivalents (2.0) (3.4)
Net cash and cash equivalents, including overdraft balances, at beginning of 11.3 14.7
year
Net cash and cash equivalents, including overdraft balances, at end of year 9.3 11.3
Notes to the preliminary announcement
Year ended 31 December 2023
1. General information
STV Group plc ("the Company") and its subsidiaries (together "the Group") is
listed on the London Stock Exchange, limited by shares, and incorporated and
domiciled in the UK. The address of the registered office is Pacific Quay,
Glasgow, G51 1PQ. The principal activities of the Group are the production and
broadcasting of television programmes, provision of internet services and the
sale of advertising airtime and space in these media.
2. Basis of preparation
The financial information set out in the audited preliminary announcement does
not constitute the Group's statutory financial statements for the year ended
31 December 2023 within the meaning of Section 434 of the Companies Act 2006
and has been extracted from the full audited financial statements for the year
ended 31 December 2023.
Statutory financial statements for the year ended 31 December 2022, which
received an unqualified audit report, have been delivered to the Registrar of
Companies. The reports of the auditors on the financial statements for the
year ended 31 December 2022 and for the year ended 31 December 2023 were
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The financial statements for the
year ended 31 December 2023 will be delivered to the Registrar of Companies
and made available to all shareholders in due course.
Prior year adjustments
Presentation of cash and cash equivalents and overdrafts
The Group previously presented cash balances and overdrafts held with the same
counterparty on a net basis due to there being a legal right to offset, with
overdraft balances cleared down in line with trading requirements. However, as
the accounts that are used to settle the overdrafts are normal trading
accounts with routine activities processing through them, the overdrafts
should be disclosed within current liabilities. The impact on the Group
balance sheet at 31 December 2022 is to increase cash and cash equivalents
from £11.3m to £18.3m and recognise a current liability of £7.0m.
Historical overstatement of trade and other receivables
The Group identified an historic error of £0.9m relating to an over accrual
of music revenue expected to be collected on its behalf by a third party. The
over accrual relates to prior periods not presented in these financial
statements and therefore the correcting adjustment was disclosed as a
restatement of the 1 January 2022 trade and other receivables balance, with a
corresponding adjustment to retained earnings. The 31 December 2022 balance
sheet has also been restated; non-current trade and other receivables restated
from £1.5m to £0.7m, current trade and other receivables restated from
£39.9m to £39.8m, and retained earnings restated from £(321.8)m to
£(322.7)m.
Going concern
At 31 December 2023, the Group was in a net debt position (excluding lease
liabilities) of £32.3m comprising drawdowns under its banking facility of
£39m, amounts drawn under a separate third party production financing
facility of £3.3m, partially offset by net cash balances, including
overdrafts, of £9.3m.
The Group has in place a £70m revolving credit facility, with £10m
accordion, that matures in March 2026. In July 2023, the Group accessed £10m
of its then £20m accordion to provide additional liquidity headroom following
acquisition of Greenbird Media Limited and against the backdrop of a difficult
macroeconomic environment impacting linear advertising in particular. To date,
we have not accessed this incremental headroom. Our covenant package includes
the key financial covenants of net debt to EBITDA (leverage), which must be
less than 3 times, and interest cover, which must be greater than 4 times.
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. It has undrawn facilities under its main banking
facility of £31m, with a further £10m available through accessing the
accordion.
As part of the regular forecasting and budgeting processes, the Group
considers the outlook for the UK advertising market and the UK and global
commissioning markets and uses them to inform the assumptions underpinning the
business's own financial forecasts. As well as defining a 'base case' set of
assumptions, the Group considers a range of alternative outcomes - on the
upside and the downside - and assesses liquidity headroom and covenant
compliance under all scenarios. The Group's forecasts and projections for both
profitability and cash generation/debt levels, taking account of reasonably
possible changes in trading performance, 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 the year and approved the Group's updated three-year plan covering the
period to 31 December 2026 in February 2024. As part of this process, the
Board gave specific consideration and challenge to the first year of this plan
and approved it as the budget for FY2024.
A severe but plausible downside scenario was identified against the base case
assumptions in that budget that reflected crystallisation of a number of
risks, principally in relation to advertising revenues and the number and
scale of programme commissions won and delivered in the year. Under this
alternative scenario, the Group modelled a reduction of more than 40% in the
budgeted revenue of the Studios division combined with a continued recession
in the UK advertising market.
Even under this scenario, the Group generated sufficient cash to enable it to
continue in operation and remain within covenant levels under the Group
banking arrangements. Therefore, the Board concluded that the Group's
forecasts and projections, taking account of reasonably possible changes in
trading performance, show it will be able to operate within the level of its
current available funding and covenant levels.
After making enquiries, 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 2023. There were no
changes to accounting standards in the year that had any material impact on
the financial statements.
4. 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 carrying value of non-derivative financial assets and liabilities,
comprising cash and cash equivalents, trade and other receivables, trade and
other payables and borrowings is considered to materially equate to their
fair value.
5. 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 operating segments are Broadcast, Digital and Studios.
Broadcast Digital Studios Total
2023 2022 2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m £m £m
Sales 90.4 107.6 20.2 19.0 67.2 23.9 177.8 150.5
Inter-segment sales (9.0) (12.5) - - (0.4) (0.2) (9.4) (12.7)
Segment revenue 81.4 95.1 20.2 19.0 66.8 23.7 168.4 137.8
Segment result
Adjusted operating profit
9.8 20.7 9.9 8.5 5.2 1.4 24.9 30.6
Unallocated corporate expenses (4.8) (4.8)
Adjusted operating profit 20.1 25.8
Adjusting items in operating profit(note 6) (6.0) (0.5)
Finance cost - put options (0.5) -
HETV tax credits (7.7) -
Finance costs (5.7) (3.0)
Share of loss of associates (0.2) (0.1)
Profit before tax - 22.2
Tax credit/(charge) 5.3 (4.9)
Profit for the year 5.3 17.3
Adjusted operating profit (as shown above) is the statutory operating profit
before adjusting items, amortisation of the fair value of intangible assets
and includes High-End Television (HETV) tax credits receivable. The HETV tax
credits relate solely to the Studios operating segment. In the current year,
£7.7m HETV tax credit claims were made (2022: £nil), £0.5m of amortisation
on the fair value of intangible assets has been included since acquiring
Greenbird Media Limited and £0.5m of finance costs in relation to put
options, resulting in a statutory operating loss of £3.5m for the Studios
division (2022: profit of £1.4m).
Total assets have reduced from £160.6m to £153.9m at 31 December 2023. This
movement primarily relates to the assets acquired from the acquisition of
Greenbird Media (see note 13) offset by a reduction in programme production
work in progress (inventory) due to material deliveries in the year.
6. Adjusting items
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 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.
The table below sets out a reconciliation of the statutory results to the
adjusted results:
2023 2023 Basic 2022 2022 Basic EPS pence
Operating profit Profit before tax EPS Operating profit Profit before tax
£m £m pence £m £m
Statutory results 6.4 - 9.7p 25.3 22.2 38.3p
Material contract implementation costs (i) 3.1 3.1 0.5 0.5
Acquisition and integration costs (ii) 2.4 2.4 - -
Amortisation of intangible asset (iii) 0.5 0.5 - -
IAS 19 finance costs (iv) - 2.8 - 1.4
Other finance costs (v) - 0.5 - -
High-end television tax credits (vi) 7.7 7.7 - -
Adjusted results 20.1 17.0 28.2p 25.8 24.1 42.3p
(i) On 8 December 2022, the Group announced an extended partnership with ITV
for digital content and advertising sales. The agreement was effective from 1
January 2023 and one-off costs associated with the negotiation and
implementation of the agreement reached in the year was £3.1m (2022: £0.5m).
(ii) On 6 July 2023, the Group acquired the independent production network of
companies headed by Greenbird Media Limited for total amounts payable of
£24.2m (note 13). The associated attributable costs, totalling £2.4m, have
been expensed as incurred in the year. This includes legal and advisory fees,
amounts attributable to earns outs payable to founding members, and
restructuring costs.
(iii) Following the acquisition of Greenbird Media Limited
in July 2023, the Group has undertaken a provisional fair value assessment of
the assets acquired and liabilities assumed. The provisional fair value
attributable to intellectual property acquired was £10.0m, with an associated
amortisation charge of £0.5m incurred since acquisition. Amortisation of
assets acquired through business combinations and investments are included
within adjusted results. As these costs are acquisition related, and in line
with our treatment of other acquisition related costs, we consider them to be
capital in nature as they do not reflect the underlying trading performance of
the Group.
(iv) IAS 19 related items, principally the net finance
cost included in the consolidated income statement, are excluded from
non-statutory measures as they are non-cash items that relate to legacy
defined benefit pension schemes.
(v) The Group recognised liabilities of £9.6m payable to minority
shareholders under put options already in force at the date of acquisition of
Greenbird Media Limited, which was estimated based on discounted profit
forecasts. Since the date of acquisition, £0.5m has been recognised as a
finance cost in relation to the unwinding of the associated discount.
(vi) 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
Consolidated 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. Post year end, HETV tax credits are being replaced by
'above the line' Audio-Visual Expenditure credits and are accounted for in a
similar way to the alternative performance measure presented above.
7. Tax
2023 2022
£m £m
The credit/(charge) for taxation is as follows:
Credit/(charge) for the year before adjusting items 4.5 (5.0)
Tax effect on adjusting items 0.8 0.1
Credit/(charge) for the year 5.3 (4.9)
Changes to the UK corporation tax rates were substantively enacted as part of
Finance Bill 2021 on 10 June 2021. These included an increase in the UK
corporation tax rate to 25% effective from 1 April 2023. The Finance Act 2023
which received Royal Assent on 10 January 2023, had no impact on corporation
tax figures. The deferred tax balances at 31 December 2023 have been stated at
a rate of 25% (2022:25%), which is the rate at which the temporary differences
are expected to unwind.
8. 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 year, excluding
ordinary shares purchased by the Company 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 all dilutive potential ordinary
shares. The Group has one type of dilutive potential ordinary shares namely
share options granted to employees.
The adjusted earnings per share figures that have also been calculated are
based on earnings before adjusting items that are significant in nature and/or
quantum and not expected to recur every year and are therefore considered to
be distortive. The adjusting items recognised in the current and prior years
are detailed in note 6 and presented below net of the related tax effect.
Adjusted earnings per share has been presented to provide shareholders with an
additional measure of the Group's year on year performance.
Earnings per share 2023 2022
Pence Pence
Basic earnings per ordinary share 9.7p 38.3p
Diluted earnings per ordinary share 9.4p 36.6p
Adjusted basic earnings per share 28.2p 42.3p
Adjusted diluted earnings per share 27.2p 40.4p
The following reflects the earnings and share data used in the calculation of
earnings per share:
Earnings £m £m
Profit for the year attributable to equity shareholders 4.5 17.5
Adjusting items in operating profit (net of tax) 5.2 0.4
IAS 19 finance cost 2.8 1.4
Other finance costs 0.5 -
Adjusted profit 13.0 19.3
Million Million
Number of shares
Weighted average number of ordinary shares in issue 45.8 45.6
Dilution due to share options 1.6 2.2
Total weighted average number of ordinary shares in issue 47.4 47.8
9. Dividends
2023 2022 2023 2022
per share per share £m £m
Dividends on equity ordinary shares
Paid final dividend 7.4p 7.3p 3.4 3.3
Paid interim dividend 3.9p 3.9p 1.8 1.8
Dividends paid 11.3p 11.2p 5.2 5.1
A final dividend of 7.4p per share (2022: 7.4p per share) has been proposed by
the Board of Directors and is subject to approval by shareholders at the 2024
AGM scheduled for 1 May 2024. The proposed dividend would be payable on 31
May 2024 to shareholders who are on the register at 19 April 2024. The
ex-dividend date is 18 April 2024. This final dividend, amounting to £3.4m
has not been recognised as a liability in these financial statements.
10. Intangible assets
Goodwill Intellectual Web Total
£m property development £m
£m £m
Cost
At 1 January 2023 - - 6.6 6.6
Additions - - 0.4 0.4
Acquisitions (note 13) 14.5 10.0 - 24.5
Disposals - - (0.3) (0.3)
At 31 December 2023 14.5 10.0 6.7 31.2
Accumulated amortisation and
impairment
At 1 January 2023 - - 5.4 5.4
Amortisation - 0.5 0.6 1.1
Disposals - - (0.3) (0.3)
At 31 December 2023 - 0.5 5.7 6.2
Net book value at 31 December 2023 14.5 9.5 1.0 25.0
Net book value at 31 December 2022 - - 1.2 1.2
11. Property, plant and equipment
Plant, technical
equipment
Leasehold and other Assets under construction
improvements £m £m Total
£m £m
Cost
At 1 January 2023 0.4 36.1 1.9 38.4
Additions - 0.4 0.4 0.8
Acquisitions (note 13) 0.1 0.1 - 0.2
Transfers - 2.0 (2.0) -
Disposals (0.1) (13.7) - (13.8)
At 31 December 2023 0.4 24.9 0.3 25.6
Accumulated depreciation and impairment
At 1 January 2023 0.2 27.6 - 27.8
Charge for year 0.1 2.6 - 2.7
Disposals (0.1) (13.7) - (13.8)
At 31 December 2023 0.2 16.5 - 16.7
Net book value at 31 December 2023 0.2 8.4 0.3 8.9
Net book value at 31 December 2022 0.2 8.5 1.9 10.6
12. Right of use assets
Property Vehicles Total
£m £m £m
Cost
At 1 January 2023 24.9 0.3 25.2
Acquisitions (note 13) 0.7 - 0.7
At 31 December 2023 25.6 0.3 25.9
Accumulated depreciation
At 1 January 2023 6.4 0.2 6.6
Depreciation charge for the year 1.3 0.1 1.4
At 31 December 2023 7.7 0.3 8.0
Net book value at 31 December 2023 17.9 - 17.9
Net book value at 31 December 2022 18.5 0.1 18.6
13. Business combinations
On 6 July 2023, the Group acquired 100% of the issued share capital of
unscripted television production group Greenbird Media Limited ('Greenbird')
for a total amounts payable of £24.2m, of which £21.4m was paid on
completion. The initial payment made was allocated £9.9m for the acquisition
of shares and £11.5m invested to settle convertible loan instruments provided
by the previous majority shareholder.
Deferred consideration of £1.2m relates to surplus cash balances held by the
majority subsidiary companies acquired at completion with £0.5m paid in
December 2023, leaving a balance of £0.7m payable in the future.
Deferred earn-out payments, estimated to be c£1.6m, are payable to the
founders based on agreed EBITDA targets over the two years ending 31 December
2024. These payments are linked to the founders' ongoing employment with the
Group and will therefore be accounted for as an expense. At 31 December 2023,
£0.9m has been accrued in respect of the first earn-out payable in Q2 2024.
This has been recognised as an adjusting item in the consolidated income
statement. Please refer to note 6 for further details.
The Group has completed the majority of its work in relation to assessing the
fair values of identifiable assets and liabilities acquired with only a small
number of minor points to be finalised. Therefore, we have presented the fair
values as provisional in the table below but do not anticipate any material
changes between the provisional and final position, which will be finalised
within 12 months from the date of acquisition, as required by the relevant
accounting standard.
Provisional fair value of identifiable assets and liabilities of Greenbird 2023
Media Limited and subsidiary companies
£m
Intangible assets 10.0
Property, plant and equipment 0.2
Right of use assets 0.7
Investments 1.5
Inventory 1.8
Trade and other receivables 2.0
Contract assets 1.9
Cash and cash equivalents 6.9
Deferred tax liabilities (2.6)
Trade and other payables (15.4)
Lease liabilities (0.8)
Contract liabilities (3.5)
Fair value of net identifiable assets 2.7
Non-controlling interest measured at proportionate share of identifiable net (4.2)
assets
Adjustments to non-controlling interest regarding derivative put options 9.6
Goodwill 14.5
Consideration 22.6
Total net cash outflow relating to acquisition of Greenbird Media Limited and £m
subsidiary companies
Cash consideration paid for equity shares 9.9
Additional cash invested to settle convertible loan instruments 11.5
Deferred consideration paid 0.5
Consideration paid 21.9
Cash and cash equivalents acquired (6.9)
Total cash outflow (15.0)
£m
Present value of the expected liability on put options 9.6
The goodwill of £14.5m represents the value placed on the opportunity to
materially enhance the future growth prospects of STV Studios creatively,
commercially, and internationally. This has been calculated as the fair value
of the consideration transferred, plus the amount of non-controlling interest
adjusted for derivative put options relating to subsidiaries acquired, less
the net of the fair value of the identifiable assets acquired and liabilities
assumed.
From the date of acquisition, Greenbird Media Limited and subsidiary
undertakings contributed £15.0m of revenue and £3.2m of operating profit to
the Group's results.
14. Investments
2023 2022
£m £m
Associates 3.9 2.4
Other 0.2 0.1
4.1 2.5
2023 2022
£m £m
Associates
At 1 January 2.4 1.5
Additions 1.7 1.0
Share of loss (0.2) (0.1)
At 31 December 3.9 2.4
The additions in associates during 2023 relates to the acquisition of a
further 15% stake in quiz show producer, Mighty Productions Limited, for a
total consideration of £0.3m in July 2023, taking the total investment held
by the Group to 40%. As part of the acquisition in Greenbird Media Limited (as
detailed in note 13), the Group acquired six associates for total
consideration of £1.4m, ranging from an ownership stake of 25% to 40%. The
Group also owns a 25% shareholding in the unscripted production company, Hello
Mary, and a 25% stake in Two Cities Television. Refer to note 20 for
subsequent events relating to Two Cities Television. No dividends have been
received from any associate undertaking.
The Group also holds shares in Mirriad Advertising plc which has a nominal
fair value at the balance sheet date. This investment is measured at fair
value through the Consolidated Statement of Comprehensive Income.
15. Deferred tax asset
At 31 December 2023, total deferred tax assets of £19.8m were recognised on
the balance sheet (31 December 2022: £21.9m) and a deferred tax liability of
£2.6m (2022: £nil) was acquired through business combinations, resulting in
a net deferred tax asset of £17.2m (2022: £21.9m). Of this, £13.7m relates
to the deficit on the Group's defined benefit pension schemes (31 December
2022: £15.7m) and the balance of £3.5m relates to tax losses, accelerated
capital allowances and short-term timing differences (31 December 2022:
£6.2m).
16. Borrowings
At the balance sheet date, the Group had a £70m revolving credit facility
(RCF) in place, with a £10m accordion, maturing in March 2026. £41.6m was
drawn down at the balance sheet date (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). The facility was
increased by £10m to £70m (through accessing its accordion) in July 2023, to
provide additional liquidity headroom on completion of the Greenbird
acquisition. There has been no requirement to call on this additional debt in
the subsequent period.
The Group also has a £7.1m loan facility relating to production financing of
which £3.3m was drawn down at the balance sheet date (2022: £nil) and a bank
overdraft within current liabilities of £4.6m (2022: £7.0m).
17. Share capital
Number of shares (thousands) Ordinary shares Share
£m premium Total
£m £m
At 1 January 2023 and 31 December 2023 46,723 23.3 115.1 138.4
The total authorised number of ordinary shares is 63 million shares (2022: 63
million shares) with a par value of £0.50 per share (2022: £0.50 per share).
All issued shares are fully paid.
18. Notes to the consolidated statement of cash flows
2023 2022
£m £m
Operating profit 6.4 25.3
Adjustments for:
Depreciation and amortisation 5.2 4.8
Share based payments 0.6 0.8
Decrease/(increase) in inventories 24.3 (29.3)
Decrease/(increase) in trade and other receivables 3.4 (10.6)
(Decrease)/increase in trade and other payables (29.1) 20.5
Cash generated by operations 10.8 11.5
Net debt reconciliation
Adjusted net debt including lease liabilities
Net cash and cash equivalents, including overdrafts Net debt
Long-term borrowings Lease liabilities
£m £m £m £m £m
At 1 January 2023 (26.4) 11.3 (15.1) (19.6) (34.7)
Cash flows (15.0) (2.0) (17.0) 1.8 (15.2)
Non-cash flows (i) (0.2) - (0.2) (1.3) (1.5)
At 31 December 2023 (41.6) 9.3 (32.3) (19.1) (51.4)
(i) Non-cash movements relate to the amortisation of borrowing costs (for
long-term borrowings), the acquisition of right-of-use assets and
corresponding lease liabilities and lease interest.
Operating cash conversion, calculated as cash generated by operations divided
by operating profit and expressed as percentage was 169% (2022: 45%).
19. Retirement benefit schemes
The Group operates two defined benefit pension schemes. The schemes are
trustee administered and the schemes' assets are held independently from those
of the Group. Pension costs are assessed in accordance with the advice of an
independent professionally qualified actuary.
The schemes are the Scottish and Grampian Television Retirement Benefit Scheme
and the Caledonian Publishing Pension Scheme. Both are closed schemes and
accounted for under the projected unit method.
Contribution rates to the scheme are determined by a qualified independent
actuary on the basis of a triennial valuation using the projected unit method.
The most recent triennial valuation was carried out as at 31 December 2020.
This valuation resulted in a deficit of £116m on a pre-tax basis at 30
September 2021 compared to £127.0m on a pre-tax basis at the previous
settlement date of 28 February 2019. The next triennial valuation will take
place as at 31 December 2023 with work currently ongoing between the Group and
the trustees.
Deficit recovery plans, which end on 31 October 2030, have been agreed with
aggregate monthly payments unchanged from the previous recovery plans. The
2023 deficit recovery payments totalled £9.7m, with annual payments then
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.
The recovery plans are designed to enable the schemes to reach a fully funded
position, using prudent assumptions about the future, by 2030.
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:
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:
2023 2022
% %
Rate of increase in salaries nil nil
Rate of increase of pensions in payment 3.15 3.45
Discount rate 4.50 4.85
Rate of price inflation (RPI) 3.15 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 of a pensioner retiring at age 65).
2023 2022
Retiring at balance sheet date:
Male 20.5 20.9
Female 22.7 23.1
Retiring in 25 years
Male 21.7 22.1
Female 24.0 24.4
The fair value of the assets in the schemes and the present value of the
liabilities in the schemes at each balance sheet date was:
At 31 December 2023 At 31 December 2022
Quoted Unquoted Total Quoted Unquoted Total
£m £m £m £m £m £m
Equity and equity options 11.0 70.1 81.1 - 70.7 70.7
Alternative return seeking 19.8 43.0 62.8 25.5 33.5 59.0
Cashflow matching credit 1.8 53.1 54.9 - 49.1 49.1
LDI and cash 119.6 (37.0) 82.6 151.4 (57.2) 94.2
Currency hedge - 1.0 1.0 - 2.1 2.1
Annuity policies - 13.0 13.0 - 14.7 14.7
Fair value of schemes' assets
152.2 143.2 295.4 176.9 112.9 289.8
Present value of defined benefit obligations
(350.2) (352.9)
Deficit in the schemes (54.8) (63.1)
A related, offsetting deferred tax asset for the Group of £13.7m (2022:
£15.7m) is included within non-current assets. Therefore, the pension scheme
deficit net of deferred tax for the Group was £41.1m at 31 December 2023
(2022: £47.4m).
20. Post balance sheet events
On 31 January 2024, the Group announced it had increased its stake in the
high-end drama production company, Two Cities Television to a majority holding
of 51% (from 25%).
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, but
expects to complete its assessment in the second half of 2024.
The carrying value of the net assets acquired at the date of acquisition was
£0.2m. Goodwill represents the value placed on the opportunity to materially
enhance the future growth prospects of STV Studios drama. 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.
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