REG - STV Group PLC - STV Group plc Full Year Results for 2022
07/03/2023 07:00
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RNS Number : 0766S STV Group PLC 07 March 2023
Press Release 0700 hours, 7 March 2023
STV Group plc Full Year Results to 31 December 2022
Record adjusted operating profit as diversification strategy continues to
deliver
Highlights
· Diversification on track, with 38% of earnings now from Digital and
Studios
· Favourable new ITV partnership significantly strengthens STV digital
strategy
· STV Player registered users surpass 5m target one year early, in Q1
2023
· STV Studios doubles new programme commissions with further strong
growth to come
· STV remains Scotland's most watched peak time channel for the 4(th)
year in a row
· Confident of achieving 2023 diversification targets, despite ongoing
economic uncertainty
· Board proposes final dividend of 7.4p, bringing full year to 11.3p,
+3% on 2021
Financial Summary 2022 2021 Change
Revenue £137.8m £144.5m -5%
Total advertising revenue £110.0m £112.6m -2%
Adjusted operating profit* £25.8m £25.2m +2%
Adjusted operating margin* 18.7% 17.5% +120bps
Adjusted PBT** £24.1m £23.6m +2%
Profit before tax £22.2m £20.1m +11%
Adjusted basic EPS** 42.3p 45.6p -7%
Statutory basic EPS 38.3p 42.7p -10%
Net (debt)/cash(+) (£15.1m) £0.3m (£15.4m)
Dividend per share (full year) 11.3p 11.0p +3%
* Before exceptional items and inclusive of High-End Television tax credits (the
latter 2021 only)
** Before exceptional items and IAS19 interest, and inclusive of High-End
Television tax credits (the latter 2021 only)
(+) Excluding lease liabilities
Throughout this announcement, where we state record financial performance, it
is made by reference to 2010 when the final disposal was made and the Group as
we know it today remained
Financial highlights
· Adjusted operating profit of £25.8m, +2% on 2021
· Total advertising revenue (TAR) of £110.0m, down only 2% on record
2021
· Total Group revenue of £137.8m, -5% on 2021, as a result of
marginally lower TAR and timing of production deliveries
· STV-controlled advertising continuing to show growth and
resilience, with VOD advertising +9% and regional advertising down 4%
(excluding Scottish Government spend, regional grew 18%)
· Digital revenue +7% at £19m and digital profit +9% at £8.5m
· Studios revenue of £23.7m down 11% on prior year due to timing of
deliveries, in particular drama (2021: £26.6m). Studios adjusted operating
profit +6% at £1.4m
· Adjusted operating margin of 18.7% (2021: 17.5%), reflecting
improved margins in both Digital and Studios
· Net debt (excluding leases) of £15.1m (2021: net cash £0.3m)
driven by short-term working capital needs to support Studios growth; will
unwind as programmes are delivered
Another year of strong audience performance
· On TV, STV's peaktime viewing share of 22.5% was the highest since
2009, with our lead over BBC1 widening:
o Most watched peaktime channel in Scotland for 4(th) year in a row
o Bigger peaktime 16-34 audience than C4, ITV2 and BBC Three combined
o All-time audience higher than any other commercial channel on 361 days
of 2022
o November 2022 was STV's highest viewing share for 19 years, driven by
I'm a Celebrity and the FIFA World Cup
· STV Player enjoyed its best ever streaming performance, with
growth across all key metrics:
o Registered users up 17% to 4.9m, and now over 5m in Q1 2023
o Online viewing up 6%, advertising impressions +27%
o Streams up 1%, with live streams up 5%
o Monthly active users up 10%, STV Player VIP users up 16%
o New research shows that 20% of Scots have already cancelled at least
one paid-for streaming service, with a further 38% saying they intend to
Continued strategic momentum
· Studios: STV Studios continues to scale rapidly:
o 30 new commissions and now 11 returning series
o 3 major new returnable drama series currently in production for Apple, BBC
and C4
o 2023 will be a breakthrough year with £50m+ of commissions already
secured for delivery, more than double 2022
· Digital: STV Player's long-term streaming growth secured through new
ITV partnership:
o 100+ hours per year of new, exclusive content will launch on STV Player
through new ITV deal
o Long-term content partnership in place with ITV until 2029, on a variable
cost basis
o Digital content offer now 6,000+ hours, with 156 new titles and 1,600
hours added in 2022
· Scottish advertising: More than 1,000 deals through the STV Growth
Fund since launch in 2018, allocating just under £20m. In 2022 there were 223
deals, with 70% of 2022 Growth Fund members re-booking from the previous year.
· Targets: On track to hit or surpass our 3-year growth targets to the
end of 2023 to:
o Double digital viewing, users and revenue (to £20m)
o Quadruple Studios revenue (to £40m)
o Achieve at least 50% of operating profit from outside traditional
broadcasting
2023 outlook
· Advertising impacted by ongoing economic uncertainty, but expected to
remain resilient
o Total advertising revenue down around 15% in Q1 as expected
o Digital VOD advertising up around 20% in Q1
o Scottish advertising expected to be down 20-25% in Q1, flat to slightly up
excluding Scottish Government spend
o April TAR expected to be down 10-15%
· 2023 content line-up on STV and STV Player stronger than ever
o 34 new drama boxsets vs 14 in 2022
o Exclusive coverage of the Rugby World Cup in the autumn
· Studios building momentum, with previous guidance of £50m revenue
and at least £3m operating profit reconfirmed
· Digital content cost guidance unchanged post ITV deal; new content
funded through revenue share arrangement
· Other cost inflation partly mitigated by savings
· H1/H2 split more pronounced this year due to advertising market
and Studios phasing
Dividend
· The Board proposes a final dividend of 7.4p per share for 2022, up
1% on 2021, giving a full year dividend of 11.3p per share, +3% on 2021, after
considering all relevant factors including the ongoing macroeconomic and
geopolitical 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:
"2022 was another year of growth for STV where we delivered increased
operating profit beyond our record performance in 2021 while continuing to
support our people, partners and communities.
Our diversification strategy, focused on driving growth in digital streaming
and content production, continues to accelerate, with digital profit up 9% and
Studios profit up 6%. Nearly 40% of STV's earnings now come from these new
growth areas as we reduce our reliance on traditional television and create a
vibrant, future-facing media business.
Our audience position remains unrivalled, with STV being Scotland's most
popular peaktime TV channel for the 4(th) year in a row and our viewing share
the highest since 2009.
Streaming service STV Player had another record year, delivering growth
against all key metrics and surpassing our target of 5m registered users in
early 2023, one year early. Our enhanced long-term partnership with ITV will
propel the next phase of our streaming growth, guaranteeing exclusive access
to 100+ hours of new, original UK content every year and complementing our
extensive acquired content offering.
STV Studios is scaling rapidly and profitably, winning a record 30 new
commissions in 2022 and already securing over £50m in revenue for 2023. This
will be a breakthrough year as we deliver 3 major new dramas for Apple, BBC
and C4 and make meaningful progress towards our goal of becoming the UK's
leading nations & regions production company.
The advertising market showed further resilience in 2022 with STV total
advertising revenues finishing only 2% down on our record 2021 performance. As
expected, given the uncertain economic climate and strong 2022 comparator,
STV's Q1 2023 total advertising is down by around 15%, though digital VOD
advertising on STV Player is expected to be up around 20% and Scottish SME
spend - excluding Scottish Government spend - also expected to be flat to
slightly up, offering some encouragement for 2023. Our advertising performance
should also be bolstered by a very strong content line-up which includes
exclusive coverage of the men's Rugby World Cup starting in September.
The Board has proposed a final dividend of 7.4p per share, giving a full year
dividend of 11.3p, +3% on 2021.
There will be a presentation for analysts today, 7 March 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 overview
Total revenue for the year was £137.8m (2021: £144.5m), down 5% as a result
of lower advertising and Studios revenues year on year. Excluding the external
lottery management company (ELM) revenues from 2021, which was disposed of in
August 201, total revenues were down 4% year on year.
Total advertising revenue (TAR) was £110.0m (2021: £112.6m), a decrease of
only 2% on the record 2021 performance, despite significant economic
uncertainty particularly in the second half of the year. After a first half
which saw TAR grow by 4% year on year, the third quarter was more challenging
as the interest rate and inflationary environment took hold and consumer
confidence was impacted by the cost-of-living crisis. Q4 was stronger than
Q3, boosted by the advertising opportunities associated with hit entertainment
shows like I'm a Celebrity and the FIFA World Cup, however the Q4 performance
wasn't sufficient to offset Q3 declines, and TAR fell in H2 by 7% overall.
Revenues in Studios were lower as a result of the timing of drama deliveries
in particular.
Adjusted operating profit increased by 2% to £25.8m (2021: £25.2m),
equivalent to an operating margin of 18.7% (2021: 17.5%). On a statutory
basis, operating profit increased by 17% to £25.3m (2021: £21.6m).
Adjusted profit before tax (PBT) was £24.1m (2021: £23.6m), after charging
finance costs of £1.6m (2021: £1.5m). These comprised interest on the
Group's borrowings of £1.1m (2021: £1.2m) 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 (2022: £1.4m; 2021: £0.8m) and exceptional costs (2022: £0.5m;
2021: £0.8m). The prior year adjusted PBT also included High-End Television
(HETV) tax credits receivable (2022: nil; 2021: £1.9m). Statutory profit
before tax for the year was £22.2m, up 11% on 2021 (£20.1m).
A total tax charge of £4.9m has been recognised in the year (2021: £0.7m),
representing an effective tax rate of 22.1% (2021: 3.5%). This is higher than
the UK standard rate of corporation tax, principally due to deferred tax in
relation to the Group's defined benefit pension schemes. Statutory profit
after tax for the year was £17.3m (2021: £19.4m).
Adjusted EPS (before exceptional items and IAS19 finance costs) at 42.3p was
down 7% on the prior year and on a statutory basis EPS was down 4.4p to
38.3p. The main driver for the reduction in EPS under both measures is the
increase in the effective tax rate in the year.
The Group closed the year with net debt (excluding leases) of £15.1m compared
to a small net funds position of £0.3m at the start of the year. This
position reflects the unwinding of the working capital cash inflow in 2021,
and the short-term requirements of a growing Studios business. In addition,
we invested £0.9m in Mighty Productions in Q1 2022 and have provided a £3.0m
production financing facility to Two Cities (of which £2.4m was drawn in the
year) to support the production of Blue Lights for the BBC. This production
financing facility matures in the first half of 2023. The Group's operating
cash conversion was 45% in the year (2021: 161%) - looking at both years
together, the conversion rate was 98%.
The Group has in place a 3-year £60m revolving credit facility, with £20m
accordion, that has been extended to March 2026 through the exercise of two
1-year extension options. At the end of the year, the Group's leverage was
0.5 times (2021: nil) and interest cover was 42.8 times (2021: 49.4 times),
both metrics well within the covenant limits.
The IAS19 accounting deficit across the Group's two defined benefit pension
schemes was £63.1m at the end of the year (2021: £79.4m). The decrease in
the liability is primarily driven by an increase in discount rates over the
period due to the increase in corporate bond yields, and payment of deficit
funding contributions.
Broadcast
STV remains the most watched commercial TV channel in Scotland by a
considerable margin. STV reaches 3 million adults in Scotland each month -
more than any other commercial channel, and has a higher daily, weekly, and
monthly reach than all subscription (SVOD) services combined. STV is the only
PSB in Scotland to outperform its Network equivalent, tracking ahead of ITV in
terms of network share across all time (+1.4%) and peak time (+1.9%) in
2022.
For the fourth consecutive year, STV was the best watched peak time channel in
Scotland, ahead of BBC1. The channel delivered 96% of the top 500 commercial
programme audiences across the year. High quality shows including soap
favourites, Coronation Street and Emmerdale; and top dramas Our House and
Karen Pirie, were among our top ten most popular series commanding significant
audiences.
The 2022 FIFA World Cup and I'm A Celebrity...Get Me Out of Here! helped STV
achieve a 25% viewing share in November, the channel's best-performing month
since 2003. Indeed, the FIFA World Cup tournament scored the channel a 19-year
viewing share high. The competition was watched by 7 in 10 people on STV in
Scotland (3.3m) over four weeks. 24 out of the 29 matches on STV
outperformed the UK network, with STV's viewing share up 3% on the UK
average. The World Cup also delivered the single biggest programme of the
year across all channels in Scotland, with the Quarter Final featuring England
vs France attracting 1.1m viewers.
News and current affairs are the cornerstone of our service in Scotland.
Award-winning news programme, STV News at Six, has been Scotland's most
watched news programme since 2019, reaching 1.4m viewers per month and
performs 10 share points ahead of the ITV Network and 5 share points ahead of
BBC Reporting Scotland.
Our award-winning training initiative, STV Expert Voices, is committed to
establishing more diversity across the contributors on our programmes and the
team has trained more than 700 people to date. STV News achieved its gender
and diversity targets for its output across 2022, with 50% of contributors
female and 9% from an ethnically diverse background.
We use our platforms to make a positive social impact in several ways via
programming and promotional airtime. Our charity, the STV Children's Appeal,
continues to support children and young people impacted by poverty in Scotland
and this year's fundraising total of over £3m brought overall funds raised
since launch to over £30m.
Reflecting the more challenging economic backdrop in the second half of the
year, regional advertising was down 4% in 2022, largely as a result of a
decline in Scottish Government advertising as a result of the pandemic threat
receding. Excluding Scottish Government spend, regional advertising by
Scottish SMEs and larger clients was up 18% year on year. The STV Growth Fund
stands at £30m. From launch to the end of 2022, we have allocated almost
£20m across more than 950 deals (now more than 1,000 in Q1 2023) with
Scottish companies, with over 200 deals completed in 2022. We have also
launched The STV Green Fund and the STV Inclusion Fund, which welcome
environmentally conscious and socially inclusive businesses to work with us.
Digital
Across the year, STV Player delivered its highest ever viewing figures with
viewing hours up 6% at 54m and streams up 1.5% at 116m. Average monthly active
users were up 10% at 1.1m per month. Our total active registered users -
individuals who have signed up to the service and provided their details -
were up 400,000 for the full year, and in early 2023 we surpassed our 5m
target for total registrations nearly one year early.
Key to this performance were two stand-out pieces of event television: I'm A
Celebrity…Get Me Out Of Here! became our most-streamed series (3.4m
streams); and the winter World Cup was our most streamed sporting event ever
(6.4m streams). Changes to the linear peak schedule in March reinforced the
strength of our Soaps with the combined consumption of Coronation Street and
Emmerdale growing 21% to a record high of over 9m streaming hours across
2022.
Our addressable audience is significant, with STV Player available on all
major platforms. Registrations to STV Player continue to grow, increasing by
17% year on year to 4.9m (now more than 5m in Q1 2023), and within that our
monthly active user base also grew by 10% to 1.1m. STV Player VIP users also
grew by 16%, which is significant because VIP users consume considerably more
STV Player content than opted-out users. Total VOD viewing increased year on
year in nine months of the year, even with the tough 2021 comparators of
lockdown and the UEFA European Championships.
In December 2022, we agreed an enhanced strategic partnership with ITV around
content sharing and advertising sales that creates incremental digital value
for both companies and aligns our interests in the streaming age. This
long-term agreement until 2029 sees STV Player take exclusive Scottish rights
for a range of premiere content and is expected to encompass at least 100
hours of original content per year. The first wave of new titles included UK
original dramas like A Spy Among Friends, Without Sin and Nolly. This deal
also sees ITV's sales team take on exclusive responsibility for selling
national VOD and simulcast advertising inventory on STV Player from 2023,
allowing STV to benefit from ITV's unrivalled scale and targeting capability
in the UK market.
We have continued our successful strategy of adding high-quality 3(rd) party
content, which complements our slate of original programming. 20 new content
deals were secured, adding 156 new titles to the Player in 2022 and boosting
our already significant library by over 1,600 hours. STV Player-only content
generated more than 32m VOD streams across the year, accounting for 39% of
total VOD streams. 2023 is off to a strong start, with our acquisition of
Brookside seeing the long running soap become the fastest programme on STV
Player to reach 1m streams and boosting ex-Scotland streams to 25% of the
total in Q1 2023.
All of this resulted in commercial VOD delivery growing across the year, with
total advertising impressions up 27% year on year, driving a 9% increase in
VOD advertising revenues, and profit and margin growth year on year.
Studios
STV Studios has had another excellent year. Our ambitious strategy is to
become a world class producer for the biggest TV networks and global streamers
and the UK's number 1 nations & regions production company. In 2022 our
growth momentum continued, and a record 30 commissions were won. More than
£50m revenue has been secured for 2023, significantly ahead of our target of
£40m by 2023.
We continue to win new business across the genres from the main UK
broadcasters, global streamers and international buyers, meaning we have been
in a consistently busy period of programme production whilst continuing to
develop and pitch original new ideas and formats, ensuring a strong pipeline
for the future.
Our teams are delivering high value returnable and returning drama series
alongside high-volume returning unscripted series, which are significant
contributors to our business growth and are also important for the development
of the creative industry and talent base in Scotland.
We now work with nine production labels and remain open to future prospects.
In addition to our three in-house production teams, we have different holdings
in six independent production companies and this low-risk strategy enables us
to spread our creative bets, with the option of increasing our holdings in
these companies over time. In 2022, we added Mighty Productions to our stable
- founded by the creative team behind daytime quiz hits like Tipping Point and
!mpossible. Each of our labels has achieved success in 2022 including Tod
Productions who, alongside STV Studios, won a major commission for AppleTV+ to
produce crime thriller Criminal Record starring Peter Capaldi and Cush Jumbo,
and Barefaced TV, who produced a major reality dating show for Discovery+.
Commissioning highlights include a second series of our prison drama, Screw,
which was confirmed following the success of the first series that, at the
time of broadcast, was Channel 4's most successful drama launch since It's A
Sin. The show, starring Nina Sosanya (His Dark Materials) and Jamie-Lee
O'Donnell (Derry Girls), has just completed shooting in Glasgow.
Quiz show Bridge of Lies with Ross Kemp, a commission won through a fiercely
competitive tender process in late 2021, was an instant ratings success for
BBC One's daytime schedule, with an average audience of over 1m viewers. There
followed a recommission for a second and third series, made up of 25 x 45"
episodes for daytime and a special primetime celebrity series. The latter
launched strongly on Saturday nights in January 2023 with 2.7m viewers (17%
share).
Our returnable antiques-based formats have seen us produce seven series in
large volumes in 2022 for BBC One, BBC Two, Really and Channel 5, including
Antiques Road Trip and its celebrity sister version; new commission, The Great
Auction Showdown; The Yorkshire Auction House and a celebrity series, plus
off-shoot, The Edinburgh Auction House. An additional win was The Travelling
Auctioneers for BBC One, the channel's most successful daytime launch in 2022
and the BBC's biggest daytime factual launch in the last 6 years.
Regulatory
We welcome the UK Government's proposal for a new regulatory framework to
secure the vital contribution of free-to-air public service broadcasters in
the digital age and look forward to the publication of its new Media Bill in
2023. The Department for Culture, Media and Sport (DCMS) has recognised the
"unique relevance" of STV's public service contribution, particularly in
Scottish news and current affairs, and the importance of ensuring our
programming is available and easily found on all major digital platforms, as
it is on broadcast, in the future. It is important that the Media Bill is
published swiftly, given this will be the legislation that underpins the
Channel 3 licences, which will renew in January 2025 with applications due in
April 2023. STV is confident of renewing its current licence.
We continue to engage with stakeholders and policy-makers on the following
regulatory priorities:
- Securing prominence for public service broadcasters, including
nations players like STV, on all digital platforms, to ensure our content is
available, accessible and prominent on the digital platforms that viewers are
increasingly choosing to access their entertainment.
- Safeguarding free-to-air, high quality, impartial and
comprehensive Scottish and local news.
- Support and stimulus measures to ensure Nations and Regions
television production, across all genres, continues to grow.
- A level regulatory playing field between TV and online players,
particularly in relation to advertising regulation.
Consolidated income statement
Year ended 31 December 2022
2022 2021
Before Exceptional Before Exceptional
exceptional items Results exceptional items Results
items (note 6) for year items (note 6) for year
Note £m £m £m £m £m £m
Revenue 5 137.8 - 137.8 144.5 - 144.5
Net operating expenses (112.0) (0.5) (112.5) (121.2) (1.7) (122.9)
Operating profit 25.8 (0.5) 25.3 23.3 (1.7) 21.6
Finance costs
- borrowings (1.1) - (1.1) (1.2) - (1.2)
- defined benefit pension schemes (1.4) - (1.4) (0.8) - (0.8)
- lease interest (0.5) - (0.5) (0.3) - (0.3)
Provision for impairment losses - ELM debtor
- - - - 0.3 0.3
Total finance costs (3.0) - (3.0) (2.3) 0.3 (2.0)
Share of loss of an associate (0.1) - (0.1) (0.1) - (0.1)
Gain on sale of non-current asset - - - - 0.6 0.6
Profit before tax 22.7 (0.5) 22.2 20.9 (0.8) 20.1
Tax (charge)/credit 7 (5.0) 0.1 (4.9) (1.0) 0.3 (0.7)
Profit for the year 17.7 (0.4) 17.3 19.9 (0.5) 19.4
Attributable to:
Owners of the parent 17.9 (0.4) 17.5 19.9 (0.5) 19.4
Non-controlling interests (0.2) - (0.2) - - -
17.7 (0.4) 17.3 19.9 (0.5) 19.4
Earnings per share
Basic 8 39.3p 38.3p 43.8p 42.7p
Diluted 8 37.5p 36.6p 42.1p 41.0p
A reconciliation of the statutory results to the adjusted results is included
at note 19. The above consolidated income statement should be read in
conjunction with the accompanying notes.
Consolidated statement of comprehensive income
Year ended 31 December 2022
2022 2021
£m £m
Profit for the year 17.3 19.4
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes 6.5 (17.2)
Deferred tax (charge)/credit (1.5) 8.5
Revaluation loss on listed investment to market value (0.3) (2.3)
Other comprehensive expense - net of tax 4.7 (11.0)
Total comprehensive income for the year 22.0 8.4
Attributable to:
Owners of the parent 22.2 8.4
Non-controlling interests (0.2) -
22.0 8.4
The above consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
Consolidated balance sheet
At 31 December 2022
2022 2021
Note £m £m
Non-current assets
Intangible assets 10 1.2 1.6
Property, plant and equipment 11 10.6 9.8
Right-of-use assets 12 18.6 19.9
Investments 13 2.5 1.9
Deferred tax asset 14 21.9 26.5
Trade and other receivables 1.5 0.4
56.3 60.1
Current assets
Inventories 47.0 17.7
Trade and other receivables 39.9 30.1
Cash and cash equivalents 11.3 14.7
98.2 62.5
Total assets 154.5 122.6
Equity
Ordinary shares 16 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 1.8 1.4
Accumulated losses (321.8) (339.2)
Shareholders' equity (8.0) (25.8)
Non-controlling interests (0.3) (0.1)
Total equity (8.3) (25.9)
Non-current liabilities
Borrowings 15 26.4 14.4
Lease liabilities 18.7 19.7
Retirement benefit obligations 18 63.1 79.4
108.2 113.5
Current liabilities
Trade and other payables 53.7 33.8
Lease liabilities 0.9 1.2
54.6 35.0
Total liabilities 162.8 148.5
Total equity and liabilities 154.5 122.6
The above consolidated balance sheet should be read in conjunction with the
accompanying notes.
Consolidated statement of changes in equity
Year ended 31 December 2022
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 2022 23.3 115.1 0.2 173.4 1.4 (339.2) (25.8) (0.1) (25.9)
Profit/(expense) for the year - - - - - 17.5 17.5 (0.2) 17.3
Other comprehensive expense - - - - - 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 23.3 115.1 0.2 173.4 1.8 (321.8) (8.0) (0.3) (8.3)
At 1 January 2021 23.3 115.1 0.2 173.4 1.0 (342.8) (29.8) (0.1) (29.9)
Profit for the year - - - - - 19.4 19.4 - 19.4
Other comprehensive expense - - - - - (11.0) (11.0) - (11.0)
Total comprehensive income for the year
- - - - - 8.4 8.4 - 8.4
Net share based compensation - - - - 0.4 (0.4) - - -
Dividends paid (note 9) - - - - - (4.4) (4.4) - (4.4)
At 31 December 2021 23.3 115.1 0.2 173.4 1.4 (339.2) (25.8) (0.1) (25.9)
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 2022
2022 2021
Note £m £m
Operating activities
Cash generated by operations 17 11.5 34.8
Interest and fees paid in relation to banking facilities (1.1) (1.4)
Corporation tax received/(paid) 0.2 (1.2)
Pension deficit funding - recovery plan payment (9.5) (9.3)
Contingent cash payment to pension schemes (2.4) (0.3)
Net cash (used in) / generated by operating activities (1.3) 22.6
Investing activities
Proceeds from sale of investments - 4.7
Proceeds from disposal of subsidiary - 0.6
Purchase of investment in associate (0.9) (0.6)
Loan notes provided to associate - (0.4)
Production finance provided to associate (2.4) (0.6)
Purchase of intangible assets (0.5) (0.4)
Purchase of property, plant and equipment (3.4) (2.5)
Net cash (used in)/generated by investing activities (7.2) 0.8
Financing activities
Payment of obligations under leases (1.8) (1.5)
Borrowings drawn 38.0 3.1
Borrowings repaid (26.0) (11.1)
Dividends paid (5.1) (4.4)
Net cash generated by/(used in) financing activities 5.1 (13.9)
Net (decrease)/increase in cash and cash equivalents (3.4) 9.5
Cash and cash equivalents at beginning of year 14.7 5.2
Cash and cash equivalents at end of year 11.3 14.7
Notes to the preliminary announcement
Year ended 31 December 2022
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. Up to its sale on 20
August 2021, the Group also operated a non-core external lottery management
company.
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 2022 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 2022.
Statutory financial statements for the year ended 31 December 2021, 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 2021 and for the year ended 31 December 2022 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 2022 will be delivered to the Registrar of Companies
and made available to all shareholders in due course.
Going concern
At 31 December 2022, the Group was in a net debt position of £15.1m
(excluding lease liabilities), comprising drawdowns under its banking facility
of £26.4m partially offset by a gross cash balance of £11.3m. 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 has in place a £60m revolving credit facility, with £20m
accordion, that matures in March 2026 following exercise of both one-year
extension options that were available to the Group (the second being exercised
in March 2023). The covenant package remains unchanged and 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.
As part of the going concern review, the Group considers forecasts of the
total advertising market, from which the Group generates the majority of its
cash inflows, to determine the impact on liquidity. The Group's forecasts and
projections, 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 2025 in December 2022. 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 FY23. A severe but plausible downside
scenario was identified against the base 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. 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 2022. 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. The trade of
STV ELM is included within 'Other' up to the date of disposal in August 2021.
Broadcast Digital Studios Other Total
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m £m £m
Sales 107.6 108.8 19.0 17.8 23.9 27.0 - 1.0 150.5 154.6
Inter-segment sales (12.5) (9.7) - - (0.2) (0.4) - - (12.7) (10.1)
Segment revenue 95.1 99.1 19.0 17.8 23.7 26.6 - 1.0 137.8 144.5
Segment result
Adjusted operating profit
20.7 21.8 8.5 7.9 1.4 1.3 - - 30.6 31.0
Unallocated corporate expenses (4.8) (5.8)
Adjusted operating profit 25.8 25.2
Exceptional items (note 6) (0.5) (0.8)
HETV tax credits - (1.9)
Finance costs (3.0) (2.3)
Share of loss of an associate (0.1) (0.1)
Profit before tax 22.2 20.1
Tax charge (4.9) (0.7)
Profit for the year 17.3 19.4
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. In the current year, no HETV tax credit claims were made (2021:
£1.9m) and so there is no impact on the adjusted operating profit metric from
this adjustment (2021: statutory operating loss of £0.6m).
There has been no significant change in total assets from the amount disclosed
in the last annual financial statements.
6. Exceptional items
To provide the users of the consolidated financial statements with a
transparent view of significant and/or non-recurring items and their impact on
the underlying trading of the Group, the Group presents items recognised in
profit or loss for each year analysed between:
I. Profit before exceptional items; and
II. The effect of exceptional items
The table below analyses the exceptional items in the current financial year
and their impact on key financial statement lines in the consolidated income
statement.
2022 2022 2022 2021 2021 2021
Before exceptional items Exceptional Results for the year Before exceptional items Exceptional items Results for the year
£m items £m £m £m £m
£m
Operating profit (i) 25.8 (0.5) 25.3 23.3 (1.7) 21.6
Finance costs (ii) (3.0) - (3.0) (2.3) 0.3 (2.0)
Share of loss of an associate (0.1) - (0.1) (0.1) - (0.1)
Gain on sale of non-current asset (iii) - - - - 0.6 0.6
Profit before tax 22.7 (0.5) 22.2 20.9 (0.8) 20.1
Tax charge (iv) (5.0) 0.1 (4.9) (1.0) 0.3 (0.7)
Profit for the year 17.7 (0.4) 17.3 19.9 (0.5) 19.4
Earnings per share
Basic 39.3p 38.3p 43.8p 42.7p
Diluted 37.5p 36.6p 42.1p 41.0p
(i) Operating profit
On 8 December 2022, the Group announced an extended partnership with ITV for
digital content and advertising sales. The agreement is effective from 1
January 2023, however there were a small number of one-off costs incurred in
2022 as part of the agreement reached, principally redundancy and legal costs,
that have been presented as exceptional in the current year.
In May 2021, the Group repaid the full amount of furlough grants received in
2020 under the Government's Coronavirus Job Retention Scheme (£1.7m) before
resuming payment of cash dividends to shareholders. The Group presented the
cost of repayment as exceptional so as not to distort the underlying trading
results of the business.
(ii) Finance costs
In the prior year, an exceptional credit of £0.3m was recognised relating to
amounts recovered from the Scottish Children's Lottery (SCL) in excess of the
expected credit loss provided for in 2020.
(iii) Gain on sale of non-current asset
In 2021, an exceptional gain of £0.6m was recognised, being net proceeds
received on disposal of STV ELM Ltd.
(iv) Tax (charge)/credit
Tax adjustments are the tax effects of the exceptional items recognised in
both years.
7. Tax
2022 2021
£m £m
The charge for taxation is as follows:
Charge for the year before exceptional items 5.0 1.0
Tax effect on exceptional items (0.1) (0.3)
Charge for the year 4.9 0.7
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 deferred tax
balances at 31 December 2022 have been stated at a rate of 25% (2021:25%),
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 operating and non-operating exceptional items and the IAS19 net financing
cost, as well as 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 2022 2021
Pence Pence
Basic earnings per ordinary share 38.3p 42.7p
Diluted earnings per ordinary share 36.6p 41.0p
Basic earnings per ordinary share (before exceptional items) 39.3p 43.8p
Diluted earnings per ordinary share (before exceptional items) 37.5p 42.1p
Adjusted basic earnings per share 42.3p 45.6p
Adjusted diluted earnings per share 40.4p 43.8p
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 17.5 19.4
Exceptional items (net of tax) 0.4 0.5
Profit for the year (before exceptional items) 17.9 19.9
Excluding IAS19 financing cost 1.4 0.8
Adjusted profit 19.3 20.7
Number of shares Million Million
Weighted average number of ordinary shares in issue 45.6 45.5
Dilution due to share options 2.2 1.8
Total weighted average number of ordinary shares in issue 47.8 47.3
9. Dividends
2022 2021 2022 2021
per share per share £m £m
Dividends on equity ordinary shares
Paid final dividend 7.3p 6.0p 3.3 2.7
Paid interim dividend 3.9p 3.7p 1.8 1.7
Dividends paid 11.2p 9.7p 5.1 4.4
A final dividend of 7.4p per share (2021: 7.3p per share) has been proposed by
the Board of Directors and is subject to approval by shareholders at the 2023
AGM scheduled for 27 April 2023. The proposed dividend would be payable on
26 May 2023 to shareholders who are on the register at 14 April 2023. The
ex-dividend date is 13 April 2023. This final dividend, amounting to £3.4m
has not been recognised as a liability in these financial statements.
10. Intangible assets
Web development
£m
Cost
At 1 January 2022 6.1
Additions 0.5
At 31 December 2022 6.6
Accumulated amortisation and impairment
At 1 January 2022 4.5
Amortisation 0.9
At 31 December 2022 5.4
Net book value at 31 December 2022 1.2
Net book value at 31 December 2021 1.6
11. Property, plant and equipment
Plant, technical
equipment
Leasehold and other Assets under construction
improvements £m £m Total
£m £m
Cost
At 1 January 2022 0.4 33.8 0.8 35.0
Additions - - 3.4 3.4
Transfers - 2.3 (2.3) -
At 31 December 2022 0.4 36.1 1.9 38.4
Accumulated depreciation and impairment
At 1 January 2022 0.2 25.0 - 25.2
Charge for year - 2.6 - 2.6
At 31 December 2022 0.2 27.6 - 27.8
Net book value at 31 December 2022 0.2 8.5 1.9 10.6
Net book value at 31 December 2021 0.2 8.8 0.8 9.8
12. Right of use assets
Property Vehicles Total
£m £m £m
Cost
At 1 January 2022 and 31 December 2022 24.9 0.3 25.2
Accumulated depreciation
At 1 January 2022 5.1 0.2 5.3
Depreciation charge for the year 1.3 - 1.3
At 31 December 2022 6.4 0.2 6.6
Net book value at 31 December 2022 18.5 0.1 18.6
Net book value at 31 December 2021 19.8 0.1 19.9
13. Investments
2022 2021
£m £m
Listed - 0.3
Associates 2.4 1.5
Other 0.1 0.1
2.5 1.9
Listed investments comprise entirely of shares held in Mirriad Advertising plc
and are measured at fair value through the Consolidated Statement of
Comprehensive Income.
The movement in investments in associates during 2022 relates to the
acquisition of a 25% stake in quiz show producer, Mighty Productions Limited,
for cash consideration of £0.9m in March 2022. The investment was initially
recognised at cost and has subsequently been updated to reflect the Group's
share of post-acquisition losses (less than £0.1m) in accordance with the
equity method of accounting. The Group acquired a 25% shareholding in the
unscripted production company, Hello Mary, for consideration of £0.6m in
September 2021 with subsequent recognition of the Group's accumulated share of
the loss of £0.1m. The Group also owns a 25% stake in Two Cities Television
which has a carrying value of £0.9m at both balance sheet dates. No
dividends have been received from any associate undertaking.
14. Deferred tax asset
At 31 December 2022, total deferred tax assets of £21.9m were recognised on
the balance sheet (31 December 2021: £26.5m). Of this, £15.7m relates to
the deficit on the Group's defined benefit pension schemes (31 December 2021:
£19.8m) and the balance of £6.2m relates to tax losses, accelerated capital
allowances and short-term timing differences (31 December 2021: £6.7m).
15. Borrowings
Since March 2021, the Group has had in place a £60m revolving credit
facility, with £20m accordion. The original tenor was 3 years, however two
one-year extension options have been exercised (in February 2022 and March
2023) with the facility now extending to March 2026. Commercial terms are in
line with the existing facility and the covenant package also remains
unchanged. Key covenants are net debt to EBITDA (leverage) must be less than
3 times, and interest cover must be greater than 4 times.
16. Share capital
Number of shares (thousands) Ordinary shares Share
£m premium Total
£m £m
At 1 January 2022 and 31 December 2022 46,723 23.3 115.1 138.4
The total authorised number of ordinary shares is 63 million shares (2021: 63
million shares) with a par value of £0.50 per share (2021: £0.50 per share).
All issued shares are fully paid.
17. Notes to the consolidated statement of cash flows
2022 2021
£m £m
Operating profit 25.3 21.6
Adjustments for:
Depreciation and amortisation 4.8 5.3
Share based payments 0.8 0.5
Increase in inventories (29.3) (2.3)
Increase in trade and other receivables (excluding STV ELM Ltd) (10.6) (2.3)
Increase in trade and other payables (excluding STV ELM Ltd) 20.5 11.2
Net decrease in STV ELM Ltd working capital - 0.8
Cash generated by operations 11.5 34.8
Net debt reconciliation
Net (debt)/cash including lease liabilities
Cash and cash equivalents Net (debt)/cash
Long-term borrowings Lease liabilities
£m £m £m £m £m
At 1 January 2022 (14.4) 14.7 0.3 (20.9) (20.6)
Cash flows (11.8) (3.4) (15.2) 1.8 (13.4)
Non-cash flows (i) (0.2) - (0.2) (0.5) (0.7)
At 31 December 2022 (26.4) 11.3 (15.1) (19.6) (34.7)
(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 45% (2021: 161%).
18. 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.
Deficit recovery plans, which end on 31 October 2030, have been agreed with
aggregate monthly payments unchanged from the previous recovery plans. The
2022 deficit recovery payments totalled £9.5m, 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:
2022 2021
% %
Rate of increase in salaries nil nil
Rate of increase of pensions in payment 3.45 3.55
Discount rate 4.85 1.90
Rate of price inflation (RPI) 3.45 3.55
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).
2022 2021
Retiring at balance sheet date:
Male 20.9 21.0
Female 23.1 23.2
Retiring in 25 years
Male 22.1 22.3
Female 24.4 24.6
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 2022 At 31 December 2021
Quoted Unquoted Total Quoted Unquoted Total
£m £m £m £m £m £m
Investment funds - 86.5 86.5 9.1 149.1 158.2
Debt instruments 151.5 6.0 157.5 201.9 26.5 228.4
Cash and cash equivalents 25.4 (4.0) 21.4 21.7 5.0 26.7
Derivatives - 9.7 9.7 - 7.1 7.1
Annuity policies - 14.7 14.7 - 19.6 19.6
Fair value of schemes' assets
176.9 112.9 289.8 232.7 207.3 440.0
Present value of defined benefit obligations
(352.9) (519.4)
Deficit in the schemes (63.1) (79.4)
Note, the prior year comparative has been updated to reflect £7.5m of assets
previously disclosed within unquoted investment funds to unquoted derivatives
to be consistent with current year classification.
A related, offsetting deferred tax asset for the Group of £15.7m (2021:
£19.8m) is included within non-current assets. Therefore, the pension scheme
deficit net of deferred tax for the Group was £47.4m at 31 December 2022
(2021: £59.6m).
19. 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:
2022 2021
Basic earnings per share Basic earnings per share
Operating profit Profit before tax Operating profit Profit before tax
Pence Pence
£m £m
£m £m
Statutory result 25.3 22.2 38.3p 21.6 20.1 42.7p
Exceptional items
(note 6) 0.5 0.5 1.0p 1.7 0.8 1.1p
Result for the year before exceptional items 25.8 22.7 39.3p 23.3 20.9 43.8p
IAS19 net finance costs - 1.4 3.0p - 0.8 1.8p
High-End Television tax credit
- - - 1.9 1.9 -
Adjusted result 25.8 24.1 42.3p 25.2 23.6 45.6p
IAS19 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.
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. There were no HETV tax
credits claimed in the current year.
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