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Half year results

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STV Group plc Half Yearly Results 2012

Half Yearly Results for the six months ended 30 June 2012
 

STV Half Yearly Financial Results showing strong financial performance and continued growth in STV Productions and digital business
 
Financial Highlights
 
  H1 2012 H1 2011 Year on year
Revenue £47.6m   £47.2m  +1%
EBITDA*   £9.3m    £8.1m +15%
Operating profit*   £8.1m    £7.0m +16%
Pre-tax profit*   £7.0m    £6.5m  +8%
Adjusted EPS**   16.0p    15.0p  +7%
Statutory EPS     5.3p   (17.7p)    -
Net debt  £55.9m  £57.5m  -3%
*  Pre-exceptionals
** Adjusted EPS reflects EPS performance pre-exceptionals year-on-year assuming equivalent 15% tax rate (2011: Nil%). 
 
Highlights
 
  • Production and digital revenues grow by 13%
  • EBITDA pre-exceptionals up 15% at £9.3m
  • Operating profit pre-exceptionals up 16% at £8.1m
  • Pre-tax profit pre-exceptionals up 8% at £7.0m
  • Net debt down 3% to £55.9m
 
Strategic Developments
 
  • Good progress towards achievement of 2015 strategic aims and KPIs on track with 2 ahead and 2 below target
  • New Channel 3 Network affiliate arrangements approved by Regulator and now in operation
  • Digital business growth continues with 13% increase in revenue and increased traffic through:
    • further enhancements to digital and consumer propositions
    • implementation of new ad serving technology improving commercial proposition
  • STV Productions achieving growth:
    • new commission announced for BBC Two, 20 episodes of daytime, celebrity cooking show 
    • new drama commission for ITV announced earlier this month and increased focus on drama development through strategic partnership with Sally Head Productions
  • Innovative bids made in partnership with leading Scottish universities to secure local television licences for Glasgow and Edinburgh
 
Richard Findlay, Chairman, said: “I am pleased to be announcing another period of significant progress for STV. Securing the new Channel 3 arrangements, whereby STV is now an affiliate of the Network, is a key strategic development.  These arrangements provide stability for our business, our consumers and our advertisers and represent commercially sustainable networking arrangements between the Channel 3 licence holders.”
 
Rob Woodward, Chief Executive Officer, said: “We are continuing to deliver growth in the non-broadcast areas of our business with a 13% increase in revenues in these activities.  The strong financial performance delivered in the period demonstrates the underlying strength of our business and we are successfully extending our reach and engaging with new consumers across an increased range of platforms.  Today’s announcement of another new BBC series commission for STV Productions demonstrates the growth momentum in that business.”
 
23 August 2012

There will be a presentation for analysts at the offices of Peel Hunt, Peel Hunt, Moor House, 120 London Wall, London EC2Y 5ET today at 12.30pm. Should you wish to attend the presentation, please contact Jamie Ramsay, College Hill, on 0207 457 2047.
 
Enquiries:

STV Group plc
Eleanor Marshall, PR Manager
Tel: 0141 3003670

College Hill
James Hogan
Jamie Ramsay
Tel: 0207 4572020

 
Financial performance
STV has delivered strong financial performance across all key metrics during the first half of the year with double digit operating profit growth and increased revenues.  Our strong EBITDA performance of 15% growth is underpinned by an increase in non-broadcast revenues of 13%.
 
Adjusted EPS increased by 7%, however the Group’s effective tax rate increasing to 15% resulting in EPS on an unadjusted pre-exceptionals basis of 16.0p, down 10%.
 
The trend of net debt reduction continues as we progress towards the target ratio of net debt below two times EBITDA.
 
Operational Review
 
STV Consumer

Channels
The consumer business has continued to deliver growth across all channels, with digital revenues up 13% to £3.0m.  Additionally, STV, our core broadcast channel, has delivered peak-time performance in excess of the Network, a key performance indicator, during the first half of the year. 
 
Our schedule continues to feature the best of Network content along with home grown productions, in addition to our local news services to cater for the preferences of our audience and provide opportunities for our commercial partners.    Our commitment to, and investment in, high quality public service content continues to secure a high level of audience engagement and positive brand profile with 25% of Scots viewing the evening news on STV,  higher than the Channel 3 UK average of 18%.  In addition to our comprehensive schedule of news programming, our new current affairs programme, Scotland Tonight, which has aired during H1 is already Scotland’s most popular current affairs programme. 
 
The Euro 2012 menu of programming delivered a particularly high audience on the channel for ABC1 men and, through our extensive cross-platform content coverage of Euro 2012, we increased consumer registrations by 8% in June, and by 50% across the first half of the year.   
 
Delivering innovative solutions for our advertisers is increasingly being fulfilled through multi-platform campaigns, where we can integrate brands across all of our assets.  In a recent campaign for Disney Pixar, we applied digital technology from MirriAd - in which STV has a strategic investment - to maximise brand exposure of new film release, Brave.
 
In February we secured an integrated, multi platform sponsorship of all of STV’s channels by The Scottish Sun on Sunday.  Using our in-house commercial production team, STV Creative, we were able to rapidly develop an innovative campaign demonstrating the reach and impact of our portfolio of channels and platforms.
 

Broadcasting Outlook
We remain cautious on the economic outlook given continuing macro-economic uncertainty and the effect on the TV advertising market. We expect our national advertising revenues to perform broadly in line with the ITV Network for the year as a whole.
 
STV national airtime revenue was down 1% in July and we expect August to be down 6% with September expected to be down 2%.  The regional airtime market remains challenging, reflecting the wider Scottish economy, and we expect Q3 to be down 12% with regional revenues expected to be up 4% across the whole year.
 

Digital
Digital revenues continue to grow as we enhance our consumer services across our digital channels. Over 60% of our broadcast audience now accesses STV online and growth in unique users generated from mobile devices has continued to grow rapidly.  Our mobile app strategy is addressing this trend with the upgrade of our highly popular STV News app and the launch of our STV Player app on iOS and Android devices.
 
Our strategy of providing locally focused media services, extending our reach, continues.  In April we launched the first STV Local metro sites for Glasgow and Edinburgh, offering compelling editorial and video content, as the targeted platform to support local advertisers and service providers in reaching their customers and reinforcing our focus on community. Our Local service is now reaching over 400,000 unique users per month.
 
We continue to explore additional revenue generating opportunities to extend our consumer offering and the introduction of metro sites to the STV Local portfolio will provide further opportunities for commercial partnerships with providers of geo-targeted services. 
 
STV Anywhere, our strategy of delivering STV content in innovative ways across platforms, took a further significant development when STV was confirmed as one of the additional content partners to be available on YouView when the platform launches in September.   YouView received over 300 expressions of interest from potential content partners and STV was one of two selected to be available from launch.
 
STV Productions

Our content Production business is successfully broadening its customer base and securing new commissions across genres with a strong delivery schedule for H2.
 
Today we have announced a new commission for BBC Two, a 20 episode daytime format for delivery later this year. 
 
Our relationship with GroupM continues to develop and, following their involvement as co-producer of a four-part series delivered to ITV2 last year, we have partnered on a drama production of the highly successful novel, The Poison Tree. Earlier this month we announced The Poison Tree commission from ITV Network for the two-part peak time drama for delivery later this year.
 
During the period we have also announced the development of an international co-production, Wallace, a historical drama series, to be developed in association with LA based Creative Media; Nine/8 Entertainment; Digital Rights Group (DRG) and Creative Scotland.
 
Regulatory

The agreement and subsequent regulatory approval of new networking arrangements, through which STV will become an affiliate of the Channel 3 Network, provide a sustainable cost basis to secure the continued delivery of high quality commercially sustainable public services in the long term.  We are now actively engaged with the Government on the process to secure a ten-year renewal of our licences.
 
Earlier this month we announced our participation in the bidding process to secure the new local television licence services to be launched in Glasgow and Edinburgh.  Our bids are based upon a unique partnership with leading universities in each of the licence areas.
 
Dividend

Following consultation with our major shareholders we continue to keep this under review and will provide an update in February.
 
Pensions

Reduction of our pension liabilities and associated risks is a key corporate priority. An on-going programme of risk and liability reduction measures is being discussed and progressed with our advisors and the scheme trustees.  The net deficit at 30 June 2012 is unchanged from the prior year end at £23m.  The triennial valuation process is ongoing and the outcome of this is expected in Q1 of 2013.
 
Principal Risks and Uncertainties

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of STV Group plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.
 
The group set out in its 2011 Annual Report and Financial Statements the principal risks and uncertainties that could impact its performance.  These remain largely unchanged since the Annual Report was published.
 

The group has rigorous internal systems to identify, monitor and manage any risks to the business. The main areas of potential risk and uncertainty are in relation to the regulatory environment, dependence on advertising, performance of the ITV Network and shortfalls within the pension schemes. These risks, together with examples of mitigating activity, are set out in more detail on pages 34 and 35 of the 2011 Annual Report which is available on the STV Group plc website: www.stvplc.tv
 
Basis of preparation 

These condensed interim financial statements are unaudited and do not constitute statutory accounts within the meaning of the Companies Act 2006.  These condensed interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting', the Disclosure and Transparency Rules and the Listing Rules of the Financial Services Authority ('FSA'), and were approved on behalf of the Board by the Chief Executive Officer, Rob Woodward  and Chief Financial Officer, George Watt on 22 August 2012.
 
The accounting policies and methods of computation applied in these condensed interim financial statements are consistent with those applied in the Group's most recent annual financial statements for the year ended 31 December 2011.
 
The financial statements for the year ended 31 December 2011, which were prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union ('IFRS'), and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' opinion on those financial statements was unqualified and did not contain a statement made under s498(2) or (3) of the Companies Act 2006. 
 
Responsibility Statement of the Directors in Respect of the Half Yearly Financial Report 

We confirm that to the best of our knowledge the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 
 
The interim management report includes a fair review of the information required by: 
 
a.   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and 
 
b.   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. 
 
The Directors of STV plc are listed in the STV plc Annual Report for 31 December 2011.
 
Rob Woodward 
CEO, STV plc
 
STV Group plc Half Yearly results 2012 - Appendix

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