Half year results 2015

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STV Group plc Half Year Results 2015
Half year results for the six months ended 30 June 2015
Commercially focused; creatively led
  • Trading and financial performance in line with expectations at the half year and good operational performance delivered against corporate and consumer business KPIs
  • Interim dividend of 3.0 pence per share confirmed in line with enhanced dividend policy announced last year, an increase of 50% year on year.  Intended final 2015 dividend of 7.0 pence per share; making a total of 10.0 pence per share for the full year, up 25%
  • Net debt continues to reduce significantly, down 13% at £35.0m, and on track to achieve target of sub 1.0x net debt:EBITDA by end of 2015
  • Innovative strategic development partnership between STV Productions and GroupM Entertainment announced creating scale and increasing development funds with first pilot project under this deal, The Dressing Room, currently in development
  • Digital revenues continue to grow significantly, up 30% year on year
Financial highlights
  H1 2015 H1 2014 Year on year
Revenue £53.6m £54.7m  -2%
EBITDA £10.0m £10.7m  -7%
Operating profit*  £8.6m  £9.8m -12%
Pre-tax profit and IAS 19 interest*  £8.0m  £8.4m   -5%
Pre-tax profit*  £7.8m  £8.4m  -7%
EPS pre IAS 19 interest* 16.8p 18.7p -10%
Statutory EPS 13.7p 18.7p -27%
Net debt £35.0m £40.1m -13%
Dividends per share   3.0p   2.0p +50%
*before exceptionals
Rob Woodward, Chief Executive Officer, said: “Today’s results are in line with expectations at the half year and represent another milestone on our route to achieving our strategic ambitions and KPI growth targets for the end of 2016. We are continuing to create sustainable growth and increased consumer margins, resulting in a rebalancing of the business through the growth of our profitable non broadcast services.  Confirmation of the enhanced dividend payment reflects the Board’s confidence in our ability to deliver against our strategic plans.”
There will be a presentation for analysts at the offices of Peel Hunt, Moor House, 120 London Wall, London, EC2Y 5ET today at 12.30pm.  Should you wish to attend the presentation, please contact Katie Martin, STV (Tel:  0141 300 3000).
STV Group plc
George Watt, Chief Financial Officer                                                
Tel: 0141 300 3049
Richard Holligan, PR & Communications Manager           
Tel: 0141 300 3670
Charlotte Street Partners
Chris Sibbald                                                                                                 
Tel: 07855 955531
Laura Leslie                                                                                                  
Tel: 0131 516 5314
Financial performance
Performance during the first half of the year is in line with forecasts against all key financial measures in the consumer business.  The performance of STV Productions reflects the normal second half weighting of deliveries.
The Board’s commitment to the long-term delivery of increased shareholder returns was demonstrated last year through the re-instatement of dividend payments and the announcement of a progressive dividend policy, designed to increase returns over the next two years.  This delivered a total dividend payment for 2014 of 8.0 pence per share, representing a 300% increase on 2013 and an increase from previous guidance.  It is announced today that an interim dividend payment of 3.0 pence per share will be paid and the final dividend is planned to be 7.0 pence per share; making a total of 10.0 pence per share for the full year, an increase of 25% year on year.
The balance sheet has continued to improve and net debt has reduced by 13% year on year to £35.0m. The Group is on track to achieve the target of sub 1.0x net debt:EBITDA by the end of 2015. 
Consumer business revenues are up 2% to £51.9m, reflecting the trend across the wider television market and despite challenging FIFA World Cup comparators.  Strong growth in digital revenues continues to be delivered, up 30% at £2.8m. STV Productions’ revenues are down year on year at £1.7m due to deliveries in 2015 being concentrated in the second half of the year.
Short term profitability is impacted by initial losses of £0.8m associated with City TV with STV Glasgow remaining on track to breakeven by the year end.  As a result, EBITDA is down 7% and operating profit before exceptional items is down 12% at £8.6m; however, the consumer business margin is above target at 18.7%. PBT before exceptional items and IAS19 interest fell by only 5% as the improved terms of the amended bank facility and lower debt levels fed through in lower interest costs.
Earnings per share before exceptional and IAS19 interest is down 10% but only 5% on an equivalent effective tax rate of 20%.
A provision of £1.0m has been made against the carrying value of the Group’s investment in Mirriad Limited.  Mirriad failed to complete a strategically important fundraising round in April and required immediate funding to continue trading.  The Group supported a rescue of the business with £0.2m of new investment as part of a wider £4.6m funding package. 
Operational Review
STV Consumer
The consumer business has performed in line with expectations during the period with good operational performance against improved advertising revenues and continued growth and profitability of digital activities.  Overall, consumer revenues are up 2% with digital revenues continuing to perform strongly up 30% and in line with expectations. 
National airtime revenues were up 3% despite strong 2014 comparatives due to the FIFA World Cup.  Regional airtime revenues were down 7% due to a reduction in spend by the Scottish Government as a result of the General Election in May impacting the phasing of campaigns.
Operating profit before exceptionals amounted to £8.6m, down 12% on last year, reflecting the initial losses of City TV.
The key performance indicator targets for the consumer business relating to consumer engagement and reach across every platform within the STV Family of services: STV; STV Player; City TV services; STV City Apps and are all on track to be achieved by the target end date of December 2016.
Our core channel, STV, has continued to perform ahead of the Network achieving peak-time out performance of 0.6 share points and this is expected to continue in the second half of the year with a strong schedule including exclusive rights to Rugby World Cup and a strong slate of high quality drama in the autumn schedule.
Both City TV services are performing in line with expectations in relation to revenue and audience targets and STV Glasgow remains on track to achieve breakeven by the year end.  The services are reaching an average of 0.9 million viewers every month, over 30% of consumers within their broadcast area. 
The acquisition of consumer insights is key to achieving stronger consumer engagement.   The KPI target is to achieve 1.6m insights by end of 2015 is on track with a 30% increase in registered users achieved in H1 taking the total to 1.3m.
Strong growth in digital revenue has been maintained with an increase of 30% during H1 and is on track to maintain and grow this rate of growth for the full year as the reach and engagement levels achieved across the STV family of services continue to grow.
STV national airtime revenue is expected to be up 3% in Q3, resulting in a cumulative position from January to September up 3%.
The regional market continues to be more volatile than the national market and is expected to be up 15% in Q3.  The cumulative position from January to end September will be flat year on year.
Digital revenues are expected to continue to grow, up 30% year on year to the end of Q3 and this rate is expected to be maintained for the full year.
To ensure that we maximise margins and revenues across the Consumer business, it is confirmed that a review of the options to manage airtime and sponsorship sales upon expiry of the current Airtime Sales Agreement with ITV at the end of 2016 has commenced. Under the terms of the current agreement, STV is legally entitled to receive terms similar and will undertake a full review of options on this basis.
STV Productions
A key strategic development partnership with GroupM Entertainment has been agreed.  This deal will see the companies co-develop and co-produce ideas across a broad range of genres, delivering scale and growth in STV Productions activities.
The first project to be developed under this new deal is also confirmed.  A documentary series, The Dressing Room, is being co-developed and the pilot will be available to present to broadcasters later this year.
The priority of the business continues to be extending the customer base and securing returning series commissions.  During the period, new commissions have been secured with entertainment format Safeword for ITV2 (7 episodes); a one-off documentary for ITV to commemorate the tenth anniversary of the London bombings -The 7/7 Bombing: Survivors’ Stories; a one-off documentary for BBC 1 Scotland, Dunblane: Our Story; an eight part documentary, Prisons – First and Last 24 hours, for Sky One; and a one off documentary for BBC4, Rollermania.
Securing a drama commission remains a key strategic priority for STV Productions. Since the changes were made to the team at the end of 2014, good progress has been made with scripts in development for the BBC, ITV and Channel 4.
A programme of liability reduction measures continues to be progressed in conjunction with the trustees of both defined benefit schemes. Discussions with the trustees’ of the schemes to agree the next triennial valuation have commenced and these are expected to conclude in early 2016.  The 2015 deficit funding payment of £7.8m was paid in January 2015.
During Q2 a Pension Increase Exchange follow up exercise was undertaken resulting in a £3.0m decrease to the pension scheme funding liability.

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 2014 Annual Report and Financial Statements the principal risks and uncertainties that could impact its performance.  These remain unchanged since the annual Report was published.  The Group has rigorous internal systems to identify, monitor and manage any risks to the business.  The principal risks identified are set out in detail on pages 17 and 18 of the 2014 Annual Report which is available on the STV Group plc website:
Basis of preparation
These condensed interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS34, ‘Interim financial reporting’, as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with IFRSs as adopted by the European Union.
Going concern basis
The group meets its day-to-day working capital requirements through its bank facilities. The current economic conditions continue to create uncertainty particularly over (a) the level of demand for the group’s products; and (b) the availability of bank finance for the foreseeable future. The group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within the level of its current facilities. After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

Statement of directors’ responsibilities
The directors’ confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
a.    an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year;
b.    material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of STV Group plc are listed in the STV Group plc Annual Report for 31 December 2014. A list of current directors is maintained on the STV Group plc website:

STV Group plc half year results 2015 - Appendix