News

STV Group plc Full Year Results to 31 December 2021

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Record financial performance and continued growth momentum
 
Highlights
  • Highest revenue (+35% on 2020) and adj. operating profit (+39% on 2020) on record
  • Strong growth on 2019 pre-Covid results (revenue +17%; adj. operating profit +12%)
  • Diversification plan building momentum, with 36% of adj. operating profit now from Digital and Studios
  • On track to hit 3-year growth targets in 2023; investment guidance remains unchanged
  • Strong audience performance, with best all-time viewing share since 2008
  • High margin digital business continues to accelerate, with streams +63%
  • Highest ever full year total advertising revenues, +24% on 2020 and +11% on 2019
  • STV Studios revenue trebled to almost £27m, with future profit trajectory supported by new creative partnerships confirmed today
  • Strong start to 2022, with Q1 total advertising forecast to be up around 20% and new large-scale Studios commissions secured
  • Good progress on social purpose strategy, including successful launch of STV Zero 
  • Board proposes final dividend of 7.3p, bringing full year to 11p (+22% on 2020)
 
Financial Summary 2021 2020 2019 vs 2020 vs 2019
Revenue £144.5m £107.1m £123.8m +35% +17%
Adjusted operating profit* £25.2m £18.2m £22.6m +39% +12%
Adjusted operating margin* 17.5% 17.0% 18.2% +50bps -70bps
Adjusted PBT** £23.6m £16.6m £20.9m +42% +13%
Profit before tax £20.1m £6.7m £18.4m +202% +10%
Adjusted basic EPS*** 45.6p 34.5p 38.7p +32% +18%
Statutory basic EPS 42.7p 18.2p 41.7p +135% +2%
Cash generated by operations £34.8m £22.4m £25.6m +55% +36%
Net cash/(debt)+ £0.3m £(17.5)m £(37.5)m +£17.8m +£37.8m
Dividend per share (full year) 11.0p 9.0p 6.3p +22% +75%
     
* Before exceptional items and inclusive of High-End Television tax credits (note 19)  
** Before exceptional items, IAS19 interest and inclusive of High-End Television tax credits (note 19)  
*** Before exceptional items and IAS19 interest, and assuming weighted average number of shares consistent with 2021 (note 19)  
+ Excluding lease liabilities

Financial highlights
  • Total revenue of £144.5m, +35% on 2020 and +17% on 2019, reflecting continued momentum in Studios and a resurgent advertising market
  • Adjusted operating profit of £25.2m, +39% on 2020 and +12% on 2019
  • STV-controlled advertising continued to deliver strong growth, with video on demand (VOD) advertising on the STV Player +38% (+54% on 2019) and regional advertising +22% (+16% on 2019)
  • Studios revenue trebled year on year, to almost £27m (2020: £8.7m; 2019: £13.7m)
  • Adjusted operating margin, up 50 basis points on 2020 at 17.5%, reflects benefits of economic recovery and close management of costs.  The decrease of 70 basis points on 2019 reflects the investment in Digital in line with our growth investment plan
  • Continued strong cash generation improves balance sheet position providing additional headroom to accelerate investment in growth, with Group in net cash position for first time
 
Another year of strong audience performance
  • STV’s all-time viewing share at 19.6% (2020: 19.2%), the highest since 2008:
    • STV still the most watched peaktime channel in Scotland, with a share of 22.2%
    • Highest viewing share gain of any commercial channel in the UK, +2%, despite tough lockdown comparators of 2020
    • 98% of all commercial audiences over 500k viewers in Scotland on STV in 2021
    • STV News at Six Scotland’s number 1 news programme for the 3rd year in a row, with an average audience of 468k viewers
  • Total online streams on STV Player up 63%, still the fastest growing UK broadcaster VOD service:
    • Online viewing up 42%
    • Monthly active users up 54%
    • Registered users up 16% to 4.3m
    • STV Player now highest rated streaming app across the major app stores
 Continued growth momentum
  • Scottish advertising: The STV Growth Fund attracted a further 85 new advertisers to television in 2021, taking the total to over 320 since launch, with the fund boosted to £30m for 2022 to support Scotland’s economic recovery
  • Digital: STV Player growth continues to build:
    • Content offer scaling up, with 1000 hours of new and acquired drama added in 2021
    • 31 new content deals delivered 173 new titles and 49 new Player-only drama boxsets
    • Player-only content streams up 93% in 2021 and now represent 42% of all VOD streams (compared to 6% in 2019)
    • Player outside Scotland now over 20% of VOD streams and users
    • New Sony deal announced last month, bringing 7 new international dramas to STV Player including the UK premiere of The Commons starring Joanne Froggatt
  • Studios: STV Studios delivered its most successful year yet:
    • 16 new commissions, 12 returnable series and now 7 returning series
    • First major streaming commission secured, Zodiac Island, for Discovery+
    • 9th creative label added through a minority investment in entertainment and quiz specialist Mighty Productions, founded by the creator and exec producer of Tipping Point and the exec producer of The Weakest Link, Hugh Rycroft and Lynn Sutcliffe
    • Exclusive partnership with drama producer TOD Productions extended for a further 3 years
  • Targets: On track to hit STV’s 3-year growth targets in 2023 to:
    • Double digital viewing, users and revenue (to £20m)
    • Quadruple Studios revenue (to £40m)
    • Achieve at least 50% of operating profit from outside traditional broadcasting
Positive outlook
  • Strongest ever content line-up in 2022 on TV and online
    • Over 150 hours of new network drama, +40% on 2021
    • In total over 1000 hours of drama boxsets on STV Player in 2022
  • Content cost guidance unchanged
    • Previously announced 3-year £30m investment plan will fund Digital & Studios growth
    • National programming costs linked to advertising revenues under long-term agreement
  • Advertising off to a very strong start in 2022:
    • Q1 total advertising revenue (TAR) expected to be around +20%, with January +21%, February +26% and March +10-15%
    • April TAR expected to be up +10-15% with comparators getting tougher from Q2
  • Studios maintaining positive momentum into 2022:
    • 11 new commissions already
    • Good visibility of 2022 revenue with over £15m already secured
Dividend
  • The Board proposes a final dividend of 7.3p per share for 2021, giving a full year dividend of 11p per share, +22% on 2020
  • There are a number of factors that the Board takes into consideration when setting the level of dividend proposed, in particular the pay-out ratio of free cash flow post pensions and any known or potential future capital commitments in support of our growth investment programme. The Board is also mindful of the economic uncertainty caused by the pandemic and the ongoing political situation
  • 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:

“2021 was an exceptional year of growth for STV which saw us deliver the highest revenue, operating profit and lowest net debt on record. We continue to support our people, partners and communities as we emerge from the pandemic with momentum and confidence.

"We are taking full advantage of the growth in video viewing, with STV recording its highest viewing share since 2008 and our streaming service STV Player growing streams by 63%, thanks to huge audiences for new dramas and Euro 2020.  This viewing success propelled us to our highest ever advertising revenues, +24% on 2020 and 11% ahead of 2019, with growth continuing into 2022.

"Our strategy of creating a more diversified media business through a relentless focus on digital streaming and production growth is delivering, with these new areas now making up 36% of our total profit. We added 1000 hours of drama boxsets to STV Player and grew active users by 54%, with over a fifth of VOD streams now coming from outside Scotland. STV Studios enjoyed its best-ever creative and financial performance in 2021, winning 16 new programme commissions across the genres, with plenty more to come as we aim to become the UK’s leading nations and regions producer.

"Our social purpose agenda is now embedded right across the business, with the STV Children’s Appeal distributing £4.4m to families and young people living in poverty in 2021, and our new Expert Voices campaign offering media training to over 400 people from under-represented groups in Scotland, with more than 40 already appearing on air.  I was also proud of the leading role we played at COP26, as we continue to promote climate action through our sustainability strategy, STV Zero.

"2022 has started well with a strong advertising performance in the first quarter, and we also have particularly good revenue visibility in Studios.  2022 will be our biggest year yet in terms of content, with over 150 hours of new, original drama, 40% more than 2020, including the Ipcress File and Our House starring Martin Compston, followed by extensive coverage of the FIFA World Cup in Qatar later this year.

"With an improved financial position, the Board has proposed a final dividend of 7.3p per share, giving a full year dividend of 11p, +22% on 2020.

"These are clearly very unsettling times with the war in Ukraine, and any business implications obviously pale into insignificance against the humanitarian cost. STV has no exposure to trading with Russia and that will remain the case.”

There will be a presentation for analysts today, 9 March 2022, at 12.30 pm, via Zoom.  Should you wish to attend the presentation, please contact Angela Wilson, 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 increased by 35% to £144.5m (2020: £107.1m) as a result of a record performance in advertising revenue and significant growth in the Studios division.  Total advertising revenue was £112.6m (2020: £90.9m), an increase of 24% on 2020 and up 11% on 2019, which was a record year pre-pandemic. The increase was largely a result of the continued growth in the Digital division coupled with a strong recovery of the linear TV advertising market.  On a like-for-like basis, excluding STV ELM Ltd which was sold in August 2021, Group revenue was up 39% on the prior year and up 21% on 2019.
 
Adjusted operating profit increased by 39% to £25.2m (2020: £18.2m), equivalent to an operating margin of 17.5% (2020: 17%). On a statutory basis, operating profit increased by 22% to £21.6m (2020: £17.7m).
 
Adjusted profit before tax was £23.6m (2020: £16.6m), after charging finance costs of £1.5m (2020: £1.5m). These comprised interest on the Group’s borrowings of £1.2m (2020: £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 (2021: £0.8m; 2020: £1.2m) and include High-End Television (HETV) tax credits receivable (2021: £1.9m; 2020: nil).  Statutory profit before tax for the year was £20.1m, an increase of £13.4m on 2020 of £6.7m.
 
A total tax charge of £0.7m has been recognised in the year (2020: credit of £1.0m), representing an effective tax rate of 3.5% (2020: -14.9%). This is lower than the UK standard rate of corporation tax, principally due to £1.9m of HETV tax credits receivable from HMRC regarding current year qualifying productions, and the rate at which deferred tax assets have been measured following the Government’s announcement to increase the standard rate of corporation tax to 25% from April 2023. Statutory profit after tax for the year was £19.4m (2020: £7.7m).
 
Adjusted EPS (excluding IAS19 net interest) at 45.6p was 32% up on the prior year, driven by the increased profit generation of the Group.  On a statutory basis, EPS at 42.7p was up 135% due to the increased profit generated and lower level of net exceptional items in the current year. 
 
The Group closed the year with net cash of £0.3m (2020: net debt of £17.5m), a first for the business.  This positive position was driven by strong cash conversion of the higher operating profit, supplemented by proceeds from the sale of non-core investments.  Operating cash conversion was 161% for the year (2020: 128%).
 
In March 2021, the Group refinanced its bank facilities, agreeing a new £60m revolving credit facility, with £20m accordion, for a minimum tenor of 3 years with two one-year extension options.  The first extension option was agreed in February 2022 on commercial terms in line with the existing facility.  The covenant package is in line with the Group’s previous facility; leverage (net debt : EBITDA) and interest cover.  At the end of the year, the Group’s leverage was nil (2020: 0.7 times) due to the marginal net cash position and interest cover was 49.4 times (2020: 28.3 times), both metrics comfortably within the covenant limits of 3 times (maximum) and 4 times (minimum) respectively.
 
Pensions
Agreement of the triennial valuations for the Group’s defined benefit schemes was reached in October, based on a combined scheme funding deficit of £116m and a recovery plan running to October 2030. The Schedule of Contributions remains at the same level as the previous settlement with the contingent cash mechanism also in place.
 
The IAS 19 accounting deficit across the schemes was £79.4m (2020: £70.3m).  The increase in the liability is primarily driven by an update to the mortality assumptions used, as well as reflecting the latest membership data following completion of the triennial valuation.  These increases were partially offset by the gain derived from the higher discount rate and the benefit of contributions paid by the Group.
 
Dividend policy
Following the return to dividend payments at the 2021 half year, the Board recommends a final dividend of 7.3 pence per share, resulting in a total dividend of 11.0 pence per share for the year, an increase of 22% on 2020.
 
Broadcast
An outstanding performance was delivered by the Broadcast division in 2021 with STV’s position in Scotland remaining unrivalled, significantly ahead of any other commercial channel and reaching 80% of adults per month, making the platform a unique and compelling proposition for advertising partners.
 
Viewing figures for STV soared during the pandemic and this strong performance was largely sustained in 2021.  STV’s share of commercial channels at 28.5%, was the highest it has been since 2008 and year-on-year growth of 1 share point was higher than any channel in Scotland or across the UK.  STV remained the best watched peak-time channel in Scotland.  Daytime, peak and all-time share reached a 12-year high, and 2021 saw the strongest all-time share performance versus the ITV Network ever (19.6% v 17.7%).
 
This viewing success was driven by a strong schedule of drama, entertainment, factual and sports output, including Six Nations Rugby and Euro 2020, the latter capturing the attention of a nation of football fans.  The much-anticipated England v Scotland match saw STV’s highest ever peak audience at 1.94m, becoming our most watched programme of the last decade and best watched football match ever.
 
Scottish news sits at the heart of our public service broadcaster offering and the team continued its exceptional run from 2020 into 2021.  For the third year in a row, STV News at Six was the best-watched news programme in Scotland, with the overall service watched by more than 54% of the Scottish population each month.  2021 saw us successfully complete a multimillion-pound project to upgrade all six broadcast centres to High Definition.
 
2.2m people access our news across our digital platforms every month, and 2021 saw us sign licensing deals with Facebook and Google for STV News content to feature on Facebook News and Google Showcase, creating new revenue streams and visibility on these important services.
 
The speed and scale of the advertising recovery in 2021 far exceeded our expectations and underlines the enduring power and relevance of high-quality television advertising, as we delivered our highest advertising revenues in STV’s history. 
 
We continue to work closely with the Scottish business community, ensuring that advertising is affordable and accessible via our innovative STV Growth Fund.  Since launch in 2018, the Growth Fund has allocated c.£16.5m to over 320 businesses who have accessed TV advertising for the first time, with 85 of these businesses joining in 2021.  Forming part of the overall fund, the £1m Green Fund for sustainable businesses, and a gifted-membership initiative as part of our £1m Inclusion Fund for businesses promoting diversity, were both launched in 2021.  We also launched STV Self Service, enabling our advertisers to design and book their own campaigns online, providing ease of access to our leading marketing platform for SMEs.
 
Overall, the Broadcast division generated an operating profit of £21.8m (2020: £15.5m), an increase of 41% on the prior year and up almost 10% on 2019.
 
Digital
Viewing on STV Player in terms of total streams was up 63% in 2021 at 114.6m (2020: 70.5m). The total amount of time spent on STV Player also increased, by 42% to 50.8m hours (2020: 35.7m hours). In 2018 we delivered 35.0m streams compared with 114.6m in 2021, representing a more than trebling across this three-year period.
 
STV Player is now available on all major platforms including Sky, Freeview, Virgin Media, Freesat, Apple TV, Fire TV and Sky Glass.  Strong digital audience growth and commercial innovation around advertising opportunities meant VOD advertising on STV Player was up 38% year on year, with advertising impressions up 43%.  4.3m adults are now registered users on STV Player, with monthly active users growing by 54%.
 
Through our expansion into the rest of the UK, 22% of VOD streams are now coming from outside of Scotland (2020: 2%), presenting a significant opportunity for future growth.
 
A strong offering of sport, soaps and drama drove viewing with network drama the key driver of traffic.  The second series of The Bay was among our best watched titles in 2021, attracting 2.9m views, alongside Marcella (1.8m), Finding Alice (1.4m) and Unforgotten (1.2m).
 
We continue to accelerate our content acquisition strategy, developing strong relationships with distributors, and with a growing focus on scripted content.  We worked with 27 partners in 2021, agreed 31 new content deals and added a plethora of drama, true crime, factual and entertainment programmes to our service, complementing the network material. These agreements added an additional 1,859 hours of Player-only content (including 867 hours of scripted), representing 173 new titles to our ever-expanding catalogue.
 
12 out of the top 20 programmes on STV Player were non-network, Player-only content, highlighting the growing success of our strategy.  These include the US version of The Bridge, The Firm, Rogue and Gracepoint, alongside archive favourites Taggart and Take the High Road.  In total, 42% of VOD streams came from Player-only content in 2021 (2020: 32%). 
 
In June we became the first broadcaster VOD service to launch a VIP rewards scheme to build better connections with our viewers and further drive streams.  STV Player VIP brings members a range of benefits, as well as a reduced advertising load, and we will constantly be refining and improving this offer.
 
Overall, operating profit generated by the Digital division increased by 21% year on year to £7.9m (2020: £6.5m).
 
STV Studios
2021 has been a record year for STV Studios.  Despite the ongoing impact of Covid restrictions, 16 programme commissions were won, for eight TV networks, and the business delivered its best-ever financial performance, with full year revenue of £26.6m (2020: £8.7m).  The division returned an adjusted operating profit of £1.3m, including the HETV tax credit receivable, compared to a £0.3m loss in 2020.
 
Commissioning highlights include new entertainment format Bridge of Lies (25 episodes, BBC One) which airs next week; a recommission for a further three series of The Yorkshire Auction House for Discovery-owned, Really; a re-commission of ratings winner Celebrity Catchphrase (13 episodes, ITV); innovative, genre bending series, Murder Island (6 episodes, Channel 4); and a further three series of Antiques Road Trip and its celebrity sister series (BBC). Finally, STV Drama spent much of 2021 in production with high-end six-part returnable drama for Channel 4, Screw.  Broadcast in early 2022 to widespread critical acclaim, Screw was Channel 4’s best launch to a drama series since It’s A Sin.
 
Our growing suite of labels has also achieved commissioning success.  Highlights include a significant win in March 2021 for Belfast-based Two Cities Television for an original returnable peak-time police drama, Blue Lights (6 episodes, BBC One), is currently in production.  Primal Media’s ground-breaking series Landmark (8 episodes, Sky Arts) launched in September 2021 and Primal are in advanced funded development with other major channels, including a new reality show in the UK as well as a dating format for a US broadcaster.  Entertainment label Barefaced TV has recently been commissioned by Discovery+ for a large-scale, high-stakes, young-skewing format Zodiac Island (working title) to be delivered in Autumn 2022.  We are excited about future prospects with the talented team at high-end drama producer, Tod Productions, who have a strong, advanced development slate. 
 
In September 2021, we acquired a 25% stake in unscripted producer, Hello Mary, and the team has already run 8-part series Trapped Underground for Discovery as well as two soon-to-be-announced new series.  Excitingly, today we have announced the addition of quiz format specialists, Mighty Productions, to our family of labels. Mighty have already won 4 series commissions, including new C4 quiz 1 & 6 Zeros, which airs from next week.
 
We delivered a strong year of catalogue tape sales across our full catalogue of programmes and format relicensing with sales of £3.4m (2020: £3.7m). A distributor neutral position drives our successful strategy of working with multiple parties to match the most appropriate sales agent to our content, securing the best deals with businesses such as Britbox, Acorn TV, Discovery and PBS (US). 
 
Social purpose
STV’s social purpose priorities remain integral to our growth strategy, and we made significant progress in 2021, including:
  • Sustainability strategy STV Zero launched, with a concerted programme of climate action successfully delivered on and off screen in 2021, including at COP26 in Glasgow
  • Diverse contributors to STV News doubled from 4% to 8% as a result of STV’s diversity & inclusion strategy, with over 400 people from diverse backgrounds given media training to become expert contributors
  • £4.4m distributed by the STV Children’s Appeal to families and young people in poverty in Scotland