TIDMSTVG
RNS Number : 3333S
STV Group PLC
16 March 2021
Press Release
STV Group plc Full Year Results for 2020
Resilience and strategic progress in an exceptional year
Next-phase growth plan announced to accelerate STV's
diversification
Highlights
-- STV coming through Covid confidently with better than expected 2020 performance
-- Digital business continues to accelerate, with online viewing
up 68% and VOD advertising up 12% in 2020, and new content deals
with Sony and eOne announced
-- Studios maintaining positive momentum, with record 19 new commissions in 2020
-- Advertising trends improving materially, with Jan-April total
advertising revenue expected to be +7-9% including April +60-75%;
STV-controlled advertising continues to outperform
-- Record audience growth maintained into 2021 on both STV (+14%) and STV Player (+83%)
-- Furlough grant of GBP1.6 million to be repaid in full,
reflecting STV's improving financial performance
-- Achieved 2020 diversification target of one third of
operating profit from new revenue streams
-- Refreshed 3-year strategic plan focuses on accelerating STV's
diversification, targeting at least 50% operating profit from
outside traditional broadcasting by the end of 2023
-- Agreement in principle to sell the lottery management
company, subject to Gambling Commission approval
-- Cash dividend reinstated at 6p (2020 full year of 9p) as a
measure of the Board's confidence in STV's future growth
Financial Summary 2020 2019 Change
============================= ========================= ========================== ==========
Revenue GBP107.1m GBP123.8m (14%)
============================= ========================= ========================== ==========
Adjusted EBITDA* GBP23.8m GBP27.7m (14%)
============================= ========================= ========================== ==========
Adjusted operating profit* GBP18.2m GBP22.6m (19%)
============================= ========================= ========================== ==========
Adjusted operating margin* 17.0% 18.2% (120bps)
============================= ========================= ========================== ==========
Adjusted profit before
tax** GBP16.6m GBP21.0m (21%)
============================= ========================= ========================== ==========
Profit before tax GBP6.7m GBP19.0m (65%)
============================= ========================= ========================== ==========
Adjusted basic EPS** 37.5p 45.8p (18%)
============================= ========================= ========================== ==========
Statutory basic EPS*** 18.2p 41.7p (56%)
============================= ========================= ========================== ==========
Net debt(+) GBP17.5m GBP37.5m 53%
============================= ========================= ========================== ==========
Dividend per share**** 9.0p 6.3p 43%
============================= ========================= ========================== ==========
* Before exceptional items
** Before exceptional items and IAS19 interest; 2019 restated
to reflect bonus issue in Dec 2020
*** 2019 restated to reflect bonus issue of shares in December
2020
**** Dividend per share growth reflects cancellation of full year
dividend for 2019
(+) Excluding lease liabilities
Financial highlights
-- Adjusted operating profit of GBP18.2m, well ahead of initial
expectations, with full year decline of 19% significantly improved
due to a strong H2
-- Total advertising revenue down 10%, with STV-controlled regional advertising down only 5%
-- Digital revenues up 5%, with VOD revenues from STV Player up
12%, illustrating the growing strength of STV's digital
business
-- Studios revenue down 36%, reflecting the pause in filming in
2020, with profit impact almost fully mitigated by strong secondary
sales
-- Significantly strengthened balance sheet following placing in
July 2020, with net debt of GBP17.5m providing headroom for
investment in growth
-- New GBP60m revolving credit facility with GBP20m accordion
agreed in early March 2021; minimum term 3 years
Another record viewing performance on screen and online
-- Total audience on STV up 14% in 2020, the highest growth of
any channel in Scotland, with all-time viewing share of 19.2%:
o STV still the most watched peaktime channel in Scotland,
stretching 10% ahead of BBC1
o Largest ever lead over the ITV Network, with all-time share
12% higher
o Award-winning STV News at Six delivering its highest ever
average audience and viewing share
-- Online viewing on STV Player up 68%, the fastest growth of any UK broadcaster VOD service
o Total streams up 65% and monthly active users up 50% year on
year
o Player-exclusive content now one third of all digital viewing,
accounting for 8 of the top 15 digital shows
Strategic progress and new targets
-- STV's Growth Fund attracted 91 new advertisers in 2020,
taking the total to 236 since launch
-- STV's Digital strategy continues to accelerate rapidly:
o STV Player now available on all major platforms UK-wide, and
pre-installed in c.70% of the UK's connected TV homes
o Recent UK-wide Sky launch has seen STV streams treble so far
in Sky homes
o Major new content partnerships with Sony and eOne for 350
hours of drama boxsets, taking total digital-only content to over
3,000 hours
-- STV Studios now proving its growth potential:
o All STV programmes still in production under Covid safety
protocols
o 19 new commissions in 2020, including 16 series, our highest
ever number
o Momentum continuing in 2021, with major new format, Murder
Island, just announced for Channel 4 and new drama series Screw
(also C4) about to start production
-- Next-phase strategic growth plan announced to accelerate STV's diversification
-- Supported by a strong balance sheet, STV plans to invest
GBP30m over the next 3 years through a combination of internal and
external investment focused on growing its Digital and Studios
businesses
-- The following ambitious new growth targets have been set for the end of 2023:
o Double digital viewing, users and advertising revenue (to
GBP20m)
o Quadruple production revenue (to GBP40m)
o Achieve at least 50% of operating profit from outside
traditional broadcasting
-- Agreement in principle to sell the non-core lottery
management company, subject to Gambling Commission approval. Deal
expected to complete in the coming weeks, and will include
agreement for STV to provide advertising services to the lottery
under a multi-year arrangement
Improving outlook
-- Strong start to 2021 on screen:
o STV channel viewing up 14% year to date
o STV Player viewing up 83% and streams up 101%
o Strong programme schedule to come, including delayed Euro 2020
football tournament
-- Advertising trends starting to improve materially:
o Resilient Q1 sees total advertising revenue (TAR) down only 3%
despite lockdown
o January TAR was -9%, February -9% and March is expected to be
+10%
o April TAR currently forecast at +60-75%, with Jan - April
+7-9%
o STV-controlled advertising continuing to outperform, with
regional +5% for Q1 and VOD advertising +15%, with April also
looking positive for both
-- STV Studios has now secured GBP20-25m of revenue for 2021 and
is maintaining commissioning momentum
-- We will continue to manage cash and costs carefully, with our
national programming costs only increasing in line with revenues
under our long-term arrangements with ITV
Board update
-- The Board has recommended a return to cash dividend payments
and a final dividend of 6.0p per share for 2020, giving a full year
cash equivalent dividend of 9.0p, +43% on 2019
-- The Board is committed to a balanced approach to capital
allocation across investing for growth, paying a progressive
dividend to shareholders, and meeting pension obligations
-- As previously indicated, Baroness Margaret Ford will step
down as Chair at the 2021 AGM next month after eight years, in line
with planned succession, and will be replaced by Paul Reynolds who
joined the Board on 1(st) February 2021
Simon Pitts, Chief Executive Officer, said:
"STV is coming through the pandemic with confidence. With profit
and net debt materially better than expectations, the 2020
financial results we are confirming today are testament to the
strength of our business and the commitment and creativity of our
people in what has been an extraordinary 12 months.
We enjoyed record audience growth in 2020, with TV viewing up
14% and online viewing up 68%, the biggest gains of any UK
broadcaster, and were also able to accelerate delivery of our
strategy. Our advertising Growth Fund enabled us to attract 91 new
Scottish advertisers, we bolstered our successful digital content
strategy with a further 1200 hours of content, and we launched our
streaming service STV Player across the UK for the first time
meaning it is now available in over 17m homes. STV Studios also
secured 19 new programme commissions, the largest number ever, as
it looks to establish itself as the UK's leading nations and
regions producer.
We took proactive steps to conserve cash and raise capital from
shareholders and, combined with better than expected trading, we
now have a significantly strengthened balance sheet as we look to
invest GBP30m in the next phase of our strategic growth, targeting
at least 50% of our operating profit from outside traditional
broadcasting by 2023. With an improved financial position and good
growth prospects the Board has also recommended a return to cash
dividend payments and a final dividend of 6p per share, giving a
full year dividend of 9p per share for 2020.
We have made another strong start to the year on screen and
online, with TV viewing up a further 14% and STV Player up 83%.
Advertising trends are also improving materially, with April
forecast to be up 60-75% and Jan-April +7-9% as lockdown hopefully
begins to ease. Our positive momentum in Studios continues, with
recent ground-breaking commission Murder Island for Channel 4, and
filming about to start on our new drama series, Screw, also for C4.
There is also much to look forward to on STV with more new drama
than ever in 2021, as well as the exciting prospect of the delayed
Euro 2020 football championships involving both England and
Scotland. While there is inevitably still uncertainty around the
pandemic, we are positive about the future outlook."
There will be a presentation for analysts today, 16 March 2021,
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 970106
Camarco: Geoffrey Pelham-Lane, Partner Tel: 07733 124226
Ben Woodford, Partner Tel: 07790 653 341
Financial performance review
Trading overview
Total revenues for the Group were GBP107m (2019: GBP124m),
driven by lower linear advertising revenues and fewer programme
deliveries. Total advertising revenue was GBP91m for the year, down
10% on 2019, a marked improvement on the H1 position when the
market declined by 20%. By Q4, total advertising revenue was
broadly flat year on year, providing confidence for a strong return
in 2021 as lockdown restrictions are removed.
Regional and digital advertising revenue, both within the direct
control of the Group, out-performed the national market which was
down 14% at GBP65m (2019: GBP75m). Regional revenue was GBP14m,
down only 5% year on year, (2019: GBP15m) whilst digital
advertising revenues grew 5% year on year, principally as a result
of the 12% growth in Player Video on Demand revenues.
In order to mitigate the impact of the reduction in revenue on
the profitability of the Group, a number of actions were taken to
reduce costs. These, combined with the benefit of the arrangement
with ITV that ties our contribution to the national programme
budget to national advertising revenue (worth GBP5m in 2020),
resulted in adjusted operating profit (before exceptional items) of
GBP18.2m (2019: GBP22.6m), firmly ahead of consensus expectations.
The Group's profit performance also reflects grant income of
GBP1.4m from the Group's access of the UK Government's Coronavirus
Job Retention Scheme (CJRS), with a further GBP0.2m being
recognised in the balance sheet. The full GBP1.6m will be repaid to
HM Government prior to our return to cash dividend in 2021.
Adjusted profit before tax of GBP16.6m (2019: GBP21.0m) was
after charging net finance costs of GBP1.5m (2019: GBP1.6m).
Interest payable on the Group's borrowings was GBP1.2m (2019:
GBP1.3m) with the balance being non-cash charges in relation to the
Group's operating leases.
An agreement in principle has been reached for the sale of the
STV external lottery management company, STV ELM Limited, subject
to approval by the Gambling Commission, with completion expected in
the coming weeks. In addition to a modest consideration for the
business, STV will also provide advertising services to the lottery
under a multi-year contract. Full provision for the amounts due
from the Scottish Children's Lottery was made at the half year with
the full year net exceptional items of GBP8.7m reflecting a small
increase to that provision (of GBP0.1m to a total of GBP8.8m),
recognition of a VAT recoverable in respect of invoices written off
(GBP0.6m) and the estimated costs of disposal (GBP0.5m). The first
two items are recognised as exceptional finance costs with the
latter being an operating exceptional item.
On a statutory basis, operating profit was GBP17.7m (2019:
GBP22.6m) and profit before tax was GBP6.7m (2019: GBP19.0m).
A total tax credit of GBP1.0m has been recognised in the year
(2019: charge of GBP3.1m), representing a negative effective tax
rate (ETR) of -14.9% (2019: 16.6%). This tax position is driven by
the low ETR of 4% on the profit before tax before exceptional
items, reflecting the increase in deferred tax assets as a result
of the Government's decision not to lower the rate of corporation
tax to 17%. Profit for the year was GBP7.7m (2019: 15.9m).
Adjusted earnings per share (before exceptional items and IAS19
interest) was 37.5p, down 18% on the prior year (2019 restated:
45.8p), which has been restated to reflect the bonus issue of
shares in December 2020. As well as being impacted by the lower
profits in the period, the 2020 metric benefits from the
significantly reduced effective tax rate for the year and also
reflects the increased share capital following the placing in July
2020. On a statutory basis, earnings per share was 18.2p, lower
than the prior year as a result of the exceptional items in
relation to the disposal of the STV ELM (2019 restated: 41.7p).
In addition to the better than expected performance from a
profit perspective, the Group ended the year with lower net debt
than anticipated at GBP17.5m before lease liabilities, a reduction
of GBP20m on 2019. The most significant contribution was the net
proceeds of GBP15.5m raised by the placing of new shares in July
2020, which combined with a number of other cash retention measures
to drive a net inflow across the year. Operating cash conversion of
108% was strong (2019: 93%), driven by tight management of working
capital and the decision to pause non-essential capital projects in
response to the first lockdown over Q2 2020.
The Group's leverage (ratio of net debt to EBITDA) at the end of
the year was 0.7 times (2019: 1.5 times), well within the covenant
maximum of 3 times, and reflecting the reduction in net debt in
particular over the second half. Following the extension to the
Group's existing bank facilities in June 2020, the facilities were
fully refinanced over Q1 2021, with a new GBP60 million revolving
credit facility and GBP20m accordion agreed for a minimum tenor of
3 years, with two one-year extension options. Covenants remain in
line with those of the previous facility.
Pensions
The IAS19 accounting deficit across the Group's two defined
benefit pension schemes was GBP70.3m, lower than the half year
position of GBP76.9m although slightly higher than last year end
(2019: GBP64.0m). The increase in the deficit year on year is due
to a lower discount rate, driven by the significant fall in
corporate bond yields as a result of the Covid-19 economic
backdrop, although also reflects strong asset returns as a result
of the hedging strategies of the schemes.
The next triennial valuation is due as at 31 December 2020 and
early stage discussions with the trustees have commenced.
Dividend policy
The Board is confident in the long-term prospects for the Group
and in its ability to deliver the new three-year diversification
and growth strategy, despite the uncertainties arising during the
UK's economic recovery from Covid-19.
Following the cancellation of the 2019 final dividend and the
payment of the 2020 interim dividend by way of a bonus issue of new
ordinary shares, paid in December 2020, the Board recommends a
return to a cash dividend with the 2020 final dividend proposed at
6p per share. It is the Board's intention to pay a progressive
dividend to shareholders, subject to prevailing market
conditions.
Operational review
Broadcast
The strategy for STV's broadcast business is to maximise its
value and profitability through the delivery of high quality,
cost-effective news and entertainment on its linear TV channel.
Despite the most challenging conditions faced by the business in
its 63-year history, STV achieved a record-breaking year of viewing
and was the most watched commercial channel in Scotland across
every timeslot. Crucially, its position as the most watched peak
time channel in Scotland was maintained, increasing its share to
10% higher than the nearest competitor BBC1. All-time audience was
up 14% year on year, the highest annual growth ever recorded. All
time share reached a 12-year high of 19.2%. STV's viewing share was
also 12% higher than the ITV Network, an indicator of the unique
connection the channel holds with its audience.
As audiences sought trusted news and information, STV's public
service remit was firmly in the spotlight. Our flagship programme
STV News at Six, already the most-watched news programme in
Scotland, achieved the highest average audience and viewing share
in its history, tracking 10% higher than the competition (from a
position of +3% pre-Covid). Average audience was up 32% and viewing
share was up 16% year on year. During 2019, five editions of the
programme secured an audience of over half a million viewers.
Across 2020, 152 editions of the programme attracted this level of
audience.
Despite advertising revenues recording the sharpest ever decline
in Q2 2020 - down 38% year on year - the advertising market
responded quickly and positively as lockdown restrictions were
relaxed in H2. Overall, total advertising revenue was 10% down for
the full year, with national advertising revenue down 14% year on
year within that. The performance of the local Scottish advertising
market was relatively stronger than the national market, bucking
wider trends and finishing down only 5% year on year.
This strong regional market position has been enhanced through
the success of the STV Growth Fund over the last 3 years. This
investment fund is designed to make advertising more affordable and
accessible for Scottish SMEs. Since its launch in 2018 it has
delivered over 550 deals and introduced c.235 new clients to
television advertising, including 91 new advertisers in 2020
despite the Covid disruption. The re-booking rate for advertisers
receiving Growth Fund investment was 42% in 2020.
Three bespoke funds have been launched in recent months as part
of the wider Growth Fund initiative. Local Lifeline allocated
airtime to the value of GBP1m to businesses and charities who
responded to the impact of Covid by helping their local communities
during the first lockdown. Through this campaign, 105 'local
heroes' were celebrated in commercial airtime on STV, showcasing
their efforts in supporting people who needed it most. As part of
our commitment to be a more inclusive and diverse business, the
Inclusion Fund was launched in late 2020 to support businesses who
champion diversity through their products and services, consumer
engagement or culture. Finally, in early 2021, the Green Fund was
announced as part of STV's environmental sustainability commitments
to be a net zero carbon business by 2030, with the aim of making
advertising more accessible to SMEs championing greener
practices.
A doubling of the Growth Fund to GBP20m was announced at the
onset of the pandemic and will be a key factor in continuing to
grow STV's share of the regional advertising market as businesses
start reinvesting in marketing to support their Covid recovery
plans.
Despite a reduction in revenue of 12% to GBP81.2m (2019:
GBP92.3m), the underlying profitability and resilience of the
business resulted in operating profit of GBP15.5m (2019: GBP19.9m).
The operating margin decreased slightly to 19.2% (2019: 21.6%).
Digital
Acceleration of the profitable growth trajectory of the Digital
business was achieved through an increasingly rich and diverse
content offering and the successful UK-wide launch of the STV
Player for the first time. By the end of 2020, the STV Player was
available on all major platforms and pre-installed in nearly three
quarters of the UK's connected TV homes, increasing the addressable
audience twelvefold to over 50 million adults.
Online viewing was up 68%, securing the STV Player's pole
position as the fastest growing broadcaster streaming service in
the UK. Within this, VOD viewing was up 57% and live simulcast
viewing was up 97%. Active monthly users grew by 50% year on
year.
Despite the wider trends in the advertising market in 2020, VOD
advertising on STV Player grew 12% for the full year. The year
closed with four consecutive months of growth, a positive indicator
of the prospects for 2021 against a stronger advertising
market.
The UK-wide launch has brought the STV Player onto all major
platforms. In June, we announced an extension of our strategic
partnership with Virgin Media enabling their customers across the
UK to watch the STV Player via their set top boxes. With the Player
already installed on YouView and Freesat, in August, the launch on
Freeview Play in August connected us to a further 13 million
devices in UK homes. The launch on Sky+, Sky Q and Now TV was
completed at the close of 2020.
Our digital content strategy aims to create an STV for everyone.
Some 3,000 hours of Player-only content is now available, c1,200
hours of which were acquired in 2020, comprising high-quality UK
and international drama boxsets, factual series, entertainment and
lifestyle shows, as well as live sports and music channels. This
content has been secured through deals with over 20 partners and
distributors and across 2020, accounted for over one third of all
viewing and 8 of STV's top 15 digital shows. The latest content
deals with eOne and Sony will add over 350 hours of predominantly
US drama.
The audience profile of the STV Player is enabling new audiences
to be reached, enhancing our offer to advertisers. 16-34 year olds
account for one third of the audience on STV Player, higher than on
STV the channel. Similarly, there is a skew towards ABC1 audiences
on STV Player and the male audience is also higher.
The strong growth achieved throughout 2020 has continued into Q1
of 2021 with online viewing up 83% and total streams up 101% year
on year, driven by an attractive offer of drama boxsets and UK-wide
distribution.
Revenue grew for the third consecutive year, up 5%, to GBP13.7m
(2019: GBP13.0m) driven by the increase in viewing. As a result of
investment commitments to continue to build the scale of the
business for the medium term, operating profit was down 10% at
GBP6.5m (2019: GBP7.3m). The business still achieved an operating
margin of 47.5% (2019: 55.7%).
Our ambitious 3-year targets for STV Player aim to double
viewing, users and revenue by 2023. To achieve that we will invest
more in digital content and marketing (aiming to launch a new
boxset every week), increasingly personalise the user experience
and launch a new loyalty scheme (STV Player VIP) to drive repeat
usage.
STV Studios
2020 saw a record number of new commissions secured and a
re-branding to reflect the growing portfolio of businesses that
form STV Studios, which now houses seven creative labels across all
genres.
Despite the challenges the pandemic presented to the production
sector globally, 19 new commissions were secured including 16
series and three single productions across all genres and for a
wide range of broadcasters .
The aim for STV Studios is to build a world class production
business with a multi-genre slate of returning series; 6 of the 19
commissions announced in 2020 are new returnable series.
2020 started with the largest single order yet placed by the BBC
for delivery of four new series of popular long-running show
Antiques Road Trip, for BBC One (100 episodes), and two series of
Celebrity Antiques Road Trip, for BBC Two (40 episodes). A third
series of BBC Scotland ratings success Inside Central Station was
also commissioned (6 episodes).
New shows secured by the Factual team include The Yorkshire
Auction House for Discovery-owned channel, Really (10 episodes),
plus a Scottish version of the series, Clear Out Cash In for STV (8
episodes). This was followed by the commission of a new format for
Channel 5, Our Family Farm Rescue (4 episodes). An innovative
lockdown production was pitched and delivered to Channel 5 during
the summer, The Tabloids and The Royals (4 episodes). A further
commissioning success at this time was an investigative documentary
for Channel 4, Is Covid Racist?
With production activity abruptly suspended in March, the
creativity of our development teams led to development slates being
revamped to serve the new requirements of broadcasters, and
productions were redesigned to enable safe working. A new
compilation series of ratings success and returning format,
Celebrity Catchphrase, was commissioned by ITV for delivery in H2
and the biggest celebrity commission secured to date will be
delivered in early 2021. Celebrity Catchphrase was the first UK
entertainment show to return to studio under strict Covid-secure
working practices in July, which were introduced across the
industry to kickstart production. Antiques Road Trip also swiftly
resumed production later that month, in accordance with new
industry safety guidelines.
Our talented drama team received widespread critical acclaim for
the 2019 film Elizabeth is Missing, for BBC One. To date the film
has won 9 major awards, including Best TV Movie at the C21 Frama
Awards and Banff Media Rockie Awards; an RTS Award for writer
Andrea Gibb; an International Emmy recognising Glenda Jackson's
performance, and a BAFTA. Further success was confirmed with a
significant new drama series commission from Channel 4 (6 episodes)
for delivery in 2021. Prison drama, Screw, is written by Rob
Williams, creator of the team's 2019 hit for BBC One, The Victim,
and production commenced in Scotland in early 2021.
In January 2020, a minority stake was acquired in high-end drama
producer Two Cities Television. The business has a strong pipeline
of drama projects and scripts at an advanced stage with
commissioning success anticipated during 2021. This was followed in
September 2020 with the latest addition to the STV Studios
portfolio, Barefaced TV , a w holly-owned creative label focused on
entertainment formats targeting younger audiences.
Entertainment specialists, Primal Media, majority-owned by STV
since July 2019, announced its first commission as part of STV
Studios- a ground-breaking seven-part series for Sky Arts,
Landmark, also to be produced in 2021.
These creative labels, including long-standing drama partner,
TOD Productions, complement the STV Studios in-house businesses:
STV Studios Drama, STV Studios Factual and STV Studios
Entertainment.
As the pandemic affected the delivery of programmes, this
revenue impact was offset by stronger library sales which accounted
for over 40% of total revenue in 2020 (2019: 20%). Strong growth in
international sales was driven in part through our distribution
deal with WME in the US. Notable deals included the sale of
critically acclaimed drama Elizabeth is Missing to over 90
territories through a distribution arrangement with NBC Universal.
This has enabled recoupment of all investment finance bringing the
film into profit within 6 months.
Total revenues were impacted by the cessation of all production
from March which continued throughout Q2. The business was broadly
breakeven with a small operating loss of GBP0.3m, (2019: loss of
GBP0.1m).
Our 3-year target for STV Studios is to quadruple turnover to
over GBP40m. To achieve that we will continue to invest to
strengthen our creative pipeline with a view to doubling the number
of returning series we make by 2023.
Simon Pitts
Chief Executive, STV Group plc
Consolidated income statement
Year ended 31 December 2020
2020 2019
Before Exceptional Before Exceptional
exceptional items Results exceptional items Results
items (note for period items (note for period
6) 6)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5 107.1 - 107.1 123.8 - 123.8
Net operating
expenses (88.9) (0.5) (89.4) (101.2) (2.0) (103.2)
Other income - - - - 2.0 2.0
------------ ------------ ------------ ------------ ------------ -------------
Operating profit 18.2 (0.5) 17.7 22.6 - 22.6
Finance costs
* borrowings (1.2) - (1.2) (1.3) - (1.3)
- defined benefit pension
schemes (1.2) - (1.2) (2.0) - (2.0)
* lease interest (0.3) - (0.3) (0.3) - (0.3)
Provision for
impairment
losses - ELM
receivable
(net) - (8.2) (8.2) - - -
Share of loss of
an associate (0.1) - (0.1) - - -
------------ ------------ ------------ ------------ ------------ ---------------
(2.8) (8.2) (11.0) (3.6) - (3.6)
------------ ------------ ------------ ------------ ------------ ---------------
Profit before tax 15.4 (8.7) 6.7 19.0 - 19.0
Tax credit/(charge) 7 (0.6) 1.6 1.0 (3.2) 0.1 (3.1)
------------ ------------ ------------ ------------ ------------ ---------------
Profit for the year 14.8 (7.1) 7.7 15.8 0.1 15.9
------------ ------------
Attributable to:
Owners of the parent 14.7 (7.1) 7.6 15.9 0.1 16.0
Non-controlling
interests 0.1 - 0.1 (0.1) - (0.1)
------------ ------------ ------------ ------------ ------------ ---------------
14.8 (7.1) 7.7 15.8 0.1 15.9
------------ ------------ ------------ ------------ ------------ ---------------
Earnings per share
(restated)
*
Basic 8 35.2p 18.2p 41.4p 41.7p
Diluted 8 33.8p 17.5p 40.1p 40.3p
* The number of shares reported in 2019 for the purposes of
earnings per share has been updated to reflect the bonus issue in
December 2020; those shares issued are assumed to have been in
issue since the start of the comparator period.
A reconciliation of the statutory results to the adjusted
results is included at note 18.
Consolidated statement of comprehensive income
Year ended 31 December 2020
2020 2019
GBPm GBPm
Profit for the year 7.7 15.9
Items that will not be reclassified to profit
or loss:
Re-measurement of defined benefit pension
schemes (15.3) 6.2
Deferred tax credit/(charge) 3.2 (0.9)
Revaluation gain on listed investment to
market value 5.9 -
Other comprehensive (expense)/income - net
of tax (6.2) 5.3
Total comprehensive income for the year 1.5 21.2
------ -----
Attributable to:
Owners of the parent 1.4 21.3
Non-controlling interests 0.1 (0.1)
------ -----
1.5 21.2
------ -----
Consolidated balance sheet
At 31 December 2020
2020 2019
Note GBPm GBPm
Non-current assets
Intangible assets 10 2.3 2.6
Property, plant and equipment 11 9.9 10.7
Right-of-use assets 12 10.4 12.2
Investments 13 6.7 0.9
Deferred tax asset 19.9 16.1
Trade and other receivables 14 0.9 9.5
------- -------
50.1 52.0
------- -------
Current assets
Inventories 15.4 13.2
Trade and other receivables 25.6 21.6
Cash and cash equivalents 5.2 6.2
46.2 41.0
------- -------
Total assets 96.3 93.0
------- -------
Equity
Ordinary shares 15 23.3 19.6
Share premium 15 115.1 102.0
Capital redemption reserve 0.2 0.2
Merger reserve 173.4 173.4
Other reserve 1.0 0.9
Accumulated losses (342.8) (343.2)
------- -------
Shareholders' equity (29.8) (47.1)
Non-controlling interests (0.1) (0.2)
------- -------
Total equity (29.9) (47.3)
------- -------
Non-current liabilities
Borrowings 22.7 43.7
Lease liabilities 9.1 10.6
Retirement benefit obligations 17 70.3 64.0
102.1 118.3
------- -------
Current liabilities
Trade and other payables 22.4 19.9
Lease liabilities 1.7 1.8
Current tax liabilities - 0.3
------- -------
24.1 22.0
------- -------
Total liabilities 126.2 140.3
------- -------
Total equity and liabilities 96.3 93.0
------- -------
Consolidated statement of changes in equity
Year ended 31 December 2020
Capital Accumul-ated Attributable Non-controlling
Share Share redemption Merger Other losses to owners interest Total
capital premium reserve reserve reserve of the equity
parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2020 19.6 102.0 0.2 173.4 0.9 (343.2) (47.1) (0.2) (47.3)
--------- --------- ----------- --------- --------- ------------- ------------- ---------------- --------
Profit for the
year - - - - - 7.6 7.6 0.1 7.7
Other
comprehensive
expense - - - - - (6.2) (6.2) - (6.2)
--------- --------- ----------- --------- --------- ------------- ------------- ---------------- --------
Total
comprehensive
income for
the
year - - - - - 1.4 1.4 0.1 1.5
--------- --------- ----------- --------- --------- ------------- ------------- ---------------- --------
Issue of
ordinary
shares 3.5 12.0 - - - - 15.5 - 15.5
Share based
compensation - - - - 0.2 - 0.2 - 0.2
Shares
acquired
by EBT - - - - (0.1) 0.3 0.2 - 0.2
Dividends paid
in shares 0.2 1.1 - - - (1.3) - - -
At 31 December
2020 23.3 115.1 0.2 173.4 1.0 (342.8) (29.8) (0.1) (29.9)
--------- --------- ----------- --------- --------- ------------- ------------- ---------------- --------
At 1 December
2018 19.6 101.9 0.2 173.4 0.8 (355.0) (59.1) - (59.1)
Implementation
of IFRS 16 (note
3) - - - - - (0.1) (0.1) - (0.1)
----- ------ ---- ------ ------ -------- -------- -------- --------
At 1 January
2019 19.6 101.9 0.2 173.4 0.8 (355.1) (59.2) - (59.2)
----- ------ ---- ------ ------ -------- -------- -------- --------
Profit for the
year - - - - - 16.0 16.0 (0.1) 15.9
Other comprehensive
income - - - - - 5.3 5.3 - 5.3
----- ------ ---- ------ ------ -------- -------- -------- --------
Total comprehensive
income for the
year - - - - - 21.3 21.3 (0.1) 21.2
----- ------ ---- ------ ------ -------- -------- -------- --------
Acquisition of
subsidiary - - - - - - - (0.1) (0.1)
Share based compensation - - - - 0.3 - 0.3 - 0.3
Shares acquired
by EBT - 0.1 - - (0.2) (2.0) (2.1) - (2.1)
Tax charge on
share based compensation - - - - - 0.2 0.2 - 0.2
Dividends paid - - - - - (7.7) (7.7) - (7.7)
Unclaimed dividends
received - - - - - 0.1 0.1 - 0.1
At 31 December
2019 19.6 102.0 0.2 173.4 0.9 (343.2) (47.1) (0.2) (47.3)
----- ------ ---- ------ ------ -------- -------- -------- --------
Statement of consolidated cash flows
Year ended 31 December 2020
2020 2019
Note GBPm GBPm
Operating activities
Cash generated by operations 16 22.4 25.6
Interest paid (1.6) (1.1)
Refinancing fees paid (0.3) -
Net taxes (paid)/received (0.4) 0.1
Exceptional reorganisation costs - (1.0)
Pension deficit funding - recovery plan
payment (9.1) (9.0)
Contingent cash payment to pension schemes (1.4) (1.3)
Net cash generated by operating activities 9.6 13.3
------ ------
Investing activities
Proceeds from sale of investment - 1.3
Purchase of investment in associate (1.1) -
Cash acquired on purchase of subsidiary - 0.4
Purchase of intangible assets (0.7) (1.6)
Purchase of property, plant and equipment (1.4) (2.9)
------ ------
Net cash used in investing activities (3.2) (2.8)
------ ------
Financing activities
Shares acquired by EBT - (2.1)
Payment of obligations under leases (1.9) (1.9)
Issue of ordinary shares 15.5 -
Borrowings drawn 19.0 20.0
Borrowings repaid (40.0) (19.0)
Net dividends paid - (7.6)
Net cash used in financing activities (7.4) (10.6)
------ ------
Net decrease in cash and cash equivalents (1.0) (0.1)
Cash and cash equivalents at beginning
of year 6.2 6.3
------ ------
Cash and cash equivalents at end of year 5.2 6.2
------ ------
Notes to the preliminary announcement
Year ended 31 December 2020
1. General information
STV Group plc ("the Company") and its subsidiaries (together
"the Group") is listed on the London Stock Exchange 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. Outside the core
business, the Group also operates an external lottery management
company, although post year end an agreement in principle has been
reached to dispose of that business, subject to Gambling Commission
approval (note 19).
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 2020 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 2020.
Statutory financial statements for the year ended 31 December
2019, 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
2019 and for the year ended 31 December 2020 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 2020 will be delivered to the Registrar of
Companies and made available to all shareholders in due course.
Going concern basis
At 31 December 2020, the Group was in a financial net debt
position with a positive gross cash balance. 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.
As part of the going concern review, the Group considers
forecasts of the total advertising market 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 covenant levels.
During 2020, and in response to Covid-19, the Group took a
number of measures to create additional headroom to enable it to
trade through a severe downside scenario, should one materialise.
These measures included the increase of bank facilities from GBP60m
to GBP80m and the relaxation of certain covenants, as well as
raising net proceeds of GBP15.5m through an issue of new share
capital. From the time when the increased facilities were put in
place to the start of March when the Group refinanced its banking
arrangements, the Group did not need to avail itself of the
incremental GBP20m in facility or the covenant relaxations. In
early March, the Group refinanced its existing facilities, due to
mature in June 2022, and now has in place a GBP60m revolving credit
facility, with a GBP20m accordion, for a minimum period of three
years with two one-year extension options. The covenant package in
place reflects those under the previous arrangement, without the
relaxations, and requires the Group's leverage to be less than
three times and interest cover to be more than four times. The
financial modelling undertaken in support of the Group's
application of the going concern basis of preparation remains valid
under the new facilities, with the Group being able to continue to
trade within the new facility limits and covenant levels.
As set out in the Group's strategy in 2018, the Group continues
to focus on diversification of operations to drive a greater
proportion of the Group's results from non-broadcast earnings.
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
2019.
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, which
remain the same as the prior year, are Broadcast, Digital, Studios
(previously called Production), and the STV ELM.
The Group's reportable segments continue to be Broadcast,
Digital and Studios, with the STV ELM included within 'Other'.
Broadcast Digital Studios Other Total
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Sales 94.8 105.7 13.7 13.0 9.1 14.6 3.5 4.8 121.1 138.1
Inter-segment
sales (13.6) (13.4) - - (0.4) (0.9) - - (14.0) (14.3)
------- ------- ----- ----- ------ ------ ----- ----- ------- -------
Segment revenue 81.2 92.3 13.7 13.0 8.7 13.7 3.5 4.8 107.1 123.8
------- ------- ----- ----- ------ ------ ----- ----- ------- -------
Segment result
Operating
profit 15.5 19.9 6.5 7.3 (0.3) (0.1) - - 21.7 27.1
------- ------- ----- ----- ------ ------ ----- -----
Unallocated corporate
expenses (3.5) (4.5)
------- -------
Adjusted operating profit 18.2 22.6
Exceptional (8.7) -
items
Finance costs (2.7) (3.6)
Share of loss in associate (0.1) -
------- -------
Profit before
tax 6.7 19.0
Tax credit/(charge) 1.0 (3.1)
------- -------
Profit for the year 7.7 15.9
------- -------
Revenue includes GBP1.0m from sources outside the UK (2019:
GBP1.0m). Operating profit includes GBP0.6m arising outside the UK
(2019: GBP0.6m).
6. Exceptional items
All exceptional items in 2020 relate to the disposal of the STV
ELM Limited. The total exceptional cost of GBP8.7m comprises three
elements:
(i) actual and expected costs associated with the disposal of the business of GBP0.5m;
(ii) VAT recoverable of GBP0.6m following the write-off of the
receivable due from the Scottish Children's Lottery (SCL); and
(iii) expected credit loss provision of GBP8.8m being full
provision for the receivable due from the SCL at the balance sheet
date, under IFRS 9.
The first amount has been recognised as an operating exceptional
item. The second and third amounts are included as exceptional
finance costs.
2019 exceptional items
The disposal of the deltaDNA investment to Unity Technologies
Inc in September 2019 resulted in a gain on sale of GBP2.0m. Costs
of GBP0.1m were incurred in the acquisition of Primal Media Limited
on 1 July 2019. A write off of development costs of GBP1.9m was
recognised in 2019. A full review of the development costs
previously capitalised was undertaken in the second half of the
year by the new management team of STV Studios, and those costs
relating to creative ideas and investments that are not aligned to
the new strategic direction of the division were written off.
7. Tax (credit)/charge
2020 2019
GBPm GBPm
The (credit)/charge for taxation
is as follows:
Charge for the year before exceptional
items 0.6 3.2
Tax effect on exceptional items (1.6) (0.1)
--------------- ---------------
(Credit)/charge for the
year (1.0) 3.1
--------------- ---------------
The Government announced in the Budget on 11 March 2020 that the
main rate of corporation tax for the financial year beginning 1
April 2020 will remain at 19% rather than falling to 17% as was
previously legislated. The 19% rate was substantively enacted on 17
March 2020 when the Budget Provisional Collection of Taxes Act
resolution was passed. The Finance Act 2020 included this amendment
and set the main rate at 19% for the financial year beginning 1
April 2021. Therefore, the Group has remeasured the deferred tax
balances to be carried at the 19% rate.
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 have also been
calculated based on earnings before adjusting items that are
significant in nature and/or quantum and are considered to be
distortive. The adjusting items include the impact of operating and
non-operating exceptional items and the IAS 19 net financing cost;
as well as the tax adjustments relating to these items. Adjusted
earnings per share have been presented to provide shareholders with
an additional measure of the Group's year-on-year performance.
The number of shares reported in 2019 for the purposes of
earnings per share has been updated to reflect the bonus issue in
December 2020, with those shares issued assumed to have been in
issue since the start of the comparator period.
Earnings per share Restated
2020 2019
Pence Pence
Basic earnings per ordinary share 18.2p 41.7p
Diluted earnings per ordinary share 17.5p 40.3p
Earnings per ordinary share (before exceptional
items) 35.2p 41.4p
Diluted earnings per ordinary share (before
exceptional items) 33.8p 40.1p
Adjusted basic earnings per share 37.5p 45.8p
Adjusted diluted earnings per share 36.1p 44.4p
The following reflects the earnings and share data used in the
calculation of earnings per share:
Earnings GBPm GBPm
Profit for the year attributable to equity
shareholders 7.6 16.0
Exceptional items (net of tax) 7.1 (0.1)
Profit for the year before exceptional items 14.7 15.9
Adjustment for IAS 19 financing cost (net
of tax) 1.0 1.7
------- --------
Adjusted profit 15.7 17.6
------- --------
Restated
Number of shares Million Million
Weighted average number of ordinary shares
in issue 41.7 38.4
Dilution due to share options 1.7 1.3
------- --------
Total weighted average number of ordinary
shares in issue 43.4 39.7
------- --------
9. Dividends
2020 2019 2020 2019
per share per share GBPm GBPm
Dividends on equity ordinary
shares
Paid final dividend - 14.0p - 5.3
Paid interim dividend 3.0p 6.3p 1.3 2.4
---------- ----------
Dividends paid 3.0p 20.3p 1.3 7.7
---------- ---------- ----- -----
The final dividend of 14.7p per share in respect of 2019 was
cancelled in May 2020 as part of the Group's response to the
Covid-19 pandemic. An interim dividend in respect of 2020 was made
by way of a bonus issue of new ordinary shares in December 2020.
The Board is now proposing a final cash dividend of 6.0p per share
in respect of 2020, subject to approval at the Company's Annual
General Meeting 2021. It is payable on 28 May 2021 to shareholders
who are on the register at 16 April 2021. The ex-dividend date is
15 April 2021. This final dividend, amounting to GBP2.7m has not
been recognised as a liability in these financial statements.
10. Intangible assets
Web development and branding
GBPm
Cost
At 1 January 2020 5.0
Additions 0.7
At 31 December 2020 5.7
----
Accumulated amortisation and impairment
At 1 January 2020 2.4
Amortisation 1.0
At 31 December 2020 3.4
----
Net book value at 31 December 2020 2.3
----
Net book value at 31 December 2019 2.6
----
11. Property, plant and equipment
Plant,
technical
Leasehold equipment Assets under
buildings and other construction Total
GBPm GBPm GBPm GBPm
Cost
At 1 January 2020 0.4 30.4 0.3 31.1
Additions - - 1.4 1.4
Transfers - 0.4 (0.4) -
At 31 December 2020 0.4 30.8 1.3 32.5
------------ ----------- --------------- --------
Accumulated depreciation
and impairment
At 1 January 2020 0.1 20.3 - 20.4
Charge for year - 2.2 - 2.2
At 31 December 2020 0.1 22.5 - 22.6
------------ ----------- --------------- --------
Net book value at 31 December
2020 0.3 8.3 1.3 9.9
------------ ----------- --------------- --------
Net book value at 31 December
2019 0.3 10.1 0.3 10.7
------------ ----------- --------------- --------
12. Right-of-use assets
Property Vehicles Total
GBPm GBPm GBPm
Cost
At 1 January 2020 13.8 0.3 14.1
Additions 0.2 - 0.2
Derecognition of right-of-use assets (0.1) - (0.1)
At 31 December 2020 13.9 0.3 14.2
-------- -------- ------
Accumulated depreciation
At 1 January 2020 1.8 0.1 1.9
Depreciation charge for the year 1.8 0.1 1.9
At 31 December 2020 3.6 0.2 3.8
-------- -------- ------
Net book value at 31 December 2020 10.3 0.1 10.4
-------- -------- ------
Net book value at 31 December 2019 12.0 0.2 12.2
-------- -------- ------
13. Investments
2020 2019
GBPm GBPm
Listed 5.6 0.1
Associates 1.0 -
Other 0.1 0.8
---- ----
6.7 0.9
---- ----
Listed investments comprise Mirriad Advertising plc and Unity
Software Inc. The increase in the value of listed investments
during the year relates to the transfer of Unity Software Inc
(formerly Unity Technologies Inc) from 'Other investments'
following its listing on the New York Stock Exchange on 22
September 2020 and its revaluation to market value at the balance
sheet date. These listed investments are measured at fair value
through the Consolidated Statement of Comprehensive Income.
The movement in investments in associates during 2020 relates to
the investment in a 25% stake in Two Cities Television Limited for
GBP1.1m in January 2020, with initial recognition at cost, and
subsequent recognition of the Group's share of losses (GBP0.1m) in
the investment under the equity method of accounting. No dividends
have been received.
14. Trade and other receivables
The reduction in non-current trade and other receivables to
GBP0.9m (2019: GBP9.5m) relates primarily to amounts written-off
during the year that were due to STV ELM Ltd (the external lottery
management company) from the Scottish Children's Lottery. In
accordance with IFRS 9, management have performed a whole of life
probability weighted impairment review resulting in an additional
expected credit loss impairment of GBP8.8m recognised in the
year.
15. Ordinary shares and share premium
Number of Ordinary Share
shares (thousands) shares premium Total
GBPm GBPm GBPm
At 1 January 2020 39,192 19.6 102.0 121.6
Issue of ordinary shares 7,051 3.5 12.0 15.5
Bonus issue of ordinary
shares 480 0.2 1.1 1.3
At 31 December 2020 46,723 23.3 115.1 138.4
-------------------- --------- --------- --------
16. Notes to the consolidated statement of cash flows
2020 2019
GBPm GBPm
Operating profit 17.7 22.6
Adjustments for:
Depreciation and amortisation 5.1 4.8
Share based payments 0.5 0.3
STV ELM Ltd disposal costs - exceptional 0.5 -
Sale of investment - exceptional - (2.0)
Acquisition costs - exceptional - 0.1
Write-off of development costs - exceptional - 1.9
----- -----
Adjusted EBITDA 23.8 27.7
Increase in inventories (2.2) (0.7)
Decrease in trade and other receivables (excluding
STV ELM Ltd) 1.1 1.5
Increase/(decrease) in trade and other payables
(excluding STV ELM Ltd) 1.1 (1.1)
Net increase in STV ELM Ltd working capital (1.4) (1.8)
Cash generated by operations 22.4 25.6
----- -----
Net debt reconciliation
Long-term Cash and Net debt Lease Net debt
borrowings cash equivalents liabilities including
lease liabilities
GBPm GBPm GBPm GBPm GBPm
At 1 January 2020 (43.7) 6.2 (37.5) (12.4) (49.9)
Cash flows 21.0 (1.0) 20.0 1.7 21.7
Non-cash flows
(i) - - - (0.1) (0.1)
At 31 December
2020 (22.7) 5.2 (17.5) (10.8) (28.3)
------------ ------------------ --------- ------------- -------------------
i) Non-cash movements relate to the acquisition of right-of-use assets.
At 31 December 2020, the Group had revolving credit and
overdraft facilities in place totalling GBP80.0m, stepping down to
GBP70.0m on 31 March 2022, (2019: total facility GBP60.0m with no
step down), of which GBP23.0m was drawn down (2019: GBP44.0m). The
balance sheet value of GBP22.7m (2019: GBP43.7m), reported as
non-current and expiring within 1 to 2 years from the balance sheet
date at the end of the current period (and within 2 to 5 years from
the end of the prior period), is presented net of GBP0.3m of
unamortised borrowing costs (2019: GBP0.3m). The bank facilities in
place at the balance sheet date had a maturity date of June 2022
and security was provided to the lenders by way of a bond and
floating charge. Subsequent to the year end, the Group's bank
facilities have been refinanced (note 19).
17. 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 2017. This valuation resulted in a
deficit of GBP127.0m on a pre-tax basis at 28 February 2019
compared to GBP130.0m on a pre-tax basis at the previous settlement
date of 30 November 2016. The next triennial valuation as at 31
December 2020 is currently underway.
Following the 2017 valuation, a 12 year recovery plan was agreed
with the first annual contributions of GBP9.0m in line with the
existing recovery plan. Annual contributions increase at the rate
of 2% per annum over the term of the plan, the first such increase
being on 1 January 2020. Additionally, in the event of
outperformance against the group's sensitised net cash flow,
contingent payments equivalent to 20% of any outperformance above a
benchmark of available cash are payable to the schemes. Sensitised
forecast net cash flow is defined as cash flow pre-pension deficit
funding payments and returns to shareholders.
The significant actuarial assumptions used for accounting
purposes reflect prevailing market conditions in the UK and are as
follows:
At 31 December At 31 December
2020 2019
% %
Rate of increase in salaries Nil Nil
Rate of increase of pensions in
payment 3.00 3.00
Discount rate 1.25 2.00
Rate of price inflation (RPI) 3.00 3.00
Assumptions regarding future mortality experience are set based
on advice, published statistics and experience in each scheme.
The average life expectancy in years of a pensioner retiring at
age 65 is as follows:
At 31 December At 31 December
2020 2019
Years Years
Retiring at balance sheet date:
Male 19.6 19.3
Female 21.9 21.5
Retiring in 25 years:
Male 21.5 21.2
Female 23.5 23.1
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 2020 At 31 December 2019
Quoted Unquoted Total Quoted Unquoted Total
GBPm GBPm GBPm GBPm GBPm GBPm
Investment funds 8.7 213.7 222.4 66.2 115.3 181.5
Debt instruments 133.1 36.6 169.7 193.6 - 193.6
Cash and cash equivalents 24.4 (1.3) 23.1 5.1 - 5.1
Derivatives - 1.4 1.4 - 1.7 1.7
Annuity policies - 20.6 20.6 - - -
-------- --------- ---------- -------- --------- ----------
Fair value of schemes' assets 166.2 271.0 437.2 264.9 117.0 381.9
-------- --------- ---------- -------- --------- ----------
Present value of defined benefit obligations (507.5) (445.9)
Deficit in the schemes (70.3) (64.0)
---------- ----------
A related, offsetting deferred tax asset of GBP13.3m (2019:
GBP10.9m) is included within non-current assets. Therefore, the
pension scheme deficit net of deferred tax was GBP57.0m at 31
December 2020 (2019: GBP53.1m).
18. 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 in order to provide a more meaningful comparison of how
the business is managed and measured on a day-to-day basis.
Below sets out a reconciliation of the statutory results to the
adjusted results:
2020 2019
Profit Restated Restated
Profit Basic Diluted before Basic Diluted
before tax EPS EPS tax EPS EPS
GBPm pence pence GBPm pence pence
Post-exceptional items 6.7 18.2p 17.5p 19.0 41.7p 40.3p
Add back: exceptional items 8.7 17.0p 16.3p - (0.3p) (0.2p)
Pre-exceptional items 15.4 35.2p 33.8p 19.0 41.4p 40.1p
Add back: IAS 19 1.2 2.3p 2.3p 2.0 4.4p 4.3p
Adjusted results 16.6 37.5p 36.1p 21.0 45.8p 44.4p
------------- -------- ---------- -------- --------- ---------
19. Post balance sheet events
In early March 2021, the Group refinanced its bank facilities,
agreeing a new GBP60m revolving credit facility, with GBP20m
accordion, for a minimum tenor of 3 years (two one-year extension
options are available). The covenant package is in line with the
Group's previous facility, namely net debt to EBITDA must be less
than 3 times, and interest cover must be greater than 4 times.
Also subsequent to the year end, the Group has reached an
agreement in principle for the sale of its lottery management
company, the STV ELM Limited. The agreement is subject to Gambling
Commission approval and will combine a modest consideration for the
business with a multi-year advertising agreement.
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