Interim Results - Part 1

SCOTTISH MEDIA GROUP PLC
6 September 1999

PART 1

Scottish Media Group plc
1999 Interim Results
Six Months Ended 30 June 1999

KEY FINANCIALS

*  Total turnover                         -up 11per cent to £111.2m
*  Operating profit (pre-C4 rebate)*      -up 12per cent to £25.9m
*  Profit before tax*                     -up 2per cent to £24.0m
*  Earnings per share*                    -up 7per cent to 27.3 pence
*  Dividend per share                     -up 10per cent to 8.8 pence

HIGHLIGHTS

*  Record interim earnings and profits*
*  Channel 4 rebate absorbed
*  Significantly improved margins
*  Successful new products - Sunday Herald and S2
*  Earnings enhancing acquisitions - Primesight and Pearl and Dean

   * Excluding exceptional items and FRS10

Commenting on the interim results, Andrew Flanagan, Chief Executive of
Scottish Media Group, said:

'In a demanding and exciting period, Scottish Media Group has once again
made significant progress.  Profits have been improved, while the loss of
the Channel 4 rebate and the costs of major new product launches have been
absorbed.

With good advertising prospects in the second half, and plans for further
development of the Group, we are confident of continuing to deliver
excellent value for shareholders.'

For further information contact:

Andrew Flanagan               Chief Executive               0171 446 7383
Gary Hughes                   Group Finance Director
Callum Spreng                 Director of Corporate Affairs

James Hogan/Craig Breheny     Brunswick                     0171 404 5959

Scottish Media Group plc
1999 Interim Results

CHAIRMAN'S STATEMENT

Introduction

It is a pleasure for my first interim statement on Scottish Media Group to
report another very successful six months for the Group, with much progress
achieved on a number of fronts.  We have grown profit before tax (excluding
exceptional items and FRS10) by £0.5 million to £24.0 million despite the
loss of the final element of the Channel 4 rebate of £1.7 million. Turnover
for the Group in the same period showed growth of over 11per cent to £111.2
million (1998: £99.9 million). During the period, the Group also engaged in
unprecedented business development activity involving the launch of a new
newspaper and a new television channel resulting in start-up losses of £2.0
million.

Two medium-sized acquisitions in the period, Primesight and Pearl and Dean,
have further strengthened the strategic base of the company as we expand
beyond Scotland, and will enhance earnings in the full year.

Earnings per share (excluding exceptionals and FRS10) grew by 7per cent to
27.3 pence.  The Board has agreed an interim dividend of 8.8 pence (1998:
8.0 pence), an increase of 10per cent.

Operational Review

Television

The Group has now combined its television operations into a single
Television Division, embracing all its broadcasting operations - Scottish
Television, Grampian Television, its new digital channel, S2, and its
network programme production business, Scottish Television Enterprises
(STE).  However, for the first six months of 1999 Broadcasting operated
separately from STE.  Total Television turnover was £65.5 million (1998:
£64.5 million) with profits of £16.5 million (1998: £15.9 million).

Broadcasting

Total television advertising revenues for the Group increased by 3per cent
for the first six months of 1999 and our share of national advertising
revenue on ITV (NAR Share) grew to 6.21per cent (1998: 6.18per cent).  Our
achievement in increasing market share was driven by a strong local market
despite ITV's growth being fuelled by some sizeable advertisers, notably On
Digital and the English clearing banks, who did not include Scotland on
their schedules.

The introduction of a further three advertising sub-regions in January,
covering the Grampian Television transmission area, and supplementing those
introduced last year for Scottish Television, now allows local advertisers
across Scotland to benefit from better targeting and lower entry costs for
the promotion of their products and services.  During the first six months
of 1999, local airtime sales increased by 11per cent and represent an
increasingly important element of the Group's total television advertising
revenue.

In addition to advertising growth, we were able to significantly improve
margins.  Excluding the effect of the removal of the Channel 4 rebate, our
margins have improved significantly to 28per cent compared to 24per cent in
the equivalent period in 1998.  This was achieved through good cost
management, the annualised impact of cost reductions from the Grampian
takeover and the benefits from our capital investment in digital technology.

In March, the ITV evening schedule was re-shaped, with the news moving to an
earlier slot to allow greater flexibility in peak-time.  This development
contributed to the combined audience share of Scottish Television and
Grampian Television increasing to 38per cent, while the lead over BBC1
increased by 3per cent to 11per cent.

In April, the Group launched the first free-to-air Scottish commercial
digital channel, S2. Its availability on digital terrestrial and two of
Scotland's three cable services ensured that the new channel launched to an
initial audience of more than 160,000 homes across Scotland.

This investment in digital terrestrial broadcasting followed the
introduction of our existing services on digital terrestrial in 1998 and
represents a further significant step towards embracing the benefits that
new technology can offer viewers, advertisers and broadcasters alike.
Targeting a younger audience than its sister stations, S2 has already
introduced a number of new advertisers to television and we are confident
that, as viewers move to digital, S2 will prove to be a valuable addition to
the Group's broadcasting business.

Scottish Television Enterprises (STE)

Profits at STE, our network programme production business, held steady at
£0.3 million on turnover which was broadly in line with the same period last
year.  However, we received fewer new commissions from the ITV Network
Centre, who also decided not to re-commission the drama series, 'McCallum'.
This led to a reduction in STE's pipeline of commissioned programming and we
instigated a comprehensive review of STE's operations.

In July, we announced the creation of a single Television Division, in which
STE will have an important and well-defined role.  The Group will benefit
from the increased synergies which can be gained across all its television
operations, while allowing STE to focus on the needs of the ITV network -
its principal customer.  STE's management team will operate principally from
London in order to remain close to their market and the network television
industry generally. They will however continue to utilise our facilities, as
creative demands allow, ensuring maximum use is made of the Group'ss
resources, thereby sustaining programme production in Scotland.

STE is now focused on the development of new programme ideas and these
efforts have been boosted by winning the Group's first ever national BAFTA
award earlier in the year for the network documentary, 'After Lockerbie',
recognising STE's continued status as a producer of high quality
programming.

Publishing

The first six months of the year saw significant progress at our Publishing
Division, with the launch of our new Sunday newspaper, the further
development of our electronic publishing business and the acquisition of a
new magazine title.  Total Publishing turnover grew by £3.1 million to £38.5
million.  Publishing profits fell slightly to £8.6 million (1998: £8.9
million) as we absorbed the start-up losses on the Sunday Herald.

Newspapers

Newspaper advertising performance was held back by concerns over prospects
for the economy which resulted in lower recruitment advertising.  However,
through good growth in the property and London display sectors, we succeeded
in maintaining overall advertising revenues at their 1998 level.

Newspaper sales showed a marginal reduction in the first six months of 1999,
reflecting the competitive Scottish marketplace.  The Herald performed well,
maintaining its Monday to Friday circulation over the period, with a slight
increase for the re-designed Saturday Herald. The Evening Times showed a
5per cent fall in circulation overall.  The evening newspaper market
continues to lose circulation, however we remain committed to slowing the
rate of decline through investing in editorial improvements.

We have again succeeded in improving margins, excluding the start-up losses
of the Sunday Herald, to 28per cent (1998: 25per cent) through a combination
of our continued focus on cost-management, reductions in the price of
newsprint and increased productivity.

In February, the Group launched the Sunday Herald to a receptive market.
Initial sampling boosted sales of the new title, as readers tried the
product for the first time, and sales have now settled above the planned
level.  With a core circulation of nearly 58,000, we have a strong platform
from which to reach new readers and advertisers and with continued support
and ongoing editorial development, we are confident the Sunday Herald will
meet its challenging first year targets.

Magazines

Our stable of magazines has continued to improve its overall contribution to
the Group, growing turnover by 38per cent to £3.3 million, and the
integration of acquired titles allowed us to further enhance the efficiency
of this operation.

We continue to grow our magazines business through selective, value-
enhancing acquisitions and in January 1999, Boxing News joined the Group and
is already making a healthy contribution to profits.  In July we acquired
the trade magazines, Independent Community Pharmacist and Independent
Electrical Retailer, and we are in the process of integrating these into our
magazines business.

Electronic Publishing

Our electronic publishing business, Delphic Interactive, was formed from the
merger of our existing internet business, Voice, with Delphic Media and
Communications last year, and in June we took full control through the
acquisition of the minority holding.  Delphic now has annualised turnover of
more than £2.0 million and has reached break-even.  Its position as a high
quality provider of Internet, CD ROM  and e-commerce services to blue-chip,
global companies, provides us with a strong position in this fast-developing
sector.

Corporate Development

Development of our core businesses, through initiatives such as the Sunday
Herald and S2, is a central part of our strategy to build a successful,
customer-focused, national media group based around well-branded assets. We
also believe value can be added for shareholders by expanding the group
geographically, within the information and entertainment sectors,
principally through carefully selected and well-executed acquisitions.

GMTV

The commercial breakfast channel GMTV, in which Scottish Media Group has a
20per cent shareholding, renewed its licence earlier this year on
significantly better terms.  Having reviewed the potential of our
investment, we have identified good prospects for the business and have
tabled proposals with our co-shareholders with a view to increasing our
shareholding in the channel.  Given GMTV's improved performance and our
intention to remain shareholders, we have re-commenced equity accounting for
this investment from 1 January 1999, which has necessitated taking a one-off
exceptional charge to account for historic losses.

Outdoor

In March, the Group took its first significant step outside Scotland into
the fast-growing outdoor advertising sector.  The acquisition of London-
based six-sheet specialist, Primesight plc for £35.8 million was
supplemented the following month by the addition of a privately-owned
Scottish outdoor advertising company in order to upweight its presence north
of the border.  These businesses have now been integrated to form the
Group's Outdoor Division.

Since acquisition, the Outdoor Division has performed in line with
expectations, making a healthy contribution to overall profits, and creating
a number of cross-media opportunities for the Group in Scotland.  We have
also invested in the refurbishment of existing sites, where appropriate, and
expanded our total inventory of six sheet sites to over 7,000.

Cinema

Cinema advertising has good growth potential, a high quality image and the
ability to capture young, affluent audiences.  In June, we acquired 98.6per
cent of Pearl and Dean Cinemas for £22.4 million.  It is one of the best-
known brands in British advertising and brings a second national and
complementary business into the Group.

While consolidated for only one month, Pearl and Dean has already displayed
the potential to make a meaningful contribution to the Group's overall
performance, buoyed by the box office success of the film, Notting Hill.
The popularity of the new Star Wars blockbuster, released in July, has
boosted the performance of the Group's new Cinema Division and we already
expect it to exceed our initial forecasts for 1999.

Hearts Football Club

Among the strongest brands in the UK media and entertainment sectors are
those of football clubs, and today (Monday, 6 September) we announced an £8
million investment in Heart of Midlothian plc ('Hearts') who compete in the
Scottish Premier League. This partnership draws on the strengths of both
Hearts and the Group.  Hearts' brand is valuable, but underdeveloped, while
Scottish Media Group brings with it significant expertise in marketing and
media.  These funds will be committed to youth development and stadium
improvements, as well as enhancing the club's player pool.  This will assist
the club in maximising its potential revenue from gate receipts, television
and other associated sources of income, to the benefit of all shareholders.
While an excellent investment opportunity in its own right, the Group will
also benefit through co-operating with Hearts in such areas as outdoor
advertising, publishing, video production and the marketing of club
merchandise.

Year 2000

The potential impact on computerised systems from the change to the year
2000 has been well-documented and the Group has taken appropriate steps to
update or replace systems which could have been affected.  This work is
substantially complete and we are satisfied that all reasonable steps have
been taken to protect the continuity of our operations as we enter 2000,
including the preparation of robust business continuity plans which, should
any unforeseen incident occur, will safeguard ongoing business operations.

Board

It is a privilege for me to become non-executive chairman of this dynamic
and well-managed company.  I and my fellow directors are grateful to our
deputy chairman, Calum MacLeod, for his stewardship of the Scottish Media
Group board in the intervening months between the resignation of Lord
Macdonald of Tradeston and my appointment.

Scottish Media Group is going through a period of significant and rapid
development, and there has been a number of changes at board level this year
which reflect the evolving profile of the company.

Sir Gavin Laird has decided to retire from the Board this Autumn after 13
years as a director of the company and I know from my co-directors that his
contribution will be greatly missed.  On behalf of the Board I record our
sincere thanks for his service.

Since the AGM, Stephen Cook, a director of Flextech plc, one of our major
shareholders, has joined as a non-executive director, and I take this
opportunity to welcome him to the Board.

Prospects

As concerns over a downturn in the UK economy recede, we believe prospects
for the advertising market are improving.  The second half has started well,
with ITV continuing to progress and recruitment advertising showing signs of
renewed growth.  For this year, the final effect of the loss of the Channel
4 rebate and the costs of launching the Sunday Herald and S2 are
substantial, but the underlying performance of our businesses remains strong
and I am confident that we will build on our 1998 performance.

Since my appointment, I have reviewed Scottish Media Group's existing
operations and analysed with senior management the Group's long term
strategy and plans for future development. I have found the company
financially strong and extremely well-placed to exploit the opportunities
which exist within information and entertainment, and I look forward to
supporting management in achieving these plans for the further benefit of
shareholders.

Don Cruickshank
Chairman

6 September, 1999

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