Interim Results

RNS Number : 6546R

STV Group PLC

26 August 2010

 



7am, Thursday 26 August

STV Group PLC

("STV")

 

Interim results for the six months ended 30 June 2010

Scotland's digital media company

STV DELIVERS STRONG RESULTS

STV has delivered a strong set of results for the first half as airtime market recovery, digital strategy growth and restructuring of the business feed through to benefit core financials. The significant upturn in airtime revenue combined with continuing cost controls has contributed to an improved performance combined with a strong uplift in Broadcasting margins.  Performance growth in all other areas of the business is being delivered and the strong trading position has enabled accelerated investment in key areas including High Definition services and digital initiatives including STV Local.

	STV (continuing)		Group
	H1 2010	H1 2009	H1 2010	H1 2009
Turnover	£50m	£42m	£57m	£49m
EBITDA*	£8m	£4m	£8m	£3m
Operating profit*	£7m	£3m	£7m	£2m
Pre-tax profit*			£6m	£1m
EPS*			16.0p	1.6p
Net Debt			£61m	£56m

*pre-exceptional items

The disposal of non-core business Pearl & Dean was completed on 14 May 2010.  The performance of Pearl & Dean is included within Group trading for the period until its disposal.

STV (continuing) refers to the core business.

 

Highlights

 

–   Turnover up 20% at £50m

–   EBITDA pre-exceptionals up 98% at £8m

–   Operating profit pre-exceptionals up 146% at £7m

–   Operating margins up from 4.5% to 12.2%

–   Broadcasting turnover up 21% at £44.2m; turnover in Content business up 24% at £3.6m and digital revenues up 60% at £1.6m

–   Relentless focus on KPIs which are broadly on track

–   Quarter 3 outlook continues to be strong; however, with continuing economic uncertainty we remain cautious in the longer term

 

Strategic developments

 

–   Disposal of remaining non-core legacy business, Pearl & Dean, completed May 2010

–   In line with our digital strategy to become the leading provider of local online services, we have accelerated investment in STV Local, a network of community based hyper-local websites

–   As we successfully build our brand across platforms, our digital initiative – STV Anywhere - has been strengthened through a global distribution deal signed with YouTube, supplying 2,500 hours of STV branded programming to the YouTube platform and providing a basis for similar deals for STV VOD content

–   Supporting our growth plans for the Content business, we have agreed an innovative format exploitation deal with US production company, Kinetic Content and successfully secured key commissions from a range of broadcasters, including a second series of Antiques Road Trip for BBC2, Missing Mums for Sky Real Lives and Taggart for ITV1 and UKTV.

 

 

Richard Findlay, Chairman, said:

"These results indicate the growing power of the new STV. At the heart of the business is first class creative content delivered to different audiences across multiple platforms. We have a clear strategy that is attracting audiences to our increasing range of platforms. Our investment in STV Local highlights our commitment to digital innovation and we are excited about the opportunity this network will create to continue to enhance the level of local media STV provides to our audiences. STV is a growth business."

Rob Woodward, Chief Executive Officer, said: 

"We have made great strides in our business over the last six months. We have continued to enhance our creative talent and invest in digital skills. We have a strong line up of programmes for the remainder of the year and we continue to execute innovative deals with industry leaders to grow our business in line with our growth strategy.  However, whilst there is an improvement in the market, we nevertheless remain cautious about the future macro economic climate."

26 August 2010

There will be a presentation for analysts at the offices of RBS Hoare Govett, 250 Bishopsgate, London EC2 today at 9.30am.

Enquiries:

STV Group Plc
Rob Woodward, Chief Executive	0141 300 3670
George Watt, Chief Financial Officer
Kirstin Stevenson, PR Manager
College Hill	020 7457 2020
James Hogan
Matthew Smallwood
Jamie Ramsay

Operational Review

Broadcasting

The bounce back in advertising revenue during H1 has improved significantly the Broadcasting division's results with turnover up 21% at £44m and operating profit doubling to £8m.  STV continues to be Scotland's most popular peak time TV station, with a share of 21.3%.

We have continued to create and deliver a strong schedule relevant for Scottish audiences, incorporating over 90% network material, such as Britain's Got Talent and Coronation Street; some carefully selected acquisitions, including two series of the hugely popular Australian crime drama Underbelly; and key home-grown productions, such as Lorraine Kelly's Missing Mums and The Football Years.  The success of this strategy is reflected in our share of peak time viewing, which broadly tracks network performance; and the cost savings that have been delivered.

STV has invested in its first High Definition service, launching our STV HD channel on DTT and Virgin Media in June 2010.  This £1m plus capital expenditure and significant ongoing operational cost represents a clear statement of intent by the Group on distributing our content on all available platforms.  This investment programme has been accelerated during the first half as a result of the positive impact of the upturn in advertising revenue.

Our Sales and Commercial team continues to offer innovative integrated advertising solutions for clients across on-air and online opportunities.  Their innovative approach has secured 86 new STV airtime advertisers for H1 2010.  The team also secured key brand names as sponsors in H1, including Scottish Power, AG BARR Soft Drinks, Golden Wonder, Scottish Leader, News of the World and Specsavers, proving that sponsorship remains a key revenue driver for our Sales team.  During 2010, an increasing number of advertisers have sought integrated, cross-platform campaigns promoted through our ground breaking social marketing initiative. 

Broadcasting outlook

	Q3	YTD	October
TV Market	+17%	+16%	+5% to +10%
STV National	+15%	+24%	+5% to +10%
STV Regional	-9%	Flat	-5% to flat
Total STV airtime revenues	+10%	+17%	+5% to +10%

Content

Creative and innovative content is at the heart of our business and the first half of 2010 has seen the delivery of further exciting strategic partnership deals and key commissions for STV:

-     In February 2010, we announced the co-commission of Taggart with ITV and UKTV and 6 x 1 hour episodes are now in post-production, with a Scottish premiere on STV this autumn;

 

-     Following the outstanding viewing figures and popularity of the first series, BBC2 commissioned a second series of successful pre-primetime series, Antiques Road Trip, which is currently in post-production;

 

-     Our commission, Missing Mums, with Lorraine Kelly has proven to be a ratings winner for Sky Real Lives, with the first programme delivering an audience share over 300% up on the slot average for the channel;

 

-     Following the strong ratings and success of our acquisition, Underbelly, STV has now launched Underbelly Series 2, confirming strong popular drama as a key part of our schedule;

 

-     STV gained exclusive access to golf legend Jack Nicklaus for a one-off, RBS sponsored programme this summer; and we launched the second series of fully-funded quiz show, Postcode Challenge, with People’s Postcode Lottery on board once again as sponsor;

 

-     STV recently announced an innovative format deal and joint venture with US production company, Kinetic Content, which will see the companies exclusively license each other’s original formats in our respective countries. This high profile deal marks the beginning of STV’s ambitions to have an active presence in the US content market.

To support the growth strategy of the Content business, we confirm that Liam Hamilton will join the business later this year as Deputy Director of Content.  Liam's joins us from DCD Media and was previously Head of Daytime at ITV. His commercial background and successful track record across the content sector will enhance our development team in the delivery of growth targets for our Content business.

Ventures

Our digital business is key to our growth strategy and we have developed key partnerships and initiatives during 2010.

Our website, stv.tv, continues to be the most popular commercial media website in Scotland.  Our average monthly unique user figures for H1 have risen by 109%, from 0.7m to 1.6m, compared with H1 2009; and the number of monthly page views has doubled year-on-year, from 17m to 35m.  We have also seen average monthly video views of over 700k per month for 2010, up 76% on last year.  Growth in traffic to the site continues and we will meet our traffic KPI in 2010.

In February, we announced a new two year TV distribution deal with interactive gaming company, NetPlay.  STV now broadcasts NetPlay programming seven nights a week, providing us with a new source of revenue generation, and programming which is popular with late night viewers.

In May 2010, STV launched the STV News iPhone App, making the popular news service available to the 50 million iPhone users across the world.  The free application is part of STV's progressive digital strategy to make our content available, anytime, anywhere.

In June, we agreed an important content deal with YouTube, which will see STV make over 2,500 hours of content, both new and archive, available for viewing via the YouTube video sharing website across the UK and internationally. This site is now live and can be visited at http://www.youtube.com/STVPlayer 

We are accelerating our investment in our significant online and mobile initiative, STV Local, launching the first pilot area in September.  During the second half of 2010 and into 2011, STV Local, working with local content partners, will launch 'must visit' hyper-local websites for local communities across Scotland.  STV has recruited a high calibre staff to work in the business but will also incorporate user generated content, making STV Local a truly interactive experience, at the heart of our digital strategy.

Non-Core Business Update

In May, we announced the sale of Pearl & Dean, which represented the final step in the Board's plan to dispose of inherited legacy businesses and to refocus the Group on its core media business.  An exceptional loss on sale of £1.5m is included in the H1 result and as expected the deal's cash impact in the current financial year is broadly neutral compared to continued ownership of Pearl & Dean.

Regulatory

The recent change in Government presents an opportunity to review the regulatory landscape and we are looking forward to engaging with the Government as it develops its proposals to reform regulation and increase the provision of local media.

We remain committed to delivering a relevant local news service to viewers in Scotland and are currently reviewing options to continue to deliver this valued service on a commercially sustainable basis. 

There is no material change since our last trading update on the legal proceedings against ITV.  Dates have been set for court hearings for both STV's claim against ITV plc and ITV Network in respect of new media rights and for the financial claim raised by ITV plc and ITV Network and STV's counter claim on airtime sales.

Looking Forward

Having disposed of our final legacy business in H1, STV is now completely focussed on our core content, broadcasting and digital business.  We are a new and revitalised organisation.  The turnaround initiated over three years ago has seen STV emerge as a lean, dynamic and innovative growth business, developing key groundbreaking partnerships.  However, whilst we see an improvement in the markets, we remain cautious going forward but enthusiastic and confident in our abilities to deliver sustained growth as Scotland's digital media company.

APPENDIX

Appendix 1 - KPI UPDATE

	2010 target	Position at Interim	2011 target	2012 target
Broadcasting
1. Increase regional advertising market share	25% share	On track	26% share	27% share
2. Peak time audience v ITV Network	To be in line with the Network	On track	To be in line with the Network	To be in line with the Network
3. Increase broadcast margin	10%	Over performing	12.5%	14%
Content
4. Production hours	110 hours	On track	130 hours	150 hours
5. Value of external commissions	£11.2m	On track	£16.8m	£21.0m
6. Content margin	10% (min)	On track	10% (min)	10% (min)
Ventures
7. Unique users per month (Q4 monthly average)	1.7m	On track	1.9m	2.1m
8. Page impressions per month (Q4 monthly average)	6.7m	On track	8.0m	8.8m
9. Digital revenue value	£5.2m	On track	£7.3m	£9.1m
10. Video streams per month (Q4 monthly average)	1.0m	On track	1.2m	1.4m
11. Ventures margin	25%	Under performing	30%	35%

Condensed consolidated income statement Six months ended 30 June 2010
			Six months 2010			Six months 2009
			Underlying results	Exceptional items	Results for period	Underlying results	Exceptional items		Results for period
			£m	£m	£m	£m	£m		£m
Note			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)
CONTINUING OPERATIONS
Revenue		3	49.7	-	49.7	41.5	-		41.5
Net operating expenses before exceptional costs			(42.8)	-	(42.8)	(38.7)	-		(38.7)
Litigation matters		5	-	(1.0)	(1.0)	-	-		-
Pension service credit		5	-	-	-	-	4.3		4.3
Net operating expenses			(42.8)	(1.0)	(43.8)	(38.7)	4.3		(34.4)
Operating profit			6.9	(1.0)	5.9	2.8	4.3		7.1
Interest income			0.2	-	0.2	0.3	-		0.3
Finance costs	- borrowings	6	(1.3)	(1.5)	(2.8)	(0.9)	-		(0.9)
	- IAS 19 pension	6	0.2	-	0.2	(0.9)	-		(0.9)
			(0.9)	(1.5)	(2.4)	(1.5)	-		(1.5)
Profit before tax			6.0	(2.5)	3.5	1.3	4.3		5.6
Tax charge		8	-	-	-	(0.1)	(1.2)		(1.3)
Profit for the period from continuing operations			6.0	(2.5)	3.5	1.2	3.1		4.3
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations		7	-	(1.5)	(1.5)	(0.6)	(3.1)		(3.7)
Profit for the period			6.0	(4.0)	2.0	0.6	-		0.6
Earnings per ordinary share
-  basic and diluted		9	16.0p		5.3p	1.6p			1.6p
Earnings per ordinary share from continuing operations
-  basic and diluted		9	16.0p		9.3p	3.3p			11.8p

Condensed consolidated statement of comprehensive income Six months ended 30 June 2010	6 months 2010	6 months 2009
	£m	£m
	(Unaudited)	(Unaudited)
Profit for the period	2.0	0.6
Other comprehensive income:
Actuarial loss on defined benefit pension schemes	(16.5)	(17.9)
Deferred tax credit	4.6	4.8
Other comprehensive expense for the period	(11.9)	(13.1)
Total comprehensive expense for the period	(9.9)	(12.5)

The above condensed consolidated income statements should be read in conjunction with the accompanying notes.

Condensed consolidated balance sheet
As at 30 June 2010
		30 June	31 December	30 June
		2010	2009	2009
	Note	£m	£m	£m
		(Unaudited)	(Audited)	(Unaudited)
ASSETS
Non-current assets
Property, plant and equipment	10	10.7	12.1	12.9
Goodwill and other intangible assets		8.0	8.2	8.2
Deferred tax asset		16.4	11.8	16.0
		35.1	32.1	37.1
Current assets
Inventories		43.7	47.0	35.5
Trade and other receivables		25.9	22.4	20.3
Cash and cash equivalents		10.7	14.3	5.1
Short-term bank deposits		0.3	0.5	0.8
		80.6	84.2	61.7
Assets classified as held for sale	7	-	12.1	30.0
Total assets		115.7	128.4	128.8
EQUITY
Capital and reserves attributable to the equity holders of the parent
Share capital		19.2	18.3	18.3
Share premium		111.4	111.3	111.3
Merger reserve		173.4	173.4	173.4
Other reserve		0.6	0.5	0.5
Retained losses		(345.9)	(335.4)	(333.3)
Total equity		(41.3)	(31.9)	(29.8)
LIABILITIES
Non-current liabilities
Borrowings	11	63.8	-	65.2
Trade and other payables		1.2	1.2	-
Provisions		3.1	3.7	1.6
Retirement benefit obligation	15	48.6	36.0	45.0
		116.7	40.9	111.8
Current Liabilities
Borrowings	11	7.9	67.5	-
Trade and other payables		30.6	28.7	14.3
Tax liabilities		0.7	0.9	5.9
Provisions		1.1	1.1	2.3
		40.3	98.2	22.5
Liabilities directly associated with assets classified as held for sale	7	-	21.2	24.3
Total liabilities		157.0	160.3	158.6
Total equity and liabilities		115.7	128.4	128.8

The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.

Condensed consolidated statement of changes in equity Six months ended 30 June 2010
	Equity attributable to equity holders of the parent
	Share  capital	Share premium	Merger reserve	Other reserve	Retained Earnings	Total Equity
	£m	£m	£m	£m	£m	£m
Balance at 1 January 2010	18.3	111.3	173.4	0.5	(335.4)	(31.9)
Net profit for the period	-	-	-	-	2.0	2.0
Actuarial loss	-	-	-	-	(16.5)	(16.5)
Deferred tax thereon	-	-	-	-	4.6	4.6
Total comprehensive expense for the period	-	-	-	-	(9.9)	(9.9)
Own shares issued and acquired	0.9	0.1	-	-	(1.0)	-
Own shares awarded	-	-	-	-	0.4	0.4
Equity settled share based payments	-	-	-	0.1	-	0.1
Balance at 30 June 2010 (unaudited)	19.2	111.4	173.4	0.6	(345.9)	(41.3)
Balance at 1 January 2009	18.0	111.3	173.4	0.7	(320.5)	(17.1)
Net profit for the period	-	-	-	-	0.6	0.6
Actuarial loss	-	-	-	-	(17.9)	(17.9)
Deferred tax thereon	-	-	-	-	4.8	4.8
Total comprehensive expense for the period	-	-	-	-	(12.5)	(12.5)
Own shares acquired	0.3	-	-	-	(0.3)	-
Equity settled share based payments	-	-	-	(0.2)	-	(0.2)
Balance at 30 June 2009 (unaudited)	18.3	111.3	173.4	0.5	(333.3)	(29.8)

The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Condensed statement of consolidated cash flows
Six months ended 30 June 2010
				6 months	6 months
				2010	2009
			Note	£m	£m
				(Unaudited)	(Unaudited)
OPERATING ACTIVITIES
Cash used by operations			14	(3.5)	(10.0)
Interest paid				(2.3)	(1.7)
Pension deficit funding	- 18 year recovery plan payment			(3.7)	(3.9)
	- One off disposal proceeds contribution			-	(4.0)
Net cash used by operating activities				(9.5)	(19.6)
INVESTING ACTIVITIES
Interest received				0.1	0.2
Purchase of property, plant and equipment				(0.4)	(0.3)
Net cash used by investing activities				(0.3)	(0.1)
FINANCING ACTIVITIES
Net borrowings drawn				2.9	11.6
Net cash generated by financing activities				2.9	11.6
Net decrease in cash and cash equivalents				(6.9)	(8.1)
Net cash and cash equivalents at beginning of period				17.6	16.4
Net cash and cash equivalents at end of period				10.7	8.3

Although not required under IFRS the directors have provided the following reconciliation of net debt for further clarity.  The net debt represents Group borrowings less cash and cash equivalents and short term deposits.

Reconciliation of movement in net debt
		6 months	6 months
		2010	2009
		£m	£m
Opening net debt		(49.4)	(36.4)
Net decrease in cash and cash equivalents in the period		(6.9)	(8.1)
Net movement in debt financing		(4.2)	(11.4)
Net movement in Escrow cash		(0.2)	(0.2)
Closing net debt		(60.7)	(56.1)

Notes to the condensed set of financial statements

Six months ended 30 June 2010

1.   Basis of preparation

This condensed consolidated interim financial information comprises the unaudited interim results for the six months to 30 June 2010 and 30 June 2009, together with the audited consolidated balance sheet as at 31 December 2009 (hereinafter referred to as "financial information"). 

This financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard (IAS) 34, 'Interim financial reporting' as adopted by the European Union. 

The condensed consolidated interim financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2009 which have been prepared in accordance with International Financial Reporting Standards (IFRS's) as adopted by the European Union.

This financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2009 were approved by the Board of Directors on 25 February 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2.   Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2009.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards, amendments to standards or interpretations are mandatory for the first time for accounting periods beginning on or after 1 January 2010.  They either were not relevant for the Group or had no material impact on the financial statements of the Group.

		Effective date
IFRS 3 (revised)	Business combinations	1 January 2010
IAS 27 (amended)	Consolidated and separate financial statements	1 January 2010
IAS 28 (amended)	Investments in associates	1 January 2010
IAS 31 (amended)	Interests in joint ventures	1 January 2010
IFRIC 17	Distribution of non-cash assets to owners	1 January 2010
IFRIC 18	Transfers of assets to customers	1 January 2010
IFRS 1 (amendment)	Additional exemptions for first-time adopters	1 January 2010

3.   Business segments

The Group's Chief Executive, the chief operating decision maker, considers the business primarily from a product perspective. Under IFRS 8, the reportable segments are therefore Broadcasting, Content, Ventures and Cinema advertising (Cinema). 

The performance of the segments is assessed based on a measure of adjusted operating profit.  This measurement basis excludes the effects of exceptional items such as restructuring costs.

The Group put its Cinema business up for sale on 13 September 2006 and the completion of the disposal occurred on 14 May 2010.

SEGMENT REVENUES

					External sales
					6 months 2010	6 months 2009
					£m	£m
Continuing operations
Broadcasting					44.2	36.6
Content					3.6	2.9
Ventures					1.9	2.0
Television					49.7	41.5
Discontinued operations
Cinema					6.9	7.3
					56.6	48.8

SEGMENT RESULTS

	Underlying segment result			Exceptional items		Segment result
	6 months 2010		6 months 2009	6 months 2010	6 months 2009	6 months 2010	6 months 2009
	£m		£m	£m	£m	£m	£m
Continuing operations
Broadcasting	7.9		3.9	(1.0)	-	6.9	3.9
Content	(1.0)		(1.1)	-	-	(1.0)	(1.1)
Ventures	-		-	-	-	-	-
Television	6.9		2.8	(1.0)	-	5.9	2.8
Exceptional pension service credit attributable to Group						-	4.3
Operating profit						5.9	7.1
Financing						(0.9)	(1.5)
Exceptional financing costs						(1.5)	-
Profit before tax						3.5	5.6
Tax charge						-	(1.3)
Profit for the period from continuing operations						3.5	4.3
Discontinued operations
Cinema	-		(0.6)	-	(4.3)	-	(4.9)
Tax charge	-		-	-	1.2	-	1.2
	-		(0.6)	-	(3.1)	-	(3.7)
Loss on disposal of discontinued operations						(1.5)	-
Loss for the period from discontinued operations						(1.5)	(3.7)
Net profit attributable to equity shareholders						2.0	0.6

In 2010, the exceptional item in Broadcasting of £1.0m relates to the legal costs to date of litigation with ITV Network and ITV plc.

In 2009, the exceptional item in Cinema of £4.3m related to an increase in the Vue onerous contract provision reflecting weaker than anticipated trading.

Operations in the interim period

In line with the UK advertising market as a whole, the autumn season provides the Group with the highest level of revenues.  However, with second half investments in areas such as HD and STV Local operating profits will be more evenly spread across the year.

4.   Exceptional items

Litigation matters

As was disclosed in our 2009 Annual Report, ITV plc and other ITV entities launched a claim against STV Group and subsidiaries for £15-£20m (net) primarily in relation to opt-out programming.  STV is vigorously defending this claim and in addition has launched further counter claims.  The £1.0m exceptional represents legal costs incurred to 30 June 2010 in respect of these claims.

Pension service credit

A past service pension credit of £4.3m was recognised in the six months to June 2009 in relation to changes made to the Scottish and Grampian Television Retirement Benefit Scheme.

Finance costs

A loss on extinguishment of debt of £1.5m was recognised in the six months to June 2010.  On 3 February 2010, the Group renegotiated its banking facilities in part to enable a disposal of Pearl & Dean and the £1.5m loss represents the write off of unamortised fees in respect of the original debt obligations.

5.   Finance costs

	6 months	6 months
	2010	2009
	£m	£m
Bank borrowings	1.3	0.9
Pension finance (credit)/charge	(0.2)	0.9
Finance costs excluding exceptional items	1.1	1.8
Exceptional finance costs (see note 5)	1.5	-
Finance costs	2.6	1.8

6.   Discontinued operations

On 14 May 2010, the disposal of the Group's cinema business, Pearl & Dean completed.

	6 months	6 months
	2010	2009
	£m	£m
Post tax results from discontinued operations	(1.5)	(3.7)

Exceptional items included within the results are as follows:

Loss on disposal of discontinued operations

On 14 May 2010, the Group completed the sale of its Cinema business, Pearl & Dean Limited, to Image Ltd ("Image") for a gross cash consideration of £1 resulting in a loss on disposal of £1.5m.   Pearl & Dean paid the 2010 minimum income guarantee of £17.6m to Vue Cinemas by way of an intercompany loan from STV.  As part of the deal agreed with Image, Pearl & Dean will repay the portion of this loan relating to the period from 1 May 2010 to 31 December 2010 amounting to £9.1m.   The first repayment of £2.5m was received upon completion, further payments of £0.7m were received to 30 June 2010 and further monthly payments will be made to repay the remaining loan balance.

Onerous contract provision

A further £4.3m was provided in the six months to June 2009 to cover future losses expected from the Vue contract within the Cinema division.

Cash flows from discontinued operations

	6 months	6 months
	2010	2009
	£m	£m
Net cash flows from operating activities (note 14)	(13.9)	(12.7)

The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:

	June 2010	December 2009	June 2009
	£m	£m	£m
Property, plant and equipment	-	-	0.1
Trade and other receivables	-	8.8	21.8
Cash and cash equivalents	-	3.3	3.2
Tax	-	-	4.9
Total assets classified as held for sale	-	12.1	30.0
Trade and other payables	-	6.9	6.1
Provisions for liabilities and charges	-	14.3	18.2
Total liabilities associated with assets classified as held for sale	-	21.2	24.3
Net liabilities of disposal group	-	(9.1)	5.7

7.   Tax

	6 months	6 months
	2010	2009
	£m	£m
The charge for tax on continuing operations is as follows:
Tax on profit on ordinary activities excluding exceptional items at 0% (30 June 2009: 10%)	-	0.1

The effective tax rate for the Group excluding exceptional items is 0% (30 June 2009: 10%). The tax charge is lower than the standard rate of 28% due to adjustments for prior year provisions and certain tax planning initiatives.

In the 2010 Budget on 22 June 2010, the UK Government announced its intention to reduce the UK Corporation Tax rate from 28% to 24% by 1% per annum over a four-year period. At 30 June 2010 no change in the rate of tax had been substantively enacted.

Had the change of rate to 27% been substantively enacted as of the balance sheet date, the deferred tax asset included within the accounts would have been reduced by approximately £0.5m.

Earnings per share

		6 months 2010	6 months 2009
		£m	£m
Underlying EPS:
	Basic EPS
	Earnings attributable to ordinary shareholders	6.0	0.6
	Weighted average number of shares in issue	37.6m	36.4m
	EPS	16.0p	1.6p
	EPS from continuing operations
	Basic earnings	6.0	0.6
	Pre-tax loss/(profit) from discontinued operations	-	0.6
	Basic underlying earnings from continuing operations	6.0	1.2
	Weighted average number of shares in issue	37.6m	36.4m
	EPS	16.0p	3.3p
EPS including exceptional items:
	Basic EPS
	Earnings attributable to ordinary shareholders (including exceptional items)	2.0	0.6
	Weighted average number of shares in issue	37.6m	36.4m
	EPS	5.3p	1.6p
	EPS from continuing operations
	Basic earnings	2.0	0.6
	Pre-tax loss from discontinued operations	1.5	4.9
	Tax relating to discontinued operations	-	(1.2)
	Basic earnings from continuing operations	3.5	4.3
	Weighted average number of shares in issue	37.6m	36.4m
	EPS	9.3p	11.8p
EPS from discontinued operations:
	Basic EPS
	Pre-tax (loss)/profit from discontinued operations	(1.5)	(4.9)
	Tax relating to discontinued operations	-	1.2
	Basic earnings from discontinued operations	(1.5)	(3.7)
	Weighted average number of shares in issue	37.6m	36.4m
	EPS	(4.0p)	(10.2p)

There is no difference between basic and diluted EPS as there is no material impact from dilutive share options.

8.   Property, plant and equipment

During the six months to 30 June 2010, the Group has incurred expenditure of £0.4m on fixed assets

(£1.0m to 31 December 2009; £0.3m to 30 June 2009).

At 30 June 2010 the Group had no commitments outstanding in respect of contracted capital expenditure (£nil at 31 December 2009; £nil at 30 June 2009).

Borrowings and loans

At 30 June 2010, borrowings of £71.7m consisted of a £55.0m term facility and a net £16.7m revolving facility (£25.0m and £42.5m respectively at 31 December 2009; £25.0m and £40.2m respectively at 30 June 2009).

9.   Share capital

During the six months to 30 June 2010 the Group acquired 1,617,301 of its new ordinary shares of 50p each which has resulted in a £0.9m increase in share capital and a £0.1m increase in share premium.   The shares were acquired for the employee share trust.

10.  Disposal of discontinued operations

As referred to in note 7, on 14 May 2010 the Group completed the disposal of its interest in Pearl & Dean. 

The net liabilities of Pearl & Dean at the date of disposal were as follows:

30 April 2010
	£m
Property, plant and equipment	0.5
Intangibles	0.2
Trade and other receivables	22.9
Trade and other payables	(4.3)
Working capital adjustment agreed as part of disposal	1.4
	20.7
Onerous contract provision released	(11.9)
Loan due to STV Group plc	(9.1)
	(21.0)
Net liabilities	(0.3)
Disposal expenses	1.8
Loss on disposal	(1.5)
Total consideration	-
Net cash flow arising on disposal:
Cash consideration	-

11.  Notes to cash flow statement

	6 months	6 months
	2010	2009
	£m	£m
Continuing operations
Operating profit  (before exceptional items)	6.9	2.8
Depreciation and other non-cash items	1.4	1.4
Operating cash flows before exceptional items and movements in working capital	8.3	4.2
Decrease in inventories	3.3	6.4
(Increase)/decrease in trade and other receivables	(2.2)	3.7
Increase/(decrease) in trade and other payables	1.5	(10.1)
Onerous property costs	(0.5)	(1.5)
Cash generated by continuing operations	10.4	2.7
Discontinued operations
Operating loss (before exceptional items)	-	(0.6)
Depreciation and other non-cash items	-	-
Operating cash flows before exceptional items and movements in working capital	-	(0.6)
Increase in trade and other receivables	(10.5)	(10.2)
(Decrease)/increase in trade and other payables	(2.6)	0.3
Onerous contract costs	(0.8)	(2.2)
Cash used by discontinued operations	(13.9)	(12.7)
Cash used by operations	(3.5)	(10.0)

12.  Retirement benefit schemes

The fair value of the assets in the schemes, the present value of the liabilities in the schemes and the expected rate of return at each balance sheet date was:

	At 30 June 2010		At 31 December 2009		At 30 June 2009
		£m		£m		£m
Equities	8.0%	123.0	8.0%	122.9	8.0%	106.1
Bonds	4.5%-5.7%	121.1	4.5%-5.7%	120.9	3.7%-6.6%	111.3
Fair value of schemes' assets		244.1		243.8		217.4
Present value of defined benefit obligations		(292.7)		(279.8)		(262.4)
Deficit in the schemes		(48.6)		(36.0)		(45.0)

A related offsetting deferred tax asset of £14.3m is shown under non-current assets.  Therefore the net pension scheme deficit amounts to £34.3m at 30 June 2010 (£25.7m at 31 December 2009; £32.0m at 30 June 2009).

13.  Litigation

There has been no material change from note disclosed in the 2009 Annual Report.

14.  Transactions with related parties

There has been no change from the 2009 Annual Report and no transactions with any related parties in the period to 30 June 2010.

15.  Availability

A copy of this statement is being sent to all shareholders on 13 September 2010 and will be available for inspection by members of the public at the Company's registered office at Pacific Quay, Glasgow, G51 1PQ.

 

Statement of directors' responsibility

The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

·      an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the  remaining six months of the financial year; and

·      material related-party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report.

The directors of STV Group plc are listed in the STV Group plc Annual Report for 31 December 2009.

By order of the Board

Jane Tames

Company Secretary

26 August 2010

Independent review report to STV Group plc

Introduction

We have been engaged by the Company to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2010, which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed statement of consolidated cash flowsand related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS's as adopted by the European Union. The condensed consolidated set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

The maintenance and integrity of the stv group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow

26 August 2010

 

END

 

 

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