STV Group plc Full Year Results 2015

RNS Number : 9388P

STV Group PLC

24 February 2016

 

                                                                                                                      Press Release

                                                                                      0700 hours, 24 February 2016           

STV Group plc Full Year Results 2015

Commercially focused

Creatively led

Financial Highlights	2015	2014	Year on year
Revenue	£116.5m	£120.4m	-3%
EBITDA*	£22.8m	£21.5m	+6%
Operating profit*	£20.3m	£19.5m	+4%
Pre-tax profit*	£19.1m	£17.3m	+10%
Adjusted EPS**	39.9 pence	36.3 pence	+10%
Statutory EPS	29.8 pence	38.7 pence	-23%
Net debt	£25.7m	£29.4m	-13%
Dividends per share	10.0 pence	8.0 pence	+25%

*Pre exceptional items and IAS19 interest

** Pre exceptional items and IAS 19 interest with a normalised tax rate of 20% (see note 19)

Highlights

·     Non-broadcast earnings at 22% compared to 11% in 2011

·      Fifth consecutive year of growth in pre-tax operating profit*

·     Double digit growth in pre-tax profit* up 10% to £19.1 million

·     Adjusted EPS** up 10% to 39.9 pence per share

·     Net debt down 13% to £25.7 million (below 1xNet Debt/EBITDA)

·     Digital revenues up 25% at £6.6 million and digital margins maintained above target level at 48%

Strategic Developments

·     Strategic growth aim of 10% CAGR in EPS** on track during 2014-2017

·     Dividend payment increased by 25% year on year with total 2015 dividend payment of 10.0 pence per share

·     Enhanced STV News digital product to launch March 2016

·     1 in 3 adults in Scotland registered with STV

Rob Woodward, Chief Executive Officer, said: "2015 returned a good performance for the Group with operating profit* above £20m for the first time in eight years generating steadily growing returns to shareholders and reducing net debt to its lowest level since the mid 1990s.

"Our investments and focus have put us in a strong position to deliver organic growth in the future and the increasing diversity of earnings improves the security of returns for our investors."

There will be a presentation for analysts at the offices of Peel Hunt, Moor House, 120 London Wall, London EC2Y 5ET today, 24 February 2016, at 12.30 pm.  Should you wish to attend the presentation, please contact Katie Martin, STV: [e-mail]  or telephone: [phone].

Enquiries:

STV Group plc

George Watt, Chief Financial Officer                              Tel: [phone]

Richard Holligan, PR & Communications Manager              Tel: [phone]

Charlotte Street Partners

Chris Sibbald                                                             Tel: [phone]

Operational Review

Introduction

At the beginning of 2015 the strategic aim to deliver a compound annual growth rate of 10% in adjusted EPS during the period 2014-2017 was announced underscoring the commitment to continue to create enhanced value and deliver returns to shareholders during the next phase of the company's growth strategy.

Supported by eleven KPI targets, good progress has been achieved against this strategy during 2015; building sustainable growth; creating further value for shareholders and strengthening the business to deliver growth and realise opportunities for further organic growth.

Overall, the Group delivered another year of growth in pre-exceptional profit before tax, adjusted earnings per share and cash generation whilst continuing to invest in key growth areas.  This included investment in the portfolio of digital products and STV Productions whilst absorbing start-up costs from the launch phase of the City TV channels.

Over one fifth of earnings have been derived from non-broadcast activities representing significant progress over the past five years when these activities represented only 11% of earnings.  This is behind the KPI target but reflects a stronger and more resilient core business than was forecast. Diversification to rebalance the business remains at the heart of the growth strategy for 2016 and beyond.

The growth of the non-broadcast business has been driven primarily by the continued development of the digital business.  This has now evolved into a core area of activity, delivering significant growth in revenues, up 25% year on year to £6.6m (2014: £5.3m), and operating margin ahead of target levels with 48% achieved (2014: 32%).

The KPI targets continue to provide strong operational focus across the Group.  Six of the eight KPI targets for the consumer business were met or exceeded or, in the case of the two KPIs with targets for the end of 2016, on track.

Due to below target commissions and deliveries for STV Productions, the two KPI targets for the business were not met.

STV Consumer

During 2015, over 56% of Scots interacted with at least three STV services every month as the STV Family of services has continued to be the focus of growth of the consumer business, building reach and deepening engagement with consumers.   

Targeted investment has been made in key growth areas during 2015.  In the consumer business, the next version of the STV Player was launched in the first half of 2015 and a significantly enhanced online STV News service has been the focus of product development activity and will launch in Q1 of 2016.  Investment has also been made in extending the STV Family through the growth of City TV.

Core channel, STV, continues to hold the position as Scotland's most watched commercial channel and, for the sixth consecutive year, achieved a peak-time audience share in excess of the Network, tracking 0.2 share points ahead.  STV reached 3.6m viewers per month and showed 44 of the top 50 most watched programmes on commercial television.

Consumer business revenues continued to increase, up 1% to £108.2m (2014: £107.1m).  National airtime revenues were up 1% at £79.3m (2014: £78.6m) and regional airtime sales continued to improve during the second half of the year to be up 6% at £12.5m (2014: £11.8m).  As confirmed in August 2015, the current Airtime Sales Agreement with ITV will expire at the end of this calendar year.  To ensure that all opportunities to maximise margins and revenues across the Consumer business are secured, a review of options to manage airtime and sponsorship sales is currently underway.  Under the provisions of the current arrangement with ITV, STV is legally entitled to receive terms similar and the review is being undertaken on that basis. 

The second of the City TV services, STV Edinburgh, was launched in January 2015 and across the year both City TV services achieved an average monthly reach of 30% of the available audience within their transmission areas.

Revenues generated from City TV increased by 66% year on year to £1.0m (2014: £0.6m). The services continue to be met with a positive response from advertisers with 130 new to television advertising and a number of these progressing to increase spend and advertise across other platforms in the STV Family, including STV.  

The recommendation made by Digital UK that the City TV channels should be able to move to Channel 8 on Freeview, following the move of BBC Three online, is welcomed.  We expect a decision on DUK's consultation process in the next week.

Licences have been secured to deliver three additional services, in Aberdeen, Ayr and Dundee, and the launch of these is planned for early 2017.  The City TV business remains on track to break even in 2017. 

The enhanced STV Player, which includes 'watch live' functionality, has continued to drive engagement and increase reach during 2015.  Long form video streams have increased by 14% and engagement levels continue to grow, with average time spent per user per day, up 15%.

The data and insights strategy is targeted at strengthening consumer engagement and developing innovative opportunities for advertisers and commercial partners to reach their target markets.  The KPI target was achieved with 1.6m individuals in our database, equivalent to 1 in 3 of the Scottish population, representing an increase of 60% year on year.

Segmentation of this data to provide advertisers with increased opportunities for targeting were introduced during 2015, initially with a geo-targeted offer, and this will be further developed during 2016.

STV Productions

STV Productions has continued to expand its customer base, securing commissions with new customers in the UK market whilst continuing to deliver returnable series in daytime and entertainment. Despite this progress, fewer commissions and lower deliveries than forecast have resulted in the growth targets for the business not being met.  As a result, the carrying value of goodwill related to this business has been written down by £5.1m.

The business achieved revenues of £8.3m (2014: £13.3m), down 38% year on year, and a margin of 5% (2014:3%), behind the target of 6%.  In 2015, the number of hours produced totalled 125 including in-house STV commissions.

Returning series commissions were secured with ITV for a fifth series of Catchphrase and the BBC committed to a two-year order for a twelfth series of Antiques Road Trip and a fifth series of Celebrity Antiques Road Trip.  In Q1 of 2016, a new commission has been secured with ITV2 for a second series of Safeword. 

The business also continues to build a reputation for the development of documentaries.  The 7/7 Bombing: Survivors Stories was aired on ITV and, in autumn 2015, Rollermania: Britain's Biggest Boy Band, aired on BBC Scotland and BBC Four.

A significant strategic development partnership with GroupM Entertainment, announced in August 2015, will provide STV Productions with scale to enter new markets and recognises the capabilities and potential of the highly talented team who are focused on delivering growth and continuing to build a leading content production business of scale.

Revenues secured so far for delivery in 2016 are above the level achieved for the whole of 2015 and the business has a strong pipeline of development activity.

Outlook

STV national airtime revenue is expected to be down 2% in Q1, slightly behind the broader television market. The regional market has performed strongly in Q1, up 32% year on year.

Digital revenues are up 25% in Q1 and this rate is expected to be maintained in the year ahead.

Financial Performance Review

Total revenue was down 3% at £116.5m (2014: £120.4m) principally due to a reduction in   STV Productions' revenues.

Consumer division revenues were up 1% at £108.2m (2014: £107.1m) with national airtime revenues up 1%, behind the broader television market, and regional airtime revenue up 6%, with a particularly strong second half performance. 

Digital revenues were up 25% at £6.6m (2014: £5.3m), below their KPI target level, with strong growth in VOD on the STV Player driving this growth trend.

STV Productions revenues amounted to £8.3m (2014: £13.3m) reflecting fewer commissions and lower deliveries.

Operating profit, before exceptional items, continued to increase, up 4% to £20.3m (2014:

£19.5m).  Consumer division operating profit increased to £19.9m (2014: £19.1m) and once again delivered margins ahead of the KPI target at 18.4% (2014: 17.8%).  This result is achieved after absorbing the initial start up losses of City TV which amounted to £1.0m (2014: £0.1m) but which will reduce in 2016 as the City TV business moves toward full break even in 2017. 

A major factor in growing the consumer division margin, despite the City TV losses, was the expansion of the digital margin from 32% to an above target 48%, driven by high margin STV Player growth.

STV Productions operating profit was flat at £0.4m (2014: £0.4m) despite the decline in the top line.

Profit before tax before exceptional items and IAS 19 interest increased by 10% to £19.1m (2014: £17.3m).

Finance borrowing costs reduced by £1.0m to £1.2m (2014: £2.2m) due to lower cash interest costs as net debt fell and the lower interest margin from the 2014 amendment and extension of the Group's bank facility impacted for a full year.  The IAS 19 non-cash pension finance charge amounted to £0.5m (2014: £nil).

There were four non-recurring, material events which have been classified as exceptional items in 2015 (2014: none) and had a net effect on profit after tax of £8.6m (2014: £nil). These included the goodwill writedown on STV Productions noted above (£5.1m), the H1 writedown of the Group's investment in Mirriad (£1.0m), a write-off of fixed assets related to City online services and redundant STV Player platforms (£1.0m) and costs related to management incentive plans (£1.7m). The combined tax impact from the latter three items was a credit of £0.2m. This was in part offset by the recognition of a deferred tax asset reflecting greater certainty over the use of the Group's available tax losses from prior years (£5.1m).

Net debt fell by a further 13% to £25.7m (2014: £29.4m) with the key net debt EBITDA ratio target of below 1.0x on a covenant basis at the year end being met.  The Group's measure of operating profit converted to free cashflow improved as anticipated in 2015 to 86% (2014: 79%), slightly below the ongoing 90% target due to working capital phasing.

Capital expenditure at £2.3m (2014: £5.0m) reduced to more normal levels in 2015 following significant investment in news equipment in the previous year.  The debt reduction is also after taking account of higher pension deficit funding payments (£7.8m) and increased dividend payments (£3.4m).

The principal movements on the Group's balance sheet were the reduction in net debt noted above, the reduction in the IAS19 pension deficit, goodwill movements and deferred tax.

The statutory result for the year after tax, exceptional items and IAS 19 interest was a profit of £11.4m (2014: £14.7m). 

The Group's effective tax rate increased to the standard rate of 20% (2014: 15%) and corporation tax payments are expected to resume in 2016.

EPS before exceptional items and IAS 19 interest with a normalised tax rate of 20% increased by 10% to 39.9p (2014: 36.3p).  On a statutory basis EPS amounted to 29.8p (2014: 38.7p).

Dividends

The proposed total dividend for 2015 is 10.0p per share, an increase of 25% on 2014 (8.0p).  During 2015, the final 2014 dividend of 6.0p per share was paid together with the interim dividend for 2015 of 3.0p per share.  A final dividend of 7.0p per share has been declared which, subject to approval at the AGM in April, will be paid on 20 May 2016 to shareholders on the register at 15 April 2016.

It remains the intention of the board to continue the progressive dividend policy in future years.

Pensions

The annual deficit funding contribution of £7.8m was paid to the defined benefit schemes in January 2016.  Discussions with the scheme trustees to settle the triennial valuation are at an advanced stage and it is expected a settlement will be agreed by the end of Q1.

Regulatory

The Group continues to be fully engaged with ongoing regulatory and public policy consultation and reviews, including the BBC Charter Review process; securing a new balance of payments structure between Public Service Broadcasters and Pay-TV operators; and achieving guaranteed prominence for Public Service Broadcasters on the Electronic Programme Guide.

Principal Risks and Uncertainties

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of STV Group plc. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

The Group set out in its 2014 Annual Report and Financial Statements the principal risks and uncertainties that could impact its performance.  These remain largely unchanged since the Annual Report was published.  The 2015 Annual Report is scheduled to be circulated to shareholders on 24 March 2016.

The Group has rigorous internal systems to identify, monitor and manage any risks to the business.

The main areas of potential risk and uncertainty are as follows:-

Regulatory environment

Our broadcast business is operated under licences, regulated by Ofcom, which contain conditions that must be adhered to and although measures have been put in place internally to ensure that this occurs, it is possible that these terms may inadvertently be breached and sanctions imposed by Ofcom, the most serious of which could be the withdrawal of the licences.

Dependence on advertising

STV's results could vary from period to period as a result of a variety of factors, some of which are outside STV's control, including general economic conditions. In response to the operating and competitive environment, STV may elect to make certain decisions that could have a material adverse effect on sales, results of operations and financial conditions.

Performance of the ITV Network

A significant amount of STV Consumer's programming content is provided by the ITV Network.  Therefore, its ability to attract and retain audiences and the advertising airtime sales performance of ITV's sales house - which is responsible for the sale of STV's UK national airtime to advertisers - are factors that affect the performance of STV Consumer and, therefore, the Group as a whole.

Pension scheme shortfalls

The STV pension schemes are relatively strong and the investment strategy is calculated to reduce any material market movement impacts, however, it is possible that the Group may be required to increase its contributions which could have an adverse impact on results and cash flow.

Financial risk

STV may be constrained by the Group's leverage and other debt arrangements. An increase in LIBOR interest rates would have an adverse impact on the financial position and business results.  STV is exposed to currency risk, credit risk, liquidity risk and cash flow interest rate risk. 

Rob Woodward

CEO, STV Group plc

    Appendix 1 - 2015 KPI Update

		2015 Actual	2015 Target
Group
1 Non broadcast EBIT share	22%		33%	Not met
Consumer
2  Peak time audience v ITV Network	+0.2 share points		To exceed Network	Exceeded
3 Consumer division margin	18.4%		17.5%	Exceeded
4 Consumer reach	Targets to                 end of 2016			All on track
5 Consumer engagement
6  Consumer insights	1.6m		1.6m	Met
7  Long form video streams	16.0m		18.0m	Not met
8  Digital revenues	£6.6m		£7.7m	Not met
9  Digital margin	48%		45%	Exceeded
STV Productions
10 Production revenue		£8.3m	£20.0m	Not met
11 Production margin		5%	6%	Not met

Consolidated income statement SYear ended 31 December 2015
				2015	2014
			Note	£m	£m
Revenue			6	116.5	120.4
Net operating expenses				(105.0)	(100.9)
Operating profit				11.5	19.5
Analysed as:
Operating profit before exceptional items				20.3	19.5
Exceptional items			7	(8.8)	-
Operating profit				11.5	19.5
Finance costs	- borrowings		8	(1.2)	(2.2)
	- IAS 19 pension		8	(0.5)	-
				(1.7)	(2.2)
Profit before tax				9.8	17.3
Tax credit/(charge)			9	1.6	(2.6)
Profit for the year				11.4	14.7
Earnings per share
Basic			10	29.8p	38.7p
Diluted			10	29.0p	37.6p

A reconciliation of the statutory results to the adjusted results is included at note 19.

Consolidated statement of comprehensive income SYear ended 31 December 2015
	2015	2014
	£m	£m
Profit for the year	11.4	14.7
Items that will not be reclassified to profit or loss:
Re-measurement losses on defined benefit pension schemes	(0.6)	(22.1)
Deferred tax (charge)/credit thereon	(0.2)	4.4
Other comprehensive expense	(0.8)	(17.7)
Total comprehensive income/(expense) for the year	10.6	(3.0)

Consolidated balance sheet
At 31 December 2015
		2015	2014
	Note	£m	£m
Non-current assets
Goodwill	12	2.8	7.9
Other intangible assets	13	1.7	1.6
Property, plant and equipment	14	7.6	8.8
Investments	15	0.7	1.2
Deferred tax asset		9.6	7.4
		22.4	26.9
Current assets
Inventories		19.2	18.3
Trade and other receivables		22.1	23.1
Cash and cash equivalents		13.7	19.8
		55.0	61.2
Total assets		77.4	88.1
Equity attributable to owners of the parent
Ordinary shares	16	19.6	19.6
Share premium	16	101.8	101.8
Merger reserve		173.4	173.4
Other reserve		0.9	0.6
Accumulated losses		(284.8)	(291.9)
Total equity		10.9	3.5
Non-current liabilities
Borrowings		39.4	49.2
Provisions		0.5	0.6
Retirement benefit obligations	18	7.8	14.9
Derivative financial instruments		0.1	0.2
		47.8	64.9
Current liabilities
Trade and other payables		18.4	19.3
Provisions		0.3	0.4
		18.7	19.7
Total liabilities		66.5	84.6
Total equity and liabilities		77.4	88.1

Consolidated statement of changes in equity Year ended 31 December 2015

Equity attributable to owners of the parent

	Ordinary  shares		Share premium	Merger reserve	Other reserve	Accumulated losses	Total equity
		£m	£m	£m	£m	£m	£m
Balance at 1 January 2015		19.6	101.8	173.4	0.6	(291.9)	3.5
Profit for the year		-	-	-	-	10.6	11.4
Other comprehensive expense		-	-	-	-	-	-
Total comprehensive income for the year		-	-	-	-	10.6	11.4
Own shares acquired		-	-	-	-	(0.9)	(0.9)
Equity-settled share based payments		-	-	-	0.3	-	0.3
Deferred tax credit on other post employment benefits		-	-	-	-	0.8	0.8
Dividends		-	-	-	-	(3.4)	(3.4)
Balance at 31 December 2015		19.6	101.8	173.4	0.9	(284.8)	10.9

	Ordinary  shares		Share premium	Merger reserve	Other reserve	Accumulated losses	Total equity
		£m	£m	£m	£m	£m	£m
Balance at 1 January 2014		19.5	112.0	173.4	0.3	(297.6)	7.6
Profit for the year		-	-	-	-	14.7	14.7
Other comprehensive expense		-	-	-	-	(17.7)	(17.7)
Total comprehensive expense for the year		-	-	-	-	(3.0)	(3.0)
Share premium reduction		-	(11.0)	-	-	11.0	-
Issue of share capital		0.1	0.8	-	-	-	0.9
Own shares acquired		-	-	-	-	(0.9)	(0.9)
Value of employee services		-	-	-	-	0.2	0.2
Equity-settled share based payments		-	-	-	0.3	-	0.3
Dividends		-	-	-	-	(1.6)	(1.6)
Balance at 31 December 2014		19.6	101.8	173.4	0.6	(291.9)	3.5

Statement of consolidated cash flows
Year ended 31 December 2015
			2015	2014
		Note	£m	£m
Operating activities
Cash generated by operations		17	20.0	20.9
Interest paid			(1.2)	(1.8)
Pension deficit funding	- recovery plan payment		(7.8)	(5.5)
Net cash generated by operating activities			11.0	13.6
Investing activities
Purchase of investment			(0.5)	(0.3)
Capitalised web development spend			(1.2)	(1.0)
Purchase of property, plant and equipment			(1.1)	(4.0)
Net cash used in investing activities			(2.8)	(5.3)
Financing activities
Purchase of treasury shares			(0.9)	-
Borrowings (repaid)/drawn			(10.0)	4.3
Dividends paid			(3.4)	(1.6)
Net cash (used by)/generated from financing activities			(14.3)	2.7
Net (decrease)/increase in cash and cash equivalents			(6.1)	11.0
Cash and cash equivalents at beginning of year			19.8	8.8
Cash and cash equivalents at end of year		17	13.7	19.8

Although not required under IFRS the directors have provided the following reconciliation of net debt for further clarity.  Net debt represents Group borrowing less cash and cash equivalents.

Reconciliation of movement in net debt
Year ended 31 December 2015
		2015	2014
	Note	£m	£m
Opening net debt		(29.4)	(35.7)
Net (decrease)/increase in cash and cash equivalents		(6.1)	11.0
Movement in debt financing		9.8	(4.7)
Closing net debt	17	(25.7)	(29.4)

Notes to the preliminary announcement

Year ended 31 December 2015

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, internet services and the sale of advertising airtime and space in these media.

2.   Basis of preparation

The financial information set out in the preliminary announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 in respect of the accounts for the year ended 31 December 2015. The statutory accounts for the year ended 31 December 2014, upon which the Company's auditors have given a report which was unqualified and did not contain a statement under the Companies Act 2006, have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 have yet to be signed. They will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.  

Going concern basis

The Group meets its day-to-day working capital requirements through its bank facilities.  The Group's forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.  The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

3.   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 2014.

There are no new IFRS or IFRICs that are effective for the first time this year that have a material impact on the Group.

4.   Estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these financial statements, management has reviewed the significant judgements made in applying the Group's accounting policies and the key sources of estimation uncertainty with the most significant changes from the those that were applied to the consolidated financial statement for the year ended 31 December 2014 being resulting write down of goodwill and the recognition of an additional deferred tax asset in respect of previously unrecognised tax losses.

5.   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 consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2014.  There have been no changes in any risk management policies since the 2014 year end annual report.

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.  Derivative financial instruments, which are measured at fair value, comprise interest rate swaps of £15.0m categorised as level 2.  The fair value of interest rate swaps is calculated at the present value of the estimated future cash flows using market interest rates. The valuation techniques employed are consistent with the year end annual report.   There are no financial instruments measured as level 3.

6.   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 Consumer and Productions.

The performance of the segments is assessed based on a measure of adjusted operating profit. 

					External sales
					2015	2014
Segment revenues					£m	£m
Consumer					108.2	107.1
Productions					8.3	13.3
					116.5	120.4

Revenue in 2015 includes £0.9m of revenues from sources outside the UK (2014: £0.8m).

					2015	2014
Segment result					£m	£m
Consumer					19.9	19.1
Productions					0.4	0.4
					20.3	19.5
Exceptional fixed/intangible asset write off attributable to Consumer					(1.0)	-
Exceptional goodwill impairment attributable to Productions					(5.1)	-
Other exceptional items attributable to Group:
Investment write-down					(1.0)	-
Management incentive plan					(1.7)	-
Operating profit					11.5	19.5
Financing					(1.7)	(2.2)
Profit before tax					9.8	17.3
Tax credit/(charge)					1.6	(2.6)
Profit attributable to owners of the parent					11.4	14.7

Operating profit in 2015 includes £0.4m arising outside the UK (2014: £0.4m).

7.   Exceptional items

i)    Goodwill impairment

During the year a provision for impairment of £5.1m has been recognised against the carrying value of goodwill to reflect the historic trading performance in Productions.

ii)   Investment write-down

A provision of £1.0m has been made against the carrying value of the Group's investment in MirriAd Limited.  MirriAd failed to complete a strategically important fundraising round in April and required immediate funding to continue trading.  The Group supported a rescue of the business with £0.5m of new investment as part of two funding packages totalling £10.6m.  However, the price of that investment fully recognised the parlous state of MirriAd and resulted in the existing investment being impaired.

iii)  Fixed/intangible assets write off

£1.0m of fixed and intangible assets has been written off during the year.  The write off is in relation to City Online services and redundant STV Player platforms.

iv)  Management incentive plan

A provision of £1.7m for costs in relation to one off discretionary management incentive plan payments and related national insurance has been made during the year.

8.   Finance costs

	2015	2014
	£m	£m
Bank borrowings	1.2	2.2
Pension finance charge	0.5	-
	1.7	2.2

9.   Tax charge

				2015	2014
				£m	£m
The credit/(charge) for taxation is as follows:
Charge for the year at 20% (2014:15%)				3.7	2.6
Tax effect of credit on exceptional items				(0.2)	-
Deferred tax asset recognised				(5.1)	-
				(1.6)	2.6

The effective tax rate for the Group excluding exceptional items and the additional deferred tax asset recognised is 20% (2014: 15%). The tax charge is lower than the standard rate of 20.25% due to adjustments for prior year provisions, utilisation of tax losses and certain tax planning initiatives.

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 on 26 October 2015. These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

10. Earnings per share

	Earnings £m		2015 Weighted average number of shares (m)	Per share Pence	Earnings £m	2014 Weighted average number of shares (m)	Per share Pence
EPS (pre-exceptional items):
Earnings attributable to ordinary shareholders		20.0	38.3	52.2p	14.7	38.0	38.7p
Basic EPS		20.0	38.3	52.2p	14.7	38.0	38.7p
Potential dilutive shares			1.0			1.1
Diluted EPS		20.0	39.3	50.9p	14.7	39.1	37.6p

	Earnings £m		2015 Weighted average number of shares (m)	Per share Pence	Earnings £m	2014 Weighted average number of shares (m)	Per share Pence
EPS (including exceptional items):
Earnings attributable to ordinary shareholders (including exceptional items)		11.4	38.3	29.8p	14.7	38.0	38.7p
Basic EPS		11.4	38.3	29.8p	14.7	38.0	38.7p
Potential dilutive shares			1.0			1.1
Diluted EPS		11.4	39.3	29.0p	14.7	39.1	37.6p

11. Dividends

	2015	2014
	£m	£m
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2014 of 6.0p	2.3	0.8
(2013: 2.0p) per share
Interim dividend for the year ended 31 December 2015 of 3.0p	1.1	0.8
(2014: 2.0p) per share
	3.4	1.6

A final dividend of 7.0p per share (2014: 6.0p per share) has been proposed and is subject to approval by the board of directors. It is payable on 20 May 2016 to shareholders who are on the register at 15 April 2016. The ex dividend date is 14 April 2016. This final dividend, amounting to £2.8m (2014: £0.8m), has not been recognised as a liability in these financial statements. 

12. Goodwill

Goodwill at 31 December 2015 was £2.8m (2014: £7.9m). It comprises capitalised goodwill on acquisitions completed since 1 January 1998 and the cost and impairment provision is split £10.6m and £7.8m respectively (2014: £10.6m and £2.7m).

A provision for impairment of £5.1m has been recognised during the year against the carrying value to reflect the historic trading performance in Productions.

13. Other intangible assets

			Web development and branding £m
Cost
At 1 January 2015			1.7
Additions			1.2
Write offs			(1.1)
At 31 December 2015			1.8
Accumulated amortisation and impairment
At 1 January 2015			0.1
Amortisation			0.3
Write offs			(0.3)
At 31 December 2015			0.1
Net book value at 31 December 2015			1.7
Net book value at 31 December 2014			1.6

14. Property, plant and equipment

	Leasehold buildings £m	Plant, technical equipment and other £m	Total £m
Cost
At 1 January 2015	0.1	27.2	27.3
Additions	-	1.1	1.1
Write offs	-	(0.2)	(0.2)
At 31 December 2015	0.1	28.1	28.2
Accumulated depreciation and impairment
At 1 January 2015	0.1	18.4	18.5
Charge for year	-	2.2	2.2
Write offs	-	(0.1)	(0.1)
At 31 December 2015	0.1	20.5	20.6
Net book value at 31 December 2015	-	7.6	7.6
Net book value at 31 December 2014	-	8.8	8.8

15. Investments

		£m
Cost
At 1 January 2015		1.2
Additions		0.5
Write-down		(1.0)
At 31 December 2015		0.7

16. Share capital

	Number of shares (thousands)	Ordinary shares £m	Share premium £m	Total £m
At 1 January and 31 December 2015	39,298	19.6	101.8	121.4

17. Notes to the consolidated statement of cash flows

	2015	2014
	£m	£m
Operating profit (before exceptional items)	20.3	19.5
Adjustments for:
Depreciation on property, plant and equipment	2.2	1.9
Amortisation of intangible assets	0.3	0.1
Past service cost - pension	(0.7)	-
Share based payment expense	0.3	0.3
	22.4	21.8
Increase in inventories	(0.9)	(0.7)
Decrease/(increase) in trade and other receivables	1.0	(1.7)
(Decrease)/increase in trade and other payables	(2.5)	1.5
Cash generated by operations	20.0	20.9

The exceptional items noted above are non-cash.

Analysis of movements in net debt

	At 1 January 2015	Cash flow	Non-cash movements	At  31 December 2014
	£m	£m	£m	£m
Cash and cash equivalents	19.8	(6.1)	-	13.7
Bank borrowings	(49.2)	10.0	(0.2)	(39.4)
Net debt	(29.4)	3.9	(0.2)	(25.7)

At 31 December 2015, the Group had revolving credit and overdraft bank facilities in place totalling £60.0m (£60.0m at 31 December 2014). At 31 December 2015 £40.0m of the facility was drawn down.

The £60.0m revolving credit and overdraft facility has a maturity date of June 2019.  Security is provided to the debt providers by way of cross guarantees and a share pledge.

18. Retirement benefit schemes

The Group operates two defined benefit pension schemes. The schemes are trustee administered and the schemes' assets are held independently of the Group's finances. 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.  They are closed schemes and therefore under the projected unit method the current service cost will increase as the members of the scheme approach retirement.

A full actuarial valuation of the schemes was carried out at 1 January 2012 and resulted in an actuarial deficit to be funded by the Group of £83.0m as at 31 March 2014.  A recovery plan period of 11 years was agreed with payments of £5.5m in 2014 and between £7.0m and £7.75m from 2015 to 2025 inclusive.  These payments are tax deductible.

The 1 January 2012 valuation has been updated to 31 December 2015 by a qualified independent actuary.   The major assumptions used by the actuary were:

	At 31 December 2015	At 31 December 2014
Rate of increase in salaries	Nil%	1.00%
Rate of increase of pensions in payment	2.90%	2.90%
Discount rate	3.90%	3.60%
Rate of price inflation (RPI)	2.90%	2.90%

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 2015	At 31 December 2014
	Years	Years
Retiring at balance sheet date:
Male	15.5	15.5
Female	18.1	18.0
Retiring in 25 years:
Male	18.7	18.6
Female	21.5	21.4

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 2015	At 31 December 2014
	£m	£m
Equities	155.0	154.8
Bonds	158.1	166.5
Fair value of schemes' assets	313.1	321.3
Present value of defined benefit obligations	(320.9)	(336.2)
Deficit in the schemes	(7.8)	(14.9)

A related offsetting deferred tax charge of £1.5m (2014: £3.1m) is shown under non-current assets.  Therefore the net pension scheme deficit amounts to £6.3m at 31 December 2015 (£11.8m at 31 December 2014).

19. Reconciliation of statutory results to adjusted results

	2015			2014
	Profit  before tax	Basic EPS	Diluted EPS	Profit  before tax	Basic EPS	Diluted EPS
	£m	pence	pence	£m	pence	pence
Post-exceptional	9.8	29.8p	29.0p	17.3	38.7p	37.6p
Add back: exceptionals	8.8	22.4p	21.9p	-	-	-
Deduct: one off recognition of deferred tax asset	-	(13.3p)	(13.0p)	-	-	-
Pre-exceptional and deferred tax	18.6	38.9p	37.9p	17.3	38.7p	37.6p
Add back: IAS 19	0.5	1.0p	1.0p	-	-	-
Adjust to equivalent tax of 20%	-	-	-	-	(2.4p)	(2.3p)
Adjusted results	19.1	39.9         p	38.9p	17.3	36.3p	35.3p

The adjusted result represents a like for like comparison with the statutory result adjusted for material

one off items and an adjustment to the prior year result to reflect an equivalent year on year tax rate

of 20%.

20. Mailing

A copy of the annual report is being sent to all shareholders on 24 March 2016 and will be available for inspection by members of the public at the Company's registered office at Pacific Quay, Glasgow, G51 1PQ.

 

END

 

 

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