STV Group plc Full Year Results for 2021

RNS Number : 1085E

STV Group PLC

09 March 2022

 

Press Release 0700 hours, 9 March 2022

STV Group plc Full Year Results to 31 December 2021

Record financial performance and continued growth momentum

Highlights

· Highest revenue (+35% on 2020) and adj. operating profit (+39% on 2020) on record

· Strong growth on 2019 pre-Covid results (revenue +17%; adj. operating profit +12%)

· Diversification plan building momentum, with 36% of adj. operating profit now from Digital and Studios

· On track to hit 3-year growth targets in 2023; investment guidance remains unchanged

· Strong audience performance, with best all-time viewing share since 2008

· High margin digital business continues to accelerate, with streams +63%

· Highest ever full year total advertising revenues, +24% on 2020 and +11% on 2019

· STV Studios revenue trebled to almost £27m, with future profit trajectory supported by new creative partnerships confirmed today

· Strong start to 2022, with Q1 total advertising forecast to be up around 20% and new large-scale Studios commissions secured

· Good progress on social purpose strategy, including successful launch of STV Zero 

· Board proposes final dividend of 7.3p, bringing full year to 11p (+22% on 2020)

Financial Summary		2021	2020	2019	vs 2020	vs 2019
Revenue		£144.5m	£107.1m	£123.8m	+35%	+17%
Adjusted operating profit*		£25.2m	£18.2m	£22.6m	+39%	+12%
Adjusted operating margin*		17.5%	17.0%	18.2%	+50bps	-70bps
Adjusted PBT**		£23.6m	£16.6m	£20.9m	+42%	+13%
Profit before tax		£20.1m	£6.7m	£18.4m	+202%	+10%
Adjusted basic EPS***		45.6p	34.5p	38.7p	+32%	+18%
Statutory basic EPS		42.7p	18.2p	41.7p	+135%	+2%
Cash generated by operations		£34.8m	£22.4m	£25.6m	+55%	+36%
Net cash/(debt) +		£0.3m	£(17.5)m	£(37.5)m	+£17.8m	+£37.8m
Dividend per share (full year)		11.0p	9.0p	6.3p	+22%	+75%
*	Before exceptional items and inclusive of High-End Television tax credits (note 19)
**	Before exceptional items, IAS19 interest and inclusive of High-End Television tax credits (note 19)
***	Before exceptional items and IAS19 interest, and assuming weighted average number of shares consistent with 2021 (note 19)
+	Excluding lease liabilities

Financial highlights

· Total revenue of £144.5m, +35% on 2020 and +17% on 2019, reflecting continued momentum in Studios and a resurgent advertising market

· Adjusted operating profit of £25.2m, +39% on 2020 and +12% on 2019

· STV-controlled advertising continued to deliver strong growth, with video on demand (VOD) advertising on the STV Player +38% (+54% on 2019) and regional advertising +22% (+16% on 2019)

· Studios revenue trebled year on year, to almost £27m (2020: £8.7m; 2019: £13.7m)

· Adjusted operating margin, up 50 basis points on 2020 at 17.5%, reflects benefits of economic recovery and close management of costs.  The decrease of 70 basis points on 2019 reflects the investment in Digital in line with our growth investment plan

· Continued strong cash generation improves balance sheet position providing additional headroom to accelerate investment in growth, with Group in net cash position for first time

Another year of strong audience performance

· STV's all-time viewing share at 19.6% (2020: 19.2%), the highest since 2008:

o  STV still the most watched peaktime channel in Scotland, with a share of 22.2%

o  Highest viewing share gain of any commercial channel in the UK, +2%, despite tough lockdown comparators of 2020

o  98% of all commercial audiences over 500k viewers in Scotland on STV in 2021

o  STV News at Six Scotland's number 1 news programme for the 3^rd year in a row, with an average audience of 468k viewers

· Total online streams on STV Player up 63%, still the fastest growing UK broadcaster VOD service:

o  Online viewing up 42%

o  Monthly active users up 54%

o  Registered users up 16% to 4.3m

o  STV Player now highest rated streaming app across the major app stores

Continued growth momentum

· Scottish advertising : The STVGrowth Fund attracted a further 85 new advertisers to television in 2021, taking the total to over 320 since launch, with the fund boosted to £30m for 2022 to support Scotland's economic recovery

· Digital : STV Player growth continues to build:

o  Content offer scaling up, with 1000 hours of new and acquired drama added in 2021

o  31 new content deals delivered 173 new titles and 49 new Player-only drama boxsets

o  Player-only content streams up 93% in 2021 and now represent 42% of all VOD streams (compared to 6% in 2019 )

o  Player outside Scotland now over 20% of VOD streams and users

o  New Sony deal announced last month, bringing 7 new international dramas to STV Player including the UK premiere of The Commons starring Joanne Froggatt

· Studios : STV Studios delivered its most successful year yet:

o  16 new commissions, 12 returnable series and now 7 returning series

o  First major streaming commission secured, Zodiac Island, for Discovery+

o  9^th creative label added through a minority investment in entertainment and quiz specialist Mighty Productions, founded by the creator and exec producer of Tipping Point and the exec producer of The Weakest Link, Hugh Rycroft and Lynn Sutcliffe

o  Exclusive partnership with drama producer TOD Productions extended for a further 3 years

· Targets : On track to hit STV's 3-year growth targets in 2023 to:

o  Double digital viewing, users and revenue (to £20m)

o  Quadruple Studios revenue (to £40m)

o  Achieve at least 50% of operating profit from outside traditional broadcasting

Positive outlook

· Strongest ever content line-up in 2022 on TV and online

o  Over 150 hours of new network drama, +40% on 2021

o  In total over 1000 hours of drama boxsets on STV Player in 2022

· Content cost guidance unchanged

o  Previously announced 3-year £30m investment plan will fund Digital & Studios growth

o  National programming costs linked to advertising revenues under long-term agreement

· Advertising off to a very strong start in 2022:

o  Q1 total advertising revenue (TAR) expected to be around +20%, with January +21%, February +26% and March +10-15%

o  April TAR expected to be up +10-15% with comparators getting tougher from Q2

· Studios maintaining positive momentum into 2022:

o  11 new commissions already

o  Good visibility of 2022 revenue with over £15m already secured

Dividend

· The Board proposes a final dividend of 7.3p per share for 2021, giving a full year dividend of 11p per share, +22% on 2020

· There are a number of factors that the Board takes into consideration when setting the level of dividend proposed, in particular the pay-out ratio of free cash flow post pensions and any known or potential future capital commitments in support of our growth investment programme. The Board is also mindful of the economic uncertainty caused by the pandemic and the ongoing political situation

· The Board remains committed to a balanced approach to capital allocation across investing for growth, fulfilling our pension obligations, and paying a sustainable, progressive dividend to shareholders

 

Simon Pitts, Chief Executive Officer, said: 

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

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

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

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

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

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

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

There will be a presentation for analysts today, 9 March 2022, at 12.30 pm, via Zoom.  Should you wish to attend the presentation, please contact Angela Wilson, [e-mail] or telephone: [phone].

Enquiries:

STV Group plc:          Kirstin Stevenson, Head of Communications   Tel: [phone]

Camarco:                  Geoffrey Pelham-Lane, Partner                           Tel: [phone]

Ben Woodford, Partner                                      Tel: [phone]

 

Financial and operating review

Group overview

Total revenue for the year increased by 35% to £144.5m (2020: £107.1m) as a result of a record performance in advertising revenue and significant growth in the Studios division.  Total advertising revenue was £112.6m (2020: £90.9m), an increase of 24% on 2020 and up 11% on 2019, which was a record year pre-pandemic. The increase was largely a result of the continued growth in the Digital division coupled with a strong recovery of the linear TV advertising market.  On a like-for-like basis, excluding STV ELM Ltd which was sold in August 2021, Group revenue was up 39% on the prior year and up 21% on 2019.

Adjusted operating profit increased by 39% to £25.2m (2020: £18.2m), equivalent to an operating margin of 17.5% (2020: 17%). On a statutory basis, operating profit increased by 22% to £21.6m (2020: £17.7m).

Adjusted profit before tax was £23.6m (2020: £16.6m), after charging finance costs of £1.5m (2020: £1.5m). These comprised interest on the Group's borrowings of £1.2m (2020: £1.2m) with the balance being non-cash costs in relation to the Group's lease liabilities. These adjusted results are before finance costs in relation to the Group's defined benefit pension schemes (2021: £0.8m; 2020: £1.2m) and include High-End Television (HETV) tax credits receivable (2021: £1.9m; 2020: nil).  Statutory profit before tax for the year was £20.1m, an increase of £13.4m on 2020 of £6.7m.

A total tax charge of £0.7m has been recognised in the year (2020: credit of £1.0m), representing an effective tax rate of 3.5% (2020: -14.9%). This is lower than the UK standard rate of corporation tax, principally due to £1.9m of HETV tax credits receivable from HMRC regarding current year qualifying productions, and the rate at which deferred tax assets have been measured following the Government's announcement to increase the standard rate of corporation tax to 25% from April 2023. Statutory profit after tax for the year was £19.4m (2020: £7.7m).

Adjusted EPS (excluding IAS19 net interest) at 45.6p was 32% up on the prior year, driven by the increased profit generation of the Group.  On a statutory basis, EPS at 42.7p was up 135% due to the increased profit generated and lower level of net exceptional items in the current year. 

The Group closed the year with net cash of £0.3m (2020: net debt of £17.5m), a first for the business.  This positive position was driven by strong cash conversion of the higher operating profit, supplemented by proceeds from the sale of non-core investments.  Operating cash conversion was 161% for the year (2020: 128%).

In March 2021, the Group refinanced its bank facilities, agreeing a new £60m revolving credit facility, with £20m accordion, for a minimum tenor of 3 years with two one-year extension options.  The first extension option was agreed in February 2022 on commercial terms in line with the existing facility.  The covenant package is in line with the Group's previous facility; leverage (net debt : EBITDA) and interest cover.  At the end of the year, the Group's leverage was nil (2020: 0.7 times) due to the marginal net cash position and interest cover was 49.4 times (2020: 28.3 times), both metrics comfortably within the covenant limits of 3 times (maximum) and 4 times (minimum) respectively.

Pensions

Agreement of the triennial valuations for the Group's defined benefit schemes was reached in October, based on a combined scheme funding deficit of £116m and a recovery plan running to October 2030. The Schedule of Contributions remains at the same level as the previous settlement with the contingent cash mechanism also in place.

The IAS 19 accounting deficit across the schemes was £79.4m (2020: £70.3m).  The increase in the liability is primarily driven by an update to the mortality assumptions used, as well as reflecting the latest membership data following completion of the triennial valuation.  These increases were partially offset by the gain derived from the higher discount rate and the benefit of contributions paid by the Group.

Dividend policy

Following the return to dividend payments at the 2021 half year, the Board recommends a final dividend of 7.3 pence per share, resulting in a total dividend of 11.0 pence per share for the year, an increase of 22% on 2020.

Broadcast

An outstanding performance was delivered by the Broadcast division in 2021 with STV's position in Scotland remaining unrivalled, significantly ahead of any other commercial channel and reaching 80% of adults per month, making the platform a unique and compelling proposition for advertising partners.

Viewing figures for STV soared during the pandemic and this strong performance was largely sustained in 2021.  STV's share of commercial channels at 28.5%, was the highest it has been since 2008 and year-on-year growth of 1 share point was higher than any channel in Scotland or across the UK.  STV remained the best watched peak-time channel in Scotland.  Daytime, peak and all-time share reached a 12-year high, and 2021 saw the strongest all-time share performance versus the ITV Network ever (19.6% v 17.7%).

This viewing success was driven by a strong schedule of drama, entertainment, factual and sports output, including Six Nations Rugby and Euro 2020, the latter capturing the attention of a nation of football fans.  The much-anticipated England v Scotland match saw STV's highest ever peak audience at 1.94m, becoming our most watched programme of the last decade and best watched football match ever.

Scottish news sits at the heart of our public service broadcaster offering and the team continued its exceptional run from 2020 into 2021.  For the third year in a row, STV News at Six was the best-watched news programme in Scotland, with the overall service watched by more than 54% of the Scottish population each month.  2021 saw us successfully complete a multimillion-pound project to upgrade all six broadcast centres to High Definition.

2.2m people access our news across our digital platforms every month, and 2021 saw us sign licensing deals with Facebook and Google for STV News content to feature on Facebook News and Google Showcase, creating new revenue streams and visibility on these important services.

The speed and scale of the advertising recovery in 2021 far exceeded our expectations and underlines the enduring power and relevance of high-quality television advertising, as we delivered our highest advertising revenues in STV's history. 

We continue to work closely with the Scottish business community, ensuring that advertising is affordable and accessible via our innovative STV Growth Fund.  Since launch in 2018, the Growth Fund has allocated c.£16.5m to over 320 businesses who have accessed TV advertising for the first time, with 85 of these businesses joining in 2021.  Forming part of the overall fund, the £1m Green Fund for sustainable businesses, and a gifted-membership initiative as part of our £1m Inclusion Fund for businesses promoting diversity, were both launched in 2021.  We also launched STV Self Service, enabling our advertisers to design and book their own campaigns online, providing ease of access to our leading marketing platform for SMEs.

Overall, the Broadcast division generated an operating profit of £21.8m (2020: £15.5m), an increase of 41% on the prior year and up almost 10% on 2019.

Digital

Viewing on STV Player in terms of total streams was up 63% in 2021 at 114.6m (2020: 70.5m). The total amount of time spent on STV Player also increased, by 42% to 50.8m hours (2020: 35.7m hours). In 2018 we delivered 35.0m streams compared with 114.6m in 2021, representing a more than trebling across this three-year period.

STV Player is now available on all major platforms including Sky, Freeview, Virgin Media, Freesat, Apple TV, Fire TV and Sky Glass.  Strong digital audience growth and commercial innovation around advertising opportunities meant VOD advertising on STV Player was up 38% year on year, with advertising impressions up 43%.  4.3m adults are now registered users on STV Player, with monthly active users growing by 54%.

Through our expansion into the rest of the UK, 22% of VOD streams are now coming from outside of Scotland (2020: 2%), presenting a significant opportunity for future growth.

A strong offering of sport, soaps and drama drove viewing with network drama the key driver of traffic.  The second series of The Bay was among our best watched titles in 2021, attracting 2.9m views, alongside Marcella (1.8m), Finding Alice (1.4m) and Unforgotten (1.2m).

We continue to accelerate our content acquisition strategy, developing strong relationships with distributors, and with a growing focus on scripted content.  We worked with 27 partners in 2021, agreed 31 new content deals and added a plethora of drama, true crime, factual and entertainment programmes to our service, complementing the network material. These agreements added an additional 1,859 hours of Player-only content (including 867 hours of scripted), representing 173 new titles to our ever-expanding catalogue.

12 out of the top 20 programmes on STV Player were non-network, Player-only content, highlighting the growing success of our strategy.  These include the US version of The Bridge, The Firm, Rogue and Gracepoint, alongside archive favourites Taggart and Take the High Road.  In total, 42% of VOD streams came from Player-only content in 2021 (2020: 32%). 

In June we became the first broadcaster VOD service to launch a VIP rewards scheme to build better connections with our viewers and further drive streams.  STV Player VIP brings members a range of benefits, as well as a reduced advertising load, and we will constantly be refining and improving this offer.

Overall, operating profit generated by the Digital division increased by 21% year on year to £7.9m (2020: £6.5m).

STV Studios

2021 has been a record year for STV Studios.  Despite the ongoing impact of Covid restrictions, 16 programme commissions were won, for eight TV networks, and the business delivered its best-ever financial performance, with full year revenue of £26.6m (2020: £8.7m).  The division returned an adjusted operating profit of £1.3m, including the HETV tax credit receivable, compared to a £0.3m loss in 2020.

Commissioning highlights include new entertainment format Bridge of Lies (25 episodes, BBC One) which airs next week; a recommission for a further three series of The Yorkshire Auction House for Discovery-owned, Really; a re-commission of ratings winner Celebrity Catchphrase (13 episodes, ITV); innovative, genre bending series, Murder Island (6 episodes, Channel 4); and a further three series of Antiques Road Trip and its celebrity sister series (BBC). Finally, STV Drama spent much of 2021 in production with high-end six-part returnable drama for Channel 4, Screw.  Broadcast in early 2022 to widespread critical acclaim, Screw was Channel 4's best launch to a drama series since It's A Sin.

Our growing suite of labels has also achieved commissioning success.  Highlights include a significant win in March 2021 for Belfast-based Two Cities Television for an original returnable peak-time police drama, Blue Lights (6 episodes, BBC One), is currently in production.  Primal Media's ground-breaking series Landmark (8 episodes, Sky Arts) launched in September 2021 and Primal are in advanced funded development with other major channels, including a new reality show in the UK as well as a dating format for a US broadcaster.  Entertainment label Barefaced TV has recently been commissioned by Discovery+ for a large-scale, high-stakes, young-skewing format Zodiac Island (working title) to be delivered in Autumn 2022.  We are excited about future prospects with the talented team at high-end drama producer, Tod Productions, who have a strong, advanced development slate. 

In September 2021, we acquired a 25% stake in unscripted producer, Hello Mary, and the team has already run 8-part series Trapped Underground for Discovery as well as two soon-to-be-announced new series.  Excitingly, today we have announced the addition of quiz format specialists, Mighty Productions, to our family of labels. Mighty have already won 4 series commissions, including new C4 quiz 1 & 6 Zeros, which airs from next week.

We delivered a strong year of catalogue tape sales across our full catalogue of programmes and format relicensing with sales of £3.4m (2020: £3.7m). A distributor neutral position drives our successful strategy of working with multiple parties to match the most appropriate sales agent to our content, securing the best deals with businesses such as Britbox, Acorn TV, Discovery and PBS (US). 

Social purpose

STV's social purpose priorities remain integral to our growth strategy, and we made significant progress in 2021, including:

· Sustainability strategy STV Zero launched, with a concerted programme of climate action successfully delivered on and off screen in 2021, including at COP26 in Glasgow

· Diverse contributors to STV News doubled from 4% to 8% as a result of STV's diversity & inclusion strategy, with over 400 people from diverse backgrounds given media training to become expert contributors

· £4.4m distributed by the STV Children's Appeal to families and young people in poverty in Scotland

 

Consolidated income statement

Year ended 31 December 2021

		2021			2020
		Before exceptional items	Exceptional  items (note 6)	Results for year	Before exceptional items	Exceptional  items (note 6)	Results for year
	Note	£m	£m	£m	£m	£m	£m
Revenue	5	144.5	-	144.5	107.1	-	107.1
Net operating expenses		(121.2)	(1.7)	(122.9)	(88.9)	(0.5)	(89.4)
Operating profit		23.3	(1.7)	21.6	18.2	(0.5)	17.7
Finance costs
- borrowings		(1.2)	-	(1.2)	(1.2)	-	(1.2)
- defined benefit pension schemes		(0.8)	-	(0.8)	(1.2)	-	(1.2)
- lease interest		(0.3)	-	(0.3)	(0.3)	-	(0.3)
Provision for impairment losses - ELM debtor		-	0.3	0.3	-	(8.2)	(8.2)
Total finance costs		(2.3)	0.3	(2.0)	(2.7)	(8.2)	(10.9)
Share of loss of an associate		(0.1)	-	(0.1)	(0.1)	-	(0.1)
Gain on sale of non-current asset		-	0.6	0.6	-	-	-
Profit before tax		20.9	(0.8)	20.1	15.4	(8.7)	6.7
Tax (charge)/credit	7	(1.0)	0.3	(0.7)	(0.6)	1.6	1.0
Profit for the year		19.9	(0.5)	19.4	14.8	(7.1)	7.7
Attributable to:
Owners of the parent		19.9	(0.5)	19.4	14.7	(7.1)	7.6
Non-controlling interests		-	-	-	0.1	-	0.1
		19.9	(0.5)	19.4	14.8	(7.1)	7.7
Earnings per share
Basic	8	43.8p		42.7p	35.2p		18.2p
Diluted	8	42.1p		41.0p	33.8p		17.5p

A reconciliation of the statutory results to the adjusted results is included at note 19. The above consolidated income statement should be read in conjunction with the accompanying notes.

Consolidated statement of comprehensive income

Year ended 31 December 2021

	2021	2020
	£m	£m
Profit for the year	19.4	7.7
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes	(17.2)	(15.3)
Deferred tax credit	8.5	3.2
Revaluation (loss)/gain on listed investment to market value	(2.3)	5.9
Other comprehensive expense - net of tax	(11.0)	(6.2)
Total comprehensive income for the year	8.4	1.5
Attributable to:
Owners of the parent	8.4	1.4
Non-controlling interests	-	0.1
	8.4	1.5

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

 

Consolidated balance sheet

At 31 December 2021

		2021	2020
	Note	£m	£m
Non-current assets
Intangible assets	10	1.6	2.3
Property, plant and equipment	11	9.8	9.9
Right-of-use assets	12	19.9	10.4
Investments	13	1.9	6.7
Deferred tax asset	14	26.5	19.9
Trade and other receivables		0.4	0.9
		60.1	50.1
Current assets
Inventories		17.7	15.4
Trade and other receivables		30.1	25.6
Cash and cash equivalents		14.7	5.2
		62.5	46.2
Total assets		122.6	96.3
Equity
Ordinary shares	16	23.3	23.3
Share premium		115.1	115.1
Capital redemption reserve		0.2	0.2
Merger reserve		173.4	173.4
Other reserve		1.4	1.0
Accumulated losses		(339.2)	(342.8)
Shareholders' equity		(25.8)	(29.8)
Non-controlling interests		(0.1)	(0.1)
Total equity		(25.9)	(29.9)
Non-current liabilities
Borrowings	15	14.4	22.7
Lease liabilities		19.7	9.1
Retirement benefit obligations	18	79.4	70.3
		113.5	102.1
Current liabilities
Trade and other payables		33.8	22.4
Lease liabilities		1.2	1.7
		35.0	24.1
Total liabilities		148.5	126.2
Total equity and liabilities		122.6	96.3

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

Consolidated statement of changes in equity

Year ended 31 December 2021

	Share capital	Share premium	Capital redemption reserve	Merger reserve	Other reserve	Accumulated losses	Attributable to owners of the parent	Non-controlling interest	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2021	23.3	115.1	0.2	173.4	1.0	(342.8)	(29.8)	(0.1)	(29.9)
Profit for the year	-	-	-	-	-	19.4	19.4	-	19.4
Other comprehensive expense	-	-	-	-	-	(11.0)	(11.0)	-	(11.0)
Total comprehensive income for the year	-	-	-	-	-	8.4	8.4	-	8.4
Net share based compensation	-	-	-	-	0.4	(0.4)	-	-	-
Dividends paid (note 9)	-	-	-	-	-	(4.4)	(4.4)	-	(4.4)
At 31 December 2021	23.3	115.1	0.2	173.4	1.4	(339.2)	(25.8)	(0.1)	(25.9)

At 1 January 2020	19.6	102.0	0.2	173.4	0.9	(343.2)	(47.1)	(0.2)	(47.3)
Profit for the year	-	-	-	-	-	7.6	7.6	0.1	7.7
Other comprehensive expense	-	-	-	-	-	(6.2)	(6.2)	-	(6.2)
Total comprehensive income for the year	-	-	-	-	-	1.4	1.4	0.1	1.5
Issue of ordinary shares	3.5	12.0	-	-	-	-	15.5	-	15.5
Share based compensation	-	-	-	-	0.2	-	0.2	-	0.2
Shares acquired by EBT	-	-	-	-	(0.1)	0.3	0.2	-	0.2
Dividends paid in shares	0.2	1.1	-	-	-	(1.3)	-	-	-
At 31 December 2020	23.3	115.1	0.2	173.4	1.0	(342.8)	(29.8)	(0.1)	(29.9)

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

Consolidated statement of cash flows

Year ended 31 December 2021

		2021	2020
	Note	£m	£m
Operating activities
Cash generated by operations	17	34.8	22.4
Interest and fees paid in relation to banking facilities		(1.4)	(1.9)
Corporation tax paid		(1.2)	(0.4)
Pension deficit funding - recovery plan payment		(9.3)	(9.1)
Contingent cash payment to pension schemes		(0.3)	(1.4)
Net cash generated by operating activities		22.6	9.6
Investing activities
Proceeds from sale of investments		4.7	-
Proceeds from disposal of subsidiary		0.6	-
Purchase of investment in associate		(0.6)	(1.1)
Loan notes provided to associate		(0.4)	-
Production finance provided to associate		(0.6)	-
Purchase of intangible assets		(0.4)	(0.7)
Purchase of property, plant and equipment		(2.5)	(1.4)
Net cash generated by/(used in) investing activities		0.8	(3.2)
Financing activities
Payment of obligations under leases		(1.5)	(1.9)
Issue of ordinary shares		-	15.5
Borrowings drawn		3.1	19.0
Borrowings repaid		(11.1)	(40.0)
Dividends paid		(4.4)	-
Net cash used in financing activities		(13.9)	(7.4)
Net increase/(decrease) in cash and cash equivalents		9.5	(1.0)
Cash and cash equivalents at beginning of year		5.2	6.2
Cash and cash equivalents at end of year		14.7	5.2

 

Notes to the preliminary announcement

Year ended 31 December 2021

1.  General information

STV Group plc ("the Company") and its subsidiaries (together "the Group") is listed on the London Stock Exchange and incorporated and domiciled in the UK.  The address of the registered office is Pacific Quay, Glasgow, G51 1PQ. The principal activities of the Group are the production and broadcasting of television programmes, provision of internet services and the sale of advertising airtime and space in these media. Up to its sale on 20 August 2021, the Group also operated a non-core external lottery management company.

2.  Basis of preparation

The financial information set out in the audited preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2021 within the meaning of Section 434 of the Companies Act 2006 and has been extracted from the full audited financial statements for the year ended 31 December 2021.

Statutory financial statements for the year ended 31 December 2020, which received an unqualified audit report, have been delivered to the Registrar of Companies. The reports of the auditors on the financial statements for the year ended 31 December 2020 and for the year ended 31 December 2021 were unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The financial statements for the year ended 31 December 2021 will be delivered to the Registrar of Companies and made available to all shareholders in due course. 

Going concern

At 31 December 2021, the Group was in a small cash position with a gross cash balance of £14.7m. The Group is in a net current asset position and generates cash from operations that enables the Group to meet its liabilities as they fall due, and other obligations.

In March 2021, the Group refinanced its bank facilities, agreeing a new £60m revolving credit facility, with £20m accordion, for a minimum tenor of 3 years (two one-year extension options are available, with the first being exercised in February 2022). The covenant package is in line with the Group's previous facility, namely net debt to EBITDA (leverage) must be less than 3 times, and interest cover must be greater than 4 times.  At 31 December 2021, the Group's leverage was nil (2020: 0.7 times) and interest cover was 49.4 times (2020: 28.3 times), both comfortably within covenant limits.

As part of the going concern review, the Group considers forecasts of the advertising market, from which the Group generates the majority of its cash inflows, as well as its prospects in the programme production market, to determine the impact on liquidity. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current available funding and financial covenants.

The directors performed a full review of principal risks and uncertainties during the year and as part of its process to review and approve the three-year plan covering the period to 31 December 2024. A severe but plausible downside scenario was identified that reflected crystallisation of a number of risks, including a downturn in advertising markets and a hiatus in programme production activity.  Under this downside scenario, the Group generated sufficient cash to enable it to continue in operation, pay its obligations as they fall due and remain within its covenant levels.

After completion of these activities and making enquiries of management, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for at least 12 months from the date of this report.  Accordingly, the Group continues to adopt the going concern basis in preparing its consolidated financial statements.

3.  Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2020.  There were no changes to accounting standards in the year that had any material impact on the financial statements.

4.  Financial risk management and financial instruments

The Group's activities expose it to a variety of financial risks:  currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The carrying value of non-derivative financial assets and liabilities, comprising cash and cash equivalents, trade and other receivables, trade and other payables and borrowings is considered to materially equate to their fair value.  

5.  Business segments

Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance is by product. The Group's operating segments are Broadcast, Digital and Studios. The trade of STV ELM is included within 'Other' up to the date of disposal in August 2021.

	Broadcast		Digital		Studios		Other		Total
	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Sales	108.8	94.8	17.8	13.7	27.0	9.1	1.0	3.5	154.6	121.1
Inter-segment sales	(9.7)	(13.6)	-	-	(0.4)	(0.4)	-	-	(10.1)	(14.0)
Segment revenue	99.1	81.2	17.8	13.7	26.6	8.7	1.0	3.5	144.5	107.1
Segment result
Adjusted operating profit	21.8	15.5	7.9	6.5	1.3	(0.3)	-	-	31.0	21.7
Unallocated corporate expenses									(5.8)	(3.5)
Adjusted operating profit									25.2	18.2
Exceptional items (note 6)									(0.8)	(8.7)
HETV tax credits									(1.9)	-
Finance costs									(2.3)	(2.7)
Share of loss of an associate									(0.1)	(0.1)
Profit before tax									20.1	6.7
Tax (charge)/credit									(0.7)	1.0
Profit for the year									19.4	7.7

Adjusted operating profit above is the statutory operating profit before exceptional items and includes high-end television (HETV) tax credits receivable. The HETV tax credits relate solely to the Studios operating segment; £1.9m was receivable in the current year (2020: nil) resulting in a statutory operating loss of £0.6m in Studios (2020: loss of £0.3m). There were no adjusting items disclosed within Broadcast or Digital operating profit.

There has been no significant change in total assets from the amount disclosed in the last annual financial statements.

6.  Exceptional items

In order to provide the users of the consolidated financial statements with a transparent view of significant and/or non-recurring items and their impact on the underlying trading of the Group, the Group presents items recognised in profit or loss for each year analysed between:

I.  Profit before exceptional items; and

II.  The effect of exceptional items

The table below analyses the exceptional items in the current financial year and their impact on key financial statement lines in the consolidated income statement.

	2021 Before exceptional items £m	2021 Exceptional  items £m	2021 Results for the year £m	2020 Before exceptional items £m	2020 Exceptional items £m	2020 Results for the year £m
Operatingprofit (i)	23.3	(1.7)	21.6	18.2	(0.5)	17.7
Finance costs (ii)	(2.3)	0.3	(2.0)	(2.7)	(8.2)	(10.9)
Share of loss of an associate	(0.1)	-	(0.1)	(0.1)	-	(0.1)
Gain on sale of non-current asset (iii)	-	0.6	0.6	-	-	-
Profit before tax	20.9	(0.8)	20.1	15.4	(8.7)	6.7
Tax (charge)/credit (iv)	(1.0)	0.3	(0.7)	(0.6)	1.6	1.0
Profit for the year	19.9	(0.5)	19.4	14.8	(7.1)	7.7
Earnings per share
Basic	43.8p		42.7p	35.2p		18.2p
Diluted	42.1p		41.0p	33.8p		17.5p

(i)  Operating profit

The exceptional item of £1.7m (2020: nil) relates to the repayment of furlough monies received in the prior year.  During 2020, and principally over the second quarter, the Group applied for grants under the Government's Coronavirus Job Retention Scheme ('CJRS') totalling £1.6m (£0.1m was also received in Q1 2021). These monies were received at a time when the business was operating under the tightest of lockdown restrictions, with total advertising revenue down 38% year on year, no programme production activity possible, and visibility over key markets very limited. The amounts received under the CJRS were allocated against payroll within operating costs in 2020. Over the second half of 2020 and into 2021, the Group's trading improved significantly, despite further lockdown measures in Q1 2021, demonstrating the resilience of its Broadcast business and the successful execution of strategy in Digital in particular. In March 2021, the Board announced its intention to resume payment of a cash dividend to shareholders. Although there was no obligation on the Group to repay furlough grants, the Board decided that CJRS monies received would be repaid in full prior to re-commencing payment of a cash dividend. As the repayment of furlough grants does not relate to the current period of trading, nor was it required under any law or regulation, the Group has presented the cost as exceptional so as not to distort the underlying trading results of the business.

In 2020, the £0.5m exceptional charge related to the accrual of costs expected to be incurred in relation to the disposal of STV ELM Ltd.

(ii) Finance costs

An exceptional credit of £0.3m has been recognised relating to amounts recovered from the Scottish Children's Lottery (SCL) in excess of the expected credit loss provided for in the prior year.

In 2020, an exceptional cost of £8.8m was recognised, being full provision of amounts due from the SCL as at 31 December 2020. Partially offsetting this amount was an exceptional credit of £0.6m, being the VAT recoverable on amounts written off.

(iii)  Gain on sale of non-current asset

An exceptional gain of £0.6m has been recognised in 2021, being net proceeds received on disposal of STV ELM Ltd.

(iv)  Tax (charge)/credit

 Tax adjustments are the tax effects of the exceptional items recognised in both years.

7.  Tax

				2021	2020
				m	£m
The charge/(credit) for taxation is as follows:
Charge for the year before exceptional items				1.0	0.6
Tax effect on exceptional items				(0.3)	(1.6)
Charge/(credit) for the year				0.7	(1.0)

The Government announced in the Budget on 3 March 2021 that the main rate of corporation tax for the financial year beginning 1 April 2023 will increase to 25% from the current rate of 19% previously legislated. The 25% rate was substantively enacted on 24 May 2021 when the Budget Provisional Collection of Taxes Act resolution was passed. The Finance Act 2020 included this amendment and set the main rate at 25% for the financial year beginning 1 April 2023. Therefore, the Group has remeasured the deferred tax balances to be carried at the 25% rate.

8.  Earnings per share 

The calculation of earnings per share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held for use by the STV Employee Benefit Trust.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has one type of dilutive potential ordinary shares namely share options granted to employees.

The adjusted earnings per share figures that have also been calculated are based on earnings before adjusting items that are significant in nature and/or quantum and not expected to recur every year and are therefore considered to be distortive. The adjusting items recognised in the current and prior years are operating and non-operating exceptional items and the IAS 19 net financing cost, as well as the related tax effect.  Adjusted earnings per share has been presented to provide shareholders with an additional measure of the Group's year on year performance.

 

Earnings per share	2021	2020
	Pence	Pence
Basic earnings per ordinary share	42.7p	18.2p
Diluted earnings per ordinary share	41.0p	17.5p
Basic earnings per ordinary share (before exceptional items)	43.8p	35.2p
Diluted earnings per ordinary share (before exceptional items)	42.1p	33.8p
Adjusted basic earnings per share	45.6p	37.5p
Adjusted diluted earnings per share	43.8p	36.1p

The following reflects the earnings and share data used in the calculation of earnings per share:

Earnings	£m	£m
Profit for the year attributable to equity shareholders	19.4	7.6
Exceptional items (net of tax)	0.5	7.1
Profit for the year (before exceptional items)	19.9	14.7
Excluding IAS 19 financing cost	0.8	1.0
Adjusted profit	20.7	15.7
Number of shares	Million	Million
Weighted average number of ordinary shares in issue	45.5	41.7
Dilution due to share options	1.8	1.7
Total weighted average number of ordinary shares in issue	47.3	43.4

9.  Dividends

	2021	2020	2021	2020
	per share	per share	£m	£m
Dividends on equity ordinary shares
Paid final dividend	6.0p	-	2.7	-
Paid interim dividend	3.7p	3.0p	1.7	1.3
Dividends paid	9.7p	3.0p	4.4	1.3

A final dividend of 7.3p per share (2020: 6.0p per share) has been proposed and is subject to approval by the Board of Directors. It is payable on 27 May 2022 to shareholders who are on the register at 15 April 2022. The ex-dividend date is 14 April 2022.  This final dividend, amounting to £3.3m has not been recognised as a liability in these financial statements.

10. Intangible assets

	Web development £m
Cost
At 1 January 2021		5.7
Additions		0.4
At 31 December 2021		6.1
Accumulated amortisation and impairment
At 1 January 2021		3.4
Amortisation		1.1
At 31 December 2021		4.5
Net book value at 31 December 2021		1.6
Net book value at 31 December 2020		2.3

11. Property, plant and equipment

	Leasehold buildings £m	Plant, technical equipment and other £m	Assets under construction £m	Total £m
Cost
At 1 January 2021	0.4	30.8	1.3	32.5
Additions	-	-	2.5	2.5
Transfers	-	3.0	(3.0)	-
At 31 December 2021	0.4	33.8	0.8	35.0
Accumulated depreciation and impairment
At 1 January 2021	0.1	22.5	-	22.6
Charge for year	0.1	2.5	-	2.6
At 31 December 2021	0.2	25.0	-	25.2
Net book value at 31 December 2021	0.2	8.8	0.8	9.8
Net book value at 31 December 2020	0.3	8.3	1.3	9.9

12. Right of use assets

	Property	Vehicles	Total
	£m	£m	£m
Cost
At 1 January 2021	13.9	0.3	14.2
Additions	11.0	0.1	11.1
Derecognition of right-of-use assets	-	(0.1)	(0.1)
At 31 December 2021	24.9	0.3	25.2
Accumulated depreciation
At 1 January 2021	3.6	0.2	3.8
Disposal	-	(0.1)		(0.1)
Depreciation charge for the year	1.5	0.1		1.6
At 31 December 2021	5.1	0.2	5.3
Net book value at 31 December 2021	19.8	0.1	19.9
Net book value at 31 December 2020	10.3	0.1	10.4

The addition in the current year relates to the lease extension of the Group Head office building at Pacific Quay, Glasgow. 

13. Investments

	2021	2020
	£m	£m
Listed	0.3	5.6
Associates	1.5	1.0
Other	0.1	0.1
	1.9	6.7

Listed investments comprise of shares held in Mirriad Advertising plc and are measured at fair value through the Consolidated Statement of Comprehensive Income.

On 18 September 2019, the Group (along with all other shareholders) sold its investment in deltaDNA Ltd to Unity Software Inc for a net consideration of £2.5m. The net consideration comprised an element payable in cash (62.5%) and the balance in shares in Unity (37.5%). Consideration of £0.5m (£0.2m in shares and £0.3m in cash) was deferred for 2 years. The Group disposed of its full investment in Unity Software Inc during the year for net consideration of £4.4m and received £0.3m in cash that was previously held in escrow.

The movement in investments in associates during 2021 relates to acquisition of a 25% shareholding in the unscripted production company, Hello Mary, for consideration of £0.6m in September 2021.  The investment was initially recognised at cost and has subsequently been updated to reflect the Group's share of post-acquisition losses (less than £0.1m) in accordance with the equity method of accounting. The Group acquired a 25% stake in Two Cities Television in 2020 for consideration of £1.1m with subsequent recognition of the Group's accumulated share of the loss of £0.2m. No dividends have been received from either company.

14. Deferred tax asset

At 31 December 2021, total deferred tax assets of £26.5m were recognised on the balance sheet (31 December 2020: £19.9m).  Of this, £19.8m relates to the deficit on the Group's defined benefit pension schemes (31 December 2020: £13.3m) and the balance of £6.7m relates to tax losses, accelerated capital allowances and short-term timing differences (31 December 2020: £6.6m).

15. Borrowings

In March 2021, the Group refinanced its bank facilities, agreeing a new £60m revolving credit facility, with £20m accordion, for a minimum tenor of 3 years. Two one-year extension options are available. The first extension option was agreed in February 2022 on commercial terms in line with the existing facility. The covenant package is in line with the Group's previous facility, namely net debt to EBITDA must be less than 3 times, and interest cover must be greater than 4 times.

16. Share capital

	Number of shares (thousands)	Ordinary shares £m	Share premium £m	Total £m
At 1 January 2021 and 31 December 2021	46,723	23.3	115.1	138.4

The total authorised number of ordinary shares is 63 million shares (2020: 63 million shares) with a par value of £0.50 per share (2020: £0.50 per share). All issued shares are fully paid.

17. Notes to the consolidated statement of cash flows

	2021	2020
	£m	£m
Operating profit	21.6	17.7
Adjustments for:
Depreciation and amortisation	5.3	5.1
Share based payments	0.5	0.5
Increase in inventories	(2.3)	(2.2)
(Increase)/decrease in trade and other receivables (excluding STV ELM Ltd)	(2.3)	1.1
Increase/(decrease) in trade and other payables (excluding STV ELM Ltd)	11.2	1.1
Net decrease/(increase) in STV ELM Ltd working capital	0.8	(0.9)
Cash generated by operations	34.8	22.4

Net debt reconciliation

	Long-term borrowings	Cash and cash equivalents	Net (debt)/cash	Lease liabilities	Net (debt)/cash including lease liabilities
	£m	£m	£m	£m	£m
At 1 January 2021	(22.7)	5.2	(17.5)	(10.8)	(28.3)
Cash flows	8.8	9.5	18.3	1.5	19.8
Non-cash flows (i)	(0.5)	-	(0.5)	(11.6)	(12.1)
At 30 December 2021	(14.4)	14.7	0.3	(20.9)	(20.6)

(i)  Non-cash changes for long-term borrowings relate to the capitalisation and amortisation of

borrowing costs, and for lease liabilities the acquisition of right-of-use assets.

18. Retirement benefit schemes

The Group operates two defined benefit pension schemes. The schemes are trustee administered and the schemes' assets are held independently from those of the Group. Pension costs are assessed in accordance with the advice of an independent professionally qualified actuary.

The schemes are the Scottish and Grampian Television Retirement Benefit Scheme and the Caledonian Publishing Pension Scheme.  Both are closed schemes and accounted for under the projected unit method.

Contribution rates to the scheme are determined by a qualified independent actuary on the basis of a triennial valuation using the projected unit method. The most recent triennial valuation was carried out as at 31 December 2020. This valuation resulted in a deficit of £116m on a pre-tax basis at 30 September 2021 compared to £127.0m on a pre-tax basis at the previous settlement date of 28 February 2019. The next triennial valuation will take place as at 31 December 2023.

Deficit recovery plans, which end on 31 October 2030, have been agreed with aggregate monthly payments unchanged from the previous recovery plans.  The 2021 deficit recovery payments will total £9.3m, with annual payments then increasing at the rate of 2% per annum over the term of the recovery plans, in line with the previous agreement. A contingent cash mechanism remains in place.  As previously, contingent funding payments equivalent to 20% of any outperformance above a benchmark of available cash will be paid to the schemes.

The recovery plans are designed to enable the schemes to reach a fully funded position, using prudent assumptions about the future, by 2030.

The fair value of the assets and the present value of the liabilities in the Group's defined benefit pension schemes at each balance sheet date was:

Assumptions used to estimate the scheme obligations

The significant actuarial assumptions used for accounting purposes reflect prevailing market conditions in the UK and are as follows:

	2021	2020
	%	%
Rate of increase in salaries	nil	nil
Rate of increase of pensions in payment	3.55	3.00
Discount rate	1.90	1.25
Rate of price inflation (RPI)	3.55	3.00

Assumptions regarding future mortality experience are set based on advice, published statistics and experience in each scheme and are reflected in the table below (average life expectations of a pensioner retiring at age 65).

	2021	2020
Retiring at balance sheet date:
Male	21.0	19.6
Female	23.2	21.9
Retiring in 25 years
Male	22.3	21.5
Female	24.6	23.5

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 2021			At 31 December 2020
	Quoted	Unquoted	Total	Quoted	Unquoted	Total
	£m	£m	£m	£m	£m	£m
Investment funds	9.1	156.6	165.7	8.7	213.7	222.4
Debt instruments	201.9	26.5	228.4	133.1	36.6	169.7
Cash and cash equivalents	21.7	5.0	26.7	24.4	(1.3)	23.1
Derivatives	-	(0.4)	(0.4)	-	1.4	1.4
Annuity policies	-	19.6	19.6	-	20.6	20.6
Fair value of schemes' assets	232.7	207.3	440.0	166.2	271.0	437.2
Present value of defined benefit obligations			(519.4)(			(507.5)
Deficit in the schemes			(79.4)			(70.3)

A related, offsetting deferred tax asset for the Group of £19.8m (2020: £13.3m) is included within non-current assets. Therefore, the pension scheme deficit net of deferred tax for the Group was £59.6m at 31 December 2021 (2020: £57.0m).

19. Reconciliation of statutory results to adjusted results

In reporting financial information, the Group presents alternative performance measures (APMs) which are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.

The Group makes certain adjustments to the statutory profit measures to exclude the effects of exceptional items and adjust for other material amounts that it believes are distortive to the underlying trading performance of the Group.  By presenting these alternative performance measures, the Group believes it is providing additional insight into the performance of the business that may be useful to stakeholders. 

Below sets out a reconciliation of the statutory results to the adjusted results:

	2021			2020
	Operating profit     £m	Profit before tax   £m	Basic earnings per share   Pence	Operating profit     £m	Profit before tax   £m	Basic earnings per share   Pence
Statutory result	21.6	20.1	42.7p	17.7	6.7	18.2p
Exceptional items (note 6)	1.7	0.8	1.1p	0.5	8.7	17.0p
Result for the year before exceptional items	23.3	20.9	43.8p	18.2	15.4	35.2p
IAS 19 net finance costs	-	0.8	1.8p	-	1.2	2.3p
High-End Television tax credit	1.9	1.9	-	-	-	-
Adjusted result	25.2	23.6	45.6p	18.2	16.6	37.5p

IAS 19 related items, principally the net interest expense included in the income statement, are excluded from non-statutory measures as they are non-cash items that relate to historical defined benefit pension schemes.

The Group meets the eligibility criteria to claim HETV tax relief through the production of certain dramas created in its Studios division. This incentive was introduced in the UK to support the creative industries and is a critical factor when assessing the viability of investment decisions in the production of high-end drama programmes. These production tax credits are reported within the total tax charge in the Consolidated Income Statement in accordance with IAS 12. However, STV considers the HETV tax credits to be a contribution to production costs and therefore more aligned to working capital in nature.  Therefore, the adjusted results for the Group reflect these credits as a contribution to operating cost and not a tax item.

20. Post balance sheet events

On 9 March 2022, the Group announced it had acquired a 25% stake in quiz show producer, Mighty Productions, and extended its existing co-development and co-production agreement with Tod Productions for a further 3 years.

 

END

 

 

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