Annual Report & Accounts 2013
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Annual Report & Accounts 2013 Annual Report & Accounts 2013 The STV Appeal 2014 is here! Visit www.stv.tv/appeal to see how you can help. Commercially focused Creatively led STV Group plc STV Group plc In producing this report we have chosen production Pacific Quay methods which aim to minimise the impact on our Glasgow G51 1PQ environment. The papers chosen – Revive 50:50 Gloss Tel: 0141 300 3000 and Revive 100 Uncoated contain 50% and 100% recycled www.stv.tv fibre respectively and are certified in accordance with the FSC (Forest stewardship Council). Both the paper mill and printer involved in this production are environmentally Company Registration Number SC203873 accredited with ISO 14001. Contents Directors’ Report Strategic Report 01 2013 Financial Highlights 02 STV – At a glance 04 Chairman’s Statement 06 Chief Executive’s Review – Q&A 10 – Consumer 18 – Production 24 Performance Review 27 – KPIs 2011-2015 29 Principal Risks 31 Corporate Responsibility Corporate Governance 38 Board of Directors 40 Corporate Governance Report 54 Remuneration Report Accounts 80 STV Group plc Consolidated Financial Statements – Independent Auditors’ Report 84 Consolidated Income Statement 84 Consolidated Statement of Comprehensive Income 85 Consolidated Balance Sheet 86 Consolidated Statement of Changes in Equity 87 Consolidated Statement of Cash Flows 88 Notes to the Financial Statements 112 STV Group plc Company Financial Statements – Independent Auditors’ Report 114 Company Balance Sheet 115 Statement of Total Recognised Gains and Losses 116 Notes to the Company Financial Statements 122 Five-Year Summary Shareholders 123 Shareholder Information 125 Notice of Annual General Meeting Designed and produced by Tayburn Directors’ Report – Strategic Report 2013 Financial Highlights 01 Another year of strong financial results and a further significant reduction in net debt. Revenue (millions) Operating Profit (millions)* 2011 2012 2013 2011 2012 2013 £102.0m £102.7m £112.1m £15.0m £17.1m £18.0m +9% +5% Pre-tax Profit (millions)* Net Debt (millions) 2011 2012 2013 2011 2012 2013 £12.7m £13.1m £15.2m £54.5m £45.3m £35.7m +16% -21% * Pre-exceptional items and IAS19 STV Annual Report & Accounts 2013 Directors’ Report – Strategic Report 02 STV – At a glance Our business • STV reaches 3.6 million viewers each all the latest news, events, offers, month with first class programming and pictures and videos for consumers the most comprehensive local news in Scotland’s four main cities. service in the UK. • In June 2014, STV will launch STV • STV Productions is one of the UK’s leading Glasgow, a brand new city-focused production businesses, with ambitious TV channel available on Freeview, plans for growth in the UK and overseas. Sky and online. • STV’s digital business incorporates • STV content is available across multi Scotland’s most popular commercial platforms including iOS, Android, PS3, media website, stv.tv. STV recently Windows 8, YouView and Samsung launched new digital services providing Smart TV. Our business model STV Consumer engagement and cover all STV Delivers unique, high quality content services. The key corporate KPIs g C in o to attract mass audiences which detailed on pages 27 and 28 are used is n t t r e are sold to advertisers to generate to monitor and measure the progress e n v t revenues. The content is delivered of each division in fulfilling its strategy. d A across multiple platforms including digital terrestrial, cable and satellite, STV Productions C o online and through connected Creates and produces high quality n s s r u e m devices such as games consoles content for broadcast networks and Smart TVs. The business aims in the UK and overseas. to use its unique content to create communities of interest and to Profit is made on initial sale and engage consumers. The KPIs have on the exploitation of back end been reviewed and new metrics rights in the UK secondary and will be introduced in 2014 to drive overseas markets. increased focus on consumer g C n o Our strategici aimsn as set out in 2012 is t t e r n e t v d By 2015,A we will: • Grow non-broadcast earnings to represent 33% ofC Groups earnings onsumer • Double STV Productions’ revenues (based on 2011 revenues) • Be the most used digital service in Scotland • Launch two new market-leading digital consumer propositions • Maintain our position as the ‘voice of Scotland’ 03 Covering Scotland STV is Scotland’s leading media brand connecting with consumers and creating opportunities for commercial partners across channels and platforms at a national, regional and city level. 91% Each month, STV reaches 91% of Scots on air. Network Coverage STV’s micro regions offer advertisers the opportunity to geo-target their TV marketing campaigns. Micro Regions STV secured licences in early Glasgow 2013 for local TV in Glasgow Edinburgh and Edinburgh. City TV Aberdeen Dundee STV Glasgow, STV Edinburgh, STV Aberdeen and STV Dundee Glasgow available to download for free Edinburgh as Apps. City Apps Aberdeen * Dundee Glasgow Super-serving Scotland Edinburgh with relevant, locally-focused and engaging content. Key Metropolitan Areas STV Annual Report & Accounts 2013 Directors’ Report – Strategic Report 04 Chairman’s Statement ‘ … continued strength in the overall financial position … pleased to confirm the return to dividend payments.’ Margaret Ford Chairman I was absolutely delighted to platforms, is ambitious and focused Financial performance join the Board of STV in 2013 and provides a clear plan to deliver Good progress has been made and to succeed Richard Findlay future growth and value creation. during 2013 in continuing to diversify as Chairman. Growing up in The recent conclusion of the licence the structure and revenue base of Scotland in the 1960s, STV renewal process for the maximum the business with non-broadcast was an important part of my term of 10 years, provides certainty activities now accounting for almost life and so it is a great privilege and a stable backdrop to enable 20% of earnings. This has been for me to join the company, continued investment and focus to achieved through further strong particularly at such an important be placed upon new growth activities, performance in digital activities time for the company and enabling the transformation of STV and growth momentum in STV for Scotland. to continue. Productions arising from a raft of new commissions and achievement of the Since June, I have observed an A year of significant progress key priority of securing commissions organisation that is focused on its During 2013 the company has been of returning long-running series for consumer relationships, commercially successful in further consolidating major broadcasters. and results oriented with a strong its leading position in Scotland clarity of purpose, objectives and through the introduction of new The balance sheet has further targets and driven by a powerful ground breaking digital consumer strengthened as net debt has creative energy at its heart. services, whilst continuing to deliver continued to reduce, down 21% an outstanding quality of public at £35.7m (2012: £45.3m), a reduction Across the company there is a palpable service content. The success of 34% over the past two years. sense of pride in the brand and the achieved by STV Productions has The company remains on track to strength of connections held with successfully enhanced its reputation achieve the target of a ratio of net consumers and commercial partners. as a leading UK production company debt to EBITDA of one and a half Combined with a clear strategy to with growing international times by the end of 2014. embrace the opportunities presented connections. by a changing media landscape, Profit before tax, IAS19 and exceptional I am assured of the potential of the STV holds a unique and ubiquitous items is £15.2m, up 16% on last year, company to realise its ambitions. connection with communities across and earnings per share on the same Scotland. In addition to serving basis are up 13% at 34.4p. In particular, I am confident the communities with high quality, company is well positioned to achieve trusted, informative and entertaining The underlying profitability of all areas its strategic aim of one-third of content, new connections are being of the business continues to perform earnings being derived from formed through seeking to enhance strongly, with improving margin non-broadcast activities by 2015. the lives of the most vulnerable performance in growth activities. The strategy to deliver this, through children in these communities Digital margins increased significantly growth of the digital business and founded upon a strong commitment to 40%, up from 26% the previous STV Productions, combined with to social investment, with over £2.5m year. Margins also improved in continuing to build a strong core raised by the STV Appeal during the STV Productions. business founded on the deep 2013 campaign. connections held with consumers The consumer business delivered across an increasing range of a margin of 17.8% (2012: 18.3%) 05 down slightly as a result of higher Positive growth momentum Creating new prospects network programme costs. Overall, across all areas of the business for future growth Group operating profit has increased STV Productions has successfully 2014 will be an historic year with the for the third consecutive year, up increased the number of new eyes of the world on Scotland and 5% at £18.0m (2012: £17.1m). commissions secured during the year STV is in a prime position to deliver including further commissions of against this opportunity. This will Signs of some improvement in the long-running returning series. As the present new and positive challenges macro economy have been reflected profile of the business develops in the for the news and current affairs team through a modest upturn in consumer UK and internationally with content of and provide an exceptional opportunity confidence, resulting in an increase the highest quality being developed for the commercial team to increase in national airtime revenues.