Annual Report and Accounts 2017 Accounts and Report Annual
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Annual Report and Accounts 2017 Accounts and Report Annual Annual Report and Accounts 2017 STV Group plc Contents 01 2017 financial and Financial Statements operational highlights 76 STV Group plc consolidated financial statements Strategic Report – independent auditors’ report 02 The STV Family 82 Consolidated income statement 04 Chairman’s statement 82 Consolidated statement Operating review 06 of comprehensive income – Group 83 Consolidated and parent – Consumer company balance sheets – Showcase of STV content 84 Consolidated and parent – Productions company statement of – STV External Lottery Manager changes in equity 22 Corporate responsibility 85 Consolidated and parent STV Children’s Appeal 2017 29 company statement Performance review 32 of cash flows 34 Principal risks and uncertainties 86 Notes to the financial statements 36 Risk management 113 Five year summary Governance Additional Information 39 Introduction to governance 114 Shareholder information 40 Board of Directors 116 Notice of Annual General Meeting 42 Corporate governance report 55 Remuneration report 72 Directors’ report STV is Scotland’s leading digital media brand, providing consumers with quality content on air, online and on demand. View our Annual Report and Accounts and other information about STV at www.stvplc.tv STV Annual Report and Accounts 2017 2017 financial and operational highlights Turnover Operating profit* (£ millions) (£ millions) 20.3 19.7 19.5 120.4 120.4 19.0 116.5 117.0 % % -3 2014 2015 2016 2017 -4 2014 2015 2016 2017 Dividends per share (pence) STV reaches 17.0 3.5m 15.0 10.0 viewers each month % 8.0 on channel 3 +13 2014 2015 2016 2017 +37% STV2 launches as in streams on Scotland’s newest channel the STV Player EPS* STV Children’s Appeal (pence) raises over £2.6m 39.7 39.9 39.6 38.7 Flat 2014 2015 2016 2017 * Pre-exceptionals and IAS 19. See Note 30. 01 Strategic Report The STV Family UNRIVALLED CONNECTION WITH CONSUMERS, REACHING 80% OF SCOTS EVERY MONTH ON AIR STV audience share continues STV2 regularly attracts more to track above ITV Network viewers than many long-established non-terrestrial channels 0.6 57% share points ahead of reach of STV2 since launch Network in peak-time Top 30 46/50 non-PSB digital channel of Scotland’s top commercial programmes shown on STV 02 STV Annual Report and Accounts 2017 Strategic Report Strategic STV delivers high quality content on air, online and on demand for consumers to access free of charge, via multiple platforms wherever and whenever they want. ONLINE ON DEMAND stv.tv STV Player Building audiences by STV Player offers a high quality delivering content online and consumer experience providing on social media channels catch up and watch live 3.7m 37% unique monthly browsers growth in streams 20% 43 mins increase in article views average time spent on STV Player 03 Strategic Report Chairman’s statement Baroness Margaret Ford 2017 was a landmark It is a marker of the resilience and £10 million capital to shareholders strength of commercial free to air over a period of up to 18 months. year for the Company television that in this anniversary This process commenced in year, the reach and impact of STV is September 2017. marking its sixtieth unrivalled and we continue to deliver anniversary, and we the largest mass audience for Sustainable growth celebrated the fact advertisers seeking to connect The strong capital discipline instilled with Scottish consumers. across the business, along with the that STV is as relevant, business continuing to be cash trusted and iconic a Delivering returns to shareholders generative during 2017, has enabled When I was appointed Chairman, the key net debt:EBITDA ratio target to brand and a presence I stated my intention to deliver value be maintained in the range of one to to our shareholders through the one and a half times. This has provided in Scottish life as at introduction of a progressive dividend financial flexibility and facilitated any time over the policy. This decision reflected the the additional return of capital to Board’s confidence in the underlying shareholders to be committed. past six decades. financial strength of the Company and the resilience of the core business, Our trading arrangements with despite macro-economic uncertainty ITV have provided a buffer against placing downward pressure on the weakness in the national advertising advertising revenue market during market and changing macro-economic this period. circumstances. Through these arrangements STV is responsible We have fulfilled this commitment for the growth components of the since our return to dividend in 2013. STV Family of consumer services Our policy continues to pay out and non-broadcast products. between 60-80% of cash generation after pension deficit contributions The strong profitable growth trend and I am pleased to propose a final in our digital activities continued ordinary dividend of 12 pence per during 2017 as the STV Player was share. This will result in a total extended on to new platforms, dividend of 17 pence per share, increasing accessibility and an increase of 13% year on year. availability of our content. In line with this commitment to the long-term delivery of increased shareholder returns, in August we announced the Board’s intention to return an additional sum of 04 STV Annual Report and Accounts 2017 Strategic Report Strategic Investing in our connections Having served on the Board as Senior with audiences Independent Director for 10 years, In the year that marked a significant David Shearer also stepped down anniversary of STV’s longevity, a from the Board at the AGM in April. newly created channel was launched. STV2, Scotland’s newest and most I would like to thank them both for innovative television channel has their outstanding contribution to been formed through the integration the success of the Company and of the five local television (L-DTPS) wish them both continued success licences won by STV. STV2 has in the future. brought together city-focused television services, initially I was delighted to announce the established for Glasgow and appointment of Simon Pitts as Edinburgh, with those subsequently successor to Rob Woodward. Simon enabled for Aberdeen, Dundee took up his role in January 2018. and Ayr, into a single networked service with a unitary schedule. Simon Miller, who joined the Board during 2016, has been appointed STV 60th Anniversary We will engage fully with the process as Senior Independent Director. being undertaken by Ofcom to assess STV launched on 31st August 1957. On behalf of the Board, I would like the impact on our channels, and Reflecting the fact that Scotland has to thank all colleagues across the STV2 in particular, of the proposed seen major changes over the past 60 business for their contributions BBC Scotland channel. years, STV has come a long way too during 2017. Their energy, drive, – growing from a small TV company creativity and passion to create and STV Productions to a 21st century broadcaster which produce great content and serve and STV Productions has secured is now Scotland’s leading digital delight our audiences and consumers several new commissions during media brand. 2017, including the first drama is highly valued. commission for delivery to the BBC. STV’s diamond anniversary and Looking ahead, my Board unique contribution to broadcasting colleagues and I are looking The strategy for the business in Scotland was celebrated and forward to supporting Simon Pitts continues to be the growth of a commemorated with 1957-style as he develops and implements Scottish based production company vintage promos and a series the strategy and plan to take the of scale delivering content to UK of programme highlights. and international broadcasters. Company forward and deliver We support the increased focus of sustainable returns to shareholders. commissioners on ensuring that their schedules represent regional and Thank you for your continued support. societal diversity, and we welcome increased commissioning spend being committed to content producers located in the nations and regions of the UK who are in a strong position to deliver on this brief. Baroness Margaret Ford Chairman Board changes At a time when STV is very much A significant chapter in the focused on the future of broadcasting Company’s more recent history was in Scotland, it’s great to pause for a brought to a close as Rob Woodward moment to reflect on the 60 years stepped down at the end of 2017 that have taken us to where we are after serving over 10 years as and the cultural and social impact Chief Executive Officer. of STV on Scottish life. 05 Strategic Report Operating review – Group RESILIENT PERFORMANCE; INCREASED RETURNS TO SHAREHOLDERS During 2017 STV Key to the development of successful consumer services is our Non-broadcast continued to focus on understanding of the demographics, habits and preferences of consumers. earnings share consolidating its position We are well on the way to meeting (%) our 2018 consumer insights KPI and as Scotland’s leading Why it’s important expect to exceed this – supported by Our strategy is to diversify the digital media business the considerable data capturing assets Group’s earnings from being over at our disposal, including the STV and delivering returns 90% driven by broadcast to a Player and Scottish Children’s Lottery. to shareholders. more broadly balanced base. To meet our 2018 targets, we How we measure it continued to focus on extending It is calculated as non-broadcast The de-risking of the business our consumer reach – or monthly operating profit (digital and through the trading arrangements average audience in millions – productions) divided by total with ITV plc has delivered a resilient across each of our services and on operating profit and expressed performance in an adverse market.