UTV Media plc Report & Accounts 2013
Contents
Summary of Results 2 Chairman’s Statement 3 Who We Are 5 Radio GB 6 Radio Ireland 8 Television 10 Strategic Report 12
Board of Directors 27 Corporate Governance 30 Corporate Social Responsibility 43 Report of the Board on Directors’ Remuneration 48 Report of the Directors 63 Statement of Directors’ Responsibilities in relation to the Group Financial Statements 67 Directors’ Statement of Responsibility under the Disclosure and Transparency Rules 67
Report of the Auditors on the Group Financial Statements 68 Group Income Statement 71 Group Statement of Comprehensive Income 72 Group Balance Sheet 73 Group Cash Flow Statement 74 Group Statement of Changes in Equity 75 Notes to the Group Financial Statements 76
Statement of Directors’ Responsibilities in relation to the Parent Company Financial Statements 120 Report of the Auditors on the Parent Company Financial Statements 121 Company Balance Sheet 122 Notes to the Company Financial Statements 123
Registered Office and Advisers 126
1 UTV Media plc Report & Accounts 2013 Summary of Results
Financial highlights on continuing operations* • Group revenue of £107.8m (2012: £112.3m) - down 11% in the first half of the year and up 3% in the second half • Pre-tax profits of £16.9m (2012: £20.1m) • Group operating profit of £20.1m (2012: £23.4m) - down 36% in the first half of the year and up 10% in the second half • Net debt £49.1m (2012: £49.4m) • Diluted adjusted earnings per share from continuing operations of 14.27p (2012: 16.63p) • Proposed final dividend of 5.25p maintaining full year dividend of 7.00p (2012: 7.00p)
* As appropriate, references to profit include associate income but exclude discontinued operations.
Operational highlights • Difficult market conditions in the first half of the year with improving macro-economic environment leading to growth in the second half • Strong audience shares across Radio and Television • Cost savings realised from Group restructuring coupled with Simply Zesty reorganisation • Radio and television broadcasting focus – divesting of New Media businesses (exceptional charge of £1.2m) • Plans to launch a new television channel in Ireland following agreement with ITV Global Entertainment for the exclusive rights, from January 2015, for ITV Studios programmes in the Republic of Ireland • talkSPORT successfully renewed exclusive national audio broadcasting rights for Premier League packages to 2016
Prospects highlights • Continued growth in the first three months of 2014 • Radio Ireland revenue (local currency) up 9%, Radio GB revenue up 7% and Television revenue up 5% • April is expected to show strong growth as anticipated • Further growth is expected in Radio GB in the second quarter in the run up to the World Cup • Ongoing expansion in talkSPORT International • Irish television licence awarded – station build commencing
Key dates • 15 May 2014 – Annual General Meeting & Interim Management Statement • 30 May 2014 – Record date for payment of dividends • 15 July 2014 – Payment of dividends • 26 August 2014 – Interim Results Announcement • 13 November 2014 – Interim Management Statement
2 UTV Media plc Report & Accounts 2013 Chairman’s Statement
“I am happy to report a year of significant progress. We now have a clear strategic focus to the Group with exciting growth platforms for the future.”
Richard Huntingford Chairman
Overview The most significant of these was the agreement we entered into with ITV Global Entertainment to acquire the rights in the The tough trading conditions of the first half gradually gave way to Republic of Ireland to ITV Studios programming from 1 January more benign conditions in the second half as advertising markets 2015. In conjunction with this, we applied for and were recently started to respond to the improving macroeconomic environment. granted, a programme content licence from the Broadcasting This was particularly the case in Ireland where, after five years Authority of Ireland to operate a new television channel in the of decline, television advertising recorded growth of 11% in the Republic of Ireland for a ten year term beginning 1 January 2015. second half while radio advertising also moved into growth. Weak With ITV programming at the heart of the schedule, our objective demand in the GB radio advertising market was compounded is to provide a service similar to that which we offer in Northern by the absence of a major sporting event in talkSPORT’s Ireland but customised to meet the needs and preferences of calendar, but here again market conditions improved as the year viewers in the Republic of Ireland. Much of the programming progressed. Having been down by 11% in the first half of the year, which we will be offering will already be familiar to Irish viewers total Group turnover (excluding discontinued operations) was up and we are confident that we will be able to establish a strong by 3% in the second half, giving a 4% reduction for the full year at viewership base in our first full year of operation. £107.8m (2012: £112.3m). Group operating profit* matched this profile, being down 36% in the first half and up 10% in the second In a further positive development for our television division, half recording a 14% reduction for the year as a whole at £20.1m Ofcom has now confirmed that our licence to operate our (2012: £23.4m). television service in Northern Ireland has been extended by a ten year period to expire on 31 December 2024. Ofcom has set our Results and dividends for the year licence fee during this term at £10k per annum. Our new affiliate The Group profit after taxation before exceptional items for the arrangement with ITV will operate for the same period and will year, amounted to £13.7m (2012 restated: £16.2m) as detailed in provide, inter alia, stability around our network programme costs, the Group Income Statement. Exceptional items arose during the subject to capped inflationary increases. year as a result of a £1.2m write down of assets on operations classified as discontinued plus an exceptional tax credit of £1.2m Refining our strategy to focus more on broadcasting, we decided due to the changes in the rates of UK corporation tax and ROI to exit from non-core activities. Our three portals, Propertypal, capital gains tax (2012: exceptional tax charge of £1.0m). This UTV Drive and Recruit NI, have been sold or are held for sale and created a Group profit for the year of £13.7m (2012: £15.2m). we are in the process of divesting of UTV Connect. The remaining parts, Tibus and Simply Zesty, of what had been our New Media There was a small reduction in net debt to £49.1m at the year end division provide support for our broadcast businesses and have (2012: £49.4m). been subsumed into our Television division. We also restructured Simply Zesty under new management to focus its activities on an Dividends amounting to £6.7m were paid during the year all-Ireland basis and at the same time implemented an efficiency representing a final ordinary dividend for 2012 of 5.25p per share savings plan throughout the Group. and an interim ordinary dividend for 2013 of 1.75p per share as shown in note 12. Review of activities Our activities now comprise three broadcast divisions, Television, A final dividend of £5.0m representing 5.25p per share is proposed Radio Ireland and GB Radio. All three divisions continue to perform for approval at the Annual General Meeting. If approved, warrants strongly in delivering sizeable audiences in their respective in respect of it will be despatched on 15 July 2014 to shareholders markets. Our television station continues to be the most watched on the register at the close of business on 30 May 2014. channel in Northern Ireland, a position it has maintained for many years. Our Irish radio stations also enjoy market leading Developments towards a broadcasting focused positions in each of the urban areas in which they operate, strategy including Ireland’s three largest cities. In GB Radio the audience In 2013 management made good progress in transitioning the for talkSPORT has steadily grown over the last eight years and business to be focused predominately on broadcasting, in line this national radio station now regularly reaches more than three with the Board strategy. million listeners every week. The Group has demonstrated its ability to consistently deliver strong audiences and this remains the key to unlocking advertising and sponsorship revenues.
* As appropriate, references to operating profit include associate income but exclude discontinued operations. 3 UTV Media plc Report & Accounts 2013 Chairman’s Statement
Prospects Conclusion Whilst the advertising market in the Republic of Ireland has been In conclusion, I am happy to report a year of significant progress. particularly challenging over the last few years, there is optimism We now have a clear strategic focus to the Group with exciting that a corner is slowly being turned. Growth in our Irish television growth platforms for the future. In addition, as we see a return advertising revenue in the second half of 2013 has continued to good levels of top-line growth in our core market places, we into the first quarter of 2014, which is expected to be up by 11%, can look forward to seeing the benefits of the operational gearing helping to increase our total Television revenues for the quarter inherent in our business model reflected in our future results. by 5% and 10% in April. Finally, I would like to pay tribute to our management and staff Growth is also being recorded in our Irish radio advertising throughout the Group who have worked so hard during the year, revenue, which is forecast to be up by 9% in local currency terms in particularly challenging circumstances, to position the Group in the first three months of this year and to show further single for future growth. digit growth in April. It is too early to know if this growth in Irish revenue can be sustained for the rest of the year, and indeed into 2015, but the trend so far is clearly encouraging, particularly in Richard Huntingford light of our expanding television interests in Ireland. Chairman 28 March 2014 After an unexpectedly difficult year for the industry in 2013, the radio market in GB is also improving. Our GB Radio revenues are expected to be up by 7% in the first quarter of 2014 and by 17% in April, with talkSPORT’s revenue forecast to grow by 12% and at least 25% in these respective periods. talkSPORT has non- exclusive radio rights to the FIFA World Cup in the early summer, which will provide a welcome boost to radio revenues in the first half of this year.
UTV Media plc Board of Directors: (l to r) (Back row) C. McConville, N. McKeown, A. Anson, H. Kirkpatrick, S. Taunton, S. Kirkpatrick, (Front row) J. McCann, R. Huntingford.
4 UTV Media plc Report & Accounts 2013
Who we are
UTV Media plc is one of the most successful media companies based in the UK and Ireland incorporating broadcasting and digital media assets across its radio and television divisions.
Radio (GB) operates talkSPORT the world’s biggest sports Television operates the Channel 3 public service broadcast radio station, talkSPORT International, Sport magazine the licence for Northern Ireland with the highest penetration of UK’s leading sports magazine, 13 independent local radio (ILR) all media. In 2015 we will launch a new dedicated UTV Ireland stations in England and Wales as well as a number of digital channel in the Republic of Ireland. Our digital media businesses radio multiplexes throughout GB. Simply Zesty and Tibus sit within the television division.
Radio Ireland is the largest local radio operator in Ireland with Our success is based on knowing our audiences and delivering 7 stations broadcasting from Belfast, Cork, Limerick, Dublin and the content they want wherever they are. Drogheda and an advertising sales house based in Dublin.
Where we are UK and Ireland 1. UTV Media plc HQ, UTV Television, U105, Simply Zesty, Tibus 2. LMFM 3. UTV Ireland, FM104, Q102, UTV Radio Solutions, Simply Zesty 4. Cork’s 96FM 5. C103 6. Limerick’s Live 95 FM 7. talkSPORT, talkSPORT International, Sport Magazine 8. Radio Wave 9. The Pulse 1 and Pulse 2 10. Juice FM 11. Wish FM 12. Wire FM 13. Tower FM 14. Peak 107
1 15. Signal 1 and Signal 2 16. Signal 107 17. Swansea Sound and The Wave 8 13 9 2 11 18. UTV Radio GB HQ 10 18 12 3 14
15 6 16
4 5 17 7
talkSPORT broadcasts to partner stations in 24 markets around the world.
5 UTV Media plc Report & Accounts 2013
Radio GB
talkSPORT presenters talkSPORT based in London is the world’s biggest sports radio station and the UK’s only 24 hour dedicated sports station. talkSPORT is an official broadcaster of the Barclays Premier League, the 2014 FIFA World Cup, the FA Cup, England football internationals and the Capital One Cup.
Internationally, as global audio partner of the Premier League, talkSPORT broadcasts Barclays Premier League, FA Cup and Capital One Cup commentary in 8 languages with partner stations in 24 markets around the world.
UTV’s network of 13 local radio stations each has a unique place in their communities providing news, information and entertainment. Our stations are Juice FM in Liverpool, The Pulse 1 and 2 in West Yorkshire, Signal 1 and 2 in Staffordshire and Cheshire, Swansea Sound and The Wave in South Wales, Peak 107 in North Derbyshire, Radio Wave in Blackpool, Tower FM in Bolton and Bury, Wire FM in Warrington, Widnes and Runcorn, Wish FM in Wigan and St Helens, and Signal 107 in Wolverhampton, Shrewsbury, Oswestry, Kidderminster.
UTV also has interests in 8 local and regional DAB digital radio multiplexes.
Sport magazine is a high quality weekly free sporting magazine which is the leading sports magazine in the UK and the second most read men’s title in the UK. It is available both as a print edition and digitally on iPad, Kindle Fire and Android devices.
6 UTV Media plc Report & Accounts 2013
What we do
Our Audience • talkSPORT is listened to by 3.2 million adults per week – 81% of all talkSPORT listeners are male and 55% are ABC1. • UTV’s 13 local stations are listened to by 1.2m adults per week – 53% are female and 64% are aged between 15 and 44. • Sport magazine has an audited weekly circulation of more than 300,000 and readership of almost 450,000, with 60% of readers aged 25 to 34 and 81% categorised as ABC1. • talkSPORT’s website has more than 3.3m average monthly unique users, while our local radio stations attract over 0.5m to their websites.
Our Content From former professionals who played at the very top of their sports to award-winning broadcasters, talkSPORT’s line-up of talent is the best in the business. The Saturdays on Juice FM Experienced broadcasters Colin Murray and Johnny Vaughan are at the helm of new shows and sporting legends including Sport magazine attracts the biggest names in sport and has former Premier League manager Neil Warnock, ex-England secured exclusive interviews with Gareth Bale, Wayne Rooney, cricketer Dominic Cork, Tottenham and France legend David David Beckham and Serena Williams amongst many others. Ginola and former England and British & Irish Lions hooker Brian Moore joined as co-hosts on the award winning Alan UTV’s local stations secured exclusive interviews in 2013 with Brazil Sports Breakfast. some of the biggest names in music including Gary Barlow, Miley Cyrus, One Direction and Olly Murs. As well as broadcasting more live football commentaries than ever before, including Barclays Premier League, Champions Swansea Sound hosted a live on-air session with one of the League, Europa League, FA Cup and Capital One Cup, talkSPORT biggest ever Welsh bands, the Manic Street Preachers. was the exclusive UK audio broadcaster of the British & Irish Lions Tour to Australia with the station’s celebrated rugby Away from music output, Bolton station Tower FM signed former commentators including David Campese, Brian Moore and Bolton Wanderers striker Kevin Davies as a commentator Shane Williams. on their live football matches while sister station Wire FM broadcast special programming to commemorate the 20th anniversary of the Warrington bomb.
7 UTV Media plc Report & Accounts 2013
Radio Ireland
FM104’s Strawberry Alarm Clock breakfast show
UTV owns 7 leading stations in the major urban areas in Ireland - FM104 and Q102 in Dublin, Cork’s 96FM and C103, Limerick’s Live 95FM, LMFM in Louth/Meath and U105 in the Greater Belfast area - and a national radio sales house UTV Radio Solutions based in Dublin. All stations are market leaders with their target audiences.
UTV Radio Solutions also sells airtime for 2 other radio stations in Galway and Waterford.
The UTV Radio Solutions network of 9 stations in Ireland represents two thirds of the Irish population providing a very strong alternative to the national state broadcaster RTE.
Our Audience
Listenership Data Weekly Market Reach Share
96FM / C103 Cork 68.4% 47.1%
Live 95FM - Limerick 75.3% 37.3%
Q102 - Dublin 15.5% 6.7%
FM104 - Dublin 29.3% 12.1%
LMFM – Louth / Meath 34.0% 30.6%
U105 – Belfast 22.0% 12.5% Limerick’s Live 95FM sponsors Limerick FC Source – RAJAR Q4 2013 /JNLR / Ipsos MRBI 2013 - 4
8 UTV Media plc Report & Accounts 2013
What we do
Our Content UTV’s 7 stations in Ireland all have a strong community focus providing music, news, sport and current affairs.
FM104 and LMFM recently secured new 10 year broadcast contracts with the Broadcasting Authority of Ireland.
UTV Radio Solutions provides innovative solutions for its clients and this was recognised at the 2013 Love Radio Awards where the team picked up an impressive 5 awards including Sales Team of the Year. The team also won awards for Best Collaboration with an Agency highlighting their partnership style approach and in The Most Effective Radio campaign, showing the effectiveness of the stations in delivering results.
UTV Radio Solutions was also at the forefront of new technology delivering successful social media campaigns for brands combined with our strong radio advertising offering.
FM104 won three Gold PPI Awards for its Strawberry Alarm Clock breakfast show.
Cork’s 96FM raised €510,000 during its 2013 annual “Giving for Living” Radiothon and was recognised by winning the Best Regional Fundraising Campaign at the Fundraising Awards 2013. The station has raised almost €3m through its Radiothon since Cork’s 96FM ‘Hands Off’ promotion its inception in 2008.
U105 Hospice Challenge
9 UTV Media plc Report & Accounts 2013
Television
Coronation Street
UTV is the most watched TV channel in Northern Ireland delivering high quality popular home produced programmes backed up by the best of the ITV Network.
UTV first went on air in 1959 as part of the ITV Network and has held the Channel 3 public service broadcasting licence ever since. UTV was also the first commercial television operator on the island of Ireland.
In 2015 we will be launching a new UTV Ireland channel in the Republic of Ireland.
Our digital businesses - Tibus which provides infrastructure and Simply Zesty marketing services - sit within the television division providing Group support as well as operating independently across Ireland, UK and globally for third party companies.
Our Audience • UTV is the market leader in Northern Ireland and more than one million people throughout Ireland tune in to UTV every day. Lesser Spotted Culture team • Post digital switchover, UTV’s share of peak time viewing has held up exceptionally well at 26.2%, which is more than 4 times the audience of our nearest commercial competitor Our Content Channel 4 which has 5.5% and well ahead of BBC NI’s 17.3%. In 2013, UTV has broadcast: • The top performing programmes in Northern Ireland were dominated by UTV which took 71 of the top 100 places • The most watched soaps – Coronation Street and Emmerdale including 14 for UTV produced regional programmes. • The most watched sporting event – UEFA Champions League • Traffic to UTV’s website more than doubled in the past Live 12 months reaching a record 1.2 million unique users in • The most watched drama – Downton Abbey December with growth driven by increasing mobile and • The most watched regional news – UTV Live social media traffic throughout the year.
10 UTV Media plc Report & Accounts 2013
What we do
UTV took part in many key events across the year including the prestigious UTV Business Eye Awards now in their 7th year; the Belfast Mela; the Spirit of Northern Ireland Awards and the Dalriada Festival among many more.
As Northern Ireland’s leading television broadcaster it is increasingly important to have a strong online and mobile presence. Our programming is available through digital platforms including our website, mobile website and a news app for Apple and Android devices. Investment is being made in new UTV player technology which will come on-stream in 2014.
On January 1, 2015 we will launch a new television channel for the Republic of Ireland entitled UTV Ireland having secured the ITV rights for key programmes in the market.
The new channel will be based in Dublin with additional newsgathering and reporting presence in Cork, Galway, Waterford and Limerick. It will utilise UTV’s existing winning formula of combining high quality news, current affairs, entertainment and The Magazine with Sarah Travers drama and will be available on all key platforms.
UTV completed its roll out in HD across all major platforms Tibus and Simply Zesty play a key role in the provision of in 2013 following significant investment in its infrastructure. infrastructure and social media marketing services to TV and radio divisions. UTV continued its strong commitment to local programmes in 2013 to bring innovative and popular programming to our Tibus audience. Tibus has been part of UTV since 2007 providing robust digital infrastructure services including managed cloud hosting, High quality news and current affairs are at the heart of our content delivery, streaming, high-grade connectivity and schedule.Two major news events on the same day - the visit of associated integration solutions to customers throughout the UK President Obama and the start of the G8 summit in Enniskillen - and Ireland. provided the news highlight of the year and the biggest TV news audience with a peak of 46%. Simply Zesty UTV won the contract to provide regional news bulletins to the Simply Zesty is one of Ireland’s largest digital agencies with ITV network breakfast programme, Daybreak which started in operations in Dublin and Belfast. Simply Zesty offers leading 2013. brands an unrivalled creative digital marketing and technology service across Europe and beyond under one virtual roof with a In a major commitment by UTV to Derry-Londonderry’s year dedicated and highly experienced team of digital professionals. as City of Culture in 2013, we showcased a fabulous line-up of artistic and cultural events with 12 hours of programmes across 2013 in Lesser Spotted Culture.
UTV Ireland is awarded a new contract by the BAI
11 UTV Media plc Report & Accounts 2013 Strategic Report
Strategic Objectives UTV Media plc aims to maximise shareholder return and create value through the development of a focused and robust portfolio of market leading media assets. This is delivered through emphasis on three strategic objectives:
1. Grow audience share and drive advertising revenues through the provision of high quality content 2. Increase advertising revenues by offering multiple platforms to advertisers 3. Develop the Group’s portfolio of assets through capitalising on new opportunities, whilst maximising the Group’s profitability.
Business Model The Group is now managed across 3 key areas of business or activity – Radio GB, Radio Ireland and Television. UTV’s core business model is illustrated as follows:
Content Platforms Audience Revenue Operations High quality Focused on making Audience share is Maximising Ensuring costs and broadcast content content available driven by quality audience share investment are across multiple content delivered drives advertising appropriate for platforms over multiple revenues business needs platforms
Driven by: Radio and TV Quality content Audience share Includes: • Securing broadcasting are drives station growth is a direct • Investing in and retaining the key mediums of listener and viewer driver of the opportunities and broadcasting and content provision. market share. business’ advertising driving growth in programming and sponsorship new markets The growth in new The provision of revenues – both rights • Recruiting the platforms reinforces content through demand and pricing. • Producing best people the absolute digital channels popular regional importance of allows the stations • Motivating and local content. to reach new and them to achieve programming growing online success • Recruiting and audiences. • Monitoring costs retaining key and managing talent across the resources Group • Ensuring capital • Acquisition expenditure of media is appropriate assets where to long term appropriate. objectives.
12 UTV Media plc Report & Accounts 2013 Strategic Report
Strategic Objective 1: Grow audience share and drive advertising revenues through the provision of high quality content
Radio GB Radio Ireland Television
talkSPORT is the flagship brand for The Group is the largest and most UTV is an iconic brand across the the Radio GB division. The station’s successful operator of independent island of Ireland. UTV has been the business model is underpinned by commercial local radio stations in Channel 3 licensee for Northern investment in high quality sports Ireland, with seven stations, two in Ireland for over 50 years, since 1959, content, in particular exclusive sports Dublin, two in Cork and one in each of and has considerable experience rights and high profile presenters and Limerick, Drogheda and Belfast. catering to the local audience. guests. In turn, this attracts a large ABC1 male audience, which is highly Radio Ireland stations provide locally The quality of UTV’s television content sought after by advertisers and difficult focused content which is attractive to has two main components: for other national radio stations and the target audience in their respective sports media outlets to replicate. areas and as a result stations have • Through the current Network significant or market leading positions. Affiliate Agreement with ITV Sports rights secured include rights (which runs through to 2024) the to broadcast every game of the By focusing on stations in key urban channel obtains a supply of quality 2014 FIFA World Cup and exclusive areas Radio Ireland has been able programming content including national, European and global audio to build a highly attractive network popular shows such as Emmerdale, broadcasting rights for the Barclays for large advertisers called “Urban Coronation Street and I’m A Premier League to 2016, enabling Access”. Celebrity (Get Me Out of Here). us to expand content provision into • Popular regional programming international markets. Each station has a dedicated team of especially news and current presenters and production staff who affairs, reflecting the communities The Group’s portfolio of local radio remain constantly in tune with the UTV serves. This is delivered by stations in GB provides entertainment, listening requirements of the audience ensuring the business has the key news and music with a focus on they serve. The stations are purposely talent, presenters and editorial and delivering an essential source of local in nature with all stations also production staff with modern skills information for local communities. playing a key role in local community, and a strong commitment to local Amidst changes within the wider radio and in particular charitable events. audiences. industry and local media landscapes, the commitment of these stations to a The successful combination of these local service represents a clear point elements allows UTV to consistently of differentiation, which has enabled outperform competitors for peak-time the stations to secure growth in local viewership in Northern Ireland. advertising revenues. With the launch of UTV Ireland in 2015 Sport magazine complements we will be seeking to replicate this talkSPORT by providing another business model in the Republic of effective means for advertisers to Ireland. reach a large UK male audience. The magazine is the most read sports magazine in the UK and is underpinned by engaging sports editorial and exclusive interviews.
Related Non Financial KPIs Audience share including listener share, listening time and/or viewer share
Related Financial KPIs Revenue
13 UTV Media plc Report & Accounts 2013 Strategic Report
Strategic Objective 2: Increase advertising revenues by offering multiple platforms to advertisers
Radio GB Radio Ireland Television
As digital technology changes the way New digital technologies continue to Over the last two years television has in which we consume media, talkSPORT be embraced by Radio Ireland division continued to invest in an updated has positioned itself as a multi-platform as both a source of new revenues, u.tv website, a mobile site and sports brand with radio at its core. a significant marketing tool for the downloadable apps. UTV is also The www.talksport.com website stations but in particular to drive continually developing its UTV player is a leading sports portal, providing traditional radio advertising through technology with a new revamped player access to exclusive breaking news and packages that include elements of new to be launched in early 2014. interviews and 2013 saw strong growth media. in visitors to the site. Website usage has grown as a result of All stations have active websites investment in new delivery channels. In 2012 the business took the strategic including features such as rolling local Online traffic has also been boosted by decision to expand the talkSPORT and national news, entertainment growing social media channels – with brand globally. talkSPORT acquired news, listen live, podcasts and show Facebook and Twitter followers for global audio rights to Premier League and presenter details etc. UTV Radio the company and key personalities matches and now broadcasts football Ireland websites have over 1 million totalling over 238,000. commentary in multiple languages via pageviews on a monthly basis. www.talksport.com, mobile apps and The UTV player pageviews grew by a growing network of overseas digital The division’s stations have 398,000 more than 100% in 2013 to over 10m. and broadcast partners in 24 countries. Facebook followers and 125,000 The launch of the new UTV player followers on Twitter, and actively in 2014 is expected to drive further talkSPORT uses social media to use these platforms to engage with growth in online traffic. connect with its audience and has listeners. 615,000 Facebook page likes and The acquisition of Simply Zesty in 2012 507,000 Twitter followers on its The business was responsible for was prompted by the need to offer primary accounts. Many of the station’s the first use of Facebook vouchers in social media and digital advertising to key presenters also have a strong Ireland as well as a world first with clients. By working alongside Simply following on social media. the use of Shazam as part of a radio Zesty and Tibus, which continues to advertising campaign. offer core digital technology support, The on-air activities of each of the Television, and other UTV Media division’s local radio stations are Each station has launched an App divisions, will be able to broaden the supported by attendance at local for mobile listening as well as product offering into new areas. events as well as an engaging local other features such as news and online and mobile presence. The local the promotion of competitions. App stations have over 90,000 Facebook downloads number over 300,000. page likes and over 110,000 Twitter followers and traffic to their websites grew significantly in 2013.
Sport magazine is also available for mobile and tablet devices, and articles from the magazine are published via www.talksport.com.
Radio GB is well positioned to benefit from the transition towards greater digital radio listening, with shareholdings in eight local and regional DAB multiplexes across the UK and digital licences for talkSPORT and a number of its local stations.
Related Non Financial KPIs Visits to digital platforms including website page views and unique users.
Related Financial KPIs Revenue
14 UTV Media plc Report & Accounts 2013 Strategic Report
Strategic Objective 3: Develop the Group’s portfolio of assets through capitalising on new opportunities, whilst maximising the Group’s profitability.
Radio GB Radio Ireland Television
In 2012, talkSPORT acquired the Macro-economic conditions in Ireland In 2013 an agreement was signed with global audio rights to Premier League remain challenging, however, Radio ITV Studios Global Entertainment, through 2016 and FA Cup matches Ireland has continued to out-perform which will give UTV the exclusive through 2018 and announced its the market primarily due to the quality broadcasting rights for ITV Studios expansion into new markets. Radio GB of the stations within our division and programmes for the Republic invested in an international broadcast the focused business model. of Ireland audience, including centre at the station’s London studios popular soaps Coronation Street providing multilingual commentary Cost management is on-going to and Emmerdale from early 2015. In of matches via talkSPORT.com and a ensure value for money is obtained February 2014 a ten year television growing network of overseas digital with focus on obtaining synergies and content provision contract with the and broadcast partners. During 2013 sharing resources across the division. Broadcasting Authority of Ireland was further international partners were The division undertook a review of the signed facilitating this. agreed in countries including China, cost base during the year with cost Malaysia, Vietnam, Singapore and savings implemented having a view The Group’s investment in UTV Ireland U.S.A. and the service now broadcasts to the long term objectives for the will position the business to drive in eight languages. business and ensuring the business growth on all platforms across the is well positioned to grow organically. island of Ireland. Radio GB continues to manage its cost Benchmarking against competitors is base by: undertaken on an on-going basis to In 2013, following a competitive • further centralisation of the back- ensure the business’ ability to retain tender process, UTV was awarded the office functions into its head office key skills and personnel. Daybreak Breakfast News contract to in Warrington, provide regional news bulletins to the ITV network breakfast programme, • ensuring discretionary spend is Daybreak. kept to a minimum • recruitment is limited to revenue/ Restructuring and cost review during profit enhancing roles. the year created a leaner, more efficient organisation which is well- The business continues to invest placed to benefit from signs of a macro in IT infrastructure to streamline economic improvement. The station operational processes and maximise has moved to a video journalism model systems to place it in the best position with a core of craft skills. This has to serve existing business needs reduced cost of acquisition of content, and capitalise on future growth and increased the editorial footprint opportunities. with a de-centralised news operation.
Related Financial KPIs Operating profit (before exceptional items) Profit before tax Cash flow Earnings per share
15 UTV Media plc Report & Accounts 2013 Strategic Report
Principal risks and uncertainties The risk factors that are considered to be most significant to the Group’s operations and achievement of its strategic objectives and how these are managed are described below. These risks do not necessarily comprise all those associated with the Group as there may be additional risks and uncertainties that are not currently known. Details on the governance arrangements by which risks and uncertainties are monitored and managed are set out in the ‘Corporate Governance’ report.
Risk description Related Potential Risk mitigation strategic impact objectives Loss of broadcasting licences and/or breach 1, 2 & 3 Loss of revenue The Group has put measures in place to of regulation ensure that licence conditions are complied The Group operates its television and radio Business continuity with. On an on-going basis, presenters businesses under licenses regulated by and producers undergo training specific to Ofcom and the Broadcasting Authority assuring that there is regulation compliance. of Ireland (BAI) which are required to be renewed on a periodic basis. The television Communications with the regulators are and radio businesses are highly regulated and given high priority and representations are the conditions to be satisfied are extensive. made to ensure that the regional position of Regulation covers not just broadcast matters UTV Media plc is considered when policy and such as programme and editorial content regulatory issues are reviewed. but extends to strict rules on ownership and location of the Group’s stations.
Strategic projects not delivered on time 1, 2 & 3 For example:
• Speed of talkSPORT internationalisation Loss of exclusive On-going management focus with close slower than forecast international market monitoring opportunity
• Disruption in the rollout of UTV Ireland: Loss of revenue Wide-ranging planning process with timeline An interruption in the supply of ITV and execution strategy clearly defined and programming in the key Republic of Brand dilution agreed. Ireland market could be detrimental to the brand as well as creating a lag in achieving new advertising revenues.
ITV Network underperforms 1 & 2 Loss of revenue UTV has a long-standing partnership with Television broadcasting activities are highly ITV. This is evidenced by the new Network dependent on the performance of the ITV Loss of audience Affiliate Agreement signed in 2012, creating network with respect to the supply of high a strong ITV family including ITV, UTV and quality network programmes and hence the Brand dilution STV. The performance of ITV1 remains of share of viewing audience obtained. paramount importance to ITV. Business continuity
Non renewal of sports broadcasting rights 1, 2 & 3 Dilution of the talkSPORT is a premium brand and this is Securing exclusive and non-exclusive sports talkSPORT attractive to the sellers of sports rights. rights, directly influences talkSPORT’s brand and loss The competitive advantage of securing listenership share and associated revenue of the important the rights is measured in respect of the and sponsorship deals. demographic – financial returns from them versus the cost the affluent male of obtaining. listener
Loss of key talent 1 & 3 Loss of audience The Group recognises talent and develops it; The Group’s share of viewing and listenership the Group offers broadcasting opportunities audience has a strong correlation to key Loss of revenue seldom replicated elsewhere in the market. individuals (talent) who are proven rating The Group offers competitive market-tested winners and any changes in the talent line up remuneration packages to motivate and could have beneficial or detrimental effects. retain key personnel.
Threat of technological obsolescence 1, 2 & 3 Loss of audience The Group works to bring innovation in its The rapid pace of development in the media audience offering, and is continually moving industry results in new products, services and Loss of revenue cross-platform with additional digital competitors frequently being launched into capabilities which allow the Group to reach the marketplace. and interact with greater audiences.
16 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook
Results and dividends for the year The Group profit before exceptional items for the year, after taxation, amounted to £13.7m (2012 restated: £16.2m) of which £13.4m (2012: £15.8m) is attributable to the members of the Company as detailed in the Group Income Statement. Exceptional items, which netted to a nominal credit, arose during the year as a result of a £1.2m write down of assets on operations classified as discontinued plus an exceptional tax credit of £1.2m due to the re-measurement of the deferred tax balances as a result of the changes in the rate of UK corporation tax and ROI capital gains tax (2012: exceptional tax charge of £0.9m). This created a Group profit for the year of £13.7m (2012: £15.2m) of which £13.5m (2012: £14.9m) is attributable to the members of the Company.
Dividends amounting to £6,678,000 were paid during the year representing a final ordinary dividend for 2012 of 5.25p per share and an interim ordinary dividend for 2013 of 1.75p per share as shown in note 12.
A final dividend of £5.0m representing 5.25p per share, is proposed for approval at the Annual General Meeting. If approved, warrants in respect of it will be despatched on 15 July 2014 to shareholders on the register at the close of business on 30 May 2014.
Developments towards a broadcasting focused strategy In 2013 management made good progress in transitioning the business to be focused predominately on broadcasting, in line with the Board strategy. UTV Connect and the portals, UTV Drive, Recruit NI and PropertyPal, which were identified as being non-core to the future strategy of the Group, have been classified as discontinued operations. Significant steps have been taken to exit from these activities, which previously operated within the New Media division with the sale of the Group’s shares in PropertyPal completed on 31 January 2014, good progress having been made on divesting of UTV Connect and offers being considered for UTV Drive and Recruitment Northern Ireland Limited.
The continued expansion of Radio GB into the International market, growth in the Irish market in the second half of the year, the ten year extension to the existing Channel 3 licence for Northern Ireland plus the award of the programme content licence to operate a television channel in the Republic of Ireland have all contributed to a strong position for the future of the radio and television broadcasting businesses.
Tibus and Simply Zesty, the continuing activities which previously resided within the New Media operating segment, will be incorporated within the Television operating segment. In 2013, these businesses continued to show integration across the broadcasting businesses. In line with the Group strategy, the focus was on providing advertisers with greater choices for campaigns spread across multiple platforms.
To facilitate this re-focused strategy a restructuring was undertaken within the Group during the year. The aim of this was to realise the synergies within the UTV Media Group and capitalise on Group efficiencies. While there were substantial costs associated with this restructuring, it also involved the buyout of the contingent consideration from certain stakeholders within Simply Zesty which resulted in a credit on the release of the remaining fair value of this financial liability. The overall impact on the Group’s results for the year was not material.
2013 £000
Redundancy costs (1,062) Legal and other restructuring costs (276) Buy out of contingent consideration 1,760 Impairment of customer relationships (188) Other asset impairments (160)
74
While there is not a material net effect on the consolidated Group results, the impact of the restructuring during the year has an impact on the analysis of operating results across the operating segments. While the non-impairment costs included in the table above are spread across all the operating segments, the credit arising on the buyout of the contingent consideration from stakeholders is totally reflected within the results of the New Media division. This, coupled with the credit arising from the acquisition of the rights from the previous corporate shareholder in January 2014, have impacted on the increase in operating profit recorded within this operating segment in the year, as shown in note 3 of the Notes to the Group Financial Statements.
17 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
The Board believes that this restructuring should ultimately facilitate the delivery of the refocused Group strategy, strengthen the future growth potential within the Group and increase the opportunity to deliver strong operational performances and significant return for shareholders.
From 2014 the Group will be managed on the basis of three divisions – Radio GB, Radio Ireland and Television.
Financial Key Performance Indicators Performance during the year against the Group’s financial KPIs was as follows:
2013 2012 Change (restated)* 1 Revenue from continuing operations £107.8m £112.3m (£4.5m) 2 Operating profit ** £20.1m £23.4m (£3.3m) 3 Profit before tax ** £16.9m £20.1m (£3.2m) 4 Free cash flow *** £15.7m £17.4m (£1.7m) 5 Diluted adjusted earnings per share**** 14.27p 16.63p (2.36p)
* 2012 results have been restated to reflect operations which became discontinued during 2013, as outlined in note 10, as well as the impact of IAS 19 “Employee Benefits (Revised)” as outlined in note 1. ** Includes associate income but excludes discontinued operations and exceptional items *** This represents the cash generated by the Group’s operational activities in the period (before financing costs, tax, dividends, and other discretionary payments) **** From continuing operations
Financial KPI 1: Revenue from continuing operations Group revenue from continuing operations has reduced by 4% to £107.8m (Restated 2012: £112.3m). A decline in revenue in Radio GB reflected the impact of the Euro Football Championships in the previous year as well as a decline in the radio market in the first half of the year. The Radio Ireland and Television businesses continued to be impacted by the difficult market conditions in Ireland although in the second half of 2013 improving market conditions resulted in revenue growth.
For further information on the Group revenue from continuing operations refer to the divisional performance reviews and to the segmental analysis of Revenue in note 3.
Financial KPI 2: Operating profit (before exceptional items) Group operating profit from continuing operations before tax, finance costs and exceptional items and including associate income has decreased by 14% to £20.1m (Restated 2012: £23.4m). This reflects the fall in revenue outlined above but also a reduction in operating costs partly as a result of cost review undertaken across the divisions during the year.
For further information on the Group operating profit refer to the divisional performance reviews and to the segmental analysis of operating profit in note 3.
Financial KPI 3: Profit before tax Group profit before tax has decreased by 16% to £16.9m (Restated 2012: £20.1m). This reflects the reduction in operating profit as highlighted above, foreign exchange losses of £0.2m and a decrease in net financing costs of £0.4m. The net financing cost was reduced by 13% to £3.0m (Restated 2012: £3.4m). This saving was a result of lower debt levels and lower interest rates.
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Group Performance Review & Outlook (continued)
Financial KPI 4 : Cash Flow 2013 2012 Increase/ (restated) (decrease) £m £m £m
EBIT (1) 20.2 23.7 (3.5) Depreciation and amortisation 2.1 1.8 0.3
EBITDA 22.3 25.5 (3.2)
Capital expenditure (net) (1.8) (2.2) 0.4 Working capital movement (1.7) (5.9) 4.2 Non-cash decrease in contingent consideration (2.9) - (2.9) Exceptional costs (0.2) - (0.2)
Free cash flow 15.7 17.4 (1.7)
Net financing costs (2.2) (2.7) 0.5 Refinancing costs - (1.1) 1.1 Tax (2.5) (1.2) (1.3) Dividends paid to equity shareholders (6.7) (5.9) (0.8) Dividends paid to non-controlling interests (0.5) (0.3) (0.2) Acquisitions (0.2) (1.9) 1.7 Discretionary pension payments (1.2) (1.2) - Other pension payment (1.4) - (1.4) Other cash flows (0.1) 1.0 (1.1)
Net cash flow 0.9 4.1 (3.2) Repayment of borrowings (4.2) (65.9) 61.7 Proceeds from borrowings 3.0 65.6 (62.6)
Net (decrease)/increase in cash (0.3) 3.8 (4.1)
(1) Earnings before interest, taxation, exceptional items and including dividend income from associates.
Free cash flow from operations decreased by £1.7m to £15.7m (Restated 2012: £17.4m), reflecting the decrease in EBITDA of £3.2m, and a £2.9m non cash gain arising on the buyout of contingent consideration rights held by the previous shareholders in Simply Zesty as part of Group fundamental restructuring, the costs of which are included within EBITDA. This was partly offset by the positive working capital movement of £4.2m largely due to the timing of payments in the prior year in the move to the Network Affiliate Arrangement.
From the free cash flow of £15.7m (Restated 2012: £17.4m) the Group paid £2.2m on financing costs, £2.5m on tax and £6.7m on dividends to equity shareholders.
Note 23 Financial Liabilities includes details of the Group’s banking facilities which were refinanced on 31 May 2012. Facilities totalling £60.5m have been utilised leaving unutilised facilities of £19.0m, plus overdraft facilities of £5.7m and cash reserves of £10.7m.
The banking covenant ratio requirements (which are calculated before exceptional items) are defined in the facilities documentation as:
(1) Net Debt to EBITDA ratio should not exceed 3.50:1 (2012: 3.50:1) (2) EBITDA to Net Interest Expense ratio should not be less than 3.25:1 (2012: 3.25:1)
The required ratios were comfortably met as follows:
(1) Net Debt to EBITDA ratio of 2.31:1 (2012: 1.91:1) (2) EBITDA to Net Interest Expense ratio of 9.78:1 (2012: 9.94:1).
The banking facilities have been secured for the period to 31 May 2017. 19 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Financial KPI 5: Diluted adjusted EPS Diluted adjusted EPS of 14.27p, a decrease of 2.36p or 14% (Restated 2012: 16.63p) reflecting the reduction in adjusted profit.
Outlook Improving market conditions across all the major broadcast businesses in the second six months of 2013 have continued into the first three months of 2014. Whilst remaining cautious due to the short-term nature of sales orders, the broader macro-economic signals around the United Kingdom and Republic of Ireland economies are encouraging. In addition to growth from these wider market conditions, benefits will be seen in 2014 from the FIFA World Cup and the cost savings from the restructuring actions carried out in 2013.
The announcement of our plans to launch a new television channel in Ireland, following our agreement with ITV Global Entertainment for the exclusive rights, from January 2015, for ITV Studios programmes in the Republic of Ireland, represents an exciting strategic step for the Group. A strong television offering in the Republic of Ireland, replicating the success of UTV’s television station in Northern Ireland, will complement our already well-established radio and online activities throughout Ireland. Start-up costs of approximately £3.0m and capital expenditure of around £8.0m are anticipated in advance of the first broadcast in January 2015.
20 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Radio GB Revenue in the Radio GB division was £50.5m (2012: £54.4m).
Radio GB’s total operating profit, including income from associates, was £8.0m (2012: £13.0m) due predominantly to the impact of the absence of a major sporting event in the year and difficult market conditions in the first six months. In light of these difficulties, management took action to control costs within the division in order to reduce the impact on operating profit.
Radio GB division contributed 47% (Restated 2012: 49%) to Group revenue and 35% (Restated 2012: 48%) to Group operating profit. talkSPORT Non Financial KPI Source 2013 2012 Change Audience: Weekly reach Radio Joint Audience 3.2m 3.0m +0.2m -- the number of individuals listening to a station for Research (RAJAR) at least 5 consecutive minutes in an average week. Average weekly hours RAJAR 6.3 hours 6.0 hours +0.3 hours -- the number of hours spent listening to a station in an average week. Sport magazine weekly circulation Audit Bureau of Circulations (ABC) 304,000 302,000 +2,000 Digital platforms: Average monthly unique users - talkSPORT.co.uk Google Analytics 3.3m 2.9m +0.4m +11% Average monthly page views - talkSPORT.co.uk Google Analytics 20.1m 18.0m +2.1m +11% talkSPORT revenues were down 10% to £29.5m (2012: £32.9m). This is explained by a decline in the UK national radio market of 5% and a revenue reduction of 7% related to the Euro 2012 football tournament in the prior year.
Despite the impact of the downturn in the national market, in line with the Group’s strategy of providing quality content to drive audience, talkSPORT’s continued focus on high-quality sports programming helped the station achieve some of its highest recorded audience figures to date, with overall reach climbing to 3.2m during 2013, an increase of 6% year on year. Most day parts also delivered record highs – Breakfast achieving reach figures of 1.4m (up 15% year on year); mid-morning achieving 0.9m (up 9% year on year); and Drivetime delivering 1.2m (up 8% year on year). Listeners are also tuning in for longer, with average hours increasing during 2013 to 6.3 hours a week. Contributing to the station’s solid performance in audience delivery was a revamped programming schedule for both weekday and weekend shows. This included the introduction of new on-air personalities as hosts and co-hosts of key shows, drawing on the world of football, cricket and rugby with a focus on ex-professional players whose depth of sporting knowledge and engaging on air personas complemented the talkSPORT programming line-up.
One notable feature of 2013, which directly impacted on talkSPORT’s financial performance, was the absence of a major international sporting event across the calendar year, beyond those that form part of the regular sports schedule. One highlight, however, was the British and Irish Lions Rugby Union Tour of Australia in June, and talkSPORT secured exclusive UK radio commentary rights on a multi-platform basis for all ten matches. This was the first time the tour had ever been exclusively broadcast on commercial radio in the UK.
Reflecting the strategic objective of investing in high quality sports content the station has an extensive range of exclusive football rights packages.
At the heart of talkSPORT’s successful programming line-up in 2013 was its compelling mix of live football commentary, analysis and discussion, driven by talkSPORT’s live Barclays Premier League programming. Exclusive national audio broadcasting rights were secured with the Premier League in April 2013 for the next three football seasons, starting with the 2013/14 season, with talkSPORT broadcasting between 60 and 64 matches in total each of those football seasons. Investment in sports rights has been instrumental in driving more than a 25% increase in talkSPORT’s audience over the past four years.
These rights complement talkSPORT’s exclusive global commercial radio rights to FA Cup matches and the Community Shield held by the station since July 2012. talkSPORT is also the official commercial radio partner for the Football League Cup, known as the Capital One Cup, with multiple platform audio rights allowing talkSPORT to broadcast Capital One Cup matches on talkSPORT UK and via its global audio platforms on talkSPORT International. 21 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Radio GB (continued) talkSPORT (continued) In preparation for the World Cup in 2014, talkSPORT signed an agreement with FIFA in November 2013 to be a Licensed Radio Broadcaster of the 2014 FIFA World Cup in Brazil for the UK. The station will broadcast live commentary of every match from the opening game on 12 June through to the final at Rio’s Marcana Stadium on 13 July .
Other key developments in 2013 associated with sports rights included talkSPORT’s extension of its global audio rights with the Premier League to enable it to offer exclusive live audio commentary of Barclays Premier League matches in any language across Europe (excluding the UK and Ireland). These extended rights are in addition to talkSPORT’s existing package of exclusive rights, held since 2012, which already allows the station to broadcast commentary on all Barclays League games in multiple languages outside the European Economic Area for three consecutive seasons. This continued investment in sports-related content has helped talkSPORT fortify its position as the world’s largest dedicated sports radio station. Multilingual commentary, including through English, Spanish and Mandarin, is broadcast via talkSPORT.com and a network of radio syndication partners. talkSPORT’s international commentaries are also distributed around the world via TuneIn, under a long-term strategic partnership with the US digital service.
During the 2013/14 Barclays Premier League season, talkSPORT extended the languages in which it broadcasts live match commentaries to include Vietnamese and Bahasa Malay, and new distribution agreements were signed in 2013 with partners in the USA, China, Vietnam, and Singapore. talkSPORT International’s live multi-lingual programming is now delivered to platforms and partners in North, Central & South America, Africa, the Middle East and the Asia-Pacific region, with the network expected to further expand into more countries in 2014.
Once again talkSPORT’s on-air success was complemented by a strong digital performance in 2013 with solid year on year growth in visitors to the site. As part of the Group’s strategy of maximising digital technology capabilities to offer multiple platforms to advertisers, talkSPORT.com works alongside the radio station delivering on-air content, listen again opportunities, plus exclusive news content generated by the in-house editorial team. talkSPORT.com achieved its highest ever numbers to the site on transfer deadline day, once again reflecting the growing interest in football-related news and content. Average monthly unique users exceeded 3.3 million, up 11% year on year, with 20.1 million monthly average page views, up 11%. talkSPORT now has more than 615,000 Facebook Likes, up 202%, and the station has increased Twitter followers on its primary account by 65% year on year to 507,000, with more than 3.7m followers on Twitter across all accounts - an increase of 74%. Access to talkSPORT.com via mobile devices increased 91% year on year, with talkSPORT App downloads increasing by 61%.
Sport Magazine, the UK’s biggest sport weekly, increased its average weekly print distribution to 304,000 and also increased its digital readership with strong year on year growth in downloads of the Sport App and continued increase in tablet readership of the magazine. Sport is now available across multiple platforms including formats adapted for iPad, Android and Kindle Fire HD.
Once again, the magazine’s performance this past year has been driven by quality content, with Sport bringing its authoritative and offbeat reporting style to every major sporting event in 2013, enhanced by a number of exclusive features carried in the magazine, including profiles and interviews with prominent sporting personalities.
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Group Performance Review & Outlook (continued)
Radio GB (continued) Local Radio Non Financial KPI Source: 2013 2012 Change Audience: Weekly reach RAJAR 1.2m 1.2m - -- the number of individuals listening to a station for at least 5 consecutive minutes in an average week Average weekly hours RAJAR 8.3 hours 8.2 hours +0.1 hours -- the number of hours spent listening to a station in an average week. Digital platforms: Average monthly unique users - Total for all local Google analytics 0.5m 0.3m +0.2m radio station websites +71% Average monthly page views - Total for all local Google analytics 2.2m 1.2m +1.0m radio station websites +84%
Revenue across the local radio business (including associate income) decreased by 2% to £21.1m (2012: £21.6m), which compares to a local market up 4% and includes anticipated reductions in revenues from the digital multiplexes.
Radio GB’s 13 local radio stations throughout England and Wales once again gave solid performances across the year, delivering a weekly audience of over 1.2m, averaging 8.3 hours per listener each week. In the final quarter of 2013, combined listening hours across all stations surpassed 10 million. Highlights of the year in audience delivery included Stoke’s Signal One’s impressive audience growth of 20% year on year achieving a weekly reach figure of 304,000, with Blackpool’s Radiowave achieving a combined weekly reach figure of 80,000, up by 19% year on year, and in South Wales, Swansea Sound and 96.5 The Wave saw weekly audience figures grow by 16% to 185,000.
Engagement online and via digital devices also saw a marked increase across the ILRs with combined station websites posting an increase in traffic of 71% year on year, with a 0.5m average for unique users visiting local radio station websites, while the figure for average monthly page views across the websites reached 2.2m, an increase year on year of 84%. Juice FM was also launched on DAB in the Liverpool region in April 2013, as another means of accessing the popular station, an important addition to the DAB portfolio given that 23% of all listening is via digital radio.
Community engagement is at the heart of each ILR station’s on air and online strategy, illustrated by the 2013 Capital One Cup final between Bradford City and Swansea, with Bradford-based stations The Pulse and Pulse 2, along with Swansea Sound supporting their respective clubs on air and online, with completely partisan live commentary provided for each of the clubs and a song for supporters of Swansea posted on Swansea Sound’s website, which was downloaded by 160,000 users.
Also contributing to the ILRs solid performances in 2013 was a full music review across the network of stations, allowing for changes to some of the programming policies which resulted in a higher rotation of current and highly popular songs. These new policies, along with continued strategic focus on compelling local content and community engagement, helped the stations deliver the growth in total listening hours.
23 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Radio Ireland The radio market in Ireland continued to be challenging, particularly in the first half of the year. Data from agencies suggests that the Irish Radio market was down between 10% and 12% in 2013. Revenue in Radio Ireland decreased by 5%, a reduction of 1% after accounting for foreign exchange, to £20.8m (2012: £20.9m). This represents a strong market performance. Operating profit in the division was down 14% year on year to £5.1m (2012: £6.0m), a decrease of 17% excluding the impact of foreign exchange. Management undertook cost control and restructuring during the year and the business is well positioned to maximise profit growth from any impending macro-economic recovery.
Radio Ireland division contributed 19% (Restated 2012: 19%) to Group revenue and 23% (Restated 2012: 22%) to Group operating profit.
Non Financial KPI Source: 2013 2012 Change Audience: Listened yesterday - daily reach (Urban Access) JNLR 818,000 880,000 (62,000) -- the number of people who listened/tuned into a station yesterday -7% (average day) Weekly reach (U105) RAJAR 195,000 200,000 (5,000) -- the number of individuals listening to a station for at least 5 -3% consecutive minutes in an average week Digital platforms: Average monthly unique users -Total for all radio station websites Google analytics 0.20m 0.18m +0.02m +9% Average monthly page views - Total for all radio station websites Google analytics 1.19m 1.21m -0.02m -1%
The network of stations within the Radio Ireland division once again delivered strong audience figures, with market leadership positions in Dublin, Cork, Limerick and Louth/Meath. These strong audience figures continue to be instrumental in driving the performance of the division.
In 2013 we continued to offer advertising clients optimum delivery through the advertising sales agency, UTV Radio Solutions, representing all UTV-owned radio stations in Ireland, along with two independent stations, Galway Bay FM and Beat 102-103. At the end of 2013 JNLR reports confirmed that 818,000 adults tuned into the Urban Access stations on a daily basis. We believe the reduction reflects a level of volatility in quarterly survey outcomes, but remain pleased with the Urban Access reach which allows us to deliver a national audience to advertisers and our continuing strong share of the markets in which we operate. In 2014 Beat 102-103 will exit the Urban Access package and will be replaced by WLR FM which has a 41.9% market share in the key Waterford city and county marketplace.
FM104 maintained the largest market share of any local station in Dublin with a 12.1% market share. The station more importantly also remains the clear leader in the Dublin market amongst the 15 to 34 demographic, with a market share of 26.8%. Its sister channel, Q102 delivers an all adult market share of 6.9% and this increases to 9.8% in the key housekeeper with dependant market and further to 10.4% in its 35 to 44 year old target market. The real strength of the UTV offering in Dublin is seen when FM104 & Q102 are combined as they complement each other. A combined total audience package share of 30.1% of Dublin’s 25 to 44 year olds and a 25.9% share of housekeepers with dependants affords the combined UTV entity a strong position in key demographics.
The JNLR report for 2013 also brought good news for Cork’s 96FM/C103 which recorded a market share of 47.1%, a substantial increase from the previous year’s 43%. In Limerick a market leading share of 37.3% was recorded, which again is an increase on the 35.7% achieved in 2012. In Louth/Meath, LMFM’s market share of 30.6% confirmed it as the clear market leader in the region. In the Greater Belfast area, U105 weekly reach decreased slightly by 3% to 195,000 however U105 recorded a 12.5% market share, making it the second most listened to commercial station in its transmission area.
Driving these strong performances across Radio Ireland was a renewed focus on the radio product through the utilisation of music research, complemented by the division’s continuing strategic emphasis on strong community engagement and the delivery of high quality, locally relevant, programming ranging from news and entertainment features, competitions, charitable fundraising activities, combined with continued investment in top radio talent. Another measure of a station’s popularity is its digital engagement, and in line with the strategic objectives Radio Ireland stations maintained solid traffic levels across its network of dedicated websites. These are designed to be brand extensions of the radio stations offering the communities they serve the chance to interact, enter competitions, listen live, and engage via online and social media platforms. The combined average monthly unique users for Radio Ireland websites increased by 9% year on year to 0.2m, while average page views remained largely unchanged at 1.19m. Facebook and Twitter followers across the stations also increased year on year with Facebook followers growing over 30% to 398,000 and Twitter followers increasing by 12% to 125,000.
24 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Television Despite a challenging backdrop to the first six months of the year improving conditions since the summer led to growth in both our Ireland and UK revenues in the second half of the year. Overall total advertising revenue in our Television division decreased by 2% across the year and this translated into an operating profit of £7.4m (Restated 2012*: £7.5m). Cost review and restructuring undertaken by management in the year have streamlined the organisation and left it well placed to benefit from any macro-economic upturn.
Television division contributed 30% (Restated 2012: 29%) to Group revenue and 32% (Restated 2012: 28%) to Group operating profit.
* The Television operating profit for 2012 has been restated for Central costs, now reported separately, and for the impact of IAS 19 “Employee Benefits (Revised)” as outlined in note 2 of the Notes to the Group Financial Statements.
Non Financial KPI Source: 2013 2012 Change Audience: Audience: market share (peak-time) -To be Broadcasters’ Audience Research Board 26.2% 25.9% +0.3% the most watched channel in NI (BARB) figures Audience: market share (news) -To be the BARB figures 35.5% 34.6% +0.9% most watched news in NI Digital platforms: Average monthly unique users Google analytics 0.8m 0.5m +0.3m +60% Average monthly page views Google analytics 10.4m 3.6m +6.8m +190%
UTV remained the most popular television channel in Northern Ireland in 2013, increasing its share of peak-time viewership to 26.2%. This represented 3.9% more viewership than ITV, which posted an audience share of 22.3%; 8.9% more viewership than BBC1 Northern Ireland; and 20.7% more than Channel 4, the nearest commercial competitor. Once again quality content formed the bedrock of UTV’s strong audience figures, with the station’s flagship news show, UTV Live, reaffirming its position as the most watched news programme in Northern Ireland, delivering an average rating of 35.5% across the year, which is 0.9% up year on year. Since its launch in 2009, UTV Live has consistently performed well and 2013 was no exception, with the daily news show achieving an audience share figure of 15.3%, up 0.5% year on year.
Beyond news and current affairs, UTV continued to produce successful, high quality local programming which delivered strong audience share, in several cases higher than the national network share and complementing UTV’s compelling network-driven programming schedule, with favourites such as Coronation Street, Emmerdale, X Factor and Downton Abbey consistently achieving share averages on UTV that were higher than those delivered across the ITV network.
The implementation of the Group strategy of developing multiple platforms to reach audiences was evident through recent launches of the revamped u.tv website, a new mobile site and Apple and Android Apps. Along with the high-quality editorial content generated for UTV’s digital platforms, plus access to the UTV player for catch-up viewing, this has resulted in more than 70% of visitors to u.tv returning multiple times throughout the year. This is a strong indicator of brand loyalty, with approximately half of u.tv’s traffic now accessing the site via mobile devices.
As a result UTV saw unprecedented year on year growth in online traffic throughout 2013. Overall the site attracted an average of 0.8m unique visitors per month in 2013, an increase of 60% year on year, and attracted an average of 10.4m monthly page views, an increase of 190% year on year. The year ended with record traffic figures for the month of December, with unique users hitting a new high of 1.2 million, up 61% year on year, with page views topping 14 million, an increase of 133%.
As part of maximising this growth opportunity, development work also commenced in 2013 on a new UTV player, a project that involved the aggregation of in-house, external and ITV content with a new player that will draw on both local and ITV advertising sources – with launch planned for Q2 2014. UTV made significant developments in 2013 that further fortified its position as a preeminent commercial television operator.
25 UTV Media plc Report & Accounts 2013 Strategic Report
Group Performance Review & Outlook (continued)
Television (continued) In February 2013 UTV was awarded the Daybreak Breakfast News contract following a competitive tender process. This multi-year contract allows UTV to provide regional news bulletins to the ITV network breakfast programme, Daybreak. This new arrangement sees UTV delivering a comprehensive news service for viewers right across the day, from Daybreak through to the lunchtime bulletin, UTV Live in the evening and the late news and current affairs programme, UTV Live Tonight.
In November 2013 UTV Media announced plans for its subsidiary, UTV Ireland Limited, to launch a new Irish TV channel that will create more than 100 new jobs. This followed the signing of an agreement with ITV Studios Global Entertainment, and it gives UTV the exclusive broadcasting rights for ITV Studios programmes for the Republic of Ireland audience including the popular soaps Coronation Street and Emmerdale from early 2015.
The Broadcasting Authority of Ireland (BAI) has now approved UTV’s licence application, and throughout 2014 UTV will focus on the construction of production and broadcast facilities in Dublin and the recruitment of staff, with the launch of UTV Ireland planned for January 2015. The channel will utilise the existing UTV winning formula of combining high quality news, current affairs, entertainment and drama. UTV Ireland will be available on multiple platforms with a catch up service available online.
The 2013 financial results of Tibus and Simply Zesty are reported as part of the New Media division however following a business review the decision was reached that, given the high level of interaction between these businesses and television, management responsibility for these businesses would fall within the television division from 2014. The results of the previously reported New Media division were revenue from continuing operations of £4.6m (Restated 2012: £4.4m) and operating profit from continuing operations of £2.3m (Restated 2012: £0.6m). New Media revenue from continuing operations contributed 4% (Restated 2012: 4%) to Group revenue and 10% (Restated 2012: 2%) to Group operating profit.
Tibus is a specialist digital service provider and also manages hosting, online broadcast and technical services for the group businesses within UTV Media plc. These include the platforms behind the UTV Player, talkSPORT digital, talkSPORT International and the www.u.tv website.
The business launched two new product lines in 2013: a UK Government ‘G-Cloud’ offering, and a streaming service aimed at niche broadcasters. Both products are extensions of Tibus’s core hosting business. Further investments in ‘Cloud’ technology will extend these service offerings into 2014 and beyond. Tibus also invested in a wholly-owned delivery network in 2013 that links sites in Belfast, Dublin and London. This is a key strand in supporting the Tibus strategy of owning and delivering content and IPR in-house, for both Group media businesses and external customers. Ownership of the data and content transmission chain is an important factor in driving down the operational costs of streaming and catch-up services for audiences in the UK and in Ireland.
Simply Zesty is a full-service digital marketing agency and is the result of the merger in January 2013 of Belfast-based Tibus, a web development agency acquired by UTV in 2008, and Simply Zesty, the Dublin-based social media agency acquired by UTV in 2012.
2013 was a year of transition and consolidation for Simply Zesty, with a good deal of focus placed on bringing two separate agencies closer together and strengthening foundations for further digital development both externally and internally, as UTV develops plans to deliver enhanced multi-platform offerings for advertising clients across the island of Ireland. Throughout the year, Simply Zesty broadened its portfolio of blue chip clients and further developed its service offerings, which now range from video to motion graphics, social media to blogging, digital brand development to website content creation and management.
Information about Environmental Matters, Entity’s Employees and Social, Community And Human Rights Issues Information about environmental matters, the entity’s employees (including gender breakdown) and social, community and human rights issues relevant to the Group are included with the Group Corporate Social Responsibility report.
This strategic report was approved by the Board on 28 March 2014 and signed on its behalf by the Group Chief Executive.
John McCann Group Chief Executive 28 March 2014
26 UTV Media plc Report & Accounts 2013 Board of Directors Non-Executive Directors Richard Huntingford Stephen Kirkpatrick Chairman Non-Executive Director Richard is a highly experienced executive in Stephen is an experienced banking and corporate the media sector and has extensive leadership finance professional with extensive experience expertise at plc board level as a Non-Executive across a broad range of commercial operations. Chairman and Director. Appointment to the board: September 2012 Appointment to the board: July 2012 Date of Birth: 28 November 1963 Date of Birth: 14 May 1956 Chair of Audit Committee Chair of Nomination Committee External Appointments External Appointments Chief Executive, Corbo Properties Limited (April Non-Executive Director, JPMorgan Mid Cap 2010 – Present); Non-Executive Director, Mutual Investment Trust plc (2013 – current); Non- Energy Limited (April 2010 – Present) Executive Director, Creston plc (2011 – current); Previous Experience Non-Executive Director, Crown Place VCT plc Member of the Governing Council of Chartered (2012 – current); Chairman, Prince’s Trust Trading Accountants Ireland (2009 – 2012); Head of Retail Limited (2010 – current); Governor, Radley College Credit, Bank of Ireland Group (2009 – 2010); Chief (2010 – current) Executive, Bank of Ireland Northern Ireland (2006 Previous Experience – 2009); Regional Director, North and Midlands, Chairman, Boomerang Plus plc (2008 -2012); Bank of Ireland (2004 – 2006); Senior Business and Executive Chairman, Virgin Radio (2007 – 2008); Corporate Banking roles, Bank of Ireland (1995 – Chief Executive Officer, Chrysalis Group plc (1987 2004); Senior Corporate Banking Manager, Ulster – 2007); Non-Executive Director, Virgin Mobile Bank (1993 – 1995); Corporate Finance Specialist, Holdings (UK) plc (2005-2006) KPMG LLP (1985 – 1993) Chairman, Channel 3 News Limited (2001); Non- Qualifications Executive Director, Radio Advertising Bureau (1996- B.A. (Hons) Business Studies, University of Ulster 1999); Board level advisor, KPMG (1975 – 1987) Fellow of the Institute of Chartered Accountants Qualifications Fellow of the Institute of Chartered Accountants
Helen Kirkpatrick MBE Non-Executive Director Helen has extensive leadership and financial expertise across a broad range of businesses at plc level. Appointment to the board: August 2007 Date of Birth: 29 September 1958 Chair of Remuneration Committee External Appointments: Corporate Finance Executive, Invest Northern Ireland Non-Executive Director, Kingspan Group PLC Previous Experience: Interim Chairman, UTV Media plc (February-July 2012) Director / Chairman, Crumlin Together Limited (2005-2012); Chairman, CAUSE (NI) Ltd (2007); Board Member, International Fund for Ireland (2000-2006); Director, Enterprise Equity Venture Capital Group (2000-2006) Director, NI-CO (Northern Ireland Public Sector Enterprises Ltd) (2000-2006) Qualifications: B.A. (Hons) Business Studies, University of Ulster Fellow of the Institute of Chartered Accountants Member of the Chartered Institute of Marketing
27 UTV Media plc Report & Accounts 2013 Board of Directors Non-Executive Directors
Andy Anson Non-Executive Director Andy has significant commercial experience in the media, entertainment and sports sectors. Appointment to the board: November 2012 Date of Birth: 28 October 1964 External Appointments: Chief Executive Officer, Kitbag Limited (2011 to present); Non-Executive Director, British Olympic Association (2011 to present) Previous Experience: Chief Executive Officer, England 2018 (2009 to 2011); Chief Executive Officer, Association of Tennis Professionals (ATP) Europe (2007 to 2009); Commercial Director, Manchester United (2004 to 2007); Partner, OC&C (2002 to 2004); Director, Emuse Technologies Limited (2002 to 2012); Managing Director, Channel 4 Interactive (2000 to 2002); Head of Strategy, Channel 4 (1999 to 2002); Director of Finance & Planning, The Walt Disney Company, California (1996 to 1999); Consultant, The Kalchas Group (1994 to 1996); Consultant, Andersen Consulting (1988 to 1993) Qualifications MBA, INSEAD (1993) BA Mathematics, Oxford University (1983-1986)
Coline McConville Non-Executive Director Coline has extensive management, operational and international media expertise across a range of commercial markets. Appointment to the board: November 2012 Date of Birth: 21 July 1964 External Appointments: Media Advisor, Actis (2012 – present); Non- Executive Director, TUI Travel plc (2011 – present); Non-Executive Director, Wembley National Stadium Limited (2012 – present) Previous Experience: Director, Shed Media plc (2009 – 2010); Director, HBOS plc (2000 – 2009); European Media Advisor, LBO Candidate, Apax Partners (2006 – 2007); Chief Executive, Europe, Clear Channel International Ltd (2002 – 2006); Chief Operating Officer, Clear Channel International Ltd (1998 – 2002); Group Development Director, More Group plc (1996 – 1998) Associate, Strategic Consulting, McKinsey & Co Ltd (1994 – 1996); Associate, Strategic Consulting, The L.E.K. Partnership (1989 – 1992) Qualifications: M.B.A. (Baker Scholar), Harvard Business School B.A. (Hons) Jurisprudence, University of New South Wales B.A. (Hons) Laws, University of New South Wales
28 UTV Media plc Report & Accounts 2013 Board of Directors Executive Directors John McCann Norman McKeown Group Chief Executive Group Finance Director, UTV Media plc John took over leadership of UTV in 1999 and is Norman is a highly experienced finance responsible for transforming UTV into a dynamic professional with extensive expertise across a media group. He is a highly experienced business broad range of businesses at plc level. leader with significant management experience Appointment to the board: March 2009 across media and financial sectors. Date of Birth: 9 June 1957 Appointment to the board: November 1992 Previous Experience Date of Birth: 4 May 1953 Group Finance Director, UTV Media plc, External Appointments (2008-present); Managing Director, Sepha Ltd, Non-Executive Director, Danske Bank Ltd; Non- (2005-2008); Finance Director, Sepha Ltd, (2000- Executive Director, Business in the Community 2005); Group Finance Director, Lamont Holdings Northern Ireland; Council Member, Chartered plc, (1997-2000); Divisional Finance Director, Accountants Ireland Scottish & Newcastle plc and Bass plc (1984-1997) Previous Experience Qualifications Director and General Manager, Ulster Television B.Sc. (Econ) Queen’s University, Belfast plc (1990 – 1999); Financial Controller/Company Fellow of the Institute of Chartered Accountants Secretary, Ulster Television plc (1983 – 1990); Rescue Executive, Industrial Development Board for Northern Ireland (1981-1983); Financial Appraisal Executive, Department of Commerce (1980-1981); Audit Function, Ernst & Young (1974- 1980) Qualifications B.Sc. (Econ) Queen’s University, Belfast Fellow of the Institute of Chartered Accountants
Scott Taunton Membership Of Board Committees * Managing Director, UTV Radio GB. Audit Committee Scott is Managing Director of the Group’s largest Stephen Kirkpatrick (in the Chair) division UTV Radio (GB) and a highly experienced Helen Kirkpatrick change management and commercial professional. Andy Anson Appointment to the board: November 2005 Date of Birth: 19 January 1971 Remuneration Committee External Appointments Helen Kirkpatrick (in the Chair) Director, The Digital Radio Group (London) Limited Richard Huntingford Previous Experience Stephen Kirkpatrick Managing Director, UTV Radio (GB) (2005 – Coline McConville present); Group Business Development Director, UTV Media plc (2002 - 2005): Managing Director, Nomination Committee UTV Internet Ltd (2000 - 2002); General Manager, Richard Huntingford (in the Chair) DNA Limited, (1995 - 2000) Helen Kirkpatrick Stephen Kirkpatrick Coline McConville Andy Anson
* As at 31 December 2013
Roy Bailie was a member of each of the above Board Committees until his retirement on 15 May 2013.
29 UTV Media plc Report & Accounts 2013 Corporate Governance
Statement from the Chairman
Dear Shareholder,
On behalf of the Board, I am pleased to present UTV Media’s Corporate Governance Report for 2013.
The Board is committed to high standards of governance and behaviour through building a corporate culture that champions responsibility, integrity and compliance in all corporate operations. Such a governance culture should ensure that the expectations of shareholders and the wider financial market are met.
I am pleased to say that the composition of the Board and all Committees are now fully compliant with the Code provisions and that the Board’s first external Board evaluation has been carried out for 2013. Accordingly, the Board considers that in respect of the year ending 31 December 2013, that it has complied with the UK Corporate Governance Code 2012 (the “Code”).
This Corporate Governance report aims to express how our commitment to high standards of governance, responsibility and integrity have been demonstrated throughout the year, by describing how the main principles of the Code have been applied in the Group. This is covered in the following sections: • Communications with shareholders • About the Board • Board and Committee structure • Board responsibilities for strategy and performance • Board responsibilities for internal control and risk management • Board meetings and performance • Operation of the Committees • Audit Committee Report • Nomination Committee Report
The new Code provision C.1.1, requires the Board to confirm that its Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy. The Board was assisted in this undertaking by advice and guidance provided by both the Audit Committee and the External Auditors. The Board confirms its agreement with Code provision C.1.1 after considering matters related to financial judgements and reporting, and matters related to strategy, operation of its business model and associated risk factors.
In conclusion, I hope that this Corporate Governance Report gives shareholders a deeper insight of how the Group operates to maintain its high standards of governance, responsibility and integrity.
Richard Huntingford Chairman 28 March 2014
30 UTV Media plc Report & Accounts 2013 Corporate Governance
Communications with Shareholders Communications with shareholders are given high priority and major shareholders have the opportunity to consult with the Chairman and the Chair of the Remuneration Committee, who is also the Senior Independent Director. The Chairman ensures that the views of shareholders are fully communicated to the Board as a whole and to promote a shared understanding of shareholder expectations.
The Executive Directors provide regular presentations to shareholders, fund managers and analysts for the interim and final results. They also provide strategy update briefings to promote open dialogue with stakeholders and attend investor conferences. Further details of the presentations and briefings to shareholders are contained on the corporate website: www.utvmedia.com.
The Board uses the Annual General Meeting, which is attended by all Directors, to communicate with private shareholders and institutional investors alike and welcomes their participation in a question and answer session. In line with the Code, the publication of the Annual Report and financial statements will be notified to shareholders at least 20 working days before the Annual General Meeting. Details of the resolutions to be proposed at the Annual General Meeting can be found in the Notice of the meeting and all resolutions are taken on a poll. Shareholders who are unable to attend the meeting can vote online or by post or by returning a form of proxy. For proxy votes on each resolution, these are declared at the Annual General Meeting after the vote from the shareholders present.
The Senior Independent Director, Helen Kirkpatrick, acts as a sounding board for the Chairman and serves as an intermediary for the other Directors. She is also is available to shareholders for concerns which cannot be resolved by contact with the Chairman, the Group Chief Executive or other Directors, or for which such contact may not be appropriate.
About the Board Role of the Board The Board is responsible to its shareholders and other stakeholders for the leadership, direction and management of the Group within an effective controlled framework, in order to deliver sustainable long term success for the Group. The Board has a formal schedule of matters specifically reserved to it for decision. This schedule channels the Board’s focus to matters of strategy, accountability, competitive performance and value creation, balanced with determining the nature and extent of the risks that the Board is willing to embrace in the implementation of its strategy.
Tenure and election Under the Company’s Articles of Association, all new Directors must be re-appointed by shareholders at the first Annual General Meeting following their initial appointment by the Board and every three years thereafter. However, as recommended by the Code, all Directors are subject to an annual election process by shareholders and this will be undertaken at the Annual General Meeting in May 2014.
The Non-Executive Directors work to specified terms of engagement which are available at the Group’s registered office and at the Annual General Meeting. The Non-Executive Directors are advised of the likely time commitments to service the Board and its business and this is advised at the time of their induction.
Insurance and indemnities The Directors and officers of the Group have the benefit of a Directors’ and Officers’ liability insurance. The Group has also entered into deeds of indemnity with its Directors. Such insurance and indemnities do not apply to any proven fraudulent or dishonest actions of a Director.
31 UTV Media plc Report & Accounts 2013 Corporate Governance
Roles of Board members and senior management team The roles of the Chairman and the Group Chief Executive are separately held, defined in writing with a clear division of responsibilities between them, and approved by the Board. The Chairman is responsible for the leadership of the Board ensuring its effectiveness in setting strategy, giving clear direction and leading on the Board agenda.
The Board delegates the responsibility for the management of the Group to the Group Chief Executive who is responsible for running the businesses and achieving targeted performance through the delivery of the overall strategy, as agreed by the Board. At Board level, the Group Chief Executive is supported by two Executive Board Directors being the Group Finance Director and the Managing Director Radio GB. The Executive Directors through the Management Committee established, have particular responsibility for the operational delivery of the Group’s strategic priorities and objectives, for the systems of control, and for risk management.
The Non-Executive Directors of the Board have a particular responsibility in bringing objective challenge, judgement and scrutiny to all matters of the Board. They are expected to fully engage in constructive and open debate ensuring that no one party or collective can dominate discussions nor unduly steer the agenda at meetings. They are expected to critically challenge proposed strategies and current operational performance, and to ask searching questions to satisfy their information requirements before Board decisions are made. The Chairman holds meetings with the Non-Executive Directors without the Executive Directors being present as necessary.
Biographies of all of the Directors of the Board are contained within the section on the “Board of Directors” and these details demonstrate the range of different skills and fields of experience that each Director brings to the Board. In combination, this gives an appropriate balance, challenge and judgement on the key issues of strategy, performance and standards of conduct, which are vital to the success of the Group. The biographies also list directorships held in other companies.
Conflict of interest The Articles of Association allow the Board to authorise any actual and potential conflict of interest that may arise and to impose such limits and conditions as it thinks fit. Conflicts of interest can only be authorised by those Directors who do not have an interest in the matter being considered and, in making such a decision, the Directors must act in a way they consider, in good faith, will most likely promote the success of the Group.
The Group has established a procedure whereby any actual and potential conflict of interest is advised to the Company Secretary and then considered by the Board. Actions arising from this consideration may include the exclusion of potentially conflicted Directors from specific Board discussions and associated decision-making. The Company Secretary has advised that there have been no actual or potential conflicts of interest noted in the year.
Board and Committee structure The Board is currently made up of the Chairman, the Group Chief Executive, two Executive Directors and four Non-Executive Directors, all of whom have served throughout 2013. A fifth Non-Executive Director, Roy Bailie, resigned from the Board in May 2013. The four serving Non-Executive Directors are independent in both judgement and character and by the terms of the Code.
The Board has established three Committees with defined responsibilities that are set out in separate terms of reference which are available on the corporate website: www.utvmedia.com. The Chair of each Committee provides the Board with a full briefing on the activities of their Committees and the minutes are circulated. The structure of the Board, Committees and membership at 31 December 2013 is outlined in the following diagram:
Board & Committee Structure Board Richard Huntingford (Chairman) John McCann Helen Kirkpatrick Stephen Kirkpatrick Andy Anson Coline McConville Scott Taunton Norman McKeown
Audit Committee Remuneration Committee Nomination Committee Stephen Kirkpatrick (Chair) Helen Kirkpatrick (Chair) Richard Huntingford (Chair) Helen Kirkpatrick Richard Huntingford Helen Kirkpatrick Andy Anson Stephen Kirkpatrick Stephen Kirkpatrick Coline McConville Andy Anson Coline McConville
32 UTV Media plc Report & Accounts 2013 Corporate Governance
Board responsibilities for strategy and performance The Board has a formal schedule of matters specifically reserved to it for decision. The full schedule of matters is available on the corporate website: www.utvmedia.com. The matters include: • Setting and monitoring strategy • Examining new business proposals / major acquisition possibilities • Ensuring adequate funding • Approving annual budgets • Reviewing trading performance • Formulating policy on key issues • Setting dividend policy • Reviewing financing structures • Ensuring the appropriate level of reporting to shareholders
The Board meetings are structured around these matters with a set agenda that covers: • Strategy development and associated risks • Updates on operational performance and financial impacts • Functional updates for each of the businesses
To enable the Board to discharge its duties in relation to these areas, all Directors receive appropriate and timely information including the Group Chief Executive’s report, monthly management accounts, budget reports and regular operational reports for each Business Division containing key metrics. This information enables them to review and assess the Group and management’s performance against agreed objectives. Briefing papers are distributed by the Company Secretary to all Directors in advance of Board meetings and where considered appropriate, the management team who are responsible for operational decisions and the functioning of the principal activities, will present to the Board.
All Directors have access to the advice and services of the Company Secretary who is responsible for advising the Board on governance matters and for ensuring that Board procedures are followed. The Company Secretary also manages the process for the Directors to obtain independent legal or financial advice at the Group’s expense, if required. The Company Secretary role is undertaken by Norman McKeown, the Group Finance Director, and the two roles are clearly distinguishable and have separate functions. Given the size of the Group, there are presently no plans to change the secretarial arrangements but this will be kept under review.
Board responsibilities for internal control and risk management The formal schedule of matters for Board attention also includes: • Assessing and maintaining the effectiveness of internal control • Maintenance of corporate governance standards • Effectiveness of risk identification and mitigation
As the Board has overall responsibility for the systems of internal control and risk management across the Group and for reviewing the effectiveness of the systems, the Board is required to conclude on the effectiveness of these systems and make a statement to this effect in the Corporate Governance report within the Annual Report. The Board makes this statement after: 1. Reviewing and evaluating the control and risk management systems designed by management to manage the delivery of the Group’s objectives, to meet the expectations of the shareholders, to safeguard the Group’s assets and to ensure that accurate financial disclosure is consistently provided. 2. Discussing the activities undertaken by the Audit Committee throughout the year and being advised by the Chair of the Audit Committee on the status of the control and risk management systems. 3. Identifying significant areas of risk and evaluating the appropriateness of management’s responses to mitigate those risks.
33 UTV Media plc Report & Accounts 2013 Corporate Governance
Design of the control environment and control systems The Board having considered the control framework established by management, deems it to be effective to manage and deliver the Group’s objectives. The key elements of the control framework that operated over the period covered by the financial statements, and up to the date of signing the accounts, include: • Business planning and budget process - There is a comprehensive business planning and budget process, supported by regular financial and operational reviews of the Business Divisions which monitor the key performance metrics enabling responsive action to be taken to address variances that may arise. • Devolved management structure - The design of a devolved management structure with the delegation of authority and responsibility for controls being allocated to each Business Division, optimises effective decision-making and accountability in appropriately tailored and controlled operating environments. This in turn promotes the effective use of assets. • Financial reporting controls – The Group Finance team is responsible for preparing the Group financial statements. There are detailed controls applied to the financial reporting process to ensure the integrity of content and disclosure, ensuring that there is full compliance with legislation and accounting standards, and thus satisfying shareholder and financial market expectations. • Control environment reviews - The network of control systems established by management in each Business Division make up the control environment for the Group, and the senior management team is expected to monitor their control systems carefully. Internal Audit will review aspects of the control environment in the Business Divisions to provide an independent assessment of the strength of the reviewed systems of control and indicate where enhancements and changes are required. All significant control weaknesses are reported to the Audit Committee.
Risk identification and management The strategic oversight of risks is considered to be an essential element of the Board’s role in ensuring the successful delivery of the Group’s objectives and targets. As this is such a fundamental element of the Board’s remit, risk issues are considered to be a matter for the full Board attention and such responsibility is not delegated to a Committee. However, the Board does rely on the specialist advice and guidance provided by the Audit Committee to assist them in the delivery of their role in relation to risk.
At an operational level, the Board has determined that management are responsible for risk management and the Board expect the senior management team to identify the major business risks faced by the Group and within each Business Division, and to determine the appropriate level of controls and procedures to manage, monitor and mitigate the risks.
Accordingly, these identified risks are reviewed throughout the year by the senior management team and significant risks are discussed with the Board as part of the Board’s role in monitoring the effectiveness of the risk management process. This dialogue and consultation process assists the Board in their evaluation of the effectiveness of the risk management systems operated across the Group’s businesses.
The principal risks and uncertainties that the Group faces, which are regularly addressed by the Board members, are set out in the “Strategic Report” section. The actions taken to manage and mitigate these risks are outlined to demonstrate effective and targeted risk management.
Audit Committee activities The Board has discussed the activities undertaken by the Audit Committee throughout the year as detailed in the Audit Committee report, and places particular focus on the Audit Committee’s view of the robustness of the internal controls and risk management systems. Additionally, reliance is based upon the Committee’s assessment of the reports and findings provided from the independent sources of Internal Audit and External Audit, and also the updates and assessments provided directly by management to the Committee.
Compliance with provision C.2.1 of the UK Corporate Governance Code Based on the above assessment on the control and risk management systems, noting that such systems are designed to manage rather than eliminate the risk of failure to achieve the Group’s objectives and can only provide reasonable but not absolute assurance against material misstatement or loss, the Board is satisfied that the Group complies with provision C.2.1 of the UK Corporate Governance Code and has established procedures that follow the guidance given in “Internal Control: Revised Guidance for Directors on the Combined Code”.
34 UTV Media plc Report & Accounts 2013 Corporate Governance
Board meetings and performance
Meetings The Board met 11 times during 2013. Attendance at the Board and Committee meetings is set out in the following table. Meetings are held at different locations and facilitated by the various Business Divisions. The locations visited included talkSPORT in London and Juice FM in Liverpool, (facilitated by the Radio GB Division), FM104 and Q102 in Dublin, (facilitated by the Radio Ireland Division), and in Belfast (facilitated by the Television Division).
Year Status Directors Board Audit Remuneration Nomination Appointed Committee Committee Committee Number of meetings 11 4 7 1 Non-Executive 2012 Chairman Richard Huntingford 11 - 7 1
2007 Independent SID Helen Kirkpatrick 11 4 7 1
2011 Independent Stephen Kirkpatrick 11 4 7 1
2012 Independent Andy Anson 10 4 - 1
2012 Independent Coline McConville 9 - 7 1
Resigned Non-independent Roy Bailie 6 1 3 - May 2013 Executive 1992 Group Chief John McCann 11 - - - Executive
2005 Executive Scott Taunton 11 - - -
2009 Executive Norman McKeown 11 - - -
The Chairman sets the style and tone of Board discussions to encourage active, constructive debate and effective decision-making founded on mutual respect and open communication between the Non-Executive and the Executive Directors.
Board strategy day Whilst strategy is discussed at all Board meetings, in November 2013, the members of the Board attended a strategy day concentrating on the Group’s strategic objectives into the medium-term. The Board obtained contextual information about the wider media market from a specialist advisor. The heads of each business were asked to provide a detailed analysis of their business model and operational activities, expected future trends and to identify where opportunities and growth potential may lie in their business and in the wider marketplace. This approach allowed the Board members to be fully informed of the proposed strategic direction at Divisional level, and to critically but constructively challenge the business model, in order to identify and refine the strategic priorities and objectives, as detailed in the Strategic Report.
Board effectiveness evaluation An external firm, Transformational Leadership Group, who is independent of the Group, was engaged to facilitate the 2013 Board effectiveness evaluation. The evaluation covered the performance of the Board as a whole, each Committee, the individual Directors and the Chairman. The assessment was based on a mixture of questionnaires and collective discussions. The evaluation and assessment was structured to include a wide range of issues and covered areas such as member constitution and length of tenure, balance of different but complementary skills, experience and knowledge of the Group, diversity matters and the prevailing culture and tone of the Board and the Chairman.
The outcome of the external evaluation exercise identified the strengths of the Board and the effectiveness of the individual contributions of each of its Directors, and their commitment to their role. This is recognised by the resolutions that all Directors are proposed for re-election at the Annual General Meeting in May 2014. Whilst the results of the performance evaluation exercise showed the Board and its Committees to be working effectively, in the spirit of continuous development, the Board have set out an action plan to be undertaken, to further progress its effectiveness.
35 UTV Media plc Report & Accounts 2013 Corporate Governance
Operation of the Committees
Audit Committee The Audit Committee has particular responsibility for: • Reviewing financial judgements and reporting • Monitoring the effectiveness of internal control and the risk management framework • Reviewing the relationship and performance of the Auditors
Nomination Committee The Nomination Committee has particular responsibility for: • Composition of the Board and Committees • Diversity on the Board • Search for Non-Executive Directors • Induction process for new Directors • Continuing professional development of the Directors • Succession planning for senior executives
Remuneration Committee The Remuneration Committee has particular responsibility for: • Framework for the Remuneration Policy • Remuneration package for Executive Directors and the senior management team • Target setting for performance related remuneration schemes • Design of share incentive plans
Reports of the Committees The Chairs of both the Audit Committee and the Nomination Committee have prepared a report to outline the workings of their respective Committees during the course of 2013 and these are detailed over the following pages.
The activities of the Remuneration Committee are described in a separate section of the Annual Report in the “Report of the Board on Directors’ Remuneration”. During the year, the Chair of the Remuneration Committee advised the Board on remuneration matters which were discussed at the Committee meetings.
36 UTV Media plc Report & Accounts 2013 Corporate Governance
Audit Committee Report
Dear Shareholder,
On the following pages, on behalf of the members of the Audit Committee, I present the Audit Committee Report for 2013 detailing how the Committee has complied with the various provisions of the UK Corporate Governance Code 2012 (the “Code”). The report comprises three sections: • The Audit Committee in action • The focus of our attention in 2013 • Our relationship with the Auditors
The Audit Committee, as a Committee of the Board, has three core aims which guide its activities: 1. To monitor the integrity of financial information, financial reporting and disclosure 2. To determine the effectiveness of the internal controls systems established by management, and compliance therewith 3. To review the quality and effectiveness of the risk management systems established and operated by management
Through these activities, the Audit Committee assists the Board in implementing its strategy, primarily through oversight of the control and risk-responsive operations of the management team. The Audit Committee seeks assurance that there is a sufficiently robust and effective system of internal controls in place to support the delivery of the Board’s strategy, and ultimately, to meet with shareholders’ expectations of Group conduct and the achievement of Group objectives.
Recognising the role and position of the Audit Committee in the governance structure, the Board asked the Audit Committee to assist in relation to Code provision C.1.1 requiring a statement that “…..the Annual Report and Accounts for 2013, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the performance, strategy and business model of the company”.
Other recent changes in the Code have been reflected in this Audit Committee report. These relate to the External Auditor relationship with the Committee, with more detailed information about audit tenure and appointment, the assessment of auditor independence and the overall evaluation of the effectiveness of the audit process, being included.
This Audit Committee report also embraces the recent Guidance on Audit Committees issued by the Financial Reporting Council (FRC) and we have included more detail about the issues and challenges that the Audit Committee faced as it carried out its activities throughout the year. We have provided an outline of how these issues were approached, the particular work needed to address such issues and the conclusions finally drawn.
I hope that this enhanced detail of reporting and other changes made to the Audit Committee report will result in our shareholders having a better understanding of the work of the Audit Committee in 2013, and consequently, that this report will be viewed as engaging, informative and useful for our shareholders.
Stephen Kirkpatrick Chairman of the Audit Committee 28 March 2014
37 UTV Media plc Report & Accounts 2013 Corporate Governance
The Audit Committee in action The members of the Audit Committee are all independent Non-Executive Directors. The current members are: • Stephen Kirkpatrick (Chair) • Helen Kirkpatrick • Andy Anson
The Board has satisfied itself that all members of the Audit Committee have recent and relevant financial experience and both the Chair, Stephen Kirkpatrick and Helen Kirkpatrick are qualified accountants. Further details about the members are provided in the Board of Directors section.
The Audit Committee carries out its role by meeting at least four times a year. The Chair of the Committee invites by invitation, the Board members, the Internal Auditor and the External Auditor, as appropriate to attend the meetings. The Chair of the Audit Committee also meets many times throughout the year with the Group Finance team, the Group Chief Executive, the Internal Auditor and the External Auditor, in order to keep updated on all issues pertinent to the Audit Committee activities that are covered over the annual cycle.
Throughout the year, the Audit Committee is responsible for reviewing a wide range of matters including: • Monitoring the integrity of the Group’s financial statements, disclosure and announcements relating to financial performance • Determining the acceptability of accounting policies and practices • Reviewing and reporting to the Board on significant financial reporting judgements relating to the financial statements • Keeping under review the effectiveness of the internal control and risk management systems operated by management • Reviewing the effectiveness of the Internal Audit function • Reviewing the quality, performance and effectiveness of the External Auditor, assessing their continuing independence and considering appointment and remuneration of the External Auditor • Reviewing the arrangements by which employees may confidentially raise concerns about possible improprieties
For more information on the Audit Committee activities, its full terms of reference can be accessed on the corporate website: www.utvmedia.com.
The focus of our attention in 2013 Significant issues we reviewed in relation to the Group’s financial reporting, internal control and risk management included:
Matters related to financial judgements and reporting The significant areas of judgement considered by the Committee in relation to the accounts for the year ended 31 December 2013 and how these were addressed are outlined below. Each of these areas received focus from the External Auditor, Ernst & Young LLP, who provided detailed analysis and assessment of the matters in their report to the Committee. • Intangible asset impairment review The Committee considered the carrying value of goodwill and radio licences in the 2013 financial statements. The areas of challenge for the Committee this year were principally Radio ROI following the challenging economic conditions in recent years and New Media due to the restatement of part of this division as ‘held for sale’. The Committee reviewed the methodology applied in the impairment review and the reports provided by management. They constructively challenged underlying assumptions used within the cash flow forecasts, ensured the reasonableness of the discount rates used and considered the impact of sensitivity calculations. The Committee concluded the intangible assets were not impaired. • Fundamental restructuring of the Group and related presentation within the Financial Statements Throughout the year, the Committee regularly reviewed the progress and financial implications of the restructuring of the Group. They considered the impact of the reorganisation and redundancy costs, the buyout and waiver of the deferred consideration for Simply Zesty and the write down of the assets held for sale. The Committee reviewed the reports provided by senior management and discussed the calculations and assumptions used. A number of related presentational and disclosure matters were also considered by the Audit Committee including whether to treat operations as discontinued, assets as being held for sale, and transactions as being exceptional. • Pension accounting The assets, liabilities and costs associated with the Group’s defined benefit retirement scheme are reviewed regularly by the Committee. In particular, this year consideration was given to the restatement in the financial statements of the results for the year ended 31 December 2012 to reflect changes in the calculation of pension costs in accordance with IAS19 “Employee Benefits (Revised)” and also to the impact in the current year of the Group Chief Executive, John McCann, reaching retirement age and settling his entitlement under the unfunded pension arrangements. The financial calculations for these two matters were provided by the Group’s actuaries, Mercer. Advice is also taken from Mercer on the appropriateness of the underlying assumptions used to value the scheme’s assets and liabilities and how these compare to external benchmarks.
38 UTV Media plc Report & Accounts 2013 Corporate Governance
Matters related to operations and associated risk factors The significant issues we reviewed in relation to the Group’s operations, internal control and risk management included: • Risks associated with Ofcom and Broadcasting Authority of Ireland (BAI) licence regulations and the importance of ITV content to Television operations • Business continuity planning and key operational risks that might impact the continuity of broadcast and support activities • New narrative reporting and Directors’ Remuneration regulations, together with changes to the UK Corporate Governance Code, and their reporting in the Report and Accounts for 2013
Matters related to the effectiveness of the internal control and risk management systems One of the key duties for the Audit Committee is to assist the Board in reviewing the control and risk management systems established by management and to report their findings to the Board. The Board can then conclude on the effectiveness of the systems and report on this in the Corporate Governance statement that is contained in the Annual Report.
Internal control systems The Chair of the Audit Committee advises the Board after considering the various reports from both its Internal and External Auditors, and additionally, on any reports prepared directly by management relating to their internal controls systems operating in their Business Divisions. The External Auditors, Internal Audit and executive management have not highlighted any fundamental control issues to the Audit Committee during the year. The Committee members are of the view that the control issues raised in the various Internal Audit reports have not resulted in any material losses to the Group, that they have received appropriate management attention and either have been, or are in the process of, being addressed.
Risk management systems Management is responsible for identifying the major business risks faced by the Group and in each Business Division, and for determining the appropriate level of controls and procedures to manage, monitor and mitigate the risks. These risks are reviewed throughout the year by the senior executive team and significant risks were discussed with the Board as part of the Board’s role in monitoring the effectiveness of the risk management process. The Audit Committee have considered the framework for risk management and discussed the development of the framework with executive management. This will be an area of focus for the Audit Committee in 2014.
Our relationship with the auditors The Audit Committee invests significant time and attention throughout the year to evaluating the work of both the External and Internal Auditors, as these Auditors provide a valued and independent source of assistance to the Committee. This is in terms of their key undertakings of evaluating the integrity of the Group’s financial statements and announcements relating to financial performance, and reviewing the effectiveness of the internal control and risk management systems established and operated by management. The Chair of the Audit Committee regularly meets with both the External and Internal Auditors without management being present.
Internal Audit services The Group’s Internal Audit function assists in the review of the effectiveness of the internal control and risk management systems operated by management. The function is independent of management and reports directly to the Audit Committee. During the year the Committee approved the Internal Audit plan, considered the findings and recommendations of the Internal Audit reports and the proposed actions to be taken by management to implement recommendations. The Committee actively monitors the progress made by management in this respect by requiring formal updates on progress on a quarterly basis. The Committee reviews the effectiveness and performance of the Internal Audit function.
Audit firm tenure and appointment The Group’s External Auditors are Ernst & Young LLP and they provide a professional opinion on the integrity of the Group’s financial statements, the accounting judgements made and contents of disclosure in the Annual Report. Ernst & Young LLP has been involved with auditing the Group’s affairs for over 50 years and there are no contractual restrictions on the Group with regards to their appointment.
On an annual basis, the External Auditors are required to confirm in writing that they have complied with UK professional and regulatory standards, including Ethical Standards for Auditors issued by the Auditing Practices Board. The Committee has considered this report from Ernst & Young LLP as part of conducting its review of the performance and effectiveness of the External Auditor. The review included assessing the scope, extent and effectiveness of direction of the Auditor’s work, discussion of the Auditor’s judgements and quality of challenge in their audit process and reporting disclosure. The Committee agreed the remuneration for audit services, the nature of any non-audit work undertaken and fee level, the independence of the current engagement team and the independence of their firm as a whole, to determine that their objectivity and independence was not compromised by any such factors. Based on the Committee’s review and assessment, the members of the Audit Committee are fully satisfied with the performance of Ernst & Young LLP, their independence and objectivity.
39 UTV Media plc Report & Accounts 2013 Corporate Governance
Audit firm tenure and appointment (continued) Based on this assessment and recognising that a new Audit partner has been appointed for the financial year 2013 as part of the five-year rotation plan, the Committee will not be undertaking a tender exercise for the provision of audit services relating to the 2014 financial reporting year, and a resolution will be put to shareholders at the AGM in May 2014, to reappoint Ernst & Young LLP as Auditors for a further year.
The Audit Committee are cognisant of current regulatory developments and envisage that a tender exercise for the provision of audit services relating to financial reporting year commencing 2015, will be undertaken.
Audit and non-audit services To ensure that the Auditor’s independence and objectivity is preserved in relation to its statutory auditing requirements, the Audit Committee has developed a policy to monitor all non-audit services that may be provided by its External Auditors. This policy means that all non-audit engagements are notified and reviewed by the Audit Committee on a quarterly basis. There are certain types of engagement, as detailed in the policy, which will always require prior approval by the Committee. The policy sets out the strict conditions that must be met for the provision of the services by the External Auditors and lists the types of work that are allowable and those which are prohibited. The policy covers factors such as tiered approval levels dependent on the type of work to be undertaken and the fee level. Details of the work carried out by the External Auditor and fees are set out in note 5 of the Notes to the Group Financial Statements and the policy is available on the corporate website: www.utvmedia.com.
The Audit Committee is satisfied that the non-audit services provided and the level of fees for this work has not impacted on the continued independence and objectivity of the External Auditors in 2013.
40 UTV Media plc Report & Accounts 2013 Corporate Governance
Nomination Committee Report
Dear Shareholder,
On the following pages, on behalf of the Nomination Committee members, I present the Nomination Committee Report for 2013. The report comprises two sections: • The role of the Nomination Committee • The focus of our attention in 2013
Members of the Nomination Committee are: • Richard Huntingford (Chair) • Helen Kirkpatrick • Stephen Kirkpatrick • Andy Anson • Coline McConville
On behalf of the Board I wish to express my thanks and great appreciation to Roy Bailie who resigned from the Board in May 2013 after nearly 17 years of service as a Non-Executive Director.
Richard Huntingford Chairman of the Nomination Committee 28 March 2014
41 UTV Media plc Report & Accounts 2013 Corporate Governance
The role of the Nomination Committee The Nomination Committee is responsible for the following: • Reviewing the size, composition and diversity of the Board in terms of satisfying the principles of the UK Corporate Governance Code (the “Code”) • Reviewing the specialist skills of the current Board members and allocating Committee responsibilities to the most suitable Board members • Identifying the keys skills required of individual Directors and for future appointments to the Board when vacancies arise • Considering tenure issues and succession planning • Conducting search procedures for proposed candidates for the Board • Overseeing the induction process for new Directors • Overseeing the continuing professional development and training of the Directors
For more information on the Nomination Committee activities, its full terms of reference can be accessed on the corporate website: www.utvmedia.com.
The focus of our attention in 2013 In the latter half of 2012, the Group appointed a new Chairman and three new Non-Executive Directors. The appointments were made from those candidates, sourced by two independent external search agencies, who had the required attributes, skills and experience, and adequate time commitment. Consequently, the first quarter of 2013 was focused on providing the Non-Executive Directors with appropriate induction and training. Each was given a comprehensive introduction to the Group and detailed information describing the Group’s activities, financial information and terms of reference for the Board and its Committees. Induction visits were arranged to the various Business Divisions to learn more about operations.
A year later, the attention has now turned to reviewing the effectiveness of the Board and ensuring that there is continuing training and development of the Non-Executive Directors. The Chairman ensures that such training and development is tailored to each Director’s individual needs. The Directors have attended briefing sessions provided by various professional bodies and there have been continued visits to the various Business Divisions during the year.
With respect to diversity issues, the Board acknowledges that diversity relates to the entire Group and not just the Boardroom, hence the Board is strongly supportive of management’s objective of attracting a highly skilled and diverse workforce, that is reflective of society, and that attraction and recruitment is in a manner that is fair and non-discriminatory.
Specifically within the Boardroom, and in line with the new Code requirements relating to diversity of the Board, with respect to gender, the Nomination Committee is pleased to note that there are two females who serve on the Board as Non-Executive Directors which represents 40% of the total number of Non-Executive Directors, and this translates into 25% representation of the total number of Board members.
The Nomination Committee considered the composition of the Board throughout 2013. Only one Non-Executive Director, Roy Bailie, was deemed as not being independent due to serving on the Board for more than nine years. Roy Bailie had previously given notice of his intention to retire from the Board and resigned in May 2013. The Nomination Committee has confirmed that all Non-Executive Directors are independent and that the Chairman was independent upon appointment.
The Nomination Committee organised the evaluation of the Board and its performance, and this exercise was carried out at the end of 2013, using the services of an independent advisor. The outcome of the external evaluation exercise identified the strengths of the Board and the effectiveness of the individual contributions of each of its Directors, and their commitment to their role. In the spirit of continuous development, the Board have set out an action plan to be undertaken, to further progress its effectiveness.
Due to the stability of the current Board composition, with a complementary balance of skills and experience in place, only one meeting of the Nomination Committee has taken place in 2013. This meeting was largely focused on discussion around future succession planning arrangements in the senior executive team that might be put in place at the appropriate time.
42 UTV Media plc Report & Accounts 2013 Corporate Social Responsibility
“The Group’s Corporate Social Responsibility activities uphold ethical values, respect society, people and communities and recognise the importance of the natural environment.” John McCann, Group Chief Executive, UTV Media plc
The Group’s Corporate Social Responsibility (CSR) strategy is a pivotal part of the business, reinforcing stakeholder pride and loyalty in what the business does and demonstrating the Group’s commitment to operating responsibly.
As a Board level responsibility, CSR is actively discussed as part of the Board’s assessment of the moral integrity of the Group.
The Group’s CSR focus is on four key areas: • Society • Community • Environment • People
Society UTV is a major media group with interests in radio and television which endeavours to grow and build the UTV brand by operating responsibly. Audiences expect a reliable performance from UTV and the Group takes its responsibilities seriously. Group stations maintain high editorial standards and engage with industry regulators, government and the media in open and honest dialogue.
The Group recognises the impact that the business’ operations can have on society and so the quality and content of output is of utmost importance.
As licensed broadcasters, the Group understands the regulatory standards which must be followed, as well as the importance of retaining loyalty, trust and interaction with audience through the integrity of output.
The business adheres to the stringent regulatory broadcasting codes and requirements of the media industry including those of independent regulatory body Ofcom, the Broadcasting Authority of Ireland (BAI), the Advertising Standards Authority (ASA), the Committee of Advertising Practice (CAP), the Press Complaints Commission (PCC) and the Authority for Television on Demand (ATVOD).
In 2013, the Television Division exceeded all of the programming commitments set by the regulator Ofcom and also provided access services for viewers with visual and/or hearing impairments. There are robust internal systems in place to ensure compliance with all programming commitments as well as relevant Broadcast Acts and Advertising Codes. UTV’s programming is scrutinised by the Regional Advisory Committee which is chaired by a member of the UTV Media plc Board and attended by senior management from the Television Division. talkSPORT and Sport magazine are respected and trustworthy sources of sports news and comment, generating some of the biggest sports’ stories of the year with exclusive interviews and insight. Staff work within the relevant broadcasting, advertising and press guidelines, while also placing emphasis on strong professional relationships with regulatory bodies.
Suppliers UTV aims to treat all suppliers with the same level of professionalism and expect, that in turn, they demonstrate their commitment to trading in the same responsible business manner - supporting ethical, environmental and social responsibilities.
The Group works with a wide variety of organisations from large multinational engineering and technology providers to major national broadcasters and small independent local companies.
Major broadcast suppliers such as ITV and the sporting / sponsorship bodies which sell the rights for national and international sporting events broadcasts, including football, rugby and cricket are central to the provision of programming and content for the Radio and Television Divisions, with Arqiva being the main source of transmission capabilities.
A small set of specialist suppliers provide the essential technology for production and where possible, the Group uses local, independent production companies for its television and radio output. The Group recognises reliance on key suppliers and the need for continuing open and fair trading arrangements.
To that end, the Group invests significant effort in managing such relationships through agreed-term contracts or service expectation agreements and using these as the basis for building constructive working relationships.
43 UTV Media plc Report & Accounts 2013 Corporate Social Responsibility
Community Audiences respect and trust the UTV brand which has the power to champion causes, support communities and help make a real difference to peoples’ lives.
The Group plays an active role with businesses in the local communities where it operates. All the divisions across the Group support the fundraising efforts of charities and community initiatives in their areas – helping to raise significant revenue during the year for a range of vital local projects.
CASE STUDY
“We were over the moon about teaming up with talkSPORT in the fight against this killer disease. Prostate Cancer UK is all about developing a movement for change in men’s health and talkSPORT has the massive reach to help us do it. With one man dying every hour from prostate cancer in the UK, we all have to raise our game. talkSPORT offers the perfect platform to reach dads and lads of all ages across the football terraces.” Owen Sharp, Chief Executive of Prostate Cancer UK
In 2013, talkSPORT named Prostate Cancer UK as its official charity partner and worked alongside the organisation during the year to raise both money and awareness of the men’s health issue. To kick off the new partnership and help raise much-needed funds, talkSPORT sponsored the new, ‘Men United Cup’, a nationwide 5-a-side football tournament.
The Cup was played out by 1,000 teams at 43 Goals Soccer Centres across the UK and the winners of the tournament took on a talkSPORT Legends’ team - including presenters such as former England players Ray Parlour and Stan Collymore. talkSPORT ran on-air activity highlighting the work that Prostate Cancer UK does, alongside interviews with the charity’s sporting and celebrity ambassadors as well as a week-long auction, online promotion and articles in talkSPORT’s sister publication, Sport magazine.
The talkSPORT Legends’ Team take part in the Men United Cup for Prostate Cancer.
44 UTV Media plc Report & Accounts 2013 Corporate Social Responsibility
Community (continued) This has been a great opportunity for talkSPORT to alert its mainly male listeners to the important work of Prostate Cancer UK.
UTV is an active member of Business in the Community (BITC) and the Group Chief Executive sits on its Northern Ireland Board. The Group fully embraces the BITC’s membership strategy of being “committed to building a sustainable future by investing in our people, the planet and the places where we operate”.
Environment The Group recognises that its business activities have an impact on the environment and is committed to reducing any potential damaging effects and improving its performance on environmental matters.
The Group’s environmental policies are aimed at encouraging all existing and new investments in business activities to be evaluated, not just in terms of economic benefits to the Group and the community but also in terms of assessing each activity’s potential impact on the environment.
While the Group is mainly an office-based operation, due consideration is given to the impact of operations on the environment. As 75% of the total Greenhouse Gas (GHG) emissions come from the electricity supplied to the Group’s locations in UK and Ireland, the Group is currently sourcing from suppliers who can provide mainly green power generation.
In an effort to minimise the waste going to landfill sites, the Group aims to recycle and reuse wherever possible.
The Group gathers information from across its business units and emissions are calculated using the Department for Environment, Food and Rural Affairs’ (DEFRA) 2013 Government conversion factors for company reporting.
Environment performance The table below outlines the Group’s environmental impact in the year, where it has been possible to measure.
Environmental Impact 2013 2012 Current Year Outcome
GHG emissions due to the use of purchased electricity 2,198 2,331 6% reduction in GHG emissions from purchased energy consumption (i) electricity consumption in 2013. Will continue to emphasise the efficient use of electricity in all facilities.
GHG emissions due to fuel consumption in vehicles (i) 734 754* 3% reduction in GHG emissions from vehicle fuel consumption in 2013 * 2012 estimated
General waste generated in Northern Ireland (ii) 10 29 65% reduction in general waste from 2012 to 2013 and will continue to encourage staff awareness to waste.
Recycled waste generated in Northern Ireland (ii) 22 20 Achieved 10% increase in recycled waste from 2012 to 2013 and will continue to encourage recycling initiatives.
Average GHG emissions per employee (i) 2.8 3.1 Achieved 10% reduction in GHG emissions per employee
GHG emissions as % of Group revenue (iii) 0.03 0.03
(i) Expressed as tonnes of CO2 (ii) Expressed as tonnes (iii) Expressed as tonnes per £000 of revenue
45 UTV Media plc Report & Accounts 2013 Corporate Social Responsibility
Environment (continued) Environment performance (continued) The Group disposes of waste using only accredited waste management companies, in line with Hazardous Waste and Waste Electrical and Electronic Equipment (WEEE) regulations.
Electricity is used as efficiently as possible in all Group facilities. Having reduced general waste year on year and maintained the focus on recycled waste, the Group will continue to promote an awareness culture with staff about the benefits of energy saving to both the Group and the environment.
Full details of UTV’s environmental policies can be found online on the Group’s website at www.utvmedia.com/pages/responsibility/ environmental.
UTV participates in the annual Business in the Community NI Environmental Benchmarking Survey achieving consistently good results for our commitment to managing environmental issues. People People are the lifeblood of UTV’s business and their commitment and productivity is critical to success in all areas. With that in mind the Group aims to create a culture in which everyone can perform to the best of their ability.
At the heart of the business is an ethos of openness and equality with the principle that every staff member makes a strong and meaningful contribution to how the business operates.
The Group’s people strategy focuses on ensuring that the best individuals are employed in the most appropriate roles - providing the necessary skills, knowledge and experience to meet operational requirements.
In 2013, the Group reviewed its operations and made a number of changes to reflect the needs of the business and to ensure the Group employed appropriately skilled and experienced individuals in the right roles to meet the needs of a multi-platform consumer focused media business.
Staff development and wellbeing To make sure that staff have the capability, competence, flexibility and confidence to carry out what is required of them in their roles, UTV provides development opportunities through coaching, mentoring, job shadowing, off-site visits, customised training programmes and company-supported further education programmes. This development focused particularly on the areas of management development, production training, engineering and operations, health and safety, dignity at work, staff wellbeing and a range of professional, IT, Finance, HR and compliance programmes.
A comprehensive induction process is provided to all staff when they join the organisation and then again when they are promoted to new roles. UTV continues to support the creative industries in the UK and Ireland, working closely with Creative Skillset, universities, the education sector and using a broad range of freelance talent as well as offering a range of school and university work placement opportunities in each of the Business Divisions.
Across the Group employee assistance is also provided, offering confidential counselling through Carecall and access to an occupational health consultant when required.
Performance and recognition The Group’s reward strategy supports the ability to attract and retain employees with the right skills, experience and knowledge to meet the needs of the business and also to ensure that staff feel appropriately recognised and rewarded for their performance. A revised performance appraisal process was piloted in the business during the year.
Benchmarking activities are carried out to ensure that the pay and rewards offered are appropriate and recognise the commitment and contribution of staff. There are attractive packages in place, including both financial and non-financial benefits. UTV also offers flexible working arrangements and as a member of Employers for Childcare, has a salary-sacrifice childcare voucher scheme for staff.
Communication and participation with staff The business believes in an open culture and collaborative working and welcomes both formal and informal feedback from staff. All employees are kept up to date on business performance, key developments and challenges for the business through regular management meetings, as well as weekly ‘team briefs’ and regular staff updates, both via the intranet and face-to-face briefings.
The senior management team consults with staff through joint working groups on areas such as health and safety, the environment, information technology, operations and sports/social activities.
There is a staff representative committee in Northern Ireland, made up of senior management, staff and union representatives which meets to consult and discuss key strategic and operational issues - an important resource during the review of the business.
46 UTV Media plc Report & Accounts 2013 Corporate Social Responsibility
Diversity in employment In recognising the importance of diversity in the workplace, the Group is committed to providing equality of opportunity to all employees, freelance staff, contractors and job applicants. Everyone is treated fairly in selection for employment, promotion and training - with assessment based on an individual’s aptitude and ability irrespective of gender, marital/family status, religious belief, political opinion, disability, age, nationality, race, ethnic origin or sexual orientation.
The Group welcomes openness in all matters of equality and consults with staff representatives on the effective implementation of equality policies. Appropriate diversity training is given to staff and in 2013, this included seminars on ‘Dignity at Work’ and ‘Recruitment and Selection’. The Group’s ‘Code of Business Conduct’ is given to all new staff and they are kept informed of equality policies through the induction process and via the intranet. Procedures are in place to address conduct, behaviour and performance issues, including the Group’s Whistleblowing policy.
Throughout the year, tours of UTV were also provided to numerous community, education and minority groups as well as supporting careers’ activities relevant to the sector.
Gender breakdown chart at 31 December 2013 Male Female Total Board 6 2 8 Senior management 36 11 47 Employees 513 444 957
555 457 1,012
Health and safety care for staff The Group is committed to the very highest standards of health and safety in order to protect staff and statutory requirements are met in all operations. An external health and safety consultancy works with the Group to ensure that practices comply with legislation and its team provides regular safety training in all Group premises.
Health and safety audits and fire risk assessments are carried out annually by an external consultant. These combined with the results of additional ad hoc inspections are provided in comprehensive reports, which detail findings and evaluations. These recommendations are graded and corrective or preventative measures taken as necessary.
The Group has appointed trained health and safety co-ordinators, fire wardens and first aiders at each location who liaise with management and staff on key issues. All staff receive health and safety awareness training and display screen equipment assessments. Specific job-related training is also provided where necessary.
In all Group buildings, maintenance contracts are in place and routine inspections carried out on mechanical, electrical and safety equipment - in line with statutory requirements.
As part of the Group’s review of governance structures for the management of health and safety, standardised documentation and reporting procedures have been introduced across the Group. This allows us to provide documentary evidence alongside an assurance assessment report which is presented annually to the Board.
All accidents, incidents and near misses are reported monthly to the Group’s Health and Safety Committee so that performance can be monitored and action taken when needed.
The health and safety incidents across the Group for 2013 are summarised in the following table:
2013 2012 Total number of accidents reported: Number of fatalities - - Number of serious incidents - 1 Number of minor incidents 19 18
19 19
Human rights issues The Group is mindful of the importance of giving due consideration to human rights issues through its relations with employees and external stakeholders such as suppliers. The Group considers its commitment to responsible and ethical trading with suppliers and policies on staff development and well-being to be adequate and appropriate to address human rights issues given the nature of the Group’s operations. 47 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Information not subject to audit Statement from the Chairman of the Remuneration Committee
Dear Shareholder
As the new Chairman of the Remuneration Committee, I am pleased to introduce the Directors’ Remuneration Report. It reflects the Remuneration Policy for the next three years from 2014 to 2016 as well as the Report for the year ended 31 December 2013. This report and the Remuneration Policy have been prepared by the Committee and approved by the Board.
The objective of our Policy is to encourage the Executive Directors to deliver exceptional performance and shareholder value by ensuring that the Group’s Remuneration Policy is aligned to the business strategy and shareholders’ interests.
Since the last Annual Report, the Government has released remuneration reporting regulations. Taking the regulations and the valued input of shareholders’ consultation together, we have had the opportunity to review the existing remuneration policy and to amend it so that it underpins the interests of shareholders, aiming to deliver a sustainable increase in shareholder value.
The Remuneration Policy, adopted by the Board on 1 January 2014, follows an earlier remuneration review and a policy debate by the Committee in Autumn 2013. We are pleased to have worked with New Bridge Street, remuneration consultants, in the development of the Committee’s new policy.
The reasons for amending the Remuneration Policy include: • Current remuneration arrangements provide limited ‘line-of-sight’ between performance and reward; • There is a high weighting on profit based measures in both the annual bonus and long term incentive plan; the amended policy is more closely linked to the Group strategy; • The link between performance and reward under the long-term incentive plan is not as strong as it could be; and • The current long term incentive plan has a low perceived value amongst executives, and therefore has little retention value and possibly does not deliver value for money.
In looking at the variable elements of remuneration, the Committee noted that targets had historically been very challenging with only 26% of bonus and only 10% of LTIP being earned over the last five years; moreover the share award content earned was minimal .
The Remuneration Policy has no lesser intent than previously to set challenging targets but recognises that shareholder interest is not best served when there is a consistent misalignment between target and rewards, resulting in nil payouts. In summary, the Policy for 2014 to 2016 is set out below together with the amendments to the 2013 policy:
Remuneration element Amended policy Previous policy Bonus • Capable of being earned up to 100% of salary • Ability to earn was capped • Two targets introduced being PBT (80%) and strategic objectives at 80% of salary (20%) – goals are measurable and quantifiable • One target – operating • Bonus to be earned comprising two elements being cash and profit deferred shares; mix is 80% cash and 20% deferred shares; • Bonus paid in cash shares are deferred for 3 years Long Term Incentive Plan • Capable of being earned up to 80% of salary • Ability to earn was 100% of • EPS based on target growth basis salary • TSR based on FTSE Small Cap Index excluding investment trusts • EPS based on RPI +3% to +6% • Awards deferred for five years - the three year performance period before they vest plus a requirement to hold the shares • TSR based on a media (after the settlement of any tax liability) for a further two years. sector grouping Other policy matters • Introduce malus clause • No malus clause • Shareholding guidelines – 1 year’s gross salary to be achieved • Executive Directors holding over 5 years; can be achieved through vesting share award the equivalent of 1 year’s gross salary to be achieved over 3 years
In the last two years, the Executive Directors and the senior management team have accelerated the strategic development of the business, specifically with the internationalisation of talkSPORT and the new television broadcasting opportunity in Ireland. It is crucial that we retain, motivate and reward, hence the need to amend Remuneration Policy.
The Committee looks forward to gaining your support on this report when it is put to vote at the Annual General Meeting in May 2014.
Helen Kirkpatrick Chairman of the Remuneration Committee 28 March 2014 48 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Policy Report
Remuneration Committee The following directors served as members of the Committee throughout the financial year ending 31 December 2013:
Members Appointment Date Resignation Date Helen Kirkpatrick (Chairman) 29 August 2007 - Richard Huntingford 30 July 2012 - Roy Bailie 23 February 2012 16 May 2013 Stephen Kirkpatrick 28 September 2012 - Coline McConville 21 November 2012 -
The Committee held seven meetings during the year with full attendance by all members at each meeting.
Role of the Committee The Remuneration Committee is responsible for making recommendations to the Board on the Group’s framework of executive remuneration and its cost within agreed terms of reference. The Board approves the Remuneration Policy and puts it to the shareholders at the Annual General Meeting at least once every three years. The Committee determines the contract terms, remuneration and other benefits for each of the Executive Directors, including performance-related schemes (both short and long term) and pension rights. It also considers the remuneration of senior management within the Group. In performing its role, the Committee takes consideration of the general increases for employees throughout the Group. The Board itself determines the remuneration of the Chairman and Non-Executive Directors informed by market benchmarking.
The Committee is advised as required by a leading firm of independent remuneration consultants, New Bridge Street, who have no other connection to the Group. New Bridge Street were selected on the basis of expertise, particularly with regard to the directors’ remuneration report regulations issued by the United Kingdom Department for Business, Innovation and Skills. Work carried out by New Bridge Street is scoped in advance by the Remuneration Committee after considering the requirement of the Group and New Bridge Street responds to the terms of reference. The fee paid to New Bridge Street for their services in respect of the year ended 31 December 2013 was £26,000 and is on the basis of hours deployed with a fees cap agreed in advance. The Committee monitors the level of service provided and a Statement of Independence has been submitted by New Bridge Street.
Remuneration Policy The Remuneration Policy has been designed to attract and retain high quality individuals within the Group, ensure that their focus is on performance beyond the short term so as to create sustained shareholder wealth, and reward individuals in relation to their successful performance. The Policy aims to combine these factors in a manner comparable with other companies operating in the FTSE small cap sector, and at the same time, align with the expectations of investors.
The Remuneration Policy seeks to deliver a fair and balanced remuneration package for each of the Executive Directors. The package consists of a number of different components of remuneration, structured in such a way as to encourage optimal performance in accordance with the Business Strategy. This in turn is aligned with shareholder return as the strategy is translated into sustainable growth and consequently an increase in shareholder value.
The Remuneration Policy set out below will be put forward for shareholder approval at the AGM on 15 May 2014 in accordance with Section 439A of the Companies Act 2006. The Policy will apply to any remuneration and loss of office payments made on or after 31 December 2013 and will be in place until reviewed by the Remuneration Committee in 2016. The Committee reserves the right to review the Policy more frequently where circumstances deem this necessary and revise where appropriate.
49 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Remuneration Structure The remuneration package for the Executive Directors consists of a combination of fixed and variable components, each designed to incentivise and provide reward for successful short, medium and long term performance. The package of components includes:
Element & purpose Operation Maximum opportunity and link to performance Basic salary The basic salary of the Executive In reviewing potential increases in To recognise the responsibilities, Directors is reflective of the sector the Executive Directors’ basic salary, experience and skills of the Directors in competitive rates in attracting, the Committee is guided by general this competitive and challenging market. rewarding and retaining the necessary increases for employees. An annual level of skills and experience required salary review is carried out for all in the media sector and FTSE small staff across the Group, including cap. They are reviewed annually by the Executive Directors. Where an inflation Committee taking into account changes based award is granted, this would be in roles, responsibilities and specific applied to the Directors, if considered retention issues. appropriate.
Certain Directors may be considered for additional increases recognising that their experience, remit and responsibilities have substantially increased in the year and new operational activities undertaken.
Annual bonus The bonus scheme is designed to A minimum of 25% of the bonus based To reward Executive Directors for reward the executives for achieving on financial metrics becomes payable the achievement of pre-determined demanding performance targets set at upon meeting the set performance performance targets based upon the this level. Additionally, it is also designed targets. The maximum total bonus annual results for the year and linked to to encourage, incentivise and recognise payable to an Executive Director is the strategic plans of the Group agreed when there has been exceptional capped at 100% of their basic salary by the Board. performance achieved in challenging and this becomes due upon attaining conditions. exceptional performance which is a The bonus will be a combination of pre-determined percentage growth. A cash and share awards to align with At least 80% of the bonus will be straight line mechanism operates for shareholder interest. based on key financial metrics with the performance within these parameters. balance subject to personal or strategic (The targets for 2014 are not disclosed objectives. as they are commercially sensitive. These will be provided in the 2014 The share award element can range Annual Report.) between 20% and 35% to be set at the discretion of the Committee. One fifth of the total bonus payable is awarded in shares. As a result of the 12 For 2014 the weighting and measures month performance period before the will be: award may vest plus a requirement for • Profit before tax (PBT) (80%) the Executive Director to hold the shares for a further two years, this award is • Strategic objectives (20%) deferred for three years. The performance conditions that are Malus provisions apply to the annual required to be met are the same for all bonus in the event of gross misconduct Executive Directors. or a material misstatement in the Group’s financial statements.
Benefits The taxable benefits comprise a car, fuel, Benefit provision is set based on the To provide market competitive non-cash private health insurance, life insurance level and requirements of the role. benefits to attract and retain high quality and necessary business equipment. individuals.
50 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Remuneration Structure (continued)
Element & purpose Operation Maximum opportunity and link to performance Pension The Group operates a defined benefit The future rate of pension accrual for To enable Executive Directors to save for pension scheme which closed to new the members under the UTV pension their retirement through participation members in 2002. Executive Directors scheme is in line with the rules of the either in the UTV Company pension who were in employment prior to this, scheme which are consistent for all staff scheme or a personal pension plan. and are members of the UTV pension within the scheme. scheme, accrue a pension benefit within To help attract, retain and motivate high this scheme. quality individuals. Benefits earned under the scheme which are in excess of the annual or lifetime allowances introduced by HMRC may be accrued within an unfunded arrangement.
For Executive Directors appointed after Pension allowances into personal 2002 (and not a member of the UTV pension plans are set at a level that is pension scheme) a pension allowance considered appropriate having regard to based on a percentage of basic salary market practice - currently 15%. is paid by the Company into a personal pension plan chosen by the Executive Director.
Long Term Incentive Plan (LTIP) The Group has put in place a long The Executive Directors may be granted To align Executive Directors’ interests term incentive plan for certain senior awards of up to a maximum of 80% of with those of shareholders and executives, including the Executive their basic salary. further incentivise consistent, strong Directors. Under this plan, awards performance. may be payable in shares at the end These are payable in shares at the end of a three-year vesting period, and to of the three-year vesting period, and to the extent that pre-set performance the extent that the pre-set performance conditions and targets are met. conditions and targets, as outlined in each of the plans, has been met. The performance conditions are aimed All such performance criteria will be to align the Directors’ performance to independently verified by the Group’s shareholder value with at least 35% independent remuneration consultants, of the award being based on Total New Bridge Street. Shareholder Return (TSR) versus the FTSE small cap. The performance This award is deferred for five years as conditions attached to the remainder a result of the three year performance of the awards are based on Earnings period before the award may vest plus a per share (EPS) growth performance requirement for the Executive Director to conditions. EPS targets are to be set hold the shares (after the settlement of on a three year compound basis with any tax liability) for a further two years. sufficiently challenging targets. The awards may be exercisable in the six month period from the date of vesting. Under the rules of the plan, the Executive Directors are also entitled Malus provisions give the Committee to the share equivalent of the authority to reduce or cancel long term dividends accrued over the three year incentive awards in the event of gross performance period in respect of any misconduct or a material misstatement vested shares. in the Group’s financial statements.
51 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Remuneration Structure (continued)
Element & purpose Operation Maximum opportunity and link to performance Share Incentive Plan This scheme comprises the Share Executive Directors are eligible to To motivate employees and encourage Incentive Plan under which employees participate in the Company’s all- ownership of shares in the company. allocate part of their pre-tax salary to employee share scheme on the same purchase shares in the Company in line terms as other employees. The scheme with HMRC guidelines. operates within specific tax legislation and, as is normal practice, there are no performance conditions.
The limit for this plan is set in line with government guidelines. (For 2013 a limit of £1,500 per annum or £125 each month was in place for each employee, increasing to £1,800 per annum or £150 per month from April 2014.)
Shareholding guidelines The Group has a policy requiring To demonstrate the Directors’ support Executive Directors to hold the and commitment to the UTV Group and equivalent of one year’s average basic keep them focused on its performance salary in UTV Media plc shares at and align their interest to those of an average market value and can be shareholders. achieved out of the conversion of vested share awards.
Directors have a period of five years from appointment to achieve the holding.
52 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Pay for performance The graphs below provide estimates of the potential future reward opportunities for the Executive Directors and the potential mix between fixed and variable pay under three different performance scenarios:
John McCann, Group Chief Executive
MinimumMinimum 100%100% £503k£503k
OnOn TTaarrgetget 70%70% 19%19% 11%11% £705k£705k
MaximumMaximum 38%38% 34%34% 28%28% £1,331k£1,331k
0%0% 25%25% 50%50% 75%75% 100%100%
FiFixxeded (Base(Base salarsalaryy,, benefitsbenefits && pension)pension) BonusBonus LLTIPTIP
Scott Taunton, Managing Director, UTV Radio GB
MinimumMinimum 100%100% £317k£317k
OnOn TTaarrgetget 74%74% 17%17% 9%9% £429k£429k
MaximumMaximum 42%42% 32%32% 26%26% £752k£752k
0%0% 25%25% 50%50% 75%75% 100%100%
FiFixxeded (Base(Base salarsalaryy,, benefitsbenefits && pension)pension) BonusBonus LLTIPTIP
Norman McKeown, Group Finance Director
MinimumMinimum 100%100% £226k£226k
OnOn TTaarrgetget 72%72% 18%18% 10%10% £312k£312k
MaximumMaximum 41%41% 33%33% 26%26% £552k£552k
0%0% 25%25% 50%50% 75%75% 100%100%
FiFixxeded (Base(Base salarsalaryy,, benefitsbenefits && pension)pension) BonusBonus LLTIPTIP
Policy on recruitment remuneration In setting the remuneration of each Executive Director on their appointment, the Committee will apply the policies outlined above. New Directors may be considered for an award under the LTIP on similar terms from the first award date after the recruitment date.
The requirement for Directors to hold the equivalent of one year’s average basic salary in UTV Media plc shares can be built up within five years of being appointed to the Board and may be achieved through the retention of share awards that vest after the settlement of any tax liability.
The Remuneration Committee may make payments to cover reasonable expenses in respect of the recruitment, relocation and other miscellaneous expenses specific to the recruitment of the Director.
53 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Remuneration Policy for the year ended 31 December 2013 As noted previously, the Remuneration Policy outlined above has been in place from 1 January 2014. Throughout the year ended 31 December 2013, the remuneration policy adopted was unchanged from the previous year. The components of the package were consistent with those included in the table above but the terms attached to the variable pay were slightly different with the maximum bonus payable to Executive Directors capped at 80% of their basic salary and the awards that might be granted under the long term incentive plan set at 100% of their basic salary. For the long term incentive awards granted in 2013, the TSR performance is comparable to other companies in the media sector and the EPS performance is based on growth of between 3% and 6% above RPI.
The details of the Directors’ Remuneration for the year ended 31 December are outlined in the section of this report headed ‘Information subject to audit’. In reviewing the remuneration profile for 2013, shareholders are encouraged to note the following characteristics of the policy and the related performance in the year: • By setting very challenging performance conditions and targets, the Remuneration Policy aims to reward the Executive Directors for their success; • The lack of bonus payment in 2013 reflects the difficult trading conditions experienced by the Group during the year; • That the balance between the annual fixed and variable components of remuneration, based on exceptional performance being achieved, is appropriately balanced at the ratio of 40:60.
Service agreements and exit payments All Executive Directors have a rolling service contract with the Group and no notice period exceeds twelve months. The service contract for John McCann is dated 16 October 2007. Scott Taunton has a service contract dated 1 July 2006 and Norman McKeown has a service contract dated 24 November 2008.
None of the service contracts makes any provision for a pre-determined amount of compensation being due in the event of early termination except in the event of change of control of the Group when remuneration shall be paid in respect of any unexpired notice period on termination of employment by the Group.
The Remuneration Committee will consider any contractual amounts due to a good leaver in accordance with the rules applicable to each particular element of the remuneration. Typically, a good leaver would be entitled to any pro-rated annual bonus award payable after the end of the financial year. The Remuneration Committee will consider any performance conditions applying to any unvested long term awards and the performance period which has lapsed. LTIP awards will typically vest at the normal vesting date for good leavers to the extent that the TSR and EPS performance conditions have been met, but will normally be pro-rated on the basis of actual service over the performance period.
A bad leaver will be treated in accordance with the terms of the individual’s contract and exit amounts will be limited to the minimum amount provided by the contract. LTIP awards and unvested deferred shares will lapse for those not regarded as good leavers.
Appointment letters and remuneration for the Non-Executive Directors All Non-Executive Directors have Letters of Appointment with the Group which provide for an initial period of three years subject to review and they do not include notice periods in excess of twelve months. The appointment dates for the Non-Executive Directors are detailed in the Board of Directors section. There is no provision for any pre-determined amount of compensation being due in the event of termination.
The remuneration of the Non-Executive Directors is determined by the Board based upon the recommendations of the Chairman and Chief Executive. The remuneration of the Chairman is determined by the Board as advised by the Remuneration Committee. The Non-Executive Directors are paid a cash fee and related business expenses are reimbursed. They do not participate in bonus or share incentive schemes and have no pension contribution entitlement.
There is an additional increment to a Non-Executive Director’s fee for being the Chair of a Committee of the Board but not for being a member of such a Committee. There was no increase to the Non-Executive fees in 2013.
54 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Executive Directors’ remuneration The remuneration policies and executive packages are designed to be competitive and encourage achievement of the Group’s strategic goals. The wider economic conditions, shareholder feedback and the pay and employment conditions throughout the Group and FTSE small cap companies are all taken into consideration.
The graph below depicts the total cost of executive pay for the years ended 31 December 2012 and 2013 in relation to profit attributable to equity shareholders, dividends paid and total staff costs.
Total cost of Executive pay in relation to Profit attributable to Shareholders, dividends paid and staff costs
£000
35,000
30,000
25,000
20,000
15,000
10,000
5,000 £000 0 35,000 Shareholder Dividends paid Staff costs Executive pay 30,000 profit 2013 2012 25,000
20,000 The remuneration package for the Executive Directors consists of a combination of fixed and variable components each designed to incentivise and provide reward15,000£000 for successful short and long term performance. 1,200 10,000 The details of the remuneration package are in line with1,064 the Remuneration Policy operating throughout the year ended 31 December 2013. The current arrangements5,0001,000 and charges in respect of pensions, together with details of the long term incentive plans that are currently in place, are outlined below. 853 0 810 800 The graph below sets out the single totalSha figurereholder of remunerationDividends paid of JohnS taffMcCann, costs the GroupExecuti Chiefve pay Executive, over the last five years. profit The decline in the single total figure for 2013 compared to 2012 compares613 to an increase of 1.2% in the remuneration paid to the 600 2013 2012 Group’s employees over the same period.450 400 Single figure remuneration of Group Chief Executive £000 200 1,200 0 1,064 1,000 2009 2010 2011 2012 2013 853 810 800 Fixed pay Variable pay Pension 613 600 450 400 90% 200 80% 70%0 2009 2010 2011 2012 2013 60% 50% Fixed pay Variable pay Pension 88% 40% Fixed pay comprises base salary and taxable benefits while variable pay represents any annual bonus paid plus the value of shares vested under the long term incentive30% plan. 50% 20% 55 30% 90%10% 80%0 2009 2010 2011 2012 2013 70% 60% Bonus LTIPS 50% 88% 40% 30% 50% 20% 30% 10% 0 2009 2010 2011 2012 2013
Bonus LTIPS £000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 Shareholder Dividends paid Staff costs Executive pay profit 2013 2012
£000
1,200 1,064 1,000 853 810 800 613 600 UTV Media plc Report & Accounts450 2013 400
Report of the200 Board on Directors’ Remuneration
0 2009 2010 2011 2012 2013 Executive Directors’ remuneration (continued) Fixed pay Variable pay Pension The graph below sets out the proportion of variable pay received by the Group Chief Executive over the last five years expressed as a percentage of the maximum bonus that could have been paid or the maximum number of shares that could have been received under the terms of the long term incentive plan.
Percentage of maximum variable awards received 90% 80% 70% 60% 50% 88% 40% 30% 50% 20% 30% 10% 0 2009 2010 2011 2012 2013
Bonus LTIPS
Shareholder views The resulting outcome of shareholder advisory vote on the 2012 Report of the Board on Directors’ Remuneration was as follows:
For 63.8% Against 36.2%
The Committee has consulted with major shareholders in respect of the pay policy and has welcomed and been receptive of their views. In their review of the Remuneration Policy, the Committee considers all remuneration related comments made at the Company’s AGM and feedback received during consultation with shareholders throughout the year.
Performance graph This graph looks at the value, by 31 December 2013, of £100 invested in UTV on 31 December 2008 compared with that of £100 invested in the FTSE All-Share Media Index and the FTSE Small-Cap Index. The other points plotted are the values at intermediate financial year-ends.
Total Shareholder Return Source: Thomson Reuters 300
250
200
150 alue (£) V 100
50
0 31 Dec 08 31 Dec 09 31 Dec 10 31 Dec 11 31 Dec 12 31 Dec 13
UTV Media FTSE All Share Media FTSE Small Cap
The Media sector has been chosen as the Company is a constituent of the sector and it represents the comparator sector for long term incentive awards issued prior to the year end. The FTSE Small Cap sector has also been included as, in line with the new Remuneration Policy, it represents the comparator sector for all new awards.
56 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Information subject to audit Annual report on remuneration Single total figure of remuneration The remuneration of the Executive Directors for the year ended 31 December 2013 is set out below: Basic salary Bonus Taxable Pension LTIPs Total benefits remuneration £ £ £ £ £ £ Executive Directors John McCann 2013 460,000 - 42,748 - 307,124 809,872 2012 452,500 - 40,215 360,470 - 853,185
Scott Taunton 2013 310,000 - 6,948 80,892 203,517 601,357 2012 305,000 - 17,311 60,658 - 382,969 Norman McKeown 2013 210,000 - 16,402 31,500 111,009 368,911 2012 200,000 - 14,925 30,000 - 244,925
Non-Executive Directors Richard Huntingford 2013 100,000 - - - - 100,000 2012 42,489 - - - - 42,489 Helen Kirkpatrick 2013 35,000 - - - - 35,000 2012 49,221 - - - - 49,221 Roy Bailie 2013 14,583 - - - - 14,583 2012 34,333 - - - - 34,333 Stephen Kirkpatrick 2013 35,000 - - - - 35,000 2012 8,417 - - - - 8,417 Andy Anson 2013 35,000 - - - - 35,000 2012 3,684 - - - - 3,684 Coline McConville 2013 35,000 - - - - 35,000 2012 3,684 - - - - 3,684
The figures for Roy Bailie reflect his remuneration for the period until he resigned on 16 May 2013.
The 2012 comparative figures for Richard Huntingford, Stephen Kirkpatrick, Andy Anson and Coline McConville reflect their remuneration for the period from when each was appointed to the Board, being 30 July 2012, 28 September 2012, 21 November 2012 and 21 November 2012 respectively. The 2012 comparative figure for Helen Kirkpatrick includes her remuneration for the period from 23 February to 30 July 2012 when she undertook the role of Interim Chairman.
The value attributable to the LTIPs represents the actual value of awards vesting in the year. Further details of this are included in the Long Term Incentives section of this report on page 59.
Details of the Executive Directors’ pension are included in the Pensions section of this report on page 58.
57 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Pensions Of the three Executive Directors, John McCann and Scott Taunton are both members of the UTV Company pension scheme. For Norman McKeown, who is a not member of the UTV Company pension scheme, the Group made a contribution of £31,500 (2012: £30,000) equating to 15% of his basic salary into a Personal Pension Plan.
The pension entitlements of the Directors included in the UTV Company pension scheme are as follows:
Accumulated value of pension accrued Age at 31 Normal At 31 At 31 December retirement December December 2013 age 2013 2012 £ £ John McCann 60 60 - 326,614 Scott Taunton 42 60 51,518 45,086
The figures in the table above are prepared in line with the requirements of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).
The pension benefits payable to John McCann are based on arrangements which were established in 1989 and which were structured in a manner to reward a small number of executives who were involved in successfully renewing the channel 3 licence for a further 25 year term. The pension benefits payable to John McCann are 1/30th of final pensionable salary, as at the previous 1 July (together with an allowance for benefits in kind), for each year of pensionable service, subject to a maximum of 20 years and accordingly, he stopped accruing service in the pension scheme from April 2006. Since then his pension entitlements had been accrued and paid to an unfunded arrangement.
In May 2013, John McCann reached normal retirement age and, in line with the agreed terms of the unfunded arrangement, the full entitlement under this arrangement was settled as a cash payment. This option achieved the lowest economic cost for the Group. Accordingly, he received a gross pre-tax lump sum payment of £1,446,184 on 9 May 2013. This payment extinguished all John McCann’s entitlements under the unfunded arrangement. Consequently at 31 December 2013 an amount of £Nil (2012: £1,902,000) has been accrued by the Group in this respect.
In the table above the accumulated value of the pension accrued is stated after accounting for the member contributions paid during the year by John McCann amounting to £Nil (2012: £Nil). As John McCann had stopped accruing pension service in the UTV scheme since April 2006, it was agreed that from 1 June 2010 he would cease to make contributions to the scheme and in return would forego an equivalent amount of his basic salary entitlement.
The pension benefits payable to Scott Taunton are 1/50th of accrued service up to 1 June 2003 and 1/60th thereafter, subject to HMRC limits. Since 2011, he has been accruing part of his benefits in the pension scheme and part under an unfunded arrangement. As at 31 December 2013, an amount of £269,000 (2012: £174,000) has been accrued by the Group in this respect of the unfunded arrangement. In the event that early retirement was permitted, the benefits payable to Scott Taunton from the UTV Company pension scheme and the unfunded arrangement would be reduced on a cost neutral basis.
In the table above the accumulated value of the pension accrued relates to the total pension entitlement from the UTV Company pension scheme and the unfunded arrangement and is calculated after accounting for the member contributions paid during the year by Scott Taunton amounting to £27,900 (2012: £27,450).
58 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Long term incentive performance plans As outlined in the Remuneration Policy, the Group has put in place a long term incentive plan for certain senior executives who may be granted awards. Up to 2013 awards were granted at up to 100% of the senior executives’ basic salary. These are payable in shares at the end of the associated three-year period, and to the extent that the pre-set performance conditions and targets, as outlined in each of the plans, has been met.
The performance conditions that have been set for the 2013 award are aimed to align the Directors’ performance to shareholder value and were selected by the Remuneration Committee.
Further details of the plans and awards for the executives, from 2010 onwards, is given below and are set out in the Interests in the Long Term Incentive Plan tables.
Performance criteria The performance criteria for the grant of awards outlined in the plans awarded annually from 2010 to 2013 are based on the combined performance elements of:
(i) the growth in diluted adjusted earnings per share from continuing operations (EPS) over the qualifying three-year period commencing in the financial year in which the award was first granted, and (ii) the ranking of the Group’s total shareholder return (TSR) against a comparator group comprising the FTSE All-Share Media sector, over the next three years commencing with the date on which the awards were first granted.
The balance of the two performance elements EPS and TSR, have been weighted such that for the 2010 plan, 50% of the total award is based on whether the EPS targets are achieved and 50% is based on whether TSR targets are achieved. For 2011, 2012 and 2013 plans, the weighting is such that 65% of the total award is based on the EPS targets being met and the remaining 35% is based on the TSR targets being achieved.
Framework for the targets set For all plans, both a minimum and a superior target are set for each of the two elements of performance that are being measured. If the minimum target set is met, then 25% of that element of the award will vest. If the superior target is achieved, the remaining 75% of that element of the award will vest. For levels of performance attained between these two parameters, the percentage of the award that will vest will be calculated on a straight line basis.
Targets The framework for the targets for EPS and TSR for the 2010 to 2013 plans is as follows: (1) The growth in diluted adjusted EPS For the 2010 plan, the performance criteria is that the equivalent annual EPS growth over the qualifying three-year period is required to exceed 1% per annum for the minimum target to be met. To meet the superior target, this will require growth to exceed 3% per annum over the three-year period. For performance of EPS growth between 1% and 3%, per annum, the % of the EPS element of the award that will vest will be calculated on a straight line basis.
For the 2011, 2012 and 2013 plans, the performance criteria is that the equivalent annual EPS growth over the qualifying three- year period is required to exceed average RPI by at least 3% per annum for the minimum target to be met. To meet the superior target, this will require growth to exceed average RPI by at least 6% per annum. For performance achieved exceeding average RPI by between 3% and 6% growth per annum, the percentage of the EPS element of the award that will vest will be calculated on a straight line basis between the minimum and maximum target.
(2) The ranking of the Group’s TSR against a comparator group For the 2010 to 2013 plans, the performance criteria is that the TSR ranking to be achieved over the qualifying three-year period is a median ranking when compared to the FTSE All-Share Media sector. To meet the superior target, this will require a ranking in the upper quartile. For rankings between the median and upper quartile, the % of the TSR element of the award that will vest will be calculated on a straight line basis.
59 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Interests in the long term incentive plan The details of the awards for the executives are set out in the tables below.
Awards granted in 2010 The following Directors were granted awards under the Company’s long term incentive plan on 30 March 2010.
At 1 January Awards Awards At 31 End of Market price 2013 vested in the lapsed in the December qualifying at date of year year 2013 period award No. No. No. No. John McCann 358,067 (179,033) (179,034) - 31 Dec 12 117.75p Scott Taunton 237,274 (118,637) (118,637) - 31 Dec 12 117.75p Norman McKeown 129,422 (64,711) (64,711) - 31 Dec 12 117.75p
The performance criteria for the grant of the award outlined in the plan for 2010 were based on a combination of two elements. The first of these, which related to 50% of the award granted, required annual growth in diluted adjusted EPS of between 1%, for a minimum 25% of this element of the award to vest, and 3%, for a maximum of 100% of this element of the award to vest. The second performance criteria, which related to 50% of the award granted, assessed the ranking of the Group’s TSR against a comparator group achieving a median ranking, over the qualifying three-year period commencing in the financial year in which the plan was first granted.
The TSR targets were not achieved and thus this element of the award in the 2010 plan will not vest. The equivalent annual EPS growth from 2009 to 2012 was in excess of 6%, thus meeting the superior EPS targets of 3% growth set for this award. Consequently 50% of the 2010 awards vested in 2013.
In addition to 50% of the awards granted in 2010, in line with the rules of the plan, the Executive Directors were entitled to the share equivalent of the dividends that were accrued over the three year performance period in respect of these vested shares. This resulted in an additional 18,554 shares, 12,295 shares and 6,706 shares being granted to John McCann, Scott Taunton and Norman McKeown respectively.
The market price of the UTV shares at the date of vesting (31 May 2013) was 155.44p. The equivalent cash values for the Executive Directors of the awards that vested in 2013 are included in the table above showing the ‘Aggregate emoluments for Executive Directors’.
After settlement of tax liabilities, the share awards that vested in 2013 were retained by the Directors.
Awards granted in 2011 The following Directors were granted awards under the Company’s long term incentive plan on 30 March 2011.
At 1 January Awards At 31 End of Market price 2013 granted in December qualifying at date of the year 2013 period award No. No. No. John McCann 315,322 - 315,322 31 Dec 13 135.10p Scott Taunton 208,734 - 208,734 31 Dec 13 135.10p Norman McKeown 125,833 - 125,833 31 Dec 13 135.10p
For the 2011 plan, the award was based on a combination of whether the EPS growth performance targets and the TSR performance ranking targets were achieved. The EPS growth targets from 2010 to 2013 were not achieved, and thus this element of the award in the 2011 plan will not vest. The TSR targets, which relates to 35% of this award, the UTV shares ranked between the median and upper quartile of the FTSE All-Share Media sector and consequently 59% of this element of the award will vest. This represents 20.7% of the total 2011 award.
60 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Awards granted in 2012 The following Directors were granted awards under the Company’s long term incentive plan on 30 March 2012.
At 1 January Awards At 31 End of Market price 2013 granted in December qualifying at date of the year 2013 period award No. No. No. John McCann 310,928 - 310,928 31 Dec 14 143.12p Scott Taunton 209,614 - 209,614 31 Dec 14 143.12p Norman McKeown 132,756 - 132,756 31 Dec 14 143.12p
Awards granted in 2013 The following Directors were granted awards under the Company’s long term incentive plan on 3 October 2013.
At 1 January Awards At 31 End of Market price 2013 granted in December qualifying at date of the year 2013 period award No. No. No. John McCann - 245,824 245,824 31 Dec 15 187.13p Scott Taunton - 165,664 165,664 31 Dec 15 187.13p Norman McKeown - 112,224 112,224 31 Dec 15 187.13p
Directors’ interests in shares The figures in the table below represent the shareholdings in the ordinary share capital of UTV Media plc beneficially owned by Directors and their family interests, other than in respect of options or other rights to acquire ordinary shares:
31 31 December December 2013 2012 Executive Directors John McCann 480,162 367,497 Scott Taunton 316,770 253,260 Norman McKeown 183,028 144,533
Non-Executive Directors Richard Huntingford 25,000 - Helen Kirkpatrick 7,318 7,318 Stephen Kirkpatrick 8,666 - Andy Anson - - Coline McConville - -
No Directors have acquired or disposed of any ordinary shares in the Group during the close period from 16 January to 17 March 2014 with the exception of those shares purchased through the Share Incentive Plan (SIP).
Executive Directors are required to hold the equivalent of one year’s average basic salary in UTV Media plc shares at an average market value and can be part achieved out of the conversion of vested share awards.
Directors have a period of five years from appointment to achieve the holding. This requirement was met at 31 December 2013.
61 UTV Media plc Report & Accounts 2013 Report of the Board on Directors’ Remuneration
Directors’ interests in shares (continued) J McCann, S Taunton and N McKeown are included as potential beneficiaries under the UTV Employee Benefit Trust and are deemed to be interested in the shares held by this Trust. The beneficial interests include ordinary shares purchased under the monthly operation of the employee SIP. During the year, the Executive Directors have each acquired 1,078 ordinary shares through the SIP. As at 31 December 2013 165,942 ordinary shares were held by Brewin Nominees Limited for the purposes of the SIP. As with other employees, the Executive Directors are deemed to have a potential interest in those shares, being beneficiaries under the trust.
No Director had any interests in the shares of any subsidiary company.
The market price of UTV Media plc ordinary shares as at 31 December 2013 was 215.00 pence and the range during the year was 130.00 pence to 227.00 pence.
The Report of the Board on Directors’ Remuneration was approved by the Board on 28 March 2014 and signed on its behalf by Helen Kirkpatrick, Chairman of the Remuneration Committee.
Helen Kirkpatrick Chairman of the Remuneration Committee 28 March 2014
62 UTV Media plc Report & Accounts 2013 Report of the Directors For the period ending 31 December 2013
To be presented at the Annual General Meeting of the Company to be held on 15 May 2014.
1. Annual report The Directors have pleasure in presenting their Annual Report, together with the audited financial statements of the Group for the year ended 31 December 2013.
2. Business development review A review of the business development of the Group during the year, its position at the year end, principal risks and uncertainties facing the Group, important events which have occurred since and indications of future developments in the business are provided in the Strategic Review.
3. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Group and divisional performance reviews. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described above. In addition, Note 29 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposures to credit risk and liquidity risk.
The Group has successfully undertaken steps during the year to strengthen its position including: • generating an operating profit, including income from associates, of £20.1m in challenging market conditions • continued emphasis placed on cash generation which has resulted in net debt at the year end of £49.1m (2012:£49.4m)
The Directors have reviewed the 2014 budgets and subsequent forecasts in light of current economic conditions and are satisfied that, along with the secured debt financing to 2017 and the continued profitability of the Group, adequate resources are available to continue in operational existence in the long term. Therefore, the Group continues to adopt the going concern basis in the preparation of its annual report.
4. Employees Further information on employees including the Group’s policy on disabled employees and employee involvement can be found in the ‘Staff and People’ section of the Corporate Social Responsibility report.
5. Environmental practices, Greenhouse gas emissions and Community and Society Further information on the Group’s environmental practices, Greenhouse gas emissions and community and society can be found in the ‘Environment’ and ‘Community and Society’ sections in the Corporate Social Responsibility report.
6. Political donations No donations were made for political purposes during the year (2012: £Nil).
7. Directors and their interests The Directors of the Company during the year were those shown in ‘Board of Directors’.
At the Annual General Meeting in 2012, J McCann, S Taunton and N McKeown had held office for three years and thus retired and offered themselves for re-election. In accordance with Article 127 of the Company’s Articles of Association, these Executive Directors are therefore not required to retire and offer themselves for re-election until the Annual General Meeting in 2015. However, while not mandatory, in line with the Code of FTSE350 recommendations relating to the annual election of Directors by shareholders, this year the Board has determined that all Directors, both Executive and Non-Executive, will be subject to an election process at the Annual General Meeting on 15 May 2014.
The Directors interest in the shares of the Company are disclosed in the Report of the Board on Directors’ Remuneration.
63 UTV Media plc Report & Accounts 2013 Report of the Directors For the period ending 31 December 2013
8. Directors’ Indemnities The Company has granted an indemnity to one or more of its Directors against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provisions remains in force as at the date of approving the ‘Report of the Directors’.
During the year, J McCann and S Taunton were trustees of the UTV Pension Scheme. The Company has granted indemnity against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 235 of the Companies Act 2006. These qualifying pension schemes indemnity provisions remain in force as at the date of approving the ‘Report of the Directors’.
9. Corporate governance The information required to be disclosed under DTR7.2 is provided within the Corporate Governance Section and point 12 of this report.
10. Financial instruments The Group’s financial risk management objectives and policies and details of the Group’s exposure to credit risk, liquidity risk and cash flow risk are outlined in note 29.
11. Substantial shareholdings The Company has been notified of the following interests representing 3% or more of the issued ordinary share capital of the Company as at 31 December 2013.
At 31 December 2013 At 17 March 2014 Ordinary Shares Percentage of Ordinary Shares Percentage of that class that class
TVC Holdings 17,240,262 17.98% 9,640,262 10.05% Fidelity International Limited 9,590,252 10.00% 9,590,252 10.00% Old Mutual Global Investors 6,883,203 7.18% 6,883,203 7.18% BlackRock 5,180,941 5.40% 5,180,941 5.40% Milestone Trust 4,625,000 4.82% 4,625,000 4.82% Standard Life Investments 3,896,023 4.06% 3,896,023 4.06%
Up to 17 March 2014 except for the holdings of ordinary shares listed above, no party has notified an interest in the ordinary shares of the Company which is required to be recorded in the register under DTR5.
64 UTV Media plc Report & Accounts 2013 Report of the Directors For the period ending 31 December 2013
12. Additional information for shareholders The following provides the additional information required for shareholders as a result of the implementation of the Takeovers Directive into UK Law.
At 31 December 2013, the Company’s issued share capital comprised:
Number Value Thousands £000
Ordinary shares of 5p each 95,903 4,795
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and for voting rights.
Ordinary shares On a show of hands at a general meeting of the Company every holder of ordinary shares present in person and entitled to vote shall have one vote on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held. The notice of the general meeting (see notice of general meeting) specifies deadlines for exercising voting rights either by proxy notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted and the number for, against or withheld in relation to each resolution are announced at the Annual General Meeting and published on the Company’s website after the meetings.
There are no restrictions on the transfer of ordinary shares in the Company other than: • Certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws and market requirements relating to close periods); and • Pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the Company require the approval of the Company to deal in the Company’s securities.
The Company’s Articles of Association may only be amended by a special resolution at a general meeting of the shareholders. Directors are reappointed by ordinary resolution at a general meeting of the shareholders. The Board can appoint a Director but anyone so appointed must be elected by an ordinary resolution at the next general meeting. Any Director who has held office for more than three years since their last appointment must offer themselves up for re-election at the Annual General Meeting. Any Non-Executive Director who at the date of the Annual General Meeting had held office for nine years or more shall be subject to re-election at each Annual General Meeting. However, in line with the Code of FTSE350 recommendations relating to the annual election of Directors by shareholders, the Board has determined that all Directors, both Executive and Non-Executive, will be subject to an election process at the Annual General Meeting in 2014.
Significant interests Directors’ interests in the share capital of the Company are set out in the Report of the Board on Directors’ Remuneration. Major interests (i.e., those greater than 3%) of which the Company has been notified are shown in point 11 to this report.
Directors’ powers to issue or purchase shares At the AGM resolutions are passed which allow the Directors to allot equity shares or sell treasury shares for cash or purchase its own shares. Such authority is limited to 5% of the Company’s ordinary shares in issue.
Company share schemes At 31 December 2013 the UTV Employee Benefit Trust, which is a discretionary trust for the benefit of employees of UTV Media plc, held 56,488 shares (2012: 699,999 shares) being 0.06% (2012: 0.73%) of the issued share capital of the Company. These shares are held to contribute towards the anticipated entitlement of senior executives to the vesting of awards in the long term incentive plans. The voting rights in relation to these shares are exercised by the trustees.
Change of control Other than disclosed above the Company is not party to any agreements which take effect, alter or terminate upon a change of control of the Company following a takeover bid. The Company is party to a number of banking agreements, which upon a change of control of the Company can be terminated by the bank upon the provision of 60 days notice.
In the event of change of control of the Company the Directors’ service contracts provide that the Company shall pay remuneration in respect of any unexpired notice period on termination of employment.
65 UTV Media plc Report & Accounts 2013 Report of the Directors For the period ending 31 December 2013
13. Auditors Ernst & Young LLP has expressed their willingness to continue in office as auditors and a resolution proposing their re- appointment will be submitted at the Annual General Meeting.
14. Directors’ statement as to disclosure of information to auditors The Directors who were members of the Board at the time of approving the Report of the Directors are listed in the ‘Board of Directors’. Having made enquiries of fellow Directors and of the Company’s auditors, each of these Directors confirms that: • to the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report of which the Company’s auditors are unaware, and • each Director has taken all the steps a director may reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s auditors are aware of that information.
By Order of the Board Ormeau Road Belfast BT7 1EB
Norman McKeown Company Secretary 28 March 2014
66 UTV Media plc Report & Accounts 2013 Statement of Directors’ Responsibilities in Relation to the Group Financial Statements
The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.
Under Company Law the Directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing those Group financial statements, the Directors are required to: • select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in International Financial Reporting Standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; • state that the Group has complied with International Financial Reporting Standards, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Directors’ Statement of Responsibility under the Disclosure and Transparency Rules The Directors confirm to the best of their knowledge that: • The Group financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of UTV Media plc and the undertakings included in the consolidation taken as a whole; and • The Directors’ Report together with the Strategic Report and Corporate Social Responsibility report includes a fair review of the development and performance of the business and the position of UTV Media plc and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.
The financial statements were approved by the Board on 28 March 2014 and the above responsibility statement was signed on its behalf by the Group Chief Executive.
John McCann Group Chief Executive 28 March 2014
67 UTV Media plc Report & Accounts 2013 Report of the Auditors on the Group Financial Statements
Independent auditor’s report to the members of UTV Media plc We have audited the Group financial statements of UTV Media plc for the year ended 31 December 2013 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group Balance Sheet, the Group Cash Flow Statement and the Group Statement of Changes in Equity and the related notes 1 to 31. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 67, the directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements In our opinion the group financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 December 2013 and of its profit for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
Our assessment of risks of material misstatement We identified the following risks that have had the greatest impact on the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team: • The carrying value of goodwill and intangible assets with indefinite lives – the Group has significant goodwill and intangible assets with indefinite lives that are required to be tested annually for impairment. The recoverable value of these assets is based on forecasting and discounting future cash flows using assumptions which are inherently judgemental and which could be influenced by management bias; • The measurement, presentation and disclosure of the restructuring transactions during the year, including the buy out of contingent consideration and the classification of operations as discontinued – during the year the Group undertook a restructuring of its activities incurring substantial costs and also realising significant gains on the buy out of contingent consideration arising on the acquisition of Simply Zesty in 2012. Further certain businesses within the Group’s New Media division, which the Group plans on exiting from, have been classified as discontinued operations in the Group’s accounts. These matters have a significant effect on the measurement, presentation and disclosure of the results of the Group. • The valuation of the Group’s defined benefit pension scheme assets and liabilities – the determination of the actuarial liability involves the application of a number of judgemental assumptions, with modest changes in these assumptions having a significant effect on the results and financial position of the Group;
68 UTV Media plc Report & Accounts 2013 Report of the Auditors on the Group Financial Statements
Our application of materiality We determined materiality for the Group to be £795,000 (2012 - £1,000,000), which is 5% (2012 - 5%) of pre-tax profits from continuing and discontinued operations. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that our overall performance materiality for the Group should be 75% (2012 – 75%) of materiality. Our objective in adopting this approach is to ensure that total detected and uncorrected audit differences in all accounts do not exceed our materiality level.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £40,000 (2012 - £50,000), as well as differences below that threshold that, in our view warranted reporting on qualitative grounds.
An overview of the scope of our audit Following our assessment of the risk of material misstatement to the Group financial statements, we selected 14 components which represent the principal business units within the Group’s four reportable segments and account for 99% (2012 - 98%) of the Group’s revenues and 98% (2012 - 97%) of the Group’s profit before tax from continuing and discontinued operations. Four of these were subject to a full audit, whilst the remaining ten were subject to a partial audit where the extent of audit work was based on our assessment of the risks of material misstatement and of the materiality of the Group’s business operations at those locations. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. For the remaining components, we performed other procedures to confirm there were no significant risks of material misstatement in the Group financial statements.
The audit work at the 14 locations and the statutory audits were executed at levels of materiality applicable to each individual entity which were much lower than Group materiality.
The Senior Statutory Auditor leads the audit at all locations.
Our response to the risks identified above was as follows:
The carrying value of goodwill and intangible assets with indefinite lives: • we challenged management’s assessment of impairment, in particular the appropriateness of the cash flow, long term growth rate and discount rate assumptions used and the impairment model methodology, engaging EY valuation specialists to assist us with this work; • we considered the historical accuracy of budgets; • we evaluated management’s sensitivity analysis and undertook our own such analysis; and • we ensured that the financial statement disclosures met the requirements of accounting standards.
The measurement, presentation and disclosure of the restructuring transactions during the year, including the buy out of contingent consideration and the classification of operations as discontinued: • we tested the measurement of the gains arising from the buy out of the Simply Zesty contingent consideration and a sample of the restructuring costs through agreement to underlying legal documentation and payments made. We challenged management’s assessment of the impairments made in respect of the discontinued operations; and • we assessed the presentation and disclosure in the annual accounts of the gains arising from the buy out of the Simply Zesty contingent consideration, the restructuring costs and operations as discontinued in view of the requirements of accounting standards.
The valuation of the Group’s defined benefit pension scheme assets and liabilities: • we challenged the assumptions used in the pension liability valuations and engaged EY pensions specialists to assist us with this procedure; • we assessed the independence, competency and capabilities of the actuary employed by management to calculate the pension liability; • we performed procedures on a sample of the pension asset valuations to confirm their existence and the reasonableness of the fair values used; and • we ensured that the financial statement disclosures were in accordance with accounting standards.
69 UTV Media plc Report & Accounts 2013 Report of the Auditors on the Group Financial Statements
Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • the information given in the Strategic report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the information given in the Corporate Governance Statement set out on pages 30 to 42 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
Matters on which we are required to report by exception We have nothing to report in respect of the following: • Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is: • materially inconsistent with the information in the audited financial statements; or • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or • is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our opinion: • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit; or • a Corporate Governance Statement has not been prepared by the company.
Under the Listing Rules we are required to review: • the directors’ statement on page 63, in relation to going concern; and • the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review.
Other matter We have reported separately on the parent company financial statements of UTV Media plc for the year ended 31 December 2013 and on the information in the Directors’ Remuneration Report that is described as having been audited.
Keith Jess (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP, Statutory Auditor Belfast 28 March 2014
70 UTV Media plc Report & Accounts 2013 Group Income Statement For the year ended 31 December 2013
Results Results before before Exceptional Exceptional Exceptional Exceptional Items Items Total Items Items Total Notes 2013 2013 2013 2012 2012 2012 (restated) (restated) £000 £000 £000 £000 £000 £000
Continuing operations Revenue 3 107,771 - 107,771 112,258 - 112,258 Operating costs 4 (87,849) - (87,849) (88,998) - (88,998)
Operating profit from continuing operations before tax and finance costs 19,922 - 19,922 23,260 - 23,260
Share of results of associates accounted for using the equity method 130 - 130 129 - 129
Profit from continuing operations before tax and finance costs 3 20,052 - 20,052 23,389 - 23,389
Finance revenue 7 49 - 49 98 - 98 Finance costs 8 (3,012) - (3,012) (3,517) - (3,517) Foreign exchange (loss)/gain (188) - (188) 146 - 146
Profit from continuing operations before tax 3 16,901 - 16,901 20,116 - 20,116
Taxation 9 (3,379) 1,215 (2,164) (4,215) (936) (5,151)
Profit/(loss) from continuing operations after tax 13,522 1,215 14,737 15,901 (936) 14,965
Discontinued operations Profit/(loss) from discontinued operations 10 161 (1,157) (996) 269 - 269
Profit/(loss) for the year 13,683 58 13,741 16,170 (936) 15,234
Attributable to: Equity holders of the parent 13,415 58 13,473 15,813 (936) 14,877 Non-controlling interest 268 - 268 357 - 357
13,683 58 13,741 16,170 (936) 15,234
Earnings per share 2013 2012 (restated) Continuing operations Basic 11 15.14p 15.34p Diluted 11 14.99p 15.24p Adjusted 11 14.41p 16.75p Diluted adjusted 11 14.27p 16.63p
Continuing and discontinued operations Basic 11 14.10p 15.62p Diluted 11 13.96p 15.52p Adjusted 11 14.58p 17.03p Diluted adjusted 11 14.44p 16.91p
71 UTV Media plc Report & Accounts 2013 Group Statement of Comprehensive Income For the year ended 31 December 2013
Notes 2013 2012 (restated) £000 £000
Profit for the year 13,741 15,234
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss: Actuarial gain/(loss) on defined benefit pension schemes 30 5,111 (4,043) Income tax relating to items that will not be reclassified subsequently (1,325) 809
3,786 (3,234)
Items that may be reclassified subsequently to profit or loss: Cash flow hedges: Loss arising during the year (4) (188) Less transfers to the income statement 321 551
Exchange gain/(loss) on translation of foreign operations 932 (1,153) Income tax relating to items that may be reclassified 78 (76)
1,327 (866)
Other comprehensive profit/(loss) for the year, net of tax 28 5,113 (4,100)
Total comprehensive profit for the year, net of tax 18,854 11,134
Attributable to: Equity holders of the parent 18,586 10,777 Non-controlling interest 268 357
18,854 11,134
72 UTV Media plc Report & Accounts 2013 Group Balance Sheet At 31 December 2013
Notes 2013 2012 £000 £000 ASSETS Non-current assets Property, plant and equipment 13 11,887 11,910 Intangible assets 14 177,576 176,589 Investments accounted for using the equity method 16 114 104 Deferred tax asset 9 1,952 4,250
191,529 192,853
Current assets Inventories 19 1,758 1,643 Trade and other receivables 20 23,565 25,163 Cash and short term deposits 21 10,691 10,958
36,014 37,764
TOTAL ASSETS 227,543 230,617
EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Equity share capital 28 55,557 55,557 Capital redemption reserve 28 50 50 Treasury shares 28 (123) (1,523) Foreign currency reserve 28 6,950 6,018 Cash flow hedge reserve - (251) Retained earnings 38,531 28,680
100,965 88,531 Non-controlling interest 106 480
TOTAL EQUITY 101,071 89,011
Non-current liabilities Financial liabilities 23 55,866 58,948 Pension liability 30 4,598 12,409 Provisions 25 411 800 Deferred tax liabilities 9 35,066 36,154
95,941 108,311
Current liabilities Trade and other payables 22 24,165 26,033 Financial liabilities 23 3,939 4,292 Derivative financial liabilities 18 - 324 Tax payable 1,727 2,275 Provisions 25 700 371
30,531 33,295
TOTAL LIABILITIES 126,472 141,606
TOTAL EQUITY AND LIABILITIES 227,543 230,617
The financial statements were approved by the Board of Directors and authorised for issue on 28 March 2014. They were signed on its behalf by:
John McCann Norman McKeown
73 UTV Media plc Report & Accounts 2013 Group Cash Flow Statement For the year ended 31 December 2013
Notes 2013 2012 (restated) £000 £000 Operating activities Profit before tax (i) 17,062 20,456 Adjustments to reconcile profit before tax to net cash flows from operating activities Foreign exchange loss/(gain) 188 (151) Net finance costs 2,963 3,419 Share of results of associates (130) (129) Amortisation and impairment of intangible assets 188 71 Non cash decrease in contingent consideration (2,859) - Depreciation of property, plant and equipment 13 1,929 1,758 Profit from sale of property, plant and equipment (4) (191) Share based payments 419 556 Difference between pension contributions paid and amounts recognised in the income statement (3,224) (601) Increase in inventories (115) (110) Decrease in trade and other receivables 1,358 956 Decrease in trade and other payables (2,999) (6,806) Decrease in provisions (60) (30)
Cash generated from operations before exceptional costs 14,716 19,198
Exceptional costs (227) - Tax paid (2,460) (1,237)
Net cash inflow from operating activities 12,029 17,961
Investing activities Interest received 58 85 Proceeds on disposal of property, plant and equipment 16 272 Purchase of property, plant and equipment (1,777) (2,436) Dividends received from associates 120 151 Outflow on acquisition of subsidiary undertaking (200) (1,670) Outflow on acquisition of radio licences - (180)
Net cash flows from investing activities (1,783) (3,778)
Financing activities Borrowing costs (1,891) (2,200) Refinancing costs - (1,059) Swap cost (321) (551) Dividends paid to equity shareholders (6,677) (5,934) Dividends paid to non-controlling interests (460) (300) Repayment of borrowings (4,216) (65,948) Proceeds from borrowings 3,000 65,595
Net cash flows used in financing activities (10,565) (10,397)
Net (decrease)/increase in cash and cash equivalents (319) 3,786
Net foreign exchange differences 52 (33) Cash and cash equivalents at 1 January 10,958 7,205
Cash and cash equivalents at 31 December 21 10,691 10,958
(i) Includes both continuing and discontinued operations.
74 UTV Media plc Report & Accounts 2013 Group Statement of Changes in Equity For the year ended 31 December 2013
Equity Capital Foreign Cash flow Share Non- share redemption Treasury currency hedge Retained holder controlling capital reserve shares reserve reserve earnings equity interest Total £000 £000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2012 55,557 50 (1,523) 7,171 (521) 22,414 83,148 469 83,617
Profit for the year - - - - - 14,877 14,877 357 15,234
Other comprehensive (loss)/income in the year (note 28) - - - (1,153) 270 (3,217) (4,100) - (4,100)
Total net comprehensive (loss)/income in the year - - - (1,153) 270 11,660 10,777 357 11,134
Share based payment - - - - - 556 556 - 556 Equity dividends paid - - - - - (5,950) (5,950) (346) (6,296)
At 31 December 2012 55,557 50 (1,523) 6,018 (251) 28,680 88,531 480 89,011
Profit for the year - - - - - 13,473 13,473 268 13,741
Other comprehensive (loss)/income in the year (note 28) - - - 932 251 3,930 5,113 - 5,113
Total net comprehensive (loss)/income in the year - - - 932 251 17,403 18,586 268 18,854
Treasury shares issued - - 1,400 - - (1,521) (121) - (121) Share based payment - - - - - 419 419 - 419 Acquisition of non- controlling interests - - - - - 228 228 (228) - Equity dividends paid - - - - - (6,678) (6,678) (414) (7,092)
At 31 December 2013 55,557 50 (123) 6,950 - 38,531 100,965 106 101,071
75 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
1. Corporate information The Group’s financial statements for the year ended 31 December 2013 were authorised for issue by the Board of the Directors on 28 March 2014 and the balance sheets were signed on the Board’s behalf by John McCann and Norman McKeown. UTV Media plc is a public limited company incorporated in Northern Ireland (NI 065086). The Company’s ordinary shares are traded on the London Stock Exchange and the Irish Stock Exchange.
The principal activities of the Group are described in the Strategic Report.
2. Summary of accounting policies Basis of preparation and statement of compliance with IFRSs The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2013. The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2013 and applied in accordance with the Companies Act 2006.
The Group has adopted the following new standards that are relevant for the preparation of the financial statements for the year ended 31 December 2013: • The Group Income Statement, the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity and affected notes have been restated to reflect changes in the calculation of pension costs in accordance with IAS19 “Employee Benefits (Revised)”. This introduced the concept of recognising net interest on the net defined benefit obligation in place of the interest on the defined benefit obligation and the expected return on plan assets recognised under the original standard. In conjunction with this change the directors have also reclassified from operating costs to other finance costs the net finance cost arising on defined benefit obligations. The net effect of these changes for the year ended 31 December 2012 has been to increase operating costs and reduce operating profit by £127,000, increase other finance costs by £398,000 and recognise a tax credit on these of £121,000. The restatements were reflected in the Group Statement of Comprehensive Income. There was no impact on the disclosed defined benefit obligation at either period end. • The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group’s financial position or performance. • IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures. The relevant disclosures are reflected in note 29.
The Group and Company financial statements are presented in sterling and all values are rounded to the nearest thousand (£000) except when otherwise indicated.
Basis of consolidation The Group financial statements comprise the financial statements of UTV Media plc (‘the Company’) and its subsidiaries (together, ‘the Group’) and the Group’s share of its joint ventures and associates results. The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities.
The results of a subsidiary acquired during the period are included in the Group’s results from the effective date on which control is transferred to the Group. The results of a subsidiary sold during the period are included in the Group’s results up to the effective date on which control is transferred out of the Group. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
76 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Judgements and key sources of uncertainty The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for the revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.
The key judgements and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and impairment of indefinite life intangible assets (including goodwill) and the measurement of defined benefit pension obligations. The measurement of intangible assets on a business combination involves estimation of future cash flows and the selection of a suitable discount rate. The Group determines whether indefinite life intangible assets are impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate (note 15). Measurement of defined benefit pension obligations requires estimation of future changes in salaries and inflation, as well as mortality rates and the selection of a suitable discount rate (note 30).
Foreign currency translation The financial statements for each of the Group’s subsidiaries, joint ventures and associates are prepared using their functional currency. The functional currency is the currency of the primary economic environment in which an entity operates.
On consolidation, the results of foreign operations are translated into sterling at the average exchange rate for the period and their assets and liabilities are translated into sterling at the exchange rate ruling on the balance sheet date. Currency translation differences, including those on monetary items that form part of a net investment in foreign operations, are recognised in the currency translation reserve.
In the event that a foreign operation is sold, the gain or loss on disposal recognised in the income statement is determined after taking into account the cumulative currency translation differences that are attributable to the operation.
In the Cash Flow Statement, the cash flows of foreign operations are translated into sterling at the average exchange rate for the period.
As permitted by IFRS 1, the Group elected to deem cumulative currency translation differences to be £Nil as at 1 January 2004. Accordingly, the gain or loss on disposal of a foreign operation does not include currency translation differences arising before 1 January 2004.
Investment in associate The Group’s investment in its associate is accounted for under the equity method of accounting. This is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. The financial statements of the associate are used by the Group to apply the equity method. The reporting dates of the associate and the Group are identical and both use consistent accounting policies.
The investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less any impairment in value. The income statement reflects the share of the results of operations of the associate. Where there has been a change recognised directly in the associates’ equity, the Group recognises its share of any changes and discloses this, when applicable in the statement of comprehensive income.
Investment in joint venture A joint venture is an entity in which the Group holds an interest under a contractual arrangement where the Group and one or more other parties undertake an economic activity that is subject to joint control.
The Group’s interest in its joint ventures is accounted for by proportionate consolidation, which involves recognising a proportionate share of the joint venture’s assets, liabilities, income and expenses with similar items in the consolidated financial statements on a line-by-line basis. The reporting dates of the joint venture and the Group are identical and both use consistent accounting policies.
77 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost includes borrowing costs for long term construction projects if recognition criteria are met.
Depreciation is calculated on a straight-line basis to charge the depreciable amount to the income statement over the estimated useful life of the asset at the following rates: • Freehold and long leasehold buildings: 4 - 5% • Leasehold improvements: 10 - 15% • Equipment and vehicles: 10 - 33% depending on type
The residual values are based on prices prevailing at the balance sheet date. Useful lives and residual values are reviewed annually and any adjustments applied prospectively.
No provision for depreciation is made in respect of freehold land.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. Impairment losses are recognised in the income statement.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amounts of the item) is included in the income statement in the year the item is derecognised.
Intangible assets Intangible assets acquired separately are capitalised at cost and those arising from a business acquisition are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The useful lives of these intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on assets with finite lives, this expense is taken to the income statement.
Intangible assets created within the business are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.
Intangible assets are tested for impairment annually either individually or at the cash generating unit level.
Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. A summary of the policies applied to the Group’s intangible assets is as follows: • Value attributable to radio licences acquired - indefinite life • Customer relationships were amortised evenly over their expected useful lives of three years • Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
Goodwill Business combinations are accounted for using the acquisition method. The costs of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed and included in operating costs.
Any contingent consideration to be transferred by the Group will be recognised at fair value at the acquisition date. Subsequent changes to the fair value will be recognised in accordance with IAS39 either within the Income Statement or in other comprehensive income.
78 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Goodwill (continued) Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Identifiable intangible assets, meeting either the contractual-legal or separability criterion are recognised separately from goodwill. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill in respect of an acquired subsidiary or joint venture is recognised as an intangible asset. Goodwill in respect of an acquired associate is included within investments in associates.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
Where the fair value of the interest acquired in an entity’s assets, liabilities and contingent liabilities exceeds the consideration paid, the excess is recognised immediately as a gain in the income statement.
As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash generating unit, to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash generating unit and part of the operation within that unit are disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash generating unit retained.
As permitted by IFRS 1, the Group elected not to apply IFRS ‘Business Combinations’ to business combinations that were recognised before 1 January 2004. As a result, goodwill recognised as an asset under UK GAAP as at 1 January 2004 has not been revised retrospectively to identify and extract intangible assets to be recognised separate from goodwill.
Impairment of assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
When the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the income statement within a separate line item before operating profit from continuing operations before tax and finance costs.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indications exist, the recoverable amount is estimated. A previously recognised impairment loss is only reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
79 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Programmes and sundry stocks Programmes completed but not transmitted and programmes in the course of production are recognised within inventories at cost. Acquired programme rights are recognised within inventories at the lower of purchase cost and net realisable value on the commencement of the period of each broadcast right. All programme costs are recognised in the income statement on a straight line basis over the period of transmission. Sundry stocks are valued at the lower of purchase cost and net realisable value. Net realisable value is the estimated selling price less applicable selling expenses.
Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.
Cash and cash equivalents Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Interest bearing loans and borrowings Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at the fair value of consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in net profit or loss when the liabilities are derecognised or impaired, as well as through the amortisation process.
Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are determined by the expected cash flows which, where material, are discounted at a rate which reflects current market assessments of the time value of money and the risks specific to the liability.
Pensions and other post employment benefits The Group operates a defined benefit pension scheme which requires contributions to be made to separately administered funds. The cost of providing benefits under the plan is determined using an independent actuarial valuation. This is based on the projected unit credit method and is recognised in accordance with the advice of a qualified actuary. Past service costs resulting from enhanced benefits are recognised on a straight-line basis over the vesting period or immediately if the benefits have vested.
Re-measurement gains and losses, and taxation thereon, are recognised in other comprehensive income and are not re- classified to profit or loss in subsequent periods. Re-measurements comprise actuarial gains and losses, the return on plan assets (excluding amounts included in net interest) and changes in the amount of any asset restrictions. Actuarial gains and losses may result from differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year or changes in the assumptions used in the valuation of the plan liabilities.
The defined benefit liability or asset recognised in the balance sheet comprises the present value of the benefit obligation using a discount rate based on appropriate high quality corporate bonds, at the balance sheet date, minus any past service costs not yet recognised, minus the fair value of the plan assets, if any, at the balance sheet date. Where the plan is in surplus, the asset recognised is limited to the amount which the Group expects to recover by way of refunds or reduction in future contributions.
The Group also operates defined contribution pension schemes. Contributions are charged to the income statement as they become payable in accordance with the scheme’s rules.
Leases Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. 80 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Treasury shares UTV Media plc shares held by the Group are classified in shareholders’ equity as ‘treasury shares’ and are recognised at cost. Consideration received for the sale of such shares is also recognised in equity with any difference between the proceeds from sale and the original cost being taken to revenue reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares.
Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Exceptional items The Group presents as exceptional items on the face of the income statement, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to better assess trends in financial performance.
Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Key classes of revenue are recognised on the following basis: • Advertising and sponsorship: on transmission • Provision of internet and digital infrastructure services: on delivery • Provision of other sundry services: on delivery • Interest: as interest accrues using the effective interest method
Share based payments The Group has a long term incentive share scheme under which it makes equity-settled share-based payments to eligible employees. The cost of equity-settled share-based payments are measured at fair value at the date of grant and recognised as an expense over the vesting period, which ends on the date on which the employees become fully entitled to the reward.
Fair value is estimated using appropriate models for the particular awards under consideration. In valuing equity settled transactions, no account is taken of any vesting conditions, other than the performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. These are also taken into account in determining the grant date fair value.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the number of the achievement or otherwise of non-market vesting conditions and of the number of equity instruments that will ultimately vest, or in the case of an instrument subject to a market condition, be treated as vesting. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Where the terms of an equity-settled payments award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of the modification, based on the difference between the fair value of original award and the fair value of the modified award, both as measured at the date of modification. No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled (where non-vesting conditions within the control of either the entity or the employee are not met), it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.
81 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Taxation The tax expense represents the sum of tax currently payable or recoverable in respect of the taxable profit or loss for the period plus any deferred tax charge or credit.
Current taxation Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Deferred taxation Deferred tax is provided in full, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences: • except where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised: • except where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and • in respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint venture, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Tax relating to items recognised directly in equity is also recognised directly in equity either in the statement of other comprehensive income or the statement of changes in equity in line with recognition of the item to which the tax relates.
Sales taxation Revenues, expenses and assets are recognised net of the amount of sales tax except: • where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Derivative financial instruments and hedging activities The Group uses derivative financial instruments such as interest rate swap contracts to hedge the risks of changes in interest rates. Such derivative financial instruments are stated at fair value.
The fair value of derivative financial instruments is based on appropriate valuation techniques which use market observable inputs such as prevailing market rates at each balance sheet date.
82 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
2. Summary of accounting policies (continued) Derivative financial instruments and hedging activities (continued) Changes in the fair value of derivative financial instruments which are designated as effective hedges of future cash flows are recognised directly in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.
Dividends Final dividends are recorded in the Group’s accounts in the period in which they are approved by the Company’s shareholders. Interim dividends are recorded in the period in which they are paid.
New standards and interpretations not applied IASB and IFRIC have issued the following standards and interpretations which are considered as relevant to the Group with an effective date (based on European Union adoption) after the date of these financial statements.
International Accounting Standards (IAS / IFRSs) Effective date* IFRS 9 - Financial Instruments: Classification and Measurement 1 January 2017** IFRS 10 - Consolidated Financial Statements 1 January 2014 IFRS 11 - Joint Arrangements 1 January 2014 IFRS 12 - Disclosure of Interests in Other Entities 1 January 2014 IAS 27R - Separate Financial Statements 1 January 2014 IAS 28R - Investments in Associates and Joint Ventures 1 January 2014 Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendment to IAS 36: Recoverable Amount Disclosures for Non- Financial Assets 1 January 2014 Amendment to IAS 39: Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014 Amendment to IAS 19: Employee Contributions 1 July 2014 IFRS Improvements 2010 – 2012 Cycle 1 July 2014 IFRS Improvements 2011 – 2013 Cycle 1 July 2014
* For periods beginning on or after. The effective dates given above are those in the original IASB/IFRIC standards unless the standard has already been endorsed by the EU in which case the date given is the mandatory effective date for adoption in the EU. ** While the effective date of this standard has not yet been confirmed, at its February 2014 meeting, the IASB tentatively decided to require an entity to apply IFRS 9 for annual periods beginning on or after 1 January 2018.
IFRS 11 establishes a principle that applies to the accounting for all joint arrangements, whereby parties to the arrangement account for their underlying contractual rights and obligations relating to the joint arrangement. IFRS 11 identifies two types of joint arrangements – a ‘joint venture’ whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement and a ‘joint operation’ whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. On adoption of this standard the Group’s existing joint ventures, which are currently accounted for by recognizing the Group’s share of the assets, liabilities, revenue and expenses relating to the joint venture, will be required to be accounted for using the equity method.
Although the Directors evaluation of the effect of adopting the other standards and interpretations has not yet been completed, it is not expected that their adoption will have a material impact on the Group’s financial statements in the period of initial application.
83 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
3. Revenue and segmental analysis (a) Operating segments During 2013 the Group operated in four principal areas of activity – radio in GB, radio in Ireland, commercial television and new media. These four principal areas of activity also formed the basis on which the Group was managed and reports were provided to the Chief Executive and the Board during the year.
Good progress has been made in transitioning the business to be focused predominately on broadcasting, in line with the Board strategy. In 2013 UTV Connect and the portals, UTV Drive, Recruit NI and PropertyPal, were identified as being non-core to the future strategy of the Group and significant steps have been taken to exit from these activities. Consequently, these businesses, which operated within the New Media division, have been classified as discontinued operations in the 2013 accounts.
Tibus and Simply Zesty, which also operated within the New Media division, will be incorporated within the Television division going forward. As a consequence from 2014 the Group will be managed and reports provided to the Chief Executive and the Board on the basis of three operating segments, being Radio GB, Radio Ireland and Television. Since these three operating segments reflect the Group’s future strategic focus, the reporting in the Strategic Review follows this structure.
The tables below present revenue and segment result information regarding the Group’s operating segments for the years ended 31 December 2013 and 2012 on the basis of how the Group was managed during 2013.
Revenue represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities, stated net of value added tax. Revenue is principally generated from advertising and sponsorship. The amount of revenue derived from the sale of goods or other activities is immaterial and therefore has not been separately disclosed. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties.
The following tables present revenue and segment result information regarding the Group’s business segments for the years ended 31 December 2013 and 2012. Central costs, which had previously been included within the Television division, are now reported separately to the Chief Executive and the Board and are therefore now analysed separately below. The Television division operating profit for the year ended 31 December 2012 has been restated for this and for the impact of IAS 19 “Employee Benefits (Revised)” as outlined in note 2.
Revenue Year ended 31 December 2013 Radio Radio GB Ireland Television New Media Total £000 £000 £000 £000 £000
Sales to third parties 50,471 20,767 31,892 4,641 107,771 Intersegmental sales 749 1,219 2,186 647 4,801
51,220 21,986 34,078 5,288 112,572
Year ended 31 December 2012 Radio Radio GB Ireland Television New Media Total £000 £000 £000 £000 £000
Sales to third parties 54,407 20,943 32,484 4,424 112,258 Intersegmental sales 787 1,294 2,628 295 5,004
55,194 22,237 35,112 4,719 117,262
84 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
3. Revenue and segmental analysis (continued) (a) Operating segments (continued)
Results Year ended 31 December 2013 Radio Radio GB Ireland Television New Media Total £000 £000 £000 £000 £000
Segment operating profit 7,900 5,139 7,356 2,292 22,687
Central costs (2,765) Associate income 130
Profit before tax and finance costs 20,052
Net finance cost (2,963) Foreign exchange loss (188)
Profit before taxation 16,901
Year ended 31 December 2012 Radio Radio GB Ireland Television New Media Total (restated) (restated) £000 £000 £000 £000 £000
Segment operating profit 12,898 5,987 7,470 601 26,956
Central costs (3,696) Associate income 129
Profit before tax and finance costs 23,389
Net finance cost (3,419) Foreign exchange gain 146
Profit before taxation 20,116
85 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
3. Revenue and segmental analysis (continued) (a) Operating segments (continued) Other segmental information
Depreciation Year ended 31 December 2013 Radio Radio New GB Ireland Television Media Total £000 £000 £000 £000 £000
Continuing operations 729 284 533 311 1,857
Discontinued operations 72
1,929
Year ended 31 December 2012 Radio Radio New GB Ireland Television Media Total £000 £000 £000 £000 £000
Continuing operations 575 265 601 207 1,648
Discontinued operations 110
1,758
(b) Geographic information Turnover is generated from GB and Ireland. The following tables present revenue information regarding the Group’s geographical segments for the years ended 31 December 2013 and 2012. Revenues relating to advertising are analysed based on the geographical location of the sales agencies through which the advertising revenues are registered. It is not possible to accurately analyse advertising revenue based on customer location.
Revenue from continuing operations Year ended 31 December 2013 Ireland GB Total £000 £000 £000
Sales to third parties 39,782 67,989 107,771
Year ended 31 December 2012 Ireland GB Total £000 £000 £000
Sales to third parties 47,593 64,665 112,258
86 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
3. Revenue and segmental analysis (continued) (b) Geographic information (continued) The following tables present the geographical analysis of the Group’s non-current assets, excluding the deferred tax asset, for the years ended 31 December 2013 and 2012.
Year ended 31 December 2013 Ireland GB Total £000 £000 £000
Property, plant and equipment 9,280 2,607 11,887 Intangible assets 82,842 94,734 177,576 Investments - 114 114
92,122 97,455 189,577
Year ended 31 December 2012 Ireland GB Total £000 £000 £000
Property, plant and equipment 9,620 2,290 11,910 Intangible assets 81,855 94,734 176,589 Investments - 104 104
91,475 97,128 188,603
4. Operating costs Continuing Discontinued operations operations Total 2013 2012 2013 2012 2013 2012 £000 £000 £000 £000 £000 £000
Purchase of programmes and programme rights 12,848 13,321 - - 12,848 13,321 Cost of inventory expensed 1,641 1,530 - - 1,641 1,530 Sales related costs 10,405 9,778 4,709 5,119 15,114 14,897 Other programme and operating costs 28,267 28,269 672 750 28,939 29,019 Staff costs (note 6) 33,323 32,508 1,212 1,289 34,535 33,797 Depreciation of property, plant and equipment 1,857 1,648 72 110 1,929 1,758 Amortisation of deferred costs - 18 187 244 187 262 Amortisation and impairment of intangibles (note 14) 188 71 - - 188 71 Licence payments 487 436 - - 487 436 Operating lease rentals - equipment & motor vehicles 485 524 - - 485 524 - land and buildings 1,398 1,353 - - 1,398 1,353 Income from sub-leases (187) (267) - - (187) (267) Write off of deferred consideration (2,859) - - - (2,859) - Profit on disposal of property, plant and equipment (4) (191) - - (4) (191)
87,849 88,998 6,852 7,512 94,701 96,510
87 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
5. Auditor’s remuneration The Group has recognised the following in respect of amounts paid or payable to its auditors in respect of the audit of the financial statements and for other services provided to the Group. 2013 2012 £000 £000
Fees payable to the company’s auditor for the audit of the company’s annual accounts 35 35
Fees payable to the company’s auditor and its associate for other services: The audit of the company’s subsidiaries pursuant to legislation 232 232 Audit-related assurance services 26 37 Tax compliance services 15 15 Tax advisory services 6 1
279 285
Fees in respect of the UTV Pension Scheme: Audit 5 5
The Audit Committee approves all work undertaken by professional advisers, and resolved that the skills and experience of Ernst & Young LLP made it a suitable choice for the provision of these non-audit services and were satisfied that appropriate safeguards are in place to ensure that there is no threat to objectivity and independence in the conduct of the audit.
88 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
6. Staff costs Continuing Discontinued operations operations Total 2013 2012 2013 2012 2013 2012 £000 £000 £000 £000 £000 £000
Wages and salaries 28,809 28,177 1,095 1,167 29,904 29,344 Redundancy costs 1,062 - 76 - 1,138 - Social security costs 2,710 2,769 100 97 2,810 2,866 Other pension costs 742 1,562 17 25 759 1,587
33,323 32,508 1,288 1,289 34,611 33,797
Included within wages and salaries is a charge of £419,000 (2012: charge of £527,000) and within social security costs £158,000 (2012: £29,000) relating to the share-based payments.
The average monthly number of employees during the year was made up as follows: 2013 2012 No. No.
Radio GB 402 392 Radio Ireland 278 277 Television 196 192 New Media 118 119
994 980
Details of Directors’ emoluments in aggregate and for each Director (including bonuses, pension entitlements, long term incentives and interest in share options) are included within the audited section of the ‘Report of the Board on Directors’ Remuneration’.
7. Finance revenue 2013 2012 £000 £000
Bank interest received and receivable 49 98
8. Finance costs 2013 2012 £000 £000
Bank loans and overdrafts 2,168 2,568 Net settlement on interest rate swap 321 551 Other finance costs - pension 523 398
Total finance costs 3,012 3,517
89 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
9. Taxation (a) Tax on profit on ordinary activities
2013 2012 £000 £000
Current income tax: UK corporation tax on profits for the year (2,453) (1,053) Adjustments in respect of previous years 248 55
(2,205) (998)
Foreign tax: ROI corporation tax on profits for the year (346) (527) Adjustments in respect of previous years 16 -
(330) (527)
Total current tax (2,535) (1,525)
Deferred tax: Origination and reversal of timing differences (684) (2,937) Adjustments in respect of previous years (160) 176
Tax charge in the income statement on operating activities (3,379) (4,286)
Exceptional deferred tax credit/(charge) 1,215 (936)
Total tax charge (2,164) (5,222)
The tax charge in the Income Statement is disclosed as: Tax charge on continuing operations (2,164) (5,151) Tax credit on discontinued operations - (71)
Tax charge in the income statement (2,164) (5,222)
Tax relating to items in the Statement of Comprehensive Income Deferred tax: Actuarial (gain)/loss on pension schemes (1,022) 930 Revaluation of cash flow hedges (61) (81) Valuation of long term incentive plan 139 5 Exceptional deferred tax charge (303) (121)
Tax (charge)/credit in the statement of comprehensive income (1,247) 733
90 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
9. Taxation (continued) (b) Factors affecting the tax charge for the period The tax assessed for the period is lower than the effective standard rate of corporation tax in the UK of 23.25% (2012: 24.50%). The differences are reconciled below:
2013 2012 £000 £000
Profit from continuing operations before tax 16,901 20,116 Profit from discontinued operations before tax 161 340
Profit on ordinary activities 17,062 20,456
Profit/(loss) on ordinary activities multiplied by effective standard Rate of corporation tax in the UK of 23.25% (2012: 24.50%) (3,967) (5,012)
Effects of: Income/(expenses) not allowed for tax purposes 166 (67) Utilisation of tax losses previously not recognised 14 141 Non-qualifying depreciation/amortisation 6 3 Lower taxes on overseas earnings 298 554 Tax overprovided in previous years 104 95 Exceptional deferred tax credit/(charge) 1,215 (936)
Tax charge for the period (2,164) (5,222)
(c) Exceptional credit/(charge) 2013 2012 £000 £000
Exceptional tax credit 2,640 1,499 Exceptional tax charge (1,425) (2,435)
1,215 (936)
During the year, the corporation tax rate in the UK was revised from 23% to 20% (effective from April 2015). Accordingly all the deferred tax assets and liabilities in respect of the reporting segments subject to UK corporation tax were restated to recognise the future gains or charges thereon at this rate. This resulted in a net credit of £2,640,000 in the year.
In 2012, the corporation tax rate in the UK was revised from 25% to 23% (effective from April 2013). Accordingly all the deferred tax assets and liabilities in respect of the reporting segments subject to UK corporation tax were restated to recognise the future gains or charges thereon at this rate resulting in a net credit of £1,499,000 in 2012.
In the Finance Bill published on 13 February 2013 and passed into law on 27 March 2013, the rate of corporate capital gains in the Republic of Ireland was increased from 30% to 33%. The exceptional tax charge of £1,425,000 in the year arises from the restatement of the relevant deferred tax assets and liabilities to reflect this.
In the Finance Bill published on 8 February 2012 and passed into law on 2 April 2012, the rate of corporate capital gains in the Republic of Ireland was increased from 25% to 30%. The exceptional tax charge of £2,435,000 in 2012 arises from the restatement of the relevant deferred tax assets and liabilities to reflect this.
91 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
9. Taxation (continued) (d) Unrecognised tax losses The Group has tax losses which arose in the UK of £13,723,000 (2012: £13,780,000) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses.
(e) Temporary differences associated with Group investments At 31 December 2013, there was no recognised deferred tax liability (2012: £Nil) for taxes that would be payable on the unremitted earnings of certain Group subsidiaries and joint ventures as the Group has determined that the undistributed profits of its subsidiaries will not be distributed in the foreseeable future.
The temporary differences associated with investments in subsidiaries, associates and joint ventures, for which deferred tax liability has not been recognised aggregate to £2,238,000 (2012: £2,954,000). It is likely that the temporary timing differences would qualify for the UK dividend exemption and therefore no tax liability is expected to arise.
There are no income tax consequences attaching to the payment of dividends by the Group to its shareholders.
(f) Deferred tax The deferred tax included in the balance sheet is as follows:
Deferred tax liability 2013 2012 £000 £000
Valuation of intangible assets on acquisition 34,874 35,937 Accelerated capital allowances 192 217
Deferred tax liability 35,066 36,154
2013 2012 £000 £000
Balance at 1 January 36,154 35,932 Charged to the income statement 30 67 Foreign exchange movement 340 (359) (Credit)/charge due to change in tax rates (1,458) 514
Deferred tax liability 35,066 36,154
92 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
9. Taxation (continued) (f) Deferred tax (continued) Deferred tax asset 2013 2012 £000 £000
Pension liability 720 2,625 Valuation of interest rate swap - 69 Decelerated capital allowances 305 406 Other temporary differences 862 1,056 Tax losses carried forward 65 94
Deferred tax asset 1,952 4,250
2013 2012 £000 £000
Balance at 1 January 4,250 6,511 Charged to the income statement (808) (2,693) (Charged)/credited to the statement of comprehensive income (1,247) 854 Charge due to change in UK corporation tax rate (243) (422)
Deferred tax asset 1,952 4,250
The deferred tax included in the Group income statement is as follows:
2013 2012 £000 £000 Deferred tax in the income statement Accelerated capital allowances (2) (48) Tax losses carried forward (30) (2,869) Other temporary differences (652) (20)
Deferred income tax expense on operational activities (684) (2,937) Adjustment in respect of previous years (160) 176 Exceptional deferred tax credit/(charge) 1,215 (936)
Total deferred tax credit/(charge) 371 (3,697)
93 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
10. Discontinued operations As outlined in the Strategic Report, UTV Connect and the portals, UTV Drive, Recruit NI and PropertyPal, have been identified as being non-core to the future strategy of the Group and significant steps have been taken to exit from these activities. Consequently, these businesses, which operated within the New Media division, have been classified as discontinued operations in the 2013 accounts.
The resultant gains or losses on disposal are expected to be recognised within discontinued operations in the Income Statement in 2014.
The results of these businesses for 2012 and 2013 are presented below: 2013 2012 £000 £000
Revenue 7,014 7,852 Operating cost (6,852) (7,517)
Operating profit 162 335 Foreign exchange (loss)/gain (1) 5
Profit before tax from discontinued operations 161 340 Current tax charge - (71)
Profit for the year from discontinued operations 161 269
The major class of assets and liabilities of the discontinued businesses at 31 December 2013 were as follows:
2013 £000 Assets Property, plant and equipment 3 Trade receivables 559 Cash 164
726
Liabilities Trade payables 1,115
Net liabilities of discontinued operations (389)
The vast majority of the working capital related balances above are expected to be settled in the normal course of business rather than through the sale process. Consequently the amount of assets and liabilities within these businesses which would fall to be classified as held for sale at 31 December 2013 is not considered to be material.
The discontinued operations created a net cash inflow from operating cash flows of £7,000 (2012: £436,000) and a cash outflow from investing activities of £12,000 (2012: £84,000) which are included in the Group Cash Flow statement.
94 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
10. Discontinued operations (continued)
Exceptional Costs – discontinued operations 2013 2012 £000 £000
Restructuring costs (227) - Impairment of assets (1,055) -
Loss for the year from discontinued operations (1,282) - Tax credit on the above items 125 -
Loss for the year from discontinued operations (1,157) -
Restructuring costs 2013 £000
Redundancy costs (note 6) (76) Professional fees (151)
(227)
Impairment of assets Before being classified as discontinued operations, the recoverable amount of the assets in these businesses were estimated and the carrying value of these assets written down to this amount. This resulted in an impairment charge of
2013 £000
Property, plant and equipment (note 13) 233 Intangible assets (note 14) 356 Trade and other receivables 466
1,055
Details of the fair value measurements used in determining these impairments are set out in note 29(b).
95 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
11. Earnings per share Basic earnings per share are calculated based on the profit for the financial year attributable to equity holders of the parent and on the weighted average number of shares in issue during the year.
Adjusted earnings per share are calculated based on the profit for the financial year attributable to equity holders of the parent adjusted for the exceptional items and the impact of net finance costs under IAS 19 “Employee Benefits (Revised)”. This calculation uses the weighted average number of shares in issue during the year.
Diluted earnings per share are calculated based on profit for the financial period attributable to equity holders of the parent. Diluted adjusted earnings per share are calculated based on profit for the financial year attributable to equity holders of the parent before exceptional items and the impact of net finance costs under IAS 19 “Employee Benefits (Revised)”. In each case the weighted average number of shares is adjusted to reflect the dilutive potential of the awards expected to be vested on the Long Term Incentive Schemes.
Earnings per share for the period ended 31 December 2012 has been restated to reflect the impact on profit of changes in the calculation of pension costs in accordance with IAS19 “Employee Benefits (Revised)” as explained in “Basis of preparation and statement of compliance with IFRSs” in note 2.
The following reflects the income and share data used in the basic, adjusted, diluted and diluted adjusted earnings per share calculations:
Net profit attributable to equity holders 2013 2012 Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total (restated) (restated) (restated) £000 £000 £000 £000 £000 £000
Net profit/(loss) attributable 14,469 (996) 13,473 14,608 269 14,877 to equity holders Adjustments to net financing 523 - 523 398 - 398 costs Exceptional items (1,215) 1,157 (58) 936 - 936
Total adjusted and diluted profit attributable to equity holders 13,777 161 13,938 15,942 269 16,211
Weighted average number of shares 2013 2012 thousands thousands
Shares in issue 95,903 95,903 Weighted average number of treasury shares (325) (700)
Weighted average number of shares for basic and adjusted earnings per share (excluding treasury shares) 95,578 95,203 Effect of dilution of the Long Term Incentive Plan 959 649
96,537 95,852
96 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
11. Earnings per share (continued) Earnings per share 2013 2012 (restated) From continuing operations
Basic 15.14p 15.34p
Diluted 14.99p 15.24p
Adjusted 14.41p 16.75p
Diluted adjusted 14.27p 16.63p
From continuing and discontinued operations
Basic 14.10p 15.62p
Diluted 13.96p 15.52p
Adjusted 14.58p 17.03p
Diluted adjusted 14.44p 16.91p
From discontinued operations
Basic (1.04)p 0.28p
Diluted (1.03)p 0.28p
Adjusted 0.17p 0.28p
Diluted adjusted 0.17p 0.28p
97 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
12. Dividends 2013 2012 £000 £000 Equity dividends on ordinary shares Declared and paid during the year Final for 2012: 5.25p (2011: 4.50p) 5,001 4,284 Interim for 2013: 1.75p (2012: 1.75p) 1,677 1,666
Dividends paid 6,678 5,950
Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December) Final dividend for 2013: 5.25p (2012: 5.25p) 5,032 4,998
13. Property, plant and equipment Freehold land Leasehold Equipment and and buildings improvements vehicles Total £000 £000 £000 £000 Cost At 1 January 2012 8,295 1,778 19,140 29,213 Exchange adjustment (38) (21) (94) (153) Acquisition of subsidiary - - 29 29 Additions 13 71 2,439 2,523 Disposals - - (1,760) (1,760)
At 31 December 2012 8,270 1,828 19,754 29,852 Exchange adjustment 33 18 82 133 Additions 33 25 2,024 2,082 Disposals - - (2,003) (2,003)
At 31 December 2013 8,336 1,871 19,857 30,064
Depreciation and impairment At 1 January 2012 2,732 236 14,972 17,940 Exchange adjustment (7) - (75) (82) Charge for the year 31 131 1,596 1,758 Disposals - - (1,674) (1,674)
At 31 December 2012 2,756 367 14,819 17,942 Exchange adjustment 7 - 62 69 Charge for the year 3 167 1,759 1,929 Impairment - - 233 233 Disposals - - (1,996) (1,996)
At 31 December 2013 2,766 534 14,877 18,177
Net book value At 31 December 2013 5,570 1,337 4,980 11,887
At 31 December 2012 5,514 1,461 4,935 11,910
At 1 January 2012 5,563 1,542 4,168 11,273
At 31 December 2013 the Group had entered into Sterling contractual commitments for the acquisition of property, plant and equipment amounting to £Nil (2012: £Nil).
98 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
14. Intangible assets Customer Licences Goodwill Relationships Total £000 £000 £000 £000 Cost At 1 January 2012 191,207 77,446 - 268,653 Additions 180 4,260 268 4,708 Exchange adjustment (1,196) (1,724) (9) (2,929)
At 31 December 2012 190,191 79,982 259 270,432 Exchange adjustment 1,030 1,452 - 2,482
At 31 December 2013 191,221 81,434 259 272,914
Impairment and amortisation At 1 January 2012 (48,400) (46,477) - (94,877) Charge for the year - - (71) (71) Exchange adjustment - 1,105 - 1,105
At 31 December 2012 (48,400) (45,372) (71) (93,843) Impairment - (356) (188) (544) Exchange adjustment - (951) - (951)
At 31 December 2013 (48,400) (46,679) (259) (95,338)
Net book value
At 31 December 2013 142,821 34,755 - 177,576
At 31 December 2012 141,791 34,610 188 176,589
At 1 January 2012 142,807 30,969 - 173,776
The licences are radio licences which are granted for minimum periods of 10 years with the option of a renewal based on the company meeting the regulatory requirements of the licence. Similar licences have been successfully renewed at insignificant cost in the past, and consequently the Group has concluded that these assets have indefinite useful life but will be subject to annual impairment testing.
The recoverable value of the licences is measured using discounted cash flow forecasts and the valuation model at 31 December 2013 indicated no impairment on these assets (2012: £Nil) as explained in note 15.
As part of the restructuring carried out in the Group during the year, the UTV Connect and PropertyPal.com businesses were reclassified as discontinued operations and impairments totalling £356,000 were recognised against the goodwill associated with these businesses. This restructuring also saw the merger of Tibus Digital Agency with Simply Zesty to deliver as a full service digital agency under the Simply Zesty brand. The integration of these businesses resulted in a change in the management within Simply Zesty and consequently the value of customer relationships was deemed to be impaired and the remaining carrying value of £188,000 was written off.
99 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
15. Impairment of goodwill and intangible assets with indefinite lives Goodwill acquired with business combinations and intangibles with indefinite lives have been allocated at acquisition to the cash generating units that are expected to benefit from that business combination. The cash generating units under which these assets are considered are: • talkSPORT • Local Radio • Radio Ireland • New Media
The first two cash generating units relate to the Radio GB reporting segment, while the Radio Ireland and New Media cash generating units are also reporting segments. These cash generating units represent the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount of each cash generating unit has been determined using value in use calculations. The key assumptions included in these value in use calculations relate to revenue growth, long term growth rates and the discount rates applied. The Group prepares cash flow forecasts for each cash generating unit based on the most recent 2014 budgets approved by the Board, internal forecasts of future growth over the period 2015 to 2018, with cash flows beyond this five year period extrapolated using expected long term growth rates. Further information on the assumptions used is detailed below.
These value in use calculations at 31 December 2013 indicated no impairment on the licences or goodwill (2012: £Nil) associated with continuing operations. As a result of the restructuring during the year, an impairment of £544,000 was recognised in respect of the intangible assets as outlined in note 14.
Carrying amount of goodwill and licences allocated to cash-generating units
talkSPORT Local Radio Radio Ireland New Media Total 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Goodwill - - 446 446 22,910 22,427 11,399 11,934 34,755 34,807 Licences 48,024 48,024 46,263 46,263 48,534 47,504 - - 142,821 141,791
48,024 48,024 46,709 46,709 71,444 69,931 11,399 11,934 177,576 176,598
Key assumptions used in value in use calculations The calculation of value in use is most sensitive to the following assumptions: • Discount rates • Revenue forecasts
Discount rates The pre-tax discount rates used in the calculations of the value in use for the UK and ROI cash generating units were 9.2% (2012: 9.6%) and 9.9% (2012: 11.2%), respectively. These pre-tax discount rates reflect management’s estimate of the Weighted Average Cost of Capital (WACC), a post-tax rate required to assess operating performance in each cash generating unit and to evaluate future capital investment proposals. Management’s estimate of the WACC required for the Group’s UK based cash generating units is 7.7% (2012: 7.8%) while that of its Republic of Ireland based cash generating unit has been estimated at 8.8% (2012: 9.5%). These WACC rates reflect the latest market projections for the risk-free rate in each country, equity risk premium and small company premium together with the cost of debt appropriate to the industry.
100 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
15. Impairment of goodwill and intangible assets with indefinite lives (continued) Revenue forecast Revenue forecasts used in the calculation of value in use are based on available market information including independent forecasts. Current results and forecasts reflect the present wider economic uncertainty and the recent upturn in advertising revenue in the Republic of Ireland.
In Radio GB industry forecasts are predicting that the market will be up by 3% to 5% in 2014. In Ireland, whilst there are no formal industry forecasts, local economists and sales agencies are indicating growth for 2014 of up to 2%. The 2014 budgets for the radio divisions have been set based on these assumptions. Given the strength of the UTV radio offering and the consistent out- performance of the market, management believe that UTV Radio is well positioned to take advantage of growth opportunities.
From 2015 through to 2018 it is forecast Radio GB, will deliver revenue growth of between 1.0% per annum to 4.0% per annum (before accounting for any significant enhancements as a result of major sporting events) with the higher range of growth reflecting the impact of developments into the international market by talkSPORT. For Radio Ireland, modest revenue growth of between 2.0% and 4.0% per annum is forecast for the period 2015 to 2018.
Revenue from the continuing operations within the New Media cash generating unit is derived from a range of internet, web- design products and social media services. It is expected that this cash generating unit will grow its market share in 2014 and operating performance will be ahead of that achieved in 2013. From 2015 through to 2018 it is forecasted to deliver ongoing revenue growth of between 5% per annum and 15% per annum as this business benefits from the restructuring undertaken in the current year.
The revenue growth rate used beyond 2018 is 2.25% (2012: 2.25%) being consistent with the long term average growth rate for the industry.
Sensitivity to changes in assumptions Following the impairment charge for Radio Ireland in 2011 and challenging market conditions in 2012 and 2013, the carrying value of this cash generating unit continues to closely match its estimated recoverable amount. In assessing the recoverable amount management have considered reasonable possible changes in the above key assumptions and it is believed that while a modest increase in the discount rate could cause the carrying value of this unit to exceed its recoverable amount, any reasonable adverse changes to the revenue growth can be managed and mitigated internally.
With regard to other cash generating units, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of those units to exceed their estimated recoverable amount.
101 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
16. Investments (a) Group 2013 2012 £000 £000
Investment in associates accounted for using the equity method 114 104
This investment in the Group accounts comprises of a 30.2% share in Digital Radio Group (London) Limited, a company incorporated in England operating a commercial radio business. This investment is held by a subsidiary undertaking of UTV Media plc.
The following illustrates the summarised financial information of the Group’s associate undertakings: 2013 2012 £000 £000
Share of associates’ balance sheet Non-current assets - 4 Current assets 259 330
Share of gross assets 259 334
Current liabilities 145 230 Non-current liabilities - -
Share of gross liabilities 145 230
Share of net assets 114 104
Revenue 453 441
Profit after tax 130 129
102 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
16. Investments (continued) (b) Group undertakings In the opinion of the Directors, the following subsidiaries of the Company principally affected the results or financial position of the Group at 31 December 2013 or are the holders of radio licences or principal contracts within the Group:
Country of Percentage of incorporation shares held Nature of business
UTV Limited Northern Ireland 100% Commercial Television UTV New Media Limited Northern Ireland 100% Holding company UTV Connect Limited (1) Northern Ireland * 100% Internet service provider The Internet Business Limited Northern Ireland * 100% Web development UTV Drive Limited (1) Northern Ireland * 100% New and used cars web portal Recruitment Northern Ireland Limited (1) Northern Ireland * 100% Recruitment web portal Simply Zesty Limited Republic of Ireland * 100% Social Media agency UTV Radio (ROI) Limited Republic of Ireland 100% Holding company County Media Limited Republic of Ireland * 100% Holding company Radio County Sound Limited Republic of Ireland * 100% Commercial Radio Shawnee Limited Republic of Ireland * 100% Sales agency Cork Media Enterprises Limited Republic of Ireland * 100% Commercial Radio Treaty Radio Limited Republic of Ireland * 100% Commercial Radio City Broadcasting Limited Republic of Ireland * 100% Commercial Radio Independent Broadcasting Corporation Limited Republic of Ireland * 100% Commercial Radio Capital Radio Productions Limited Republic of Ireland * 100% Commercial Radio UTV Media (GB) Limited England 100% Holding company talkSPORT Limited England * 100% Commercial Radio Switchdigital (Scotland) Limited Scotland * 92% Commercial Radio Switchdigital (London) Limited England * 80.5% Commercial Radio UTV Digital (B&H) Limited (2) England * 100% Commercial Radio UTV Digital Limited (2) England * 100% Commercial Radio Pulse FM Limited England * 100% Non-trading Signal Radio Limited England * 100% Non-trading Swansea Sound Limited England * 100% Non-trading Radiowave (Blackpool) Limited England * 100% Non-trading Allied Radio Limited Scotland * 100% Non-trading 102.4 Wish Limited England * 100% Non-trading Wire FM (1997) Limited England * 100% Non-trading Grand Central Broadcasting Limited England * 100% Non-trading Tower 107.4 FM Limited England * 100% Non-trading Wolverhampton Area Radio Limited England * 100% Non-trading Perfecttaste Limited England * 100% Non-trading
* held by a subsidiary undertaking
The Directors have taken advantage of the exemptions conferred by section 410 (1) and (2) of the Companies Act 2006.
Joint ventures First Radio Sales Limited England * 50% Sales agency Propertypal.com Limited (1) (3) Northern Ireland * 50% Property web portal
(1) Held as discontinued operations at 31 December 2013 (2) The Group acquired the non-controlling interests in the shares of UTV Digital (B&H) Limited and UTV Digital Limited on 29 November 2013 for a nominal sum. (3) The Group sold its shares in PropertyPal.com Limited on 31 January 2014 for a nominal sum after accounting for costs.
103 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
16. Investments (continued) (c) Joint ventures At 31 December 2012 and 2013 there is one 50% joint venture company, First Radio Sales, included within continuing operations. The revenue, expenditure, asset and liability information relating to the joint venture proportionately consolidated in the Group accounts is disclosed below.
2013 2012 £000 £000 Attributable to joint ventures:
Revenue 808 989 Operating costs (699) (738)
Profit before tax 109 251 Taxation - -
Profit for the year 109 251
Current assets 1,655 1,741
Current liabilities 1,394 1,491
Non-current liabilities - -
17. Business combinations On 5 March 2012 UTV Media plc acquired 100% of the issued share capital of Simply Zesty Limited (‘Simply Zesty’), a company incorporated in the Republic of Ireland.
The total cash consideration paid in 2012 amounted to £1,670,000 and the fair value of the estimated contingent consideration amounting to £3,001,000 was recognised at the date of acquisition. The terms of the share purchase agreement outlined contingent consideration which was payable over a five year ratchet period to 31 January 2017 based on the achievement of future EBITDA targets. The acquisition was accounted for in 2012 as outlined below.
Analysis of the acquisition of Simply Zesty Fair Value to Group £000
Customer relationships 268 Property, plant and equipment 29 Trade and other receivables 354 Bank Loans (17) Trade and other payables (223)
Fair value of net assets 411 Goodwill arising on acquisition 4,260
4,671
Discharged by: Cash 1,670 Accrued contingent consideration 3,001
4,671
104 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
17. Business combinations (continued) Included in the £4,260,000 of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These primarily relate to the expected value of synergies arising from the integration of Simply Zesty with the Group’s existing New Media business and the wider strategic benefits of the acquisition to the Group.
At 31 December 2013 the contingent consideration was valued as £Nil. The movement in the accrued contingent consideration from the date of acquisition to 31 December 2013 was as follows:
2013 2012 £000 £000
At 1 January 2,888 - Arising on acquisition - 3,001 (Gains)/losses recognised in the Income Statement: - Re-measurement of fair value (268) (22) - Gains arising on settlements (2,591) - - Finance cost 22 - - Foreign exchange loss/(gain) 149 (91) Settlement payment (200) -
At 31 December - 2,888
In 2013 the settlement gains and payments arise from: 1. The acquisition of the rights from the previous corporate shareholder On 14 January 2013 the Group entered into an agreement with a previous corporate shareholder of Simply Zesty Limited to pay a cash consideration of £200,000 in settlement of their rights in relation to the estimated contingent consideration arising on the acquisition of Simply Zesty Limited. The fair value of the related estimated contingent consideration amounted to £1,031,000. 2. The restructuring of the Group As outlined in the Strategic Report, as part of the restructuring the Group bought out the contingent consideration rights of the remaining stakeholders within Simply Zesty for nominal sums. The estimated fair value of this contingent consideration amounted to £1,760,000. There were also redundancy and legal costs associated with this restructuring accounted for within the Group’s Income Statement and Cash Flow.
105 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
18. Derivatives 2013 2012 Interest rate swaps £000 £000
Current liabilities - 324
19. Inventories 2013 2012 £000 £000
Programme and programming rights 1,755 1,641 Sundry stocks 3 2
1,758 1,643
20. Trade and other receivables 2013 2012 £000 £000
Trade receivables 18,236 19,690 Other receivables 942 1,565 Prepayments and accrued income 4,387 3,908
23,565 25,163
Trade receivables are non-interest bearing and are generally on 30 day terms and are shown net of a provision for impairment. The amount of the provision netted against the gross trade receivables balance was £2,696,000 at 31 December 2013 (2012: £2,643,000).
The ageing of net trade receivables are as follows: Neither past ¦----Past due but not impaired----¦ due nor impaired Total 31 – 60 61 – 90 >91 days days days £000 £000 £000 £000 £000
2013 18,236 10,605 5,075 1,143 1,413
2012 19,690 11,254 4,841 2,080 1,515
Movements on the provision against trade receivables are as follows: 2013 2012 £000 £000
Opening balance 2,643 2,708 Foreign exchange 11 (13) Charge for the year 161 119 Utilised (119) (171)
Closing balance 2,696 2,643
The credit quality of trade receivables that are neither past due nor impaired is assessed by reference to external credit ratings where available otherwise historical information relating to counterparty default rates combined with current knowledge of the counterparty is used.
106 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
21. Cash and short term deposits 2013 2012 £000 £000
Cash at bank and in hand 5,666 6,863 Short term deposits 5,025 4,095
10,691 10,958
Cash at bank and in hand earns interest rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months depending on immediate cash requirements of the Group, and earn interest at the respective short term deposit rates. The fair value of cash and short term deposits is £10,691,000 (2012: £10,958,000) for the Group.
22. Trade and other payables
2013 2012 £000 £000
Trade payables 7,611 9,269 Other payables 1,531 1,565 Other taxation and social security 4,007 3,532 Accruals and deferred income 11,016 11,667
24,165 26,033
23. Financial liabilities 2013 2012 £000 £000 Current Current instalments due on bank loans 3,939 3,852 Current instalment due on contingent consideration - 440
3,939 4,292
Non-current Non-current instalments due on bank loans 55,866 56,500 Non-current instalment due on contingent consideration - 2,448
55,866 58,948
59,805 63,240
There are three bank overdraft facilities in the Group with a cumulative limit of £4.0m in the UK and €2.0m in the ROI. These are secured by a floating charge over the Group’s assets. The borrowings at 31 December 2013 are stated net of £730,000 (2012: £939,000) of deferred financing costs. The effective interest rate of the bank loans, including the impact of interest rate swap agreements in 2013, is 2.78% (2012: 3.90%).
The contingent consideration at 31 December 2012 was in respect of the acquisition of Simply Zesty Limited. The movement in this balance during the year is explained in note 17, Business Combinations.
107 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
23. Financial liabilities (continued) Movements on the bank loans during the year were due to mandatory and voluntary repayments on the term loan plus a £3m draw down on the credit loan. The balance at 31 December 2013 comprises of the following:
2013 2012 £000 £000
Senior facilities £65m 5 year revolving credit loan “A” 46,000 43,000 Senior facilities €25m 5 year amortising term loan 14,535 18,291
60,535 61,291 Less current instalment on bank loans (4,153) (4,065)
56,382 57,226
The Group’s banking facilities were refinanced on 31 May 2012 and comprise a £65m Revolving Credit Facility (RCF), and a €25m amortising Term Loan Facility (TLF).
The TLF is repayable by instalments of €2.5m, the first of which was paid on 31 December 2012, with further instalments due in June and December each year to 31 December 2016 and a final payment of €2.5m due on 31 May 2017.
The £65m RCF is available to the Group for the period to 31 May 2017 when any amounts drawn will be repaid or refinanced. A commitment fee of 40% of the applicable margin is payable quarterly on any undrawn portion.
These facilities have been provided by a banking group comprising Bank of Ireland, Ulster Bank (a subsidiary of Royal Bank of Scotland) and Danske Bank.
The applicable margins contracted on the financial liabilities range from 2.00% to 3.50% depending on the Net Debt to EBITDA ratio. The applicable margins paid in the current financial year are detailed below:
Applicable margin Senior Facilities From To 2.25% 1 January 2013 29 September 2013 2.50% 30 September 2013 30 December 2013
24. Obligations under leases and hire purchase contracts Obligations under operating leases The Group has entered into commercial leases for certain properties, motor vehicles and equipment. These leases have an average duration of between 1 and 99 years generally with an option for renewal at the end of lease term. There are no restrictions placed upon the lessee by entering into these leases. Future minimum rentals payable under operating leases are as follows:
2013 2012 £000 £000
Not later than one year 1,517 1,714 After one year but not more than five years 3,130 3,205 After five years 1,986 3,007
6,633 7,926
108 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
25. Provisions
Onerous leases Dilapidation Total £000 £000 £000
At 1 January 2013 - Current 31 340 371 - Non-current 46 754 800
77 1,094 1,171
Utilised (32) - (32) (Released)/created during the year - (28) (28)
At 31 December 2013 45 1,066 1,111
Analysed as: - Current 31 669 700 - Non-current 14 397 411
45 1,066 1,111
The provisions relate to estimated dilapidation costs and committed rental costs on transmission equipment with respect to discontinued operations and currently unoccupied properties rental costs are stated net of sublease income. The timing of these liabilities depends on each individual lease and the likelihood of subletting. The leases are between 1 and 99 years in duration and have zero to 59 years outstanding.
26. Share based payments (a) Long term incentive plan The Company currently has a long term incentive plan for certain UTV senior executives. During 2010, 2011, 2012 and 2013 executives were granted awards, with an exercise price of zero, of up to 100% of basic salary which are payable in shares at the end of three years to the extent that performance criteria are met.
Granted awards under the Company’s long term incentive plan that were outstanding at the end of the year had the following market prices at the date of award (based on the average price in the five days prior to the award):
End of qualifying period Market price on 2013 2012 grant date No. No.
31 December 2012 117.75p - 1,217,955 31 December 2013 135.10p 955,613 955,613 31 December 2014 143.12p 1,030,856 1,030,856 31 December 2015 187.13p 825,931 -
These awards have two performance conditions applied: • For the 2010 award 50% and for the 2011,2012 and 2013 awards 65% is based on growth in diluted, adjusted earnings per share (EPS) per annum over the three financial year period commencing with the financial year in which the awards were granted and • For the 2010 award 50% and for the 2011, 2012 and 2013 awards 35% is based on the ranking of the Company’s total shareholder return (TSR) against a comparator group comprising the companies of the FTSE All Share Media sector over the three financial year period commencing with the financial year in which the awards were granted.
109 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
26. Share based payments (continued) (a) Long term incentive plan (continued) EPS performance condition For the EPS portion of the award, no award will vest unless the Company’s equivalent annual EPS growth over the three financial years commencing with the financial year in which the award is granted exceeds 1% per annum for the 2010 award and exceeds average RPI by at least 3% per annum for the 2011, 2012 and 2013 awards. If this level of growth is achieved, 25% of the award will vest. Additional vesting will be achieved on a straight line basis for further growth above this up to the maximum 100% for EPS growth in excess of 3% per annum for the 2010 award and in excess of average RPI by at least 6% for the 2011, 2012 and 2013 awards.
In determining the fair value of the awards, the fair value of the EPS portion of the awards is equal to the share price at the time of grant multiplied by the number of shares under award and the percentage vesting based on EPS performance spread over the period of vesting. It is assumed that all recipients of awards will fulfil their service conditions.
Awards granted in 2010 The equivalent annual EPS growth from 2009 to 2012 was in excess of 6%, thus meeting the superior EPS targets of 3% growth set for this award. Consequently 50% of the 2010 awards vested in 2013. A charge of £59,000 (2012: £237,000) was recognised in the accounts in respect of these awards.
Awards granted in 2011, 2012 and 2013 Based on current market forecasts, it is not expected that the 2011, 2012 or 2013 EPS performance criteria will be achieved to satisfy the vesting of these awards and therefore no charge has been made to the accounts in respect of these awards (2012: £Nil).
TSR performance conditions The amount of the award that vests to each senior executive increases in accordance with the level of performance achieved. Under the TSR portion of the award, no award will vest unless the Company’s TSR compared to the TSR of the members of the comparator group is ranked at the median over the three financial year period commencing with the financial year in which the awards were granted. If this level is achieved then 25% of the award will vest. Additional vesting will be achieved on a pro rata basis if the ranking is between the median and upper quartile up to a maximum of 100% if the ranking is in the upper quartile. For the TSR portion of the awards the fair value of the awards has been derived using the Monte-Carlo simulation model, taking into account the terms and conditions upon which the awards were granted. The following table lists the inputs to the model used for the awards granted and the derived fair value of each share awarded.
2013 2012 Dividend Yield (%) 0 0 Expected share price volatility (%) 35.2 41.4 Risk-free interest rate (%) 0.75 0.61 Expected life of options (years) 3 3 Share price (p) 185.00 150.75 Fair value derived (p) 124.92 110.25
The expected share price volatilities are calculated based on the movements in the historical return index (share price with dividends reinvested) over a period of time commensurate with the remaining term of the award (i.e. the period from the date of grant to the end of the performance period).
On vesting of the awards the participants are entitled to cash or shares equal in value to the dividends that would have been paid on those shares between the date of grant and the date of vesting. The fair value of the awards has been calculated on the assumption that the dividend right is settled in shares.
No other feature of awards granted was incorporated into the measurement of the fair value.
The valuation of these awards at 31 December 2013 has resulted in a charge to the accounts of £360,000 (2012: £319,000).
110 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
26. Share based payments (continued) (a) Long term incentive plan (continued) Awards granted in 2010 The TSR targets were not achieved and thus this element of the award in the 2010 plan did not vest and expired during the financial year.
Awards granted in 2011 At 31 December 2012, the UTV shares ranked between the median and upper quartile of the FTSE All-Share Media sector and consequently 59% of the TSR element, which relates to 35% of this award, will vest. This represents 20.7% of the total 2011 award. An additional £61,000 (2012:£Nil) was accrued for the NIC payable on the vesting of these awards.
Awards granted in 2012 and 2013 At 31 December 2013, UTV’s TSR ranked in the upper quartile of the FTSE All-Share Media sector, the set comparator group for these awards. Based on this it is expected that 100% of the TSR elements of the awards granted in 2012 and 2013 will vest. An additional £90,000 (2012:£Nil) was accrued for the NIC payable on the vesting of these awards.
All awards may be exercisable in the six month period from the date of vesting.
(b) Share Incentive Plan The all-employee SIP enables eligible UK based employees to buy shares in the Company out of pre-tax salary, subject to a limit in line with government guidelines which throughout 2013 was set at £1,500, or if lower, 10% of the employee’s pre-tax salary. This may be deducted from the pre-tax salary in one lump sum of £1,500 (or such lower amount) or a maximum of £125 per month. During the year, 50,602 shares were purchased by the trustees of the SIP on behalf of 86 employees at a total cost of £93,000.
27. Authorised and issued share capital Authorised shares Allotted, issued Authorised and fully paid 2013 2012 2013 2012 £000 £000 £000 £000
Ordinary shares of 5p each (2012: 5p each) 10,000 10,000 4,795 4,795 Redeemable preference shares of £1 each (2012: £1 each) 50 50 - -
At 31 December 2012 and 2013 10,050 10,050 4,795 4,795
Ordinary shares issued and fully paid
Authorised Issued Nominal Nominal Number value Number value thousands £000 thousands £000
At 31 December 2012 and 2013 200,000 10,000 95,903 4,795
Redeemable preference share capital Issued Nominal Number value thousands £000
At 31 December 2012 and 2013 50 -
111 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
28. Share capital and reserves Analysis by item recognised in other comprehensive income for each component of equity: Year ended 31 December 2013 Foreign Cashflow currency hedge Retained reserve reserve earnings Total £000 £000 £000 £000
Actuarial gain on defined benefit pension schemes (net of tax) - - 3,930 3,930 Exchange gain on translation of foreign operations 932 - - 932 Net gain on cashflow hedge (net of tax) - 251 - 251
Other comprehensive income in the year 932 251 3,930 5,113
Year ended 31 December 2012 Foreign Cashflow currency hedge Retained reserve reserve earnings Total £000 £000 £000 £000
Actuarial loss on defined benefit pension schemes (net of tax) - - (3,217) (3,217) Exchange loss on translation of foreign operations (1,153) - - (1,153) Net gain on cashflow hedge (net of tax) - 270 - 270
Other comprehensive income in the year (1,153) 270 (3,217) (4,100)
Equity share capital The balance classified as equity share capital includes the total net proceeds (both nominal value and share premium) on issue of the Company’s equity share capital, comprising £0.05p ordinary shares.
Foreign currency reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
Cash flow hedge reserve In 2012, the cash flow hedge reserve reflected the unrealised gains and losses incurred on the interest rate swap designated as a hedge of the expected floating rate interest payments on the bank loans. These swaps matured in 2013 with the amounts recognised with this reserve at termination transferred to the income statement.
Capital redemption reserve This balance was created on redemption of 50,000 redeemable preference shares on 19 December 2007.
Treasury shares Treasury shares represent the cost of UTV Media plc shares purchased in the market and held by the UTV Employee Benefit Trust to contribute towards the anticipated entitlement of senior executives to the vesting of awards in the long term incentive plans.
At 31 December 2013 the Group held 56,488 (2012: 699,999) of its own shares at an average cost of £2.17 (2012: £2.17). The market value of these shares at 31 December 2013 was £121,000 (2012: £844,000).
112 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
29. Derivatives and other financial instruments (a) Capital structure and financial risk management The Group’s principal financial instruments, other than derivatives, comprise bank loans, and cash and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The main risks arising from the financial instruments are cash flow interest rate risk, foreign currency risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The Group’s accounting policy in relation to derivatives is set out in note 2.
It is, and has been throughout the year under review, Group policy not to trade in financial instruments.
Capital management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes during the years ending 31 December 2013 and 31 December 2012. Details on the capital structure are disclosed in note 23 and the Strategic Review.
Cash flow interest rate risk The Group’s exposure to the risk for changes in market interest rates relate primarily to the medium term debt obligations with a floating interest rate. The Group’s policy is to manage its total interest cost using a mix of fixed and variable rate debts, with between 40% and 60% of its total committed borrowing facilities at fixed rates of interest. The Board had authorised in June 2010 interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed notional principal amount. These swaps were designated to hedge underlying Group debt obligations for a period until the 28 June 2013 when they matured.
The interest rate policy above was suspended in May 2013 after careful consideration by the Group Board members. In line with market sentiment at that time and subsequently the MPC forward guidance on interest rates, the Board members continue to agree that the cost of carry on new interest rate swap contracts is not good value for shareholders. Interest rate swap prices are reviewed by the Board on a monthly basis and the Group Finance Director reviews the situation weekly. The Board will keep this policy under review throughout the 2014 financial year.
Foreign currency risk The Group has minimal transactional currency exposure arising from sales or purchases by an operating unit in currencies other than its functional currency. Approximately 5.0% (2012: 4.0%) of the Group’s sales are denominated in currencies other than the functional currency of the operating unit making the sale, whilst 3.9% (2012: 4.0%) of costs are denominated in currencies other than the unit’s functional currency.
As a result of significant investment operations in the Republic of Ireland, the Group’s income statement and balance sheet can be affected by movements in the euro/sterling exchange rates. The Group seeks to mitigate the effect of the currency risk created by the euro cash flow from the ROI operations, by creating a natural hedge with the euro denominated borrowings.
Credit risk The Group trades only with recognised, creditworthy third parties. It is the policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the result that exposure to bad debts is normally not significant. Other financial assets comprise of cash and cash equivalents which are therefore subject to minimal credit risk. As the Group trades only with recognised third parties there is no requirement for collateral.
Group policies also restrict the counterparties with which derivative transactions can be contracted and funds may be invested to those approved by the Group Treasury Manager and approved by the Board, comprising banks and financial institutions with a high credit rating. The Group Treasury Manager ensures that exposure is spread across a number of approved financial institutions.
Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, finance leases and hire purchase contracts. Details of the Group’s committed borrowing facilities are given in note 23. Group policy is that funding is reviewed in line with operational cash flow requirements and investment strategy. Repayment terms and conditions are approved by the Board in advance of acceptance of any facility.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising undrawn bank facilities and cash and cash equivalents) on the basis of expected cash flows. This monitoring includes financial ratios to assess headroom under financial covenants on bank facilities and takes into account the accessibility of cash and cash equivalents. 113 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
29. Derivatives and other financial instruments (continued) (b) Fair values Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial assets and liabilities excluding trade receivables and payables, that are carried in the financial statements.
Carrying amount Fair value 2013 2012 2013 2012 £000 £000 £000 £000 Financial assets Cash and short term deposits 10,691 10,958 10,691 10,958
Financial liabilities Interest-bearing loans and borrowings 59,805 60,352 59,805 60,352 Contingent consideration - 2,888 - 2,888 Interest rate swap - 324 - 324
59,805 63,564 59,805 63,564
At 31 December 2012, the fair value of interest rate swaps were based on a valuation technique which uses market observable inputs such as prevailing market forward interest rates and the fair value of contingent consideration was measured using the present value of the probability-weighted average of expected pay out outcomes under the related earn out agreement.
The Group uses the following hierarchy as set out in IFRS 7 “Financial Instruments: Disclosures” for determining and disclosing the fair value of financial instruments by valuation technique: • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; • Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and, • Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The fair value of interest rate swaps as at 31 December 2012 were considered by the Directors to fall within the level 2 fair value hierarchy while the fair value of contingent consideration is considered by the Directors to fall within the level 3 fair value hierarchy. There have been no transfers between level 1, 2 or 3 of the hierarchy during the current and previous years. As disclosed in note 17 the contingent consideration liability was settled during 2013.
As indicated in note 10 certain of the Group’s New Media businesses have been classified as discontinued operations reflecting the planned sale of these businesses. Further as disclosed in note 10 impairments have been recognised in order to write down certain assets within these businesses to their recoverable amount. The fair values estimated as part of these impairments are considered by the directors to fall within the level 3 fair value hierarchy. The fair values of non-current assets were measured based upon an assessment of whether the assets concerned were likely to be sold as part of the disposal process and if so the value indicated by potential purchasers. The fair value of trade and other receivables are based on an estimate of the probability of recovery in view of the planned exit from these businesses. The carrying of intangible assets allocated to the discontinued operations were measured on the basis of the relative values of the businesses disposed of and the portion of the cash generating unit the business was part of and which is being retained.
(c) Interest rate risk The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in interest rates on floating rate borrowings, on cash on short term deposit and on interest rate swap, with all other variables held constant. The effect on equity is not considered material to the financial position of the Group and therefore no disclosure has been made.
Due to current low interest rates and the positive turnaround in the economy, the analysis considers only the impact of a rise in interest rates as a decrease in rates is not considered to be reasonably possible.
Increase in basis points Effect on profit before tax £000 2013 Sterling +50 (148) Euro +50 (72)
2012 Sterling +50 (59) Euro +50 (62) 114 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
29. Derivatives and other financial instruments (continued) (d) Credit risk There are no significant concentrations of credit risk within the Group. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the balance sheet date.
The Group has established procedures to minimise risk of default by trade debtors including detailed credit checks undertaken before a customer is accepted. Historically, these procedures have proved effective in minimising the level of impaired and past due debtors.
(e) Foreign exchange risk The following table demonstrates the sensitivity to a reasonably possible change in the euro exchange rates with all other variables held constant, of the Group’s profit before tax by an operating unit where the euro is not their functional currency (due to changes in the fair value of monetary assets and liabilities). The potential change in the euro exchange rates are based on market forecasts.
Increase/ Effect on decrease in profit before Euro rate tax £000 2013 Euro +5% (38) -5% 42 2012 Euro +2% (18) -2% 18
(f) Liquidity risk The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2013 and 2012 based on contractual undiscounted payments. In the table below interest rates on variable rate loans have been based on forward curves plus contracted applicable margins estimated based upon the Group’s debt covenant forecasts. On Less than 3 to 12 1 to 5 demand 3 months months years >5 years Total £000 £000 £000 £000 £000 £000 Year ended 31 December 2013 Interest bearing loans and borrowings - 563 5,767 62,170 - 68,500 Trade and other payables 1,021 11,700 6,746 372 - 19,839
1,021 12,263 12,513 62,542 - 88,339
On Less than 3 to 12 1 to 5 demand 3 months months years >5 years Total £000 £000 £000 £000 £000 £000 Year ended 31 December 2012 Interest bearing loans and borrowings - 456 5,757 62,924 - 69,137 Trade and other payables 1,025 11,919 9,135 422 - 22,501 Interest rate swap - 164 160 - - 324 Contingent consideration - - 447 2,658 - 3,105
1,025 12,539 15,499 66,004 - 95,067
Details of how the Group manages the liquidity risk arising from the above analysis are provided in note 29(a). As disclosed in note 29(a) the Group takes into account the accessibility of cash and cash equivalents in managing the liquidity risk in the above analysis, the amount of which at 31 December 2012 and 2013 is disclosed in note 21 and is available either on demand or within 3 months.
115 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
29. Derivatives and other financial instruments (continued) (g) Hedging activities The Group have not contracted any Interest Rate swap agreements in 2013 as detailed in note 29(a). All Group Borrowing Facilities are subject to the relevant 11am LIBOR/EURIBOR interest rate fixing on each quarterly loan tranche rollover date.
At 31 December 2012 the Group held four interest rate swaps which were designated to hedge a portion of the interest payments on each of the sterling denominated and euro denominated facilities arising. These swaps matured on 28 June 2013 with the amounts recognised with this reserve at maturity transfer to the income statement. The Group recognised a loss of £4,000 (2012: £188,000) directly in equity and a charge in the finance cost line of £321,000 (2012: £551,000) in respect of these cash flow hedges.
30. Pensions and other post retirement benefits The Group operates a defined benefit pension scheme in Northern Ireland (‘The UTV Scheme’). The UTV Scheme is funded by the payment of contributions to separately administered trust funds. In addition, the scheme contains an unfunded element as described in the Report of the Board on Directors’ Remuneration. The assets and liabilities of the scheme at 31 December are:
2013 2012 £000 £000
Equities 61,913 53,827 Bonds 25,589 23,834 Cash 221 202
Fair value of scheme assets 87,723 77,863 Present value of scheme liabilities (92,321) (90,272)
Deficit in the scheme (4,598) (12,409)
The amounts recognised in the Group Income Statement and in the Group Statement of Comprehensive Income for the year are analysed as follows:
2013 2012 (restated) £000 £000
Recognised in the Income Statement Current service cost (831) (1,138) Interest cost (3,989) (3,752) Interest income 3,465 3,354 Curtailment gain 782 -
Recognised in arriving at operating profit (573) (1,536)
Recognised in the Statement of Comprehensive Income Higher than expected return on scheme assets 8,283 5,344 Other actuarial gains and losses (3,172) (9,387)
Actuarial gain/(loss) recognised in the statement of comprehensive income 5,111 (4,043)
Pension costs are assessed in accordance with the advice of a professionally qualified actuary and are accounted for on the basis of charging the cost of providing pensions over the period during which the Group derives benefit from the employees’ services.
116 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
30. Pensions and other post retirement benefits (continued) Scheme assets are stated at their market value at the respective balance sheet dates.
31 31 December December 2013 2012
Assumptions Rate of general increase in salaries 3.80% 3.40% Pension in payment increase 3.30% 2.90% Discount rate 4.60% 4.50% Inflation 3.30% 2.90%
Assumed life expectancy for a 65 year old - Male: pensioner 23.4 23.3 - Female: pensioner 25.4 25.3 - Male: non-pensioner 25.6 25.6 - Female: non-pensioner 27.8 27.8
Changes in the present value of the defined benefit obligations are analysed as follows:
£000
At 1 January 2012 (79,078) Service cost (1,138) Members contributions (224) Benefits paid 3,307 Interest cost on scheme liabilities (3,752) Actuarial gains and losses (9,387)
At 31 December 2012 (90,272) Service cost (831) Curtailment 782 Members contributions (203) Benefits paid 3,918 Settlement payment 1,446 Interest cost on scheme liabilities (3,989) Actuarial gains and losses (3,172)
At 31 December 2013 (92,321)
117 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
30. Pensions and other post retirement benefits (continued) Changes in the fair value of the schemes assets are analysed as follows:
£000
At 1 January 2012 70,509 Interest income 3,354 Employer contribution 1,739 Members contribution 224 Benefits paid (3,307) Actuarial gains and losses 5,344
At 31 December 2012 77,863 Interest income 3,465 Employer contribution 1,827 Members contribution 203 Benefits paid (3,918) Actuarial gains and losses 8,283
At 31 December 2013 87,723
The net defined benefit obligation comprises £4,329,000 (2012: £10,333,000) from plans that are wholly or partly funded and £269,000 (2012: £2,076,000) arising from unfunded plans.
The cumulative amount of actuarial gains and losses recognised since 1 January 2004 in the Group statement of comprehensive income is £4,989,000 of losses (2012 (restated): £10,100,000 loss). The Directors are unable to determine how much of the pension scheme deficit, recognised on transition to IFRSs and taken directly to equity, of £831,000 in the Group is attributable to actuarial gains and losses since inception of those pension schemes. Consequently, the Directors are unable to determine the amount of actuarial gains and losses that would have been recognised in the Group statement of comprehensive income before 1 January 2004.
The estimated normal Group contributions for the next financial period are £412,000 (2012: £555,000). In 2013 the Group made additional funding towards the actuarial deficit on the UTV scheme amounting to £1,209,000 (2012: £1,181,000). The Group has also agreed to fund a further £1,209,000 each year to 2015 in addition to normal contributions. This revised schedule of payments was agreed on 28 September 2012.
In addition in 2009 the Group transferred certain properties to the scheme and entered into a five year lease of those properties at an annual rent of £92,000 per annum. In line with the agreement entered into between the Group and the trustees of the UTV scheme, an option has been exercised to transfer the properties from UTV scheme to the Group in 2014 for consideration of £1,450,000. For accounting purposes these transactions are treated as part of the schedule of contributions and hence are accounted for on cash basis, with no de-recognition of the properties or recognition of any future liabilities in the Group’s financial statements.
The Group also operates a number of defined contribution pension schemes and personal pension schemes in Northern Ireland, the Republic of Ireland and Great Britain. Contributions are charged in the income statement as they become payable in accordance with the rules of the scheme. Contributions in the year amounted to £510,000 (2012: £449,000).
The most significant factor in deriving the pension liability is the discount rate. In applying sensitivity to this factor of plus or minus 0.5% (2012: 0.5%) the impact on the scheme liabilities could be a decrease of 7.8% (2012: 7.7%) or an increase of 9.2% (2012: 8.7%). However movements in this sensitivity could result in other offsetting factors such as salary inflation.
118 UTV Media plc Report & Accounts 2013 Notes to the Group Financial Statements For the year ended 31 December 2013
31. Related party transactions During the year the Group made sales in the normal course of business to its associated companies and was charged commission by its joint ventures. In addition, joint ventures collect trade receivables on behalf of the Group. Transactions entered into and the trading balances at the year end are summarised below. Payments are made and debts collected under normal trade terms.
2013 2012 £000 £000
Sales to associated companies 541 524
Amounts owed by associated companies - -
Sales to joint ventures 50 60
Charges from joint ventures 422 525
Amounts owed by joint ventures 826 817
Amounts owed to joint ventures 11 3
The key management personnel in the Group are the Directors. Details of transactions with the Directors are included within the ‘Report of the Board on Directors’ Remuneration’.
Compensation of key management personnel 2013 2012 £000 £000
Short-term employee benefits 1,190 1,172 Post employment benefits 263 354 Share-based payments 267 344
1,720 1,870
119 UTV Media plc Report & Accounts 2013 Statement of Directors’ Responsibilities in Relation to the Parent Company Financial Statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; and • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
120 UTV Media plc Report & Accounts 2013 Report of the Auditors on the Parent Company Financial Statements For the year ended 31 December 2013
Independent auditor’s report to the members of UTV Media plc We have audited the parent company financial statements of UTV Media plc for the year ended 31 December 2013 which comprise the Parent Company Balance Sheet and the related notes 1 to 9. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 120, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements In our opinion the parent company financial statements: • give a true and fair view of the state of the company’s affairs as at 31 December 2013; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the Group company financial statements.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit.
Other matter We have reported separately on the Group financial statements of UTV Media plc for the year ended 31 December 2013.
Keith Jess (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Belfast 28 March 2014 121 UTV Media plc Report & Accounts 2013 Company Balance Sheet At 31 December 2013
2013 2012 Notes £000 £000 Fixed assets Investments 3 249,047 248,628
Current assets Debtors: amounts due within one year 4 3,860 11,787 Debtors: amounts falling due after one year 5 20,949 20,949 Cash at bank and in hand 19 23
24,828 32,759
Creditors: amounts falling due within one year 6 (51,818) (51,099)
Net current liabilities (26,990) (18,340)
Total assets less current liabilities 222,057 230,288
NET ASSETS 222,057 230,288
Capital and reserves Called up share capital 7 4,795 4,795 Capital redemption reserve 8 50 50 Share premium account 8 50,762 50,762 Profit and loss account 8 166,450 174,681
EQUITY SHAREHOLDERS’ FUNDS 222,057 230,288
The financial statements were approved by the Board of Directors and authorised for issue on 28 March 2014. They were signed on its behalf by:
John McCann Norman McKeown
122 UTV Media plc Report & Accounts 2013 Notes to the Company Financial Statements For the period ended 31 December 2013
1. Basis of preparation The accounts are prepared under the historical cost convention, and in accordance with applicable UK accounting and financial reporting standards.
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. The Company is also exempt from the disclosures required by FRS 29 as the Group accounts include such disclosures.
2. Accounting policies Fixed asset investments Fixed asset investments are stated at cost less any provisions for permanent impairment in value. The carrying values of investments are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Where merger relief is available the cost is based on the nominal price of the shares issued.
Financial assets Financial assets are recognised when the Company becomes party to the contracts that give rise to them and are classified as loans and receivables. When financial assets are recognised initially, they are measured at fair value, being the directly attributable transaction cost. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required. The Company has no financial assets classified as held for trading or held to maturity in the current period.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or available- for-sale. Such assets are carried at amortised cost using the effective interest method if the time value of money is significant. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Called up share capital Ordinary shares are classified as equity. Incremental costs directly attributable for the issue of new shares or options are shown in equity as a deduction from the proceeds.
Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
Share based payments The Group has a long term incentive share scheme under which it makes equity-settled share-based payments to eligible employees. The cost of equity-settled share-based payments are measured at fair value at the date of grant and recognised as an expense over the vesting period, which ends on the date on which the employees become fully entitled to the reward.
Fair value is estimated using appropriate models for the particular awards under consideration. In valuing equity settled transactions, no account is taken of any vesting conditions, other than the performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. These are also taken into account in determining the grant date fair value.
The cost of equity-settled share based payments is recognised, by the Company as an increase in the value of its investment in subsidiaries together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative cost recognised for equity-settled share based payments at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The cost for the period represents the movement in cumulative expense recognised as at the beginning and end of that period.
123 UTV Media plc Report & Accounts 2013 Notes to the Company Financial Statements For the period ended 31 December 2013
2. Accounting policies (continued) Share based payments (continued) No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled payments award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of original award and the fair value of the modified award, both as measured at the date of modification. No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled (where non-vesting conditions within the control of either the entity or the employee are not met), it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.
3. Investments £000 Cost At 1 January 2013 330,433 Additions 419
At 31 December 2013 330,852
Impairment At 1 January and 31 December 2013 81,805
Net book value At 31 December 2013 249,047
At 31 December 2012 248,628
Additions during the year related to the cost of long term incentives share scheme under which it makes equity-settled share- based payments to eligible employees of subsidiary undertakings.
The key subsidiary companies held by UTV Media plc is recorded in the Group accounts in note 16.
4. Debtors: amounts due within one year 2013 2012 £000 £000
Amounts due from group undertakings 3,860 11,787
5. Debtors: amounts falling due after more than one year 2013 2012 £000 £000
Preference share capital 20,949 20,949
This debtor represents redeemable preference shares in Anotherway (an unlimited company), a subsidiary company of UTV Media plc which is incorporated in the Republic of Ireland.
124 UTV Media plc Report & Accounts 2013 Notes to the Company Financial Statements For the period ended 31 December 2013
6. Creditors 2013 2012 £000 £000
Accruals 76 75 Amounts owed to group undertakings 51,742 51,024
51,818 51,099
7. Authorised and issued share capital Ordinary share capital Authorised Issued Authorised Nominal Issued Nominal Number value Number value thousands £000 thousands £000
At 31 December 2012 and 2013 200,000 10,000 95,903 4,795
Redeemable preference share capital Authorised Issued Authorised Nominal Issued Nominal Number value Number value thousands £000 thousands £000
At 31 December 2012 and 2013 50 50 - -
At 31 December 2013 the Group held 56,488 (2012: 699,999) of its own shares at an average cost of £2.17 (2012: £2.17). The market value of these shares at 31 December 2013 was £121,000 (2012: £844,000).
8. Reconciliation of movements in shareholders’ funds Called Capital Share up share redemption premium Profit and capital reserve account loss account Total £000 £000 £000 £000 £000
At 31 December 2011 4,795 50 50,762 102,896 158,503 Profit for the year - - - 77,179 77,179 Dividends paid - - - (5,950) (5,950) Share based payment - - - 556 556
At 31 December 2012 4,795 50 50,762 174,681 230,288 Loss for the year - - - (1,972) (1,972) Dividends paid - - - (6,678) (6,678) Share based payment - - - 419 419
At 31 December 2013 4,795 50 50,762 166,450 222,057
9. Related party transactions The company has taken advantage of the exemption in FRS8 “Related Party Disclosures” from disclosing transactions with other wholly owned members of the UTV Media plc Group. There were no other transactions which fall to be disclosed under the terms of FRS8.
125 UTV Media plc Report & Accounts 2013 Registered Office and Advisers
Registered Office Ormeau Road Belfast BT7 1EB
Registered Number: NI 065086 Company Secretary: Norman McKeown BSc (Econ) FCA
Corporate Website www.utvmedia.com
Auditors Registrars Ernst & Young LLP Computershare Investor Services PLC 16 Bedford Street The Pavilions Belfast Bridgwater Road BT2 7DT Bristol BS13 8AE
Bankers Solicitors Bank of Ireland Travers Smith Corporate & Retail Banking 10 Snow Hill 1 Donegall Square South London Belfast EC1A 2AL BT1 5LR
Ulster Bank Limited A&L Goodbody Corporate Banking 42-46 Fountain Street 11-16 Donegall Square East Belfast Belfast BT1 5UB BT1 5EB
Danske Bank Arthur Cox Corporate Banking Earlsfort Centre Donegall Square West Earlsfort Terrace Belfast Dublin 2 Co Antrim BT1 6JS
National Westminster Bank PLC G L MacLaine & Co Manchester City Office 13 Lombard Street Bolton Customer Service Centre Belfast De Havilland Way BT1 1RH Bolton BL6 4YU
Brokers and financial advisers Numis Securities Limited Goodbody Corporate Finance The London Stock Exchange Building Ballsbridge Park 10 Paternoster Square Ballsbridge London Dublin 4 EC4M 7LT
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