Annual Report and Accounts 2018 Accounts and Report Annual BUILDING ABUILDING STRONG
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Annual Report and Accounts 2018 STV Group plc BUILDING A STRONG FOUNDATION FOR GROWTH Annual Report and Accounts 2018 Contents 01 2018 financial and operational highlights 02 Who we are and what we do Strategic Report 04 Chairman’s statement 06 Operating review – STV 2020 – introducing our vision and strategy for long term growth – Broadcast – Digital – Production – The STV of the future 26 Corporate responsibility 34 Financial review 36 Risk management 39 Principal risks and uncertainties Governance 41 Introduction to governance 42 Board of Directors 44 Corporate governance report 54 Remuneration report 62 Directors’ report Financial Statements 65 STV Group plc consolidated financial statements – independent auditors’ report 71 Consolidated income statement 71 Consolidated statement of comprehensive income 72 Consolidated and parent company balance sheets 73 Consolidated and parent company statement of changes in equity 74 Consolidated and parent company statement of cash flows 75 Notes to the financial statements 100 Five year summary Additional Information 101 Shareholder information 103 Notice of Annual General Meeting View our Annual Report and Accounts and other information about STV at www.stvplc.tv STV Annual Report and Accounts 2018 01 2018 financial and operational highlights TURNOVER OPERATING PROFIT* (£ millions) (£ millions) £125.9m (+8%) £20.1m (+6%) 2017: £117.0m 2017: £19.0m TOTAL ADVERTISING REVENUE NON-BROADCAST PROFIT (£ millions) (£ millions) £97.4m (+4%) £4.8m (+30%) 2017: £93.5m 2017: £3.7m EPS* DIVIDENDS PER SHARE (pence) (pence) 41.1p (+4%) 20.0p (+18%) 2017: 39.6p 2017: 17.0p +13% +24% STV share of viewing in streams on the STV Player £2.1m £2.6m raised by the Scottish raised for the STV Children’s Appeal Children’s Lottery * Pre-exceptional and IAS19, see note 31. Dancing on Ice was one of the best watched programmes on STV in 2018 reaching 2.1 million viewers. 02 Overview Who we are and what we do We are Scotland’s home of news and entertainment Inverness stv.tv Aberdeen STV is our main TV channel, accessible Our website, providing a portal to all free-to-air on all the main TV platforms of our content such as News, Sport, in Scotland. Entertainment, Weather, Competitions, Video on Demand and STV programme 22.1% information with TV listings. STV delivered its best share of viewing performance in a decade in 2018 28.2 million with a peak time viewing share of Average monthly page views 22.1%. This was up 13% on the year increased by 40% in 2018. before, the highest increase of any TV channel in the UK. DundeeDundee STV Player Our online Video on Demand service, accessible through the STV website as well as being available on a variety Edinburgh of smartphones, tablets, consoles, set top boxes and Smart TVs. Glasgow 35million During 2018 there were 35 million long form streams on the Player, 24% up on 2017. London: Commercial and Productions STV Annual Report and Accounts 2018 03 Inverness STV IN A NUTSHELL > Two Channel 3 licence Aberdeen areas covering Scotland. > Exclusive access to all the big network shows. > Button 3 in every Scottish home = STV. > Scottish news, sport, current affairs and other Scottish content. > Strong share of TV advertising market and unique regional ad sell. > Fast-growing and profitable DundeeDundee digital streaming service. > Popular websites for news, sport and entertainment. > Scotland’s largest production company. Edinburgh Glasgow London: Commercial and Productions 04 Strategic Report Chairman’s statement 2018 was a year of significant change for Support for the STV Children’s Appeal STV starting with the arrival in January of continues to grow in communities up Simon Pitts who took the helm as Chief and down the country with schools, local Executive Officer. Following a thorough businesses and individuals giving their time review, the new three year strategy was and commitment to this hugely important announced in May, which the Board fully cause raising £2.6m in 2018. Together with endorsed and its implementation began the Scottish Children’s Lottery, a total of immediately. £4.7m was raised for charitable causes, nearly 15% more than last year. Our people Our staff are integral to the delivery of Looking forward the new strategy and the Board is acutely In summary, 2018 has been a year of aware that the success of an organisation progress for the business and we are is dependent upon the people and talent executing a growth strategy that we within it. STV is fortunate to have so many believe will build momentum and enable committed staff whose contributions and us to deliver strong shareholder returns. drive are key to STV’s achievements. On The success of STV relies on a strong Board behalf of the Board, I would like to thank made up of a diverse range of experience, all colleagues across the business for their skills and perspectives. We were delighted commitment, patience and hard work to appoint David Bergg as a Non-Executive throughout this time. Director in May who brings his extensive Baroness Margaret Ford OBE knowledge of commercial broadcasting. Chairman We are delighted that many career With a strong and focused CEO, the Board opportunities have been created in feels it is well positioned to support the 2018 with over 100 STV people in new development of the Company’s culture roles. Over 75 staff members have and strategy. been internally promoted and the staff development process is being refocused I would like to thank my Board colleagues and refreshed. I would like to thank for their valuable support and wise counsel those employees who left STV for during 2018 and we look forward to their significant contribution. supporting Simon and the Management Team in the coming year. Together we News is fundamental to STV and during will continue to maintain a strong and the year we launched a comprehensive effective governance structure to enable change programme that invests in training, the business to deliver its strategy, digital and technology to ensure that STV generate shareholder value and safeguard News remains the most comprehensive, our shareholders’ long-term interests. most popular and most trusted news service in Scotland. On behalf of the Board, I would like to warmly welcome Lindsay Dixon who Driving the Scottish economy joins as Chief Financial Officer in May We created the STV Growth Fund in which following the resignation of George Watt. we are investing £5m of airtime to support George is leaving after over 20 years with Scottish businesses and grow future STV to pursue a non-executive career advertising budgets. Our commitment and his fellow Directors thank him for to driving economic growth in Scotland his outstanding contribution to the was further strengthened when we joined success of STV and wish him every forces with Entrepreneurial Scotland to success in the future. launch Summit, celebrating a host of Scottish entrepreneurs and also with the Thank you for your continued support. STV Growth Academy which is designed to help small and medium sized businesses. STV is a cash generative group with clear strategic priorities that focus the organisation on growth. STV Annual Report and Accounts 2018 05 Royal Television Society Awards Ben Philip, based in Aberdeen, took home the award for Young Journalist presented in memory of George Sinclair. Ben has been part of the STV News team for just over a year, taking on the role of both presenter and reporter on a daily basis at STV. Scotland Tonight The leading Scottish current affairs programme. Scottish Children’s Lottery Raised £3m since launch to support children and young people’s charities. STV Appeal Now in its eighth year, having raised over £19m. Celebrity Antiques Road Trip Long running ratings success for BBC Two consistently achieving 2 million viewers. STV Growth Academy Established to provide SMEs with business insight. 06 Strategic Report STV 2020 – introducing our vision and strategy for long term growth STV is a company full of talented is now fully in place. I’m delighted that and committed people with a strong we’ve also managed to make a large brand and a privileged place in the lives number of internal promotions across of Scottish TV viewers. We’re the home the business, recognising the strong of some of the biggest, most popular talent already working at STV. shows on television but we also have a clear public purpose. Strong foundations for growth We’ve made good early progress in Our challenge is to build on these delivering our plan, including agreeing strengths while recognising that viewing important new commercial deals across habits are constantly changing and that Broadcast, Digital and Production that set we need to change too to stay relevant. us up for the future. I’m also delighted that The ambitious growth strategy we set out all parts of the business are now growing. in May is rooted in the many conversations I had with colleagues, stakeholders and There is a huge amount to do but we viewers inside and outside STV when have a strong foundation on which to I joined the business. It is designed to drive further growth: make the best of STV’s great potential – to simplify the way we operate, to invest • TV viewing remains resilient, particularly in the most exciting areas of growth, and in Scotland where people watch an to re-establish STV as an independent average of 24 minutes more television Simon Pitts creative force in Scotland and beyond. a day than anywhere else in the UK; Chief Executive Officer • At STV we have the most powerful Our comprehensive three-year strategy marketing shop window in Scotland which for creative and digital success is now we can use to build both new programme well underway and is already delivering brands and advertiser brands; tangible results.