2022 INTERIM RESULTS

Total revenue increased by 3% to £62.1m (2021: £60.3m), reflecting growth across each of Broadcast, Digital and Studios. Total advertising revenues of £53.2m were up 4% on the same period in the prior year, which was one of the strongest trading performances on record.  The other key contributor to Group revenues is the Studios division, which generated a 16% increase year on year in the first half.

Operating profit of £11.9m was up 22% on the first half of 2021.  There were no exceptional items in the current period; the prior year amount of £1.7m was the repayment of furlough grants received in 2020.  On an adjusted basis, operating profit was 4% up year on year.

Total finance costs were £1.3m (2021: £1.2m).  These comprised interest on the Group’s borrowings of £0.4m (2021: £0.7m) with the balance being non-cash costs in relation to the Group’s defined benefit pension schemes of £0.6m (2021: £0.4m) and interest on lease liabilities of £0.3m (2021: £0.1m).

The Group generated adjusted profit before tax (before exceptional items and IAS19 interest) of £11.2m (2021: £10.6m), an increase of 6% on the prior year, with adjusted earnings per share increasing by 4% to 20.0p (2021: 19.2p).

The statutory result for the year was a profit before tax of £10.6m (2021: £8.5m).  The effective tax rate (ETR) on the profit before tax is 20.2%, slightly higher than the standard rate in the UK of 19% and mainly driven by the difference between the rate at which current and deferred tax has been recognised.

The Group’s key leverage covenant (ratio of net debt to EBITDA) at the end of the period was 0.2 times, (December 2021: nil), with significant headroom against the covenant maximum of 3 times.  In February 2022, the Group exercised its first option to extend its revolving credit facility by one year to March 2025.

Across the Group’s two defined benefit pension schemes, the accounting deficit before tax decreased to £42.3m at the half year (31 December 2021: £79.4m). This was largely driven by an increase in the discount rate due to a rise in corporate bond yields.

STV’s broadcast channel continues to have unrivalled reach in Scotland (3 in 4 adults every month), and has a higher daily, weekly, and monthly reach than all subscription (SVOD) services combined.

STV is the most watched commercial channel in Scotland and is the only PSB in Scotland to outperform its Network equivalent, by 8% in all time share in H1.  It has the biggest share of all commercial channels across Scotland – more than three times larger than the next biggest competitor, Channel 4 – and delivered 99% of commercial programmes with audiences over 500k in the first half of 2022.

This success is down to our content and for the fourth consecutive year, STV was the most popular peak time channel in Scotland.  High quality programmes including The Masked Singer, Ant & Dec’s Saturday Night Takeaway; soap favourites, Coronation Street and Emmerdale; and top dramas The Bay and Our House, were in the top 10, commanding significant audiences.

We continue to work closely with Scotland’s business community and recognise the key role our advertising platform plays in the growth of businesses across Scotland.  Over the first half of the year, our STV-controlled regional advertising grew by 11% year on year, driven by the return of larger clients across a range of sectors.  The STV Growth Fund continues to attract more new advertisers to TV, adding 43 in the first half of the year.  The re-booking rate is also high with over 70% of 2022 Growth Fund members returning from the prior year.  The STV Green Fund and the STV Inclusion Fund welcome environmentally conscious and socially inclusive businesses to work with us, and both are important parts of our Social Impact strategy.

Overall, total advertising revenue (TAR) comprising national, regional, and digital advertising was up 4% on the first half of 2021, despite ongoing economic uncertainty.

Our regional productions remain hugely popular and relevant for our audiences.  Flagship news programme, STV News at Six, has been Scotland’s most watched news programme since 2019, reaching 2.1m viewers per month. Ofcom’s latest Nations and Regions report revealed that nearly one third of people in Scotland use STV News for news about their own nation, higher than any of our rivals. Our local programming remains popular, with recent antiques series, Clear Out, Cash In achieving a higher average audience in Scotland than Love Island; and we continue to hold politicians to account and interrogate the pressing issues in our current affairs programme, Scotland Tonight, which airs four times a week.

We continue to use our platforms to make a positive social impact.  Through STV News we are educating and informing audiences about the need for climate action and promoting positive mental wellbeing by supporting the Britain Get Talking campaign, tailoring the messaging for our audiences using familiar local faces.

Overall, the financial performance of the division was strong in H1 2021 with revenues of £46.0m up 2% on the prior half year period, driven by regional advertising, and operating profit of £10.7m also up 2% year on year.  Operating margins have been maintained at the highs of last year, at 23% for H1.

Registrations to STV Player continue to grow, increasing by 13% year on year, and within that our monthly active user base also grew by 7%, with STV Player VIP users growing by 37%.  VOD viewing increased year on year in 4 out of the 6 months of H1, even with the tough comparators of lockdown and the Euros.  STV Player viewers spend an average of just over an hour a day with the service, and research shows we have the most loyal viewers of all the commercial PSB streaming services.

We continue our strategy of adding high-quality, wide-ranging Player-only content to complement our Network offering.  Ten new content deals were secured in H1, adding 96 new titles totalling an additional 825 hours; deals were completed with Sony Pictures, Banijay and All3Media which have boosted our total hours to over 5,500.  We expect to add approximately 500 hours of new STV Player-only content in H2, offering constantly refreshed programming for our users.

The top 20 programmes in H1 on STV Player included 8 STV Player acquisitions, including new box sets City Homicide and The Commons as well as STV archive favourite, Taggart.  STV Player-only content generated more than 15m VOD streams in H1, accounting for 37% of total VOD streams.  Our STV Player Presents initiative sees us leverage our broadcast channel to premiere the first episode of new Player-only content, from which we drive viewers to the STV Player to watch the rest of the series.

In H1, we signed a unique new partnership with Acorn TV, which enables us to showcase premium Acorn TV original dramas to viewers across the UK on STV Player for free. The first AVOD-SVOD endeavour of its kind in the UK, the collaboration adds more high-end drama to STV Player, whilst simultaneously introducing STV viewers to the SVOD, as key Acorn titles will form part of our STV Player Presents initiative.

We also agreed a new multi-year deal with Virgin Media to extend our strategic partnership. In Scotland, Virgin Media’s fully regionalised HD version of the STV broadcast channel will continue as part of the agreement. Across the rest of the UK, Virgin Media set-top boxes (STBs), including the new Stream device, will continue to carry all our drama box sets.

In addition to appealing new content, we have made several enhancements to the user experience, including personalised recommendations and an improved homepage; and mandatory registrations mean we know more about our users and can serve them targeted advertising.

Commercial VOD delivery grew across the first half of the year, with total ad impressions up 21% year on year, driving a 16% increase in VOD revenues.  Total revenue for the division was £9.2m in the first half, up 8% on the prior year.  Operating profit also grew year on year, up 1% to £4.0m (2021: £3.9m), with a slight first-half weighting for some costs reducing the flow through of incremental revenue to profit.

STV Player has also begun to win recognition across the industry, winning Best Programme Acquisition for gripping drama, The Commons, at the Broadcast Digital Awards; and was shortlisted at the Edinburgh TV Festival for Best Streaming Service.

STV Studios continues to win new business across drama, factual and entertainment, with a record 25 commissions in 2022 to date for the main UK broadcasters and two global streamers.

Our continuing commissioning success means that we are now in a very busy period of programme production activity meaning that we are set to exceed our target to quadruple revenues to at least £40m by 2023 (from the baseline of £8.7m in 2020).

Our team is delivering high volume returning series, which are significant contributors to our business growth and are also important for the growth of the creative industry and talent base in Scotland. Highlights in H1 2022 include:

• A second series of our prison drama, Screw, was confirmed after the first series was Channel 4’s most successful drama launch since It’s A Sin.
• A bumper order from Really for a further five new series – 58 episodes in total - based on our popular format The Yorkshire Auction House. The show is incredibly successful for Really, comprising 9 of the top 10 transmissions in H1 for the channel.
• The recommission of quiz show Bridge of Lies with Ross Kemp, for BBC One, including a primetime celebrity version and 25 x 45” episodes for daytime.
• In addition to securing returning series, a significant commission of 80 x 1-hour episodes of a new returnable format, The Great Auction Showdown, for Channel 5 was announced and will be delivered later this year.

Our strategy of acquiring stakes in partner production companies is starting to pay off.  In H1, we added a 9^th label to the group, Mighty Productions – the minds behind Tipping Point and Impossible - with the opportunity to increase our position to a majority interest over time.  All our labels share our growth ambitions and have shown good progress in 2022 to date, with several projects in advanced development and some key commissions and productions underway:

• In June we announced drama, Criminal Record, for Apple TV+ which is a co-production with our exclusive production partner, Tod Productions.
• New dating show format for global streamer, discovery+, Written in the Stars, was won by our entertainment label Barefaced TV.
• A third series of award-winning, Jerk, was confirmed for Primal Media with a further major commission yet to be announced.
• Hello Mary won a four-part series, One Night Stand, for E4.
• High end drama producer, Two Cities, will deliver their Belfast-based cop drama, Blue Lights, to BBC One later this year.

Catalogue tape sales across our full range of programmes and format relicensing remained strong in H1 with our distributor-neutral position enabling us to work with multiple parties to match the most appropriate sales agent to our content.

Studio revenues were £6.9m (2021: £6.0m) with an operating loss of £1.0m (2021: loss of £0.9m).  In line with historic norms, the phasing of programme deliveries is weighted towards H2; the division has already secured revenues of £20m – £25m this year and is expected to contribute of at least £1m in profit for the second year in a row.

The Board considers the principal risks and uncertainties affecting the business activities of the Group are:

• Regulatory environment
• Market volatility and advertising spend
• Reliance on ITV for quality network programming and effective national sales
• Changing viewing habits
• Cyber attack or breach incident
• Defined benefit pension scheme shortfalls
• Recruitment and retention of people

Further details of the Group’s policies on principal risks and uncertainties are contained within the Group’s 2021 Annual Report, a copy of which is available at www.stvplc.tv.