STV GROUP PLC FULL YEAR RESULTS TO 31 DECEMBER 2023

Total revenue grew by 22% to £168.4m (2022: £137.8m). This was primarily related to growth in Studios revenue, which reached £66.8m in the year, up from £23.7m in 2022, with a contribution of £15.0m from Greenbird Media Limited (“Greenbird”) in the period since acquisition.  Digital revenues also continued to grow and were up 6% on the prior year.

Total advertising revenue (TAR) for the year was £97.3m (2022: £110.0m), a decrease of 12% on the 2022 performance, with linear advertising revenues being heavily impacted by the challenging macro-economic environment.  Within this, national advertising revenue was down 16% with regional continuing to out-perform at -9% year on year.

Adjusted operating profit of £20.1m was down 22% on the record set in 2022 of £25.8m, equivalent to an adjusted operating margin of 11.9% (2022: 18.7%).  On a statutory basis, operating profit was £6.4m (2022: £25.3m).  The proportion of Group adjusted operating profit derived from non-broadcast earnings was 75%, compared to 38% achieved in 2022.  This increase is in part due to the absolute quantum of Digital and Studios adjusted operating profit increasing year on year (£5.2m equivalent to 53%) but it is also impacted by the declines in high margin linear advertising revenues that have resulted in a 53% reduction in Broadcast operating profit year on year.

Adjusted profit for the year was £13.8m (2022: £19.1m), which includes a net tax credit of £4.5m (2022: charge of £5.0m), primarily in relation to High-End Television (HETV) tax credits receivable, and is after charging finance costs of £2.9m (2022: £1.6m). The finance costs comprised interest on the Group’s borrowings of £2.4m (2022: £1.1m) with the balance being non-cash costs in relation to the Group’s lease liabilities. These adjusted results are before finance costs in relation to the Group’s defined benefit pension schemes (2023: £2.8m; 2022: £1.4m), finance costs being the unwind of discount in relation to put options recognised in a business combination (2023: £0.5m, 2022: nil) and adjusting items in operating profit (2023: cost of £6.0m; 2022: cost of £0.5m). Statutory profit after tax was £5.3m (2022: £17.3m).

Adjusted earnings per share at 28.2p was down 33% on the prior year, driven by lower operating profit and higher interest costs.  On a statutory basis EPS was 9.7p (2022: 38.3p).

At the balance sheet date, the Group had net debt of £32.3m compared to £15.1m at the start of the year. The increase is principally driven by the acquisition of Greenbird Media, which was a net cash outflow of £15m on acquisition. Initial cash consideration of £21.4m was paid on completion with a further £0.5m paid in December 2023 as surplus cash was paid via a dividend to Greenbird from one of its subsidiaries.  Operating cash conversion in the year improved on 2022, as expected, and was 169% (2022: 45%).

The Group has in place a £70m revolving credit facility, with £10m accordion, maturing in March 2026.  The Group also has a production financing facility relating to commissioned programme production, of which £3.3m was drawn at the end of the year. This facility will mature when the programme is delivered to the commissioner in H1 2024.  At the end of the year, the Group’s leverage (calculated on a covenant basis) was 1.2 times (2022: 0.5 times) and interest cover was 12.9 times (2022: 42.8 times), both metrics well within the covenant limits.

The IAS 19 accounting deficit across the Group’s two defined benefit pension schemes was £54.8m at the end of the year (2022: £63.1m). The decrease in the liability is primarily driven by updated mortality assumptions that reduce life expectancies.

2023 has been a standout year for STV Studios.  The production business continues its strong growth trajectory, with revenues almost trebling year on year and profit growing nearly fourfold from a combination of organic growth and the acquisition of Greenbird Media.  It is scaling rapidly and profitably, strengthening its position as the biggest production company in Scotland and moving closer towards our core objective of becoming the UK’s number 1 nations and regions producer.

Over the past four years a key part of our expansion plan, alongside organic growth, has been to invest in new production partners. In July 2023, we accelerated this strategy through the acquisition of Greenbird Media, significantly increasing the number of production labels under the STV Studios umbrella (from 9 to 24), more than trebling our portfolio of returning series and expanding our forward pipeline of new programme ideas. STV Studios now has expanded bases in Glasgow and London, as well as offices in Cardiff, Belfast, Brighton and Manchester, strengthening our ability to take advantage of the continuing growth of production in the nations and regions.

The Studios business was already on track to exceed our 2023 target of £40m of revenue, but this transformative acquisition has added significant scale and creative firepower to the division and accelerated STV’s overall diversification strategy in terms of both revenue and profit.  The acquisition was materially earnings-enhancing from day one and was funded from STV Group’s existing financial resources.

STV Studios - including the Greenbird labels - has produced a record 68 series in 2023 while securing more than 50 new commissions and recommissions. This is a very strong performance set against a difficult global commissioning backdrop, with many UK broadcasters and global streaming services slowing their rate of new programme commissions in the current economic climate.

Programme highlights across Scripted and Unscripted for 2023 include:

• BBC One commissioned two new series of hit gameshow Bridge of Lies with Ross Kemp, with the format also selling to Spain and the US.
• One of the BBC’s biggest new dramas of the year, critically acclaimed Belfast-based police drama, Blue Lights was recommissioned for a second series. In Q1 2024, a further two series were ordered from our label, Two Cities.
• Series 2 of prison drama, Screw, which aired on Channel 4 in the autumn, attracted an average audience of 1.6m per episode.
• Thriller Criminal Record, a co-production with our exclusive partner, Tod Productions, launched globally in January 2024 on Apple TV+ to a raft of rave reviews.
• Antiques Road Trip (BBC), Travelling Auctioneers (BBC) and The Yorkshire Auction House (Really, Discovery) are important returning series for the business and continued to deliver strong ratings.
• Primal Media produced innovative new reality format, The Underdog: Josh Must Win for Channel 4, airing in 2024; and a series development deal with US media group, NBCUniversal, has been secured.
• Tuesday’s Child won brand new entertainment format The Fortune Hotel for ITV/STV and a recommission for BBC returner, The Hit List.
• Crackit Productions won and delivered a number of their successful returning series in 2023, including titles such as Casualty 24/7 and Trucking Hell for Channel 5, Deadliest Families for Discovery, and Social Media Murders for ITV2.

As in 2022, tape sales of our extensive programme catalogue remain very strong, proving to be a reliable and valuable income stream for the business. Following the acquisition of Greenbird Media, we have significantly increased the number of episodes in our distribution portfolio, including shows such as Antiques Road Trip, The Travelling Auctioneers, Bridge of Lies, LEGO Masters and A&E After Dark.

Testament to the tenacity, talent and creativity of our people, STV Studios was named Production Group of the Year at the prestigious Edinburgh TV Awards in August 2023.

We move into 2024 mindful of the ongoing uncertainty in the market. However, not only do we have a strong stable of returning series, we have a compelling pipeline of new programme ideas across the expanded STV Studios, and we’re excited about the year ahead for our newly enlarged creative powerhouse.

A combination of appealing and exclusive content, availability across all major platforms in the UK, and a continuously improving user experience ensured that STV Player continued its strong growth trajectory in 2023. The migration of audiences from linear to VoD continues and viewing hours were up 25% at 71m compared with 2022, and streams increased by 28% at 149m.

STV Player marked its biggest ever month and quarter in terms of viewing hours, contributing to a record-breaking year for the streamer.  A strong content line-up, including exclusives in Scotland like dramas Crime, Six Four and The Long Shadow, alongside appealing acquired material, such as Brookside and Suspects, helped make this our biggest year ever for Video on Demand.

Total active registered users – individuals who have signed up to the service, provided their details and viewed content - were up 400,000 at 1.8m across 2023, with 1m users active every month across our STV owned and third-party platforms. STV Player VIP users continued to grow, with new VIPs up by two thirds year on year – that’s 570,000 opted-in users by the end of 2023.

Following an agreement with ITV in December 2022, STV Player has exclusive Scottish rights for a range of original and premiere content, encompassing at least 100 hours of brand new and exclusive box sets per year.  58 new series premiered in 2023 under this new deal, driving 28% of VOD viewing. Five of these titles are in the top 15 best-watched VOD shows, including Irvine Welsh drama Crime starring Dougray Scott; true crime drama, The Long Shadow; crime thriller, Payback, along with Six Four and Malpractice.  Favourites like The Bay, Unforgotten and Vera also continue to drive strong viewing numbers for STV Player. Drama remains a big driver of digital viewing, with almost four in ten STV drama hours viewed via STV Player across 2023.

In addition to access to exclusive Network content in Scotland, this agreement sees ITV’s market leading sales team take on exclusive responsibility for selling all national and digital VOD and simulcast advertising inventory on STV Player from 2023, allowing STV to benefit from ITV’s unrivalled scale in the UK market. We joined ITV’s addressable advertising platform, Planet V, allowing advertisers to access STV’s inventory alongside ITV’s combination of mass simultaneous reach and data-driven, targeted advertising.

This has seen the level of targeted, programmatic advertising on our streaming service increase from 40% to 90% across the year, with our digital brand count increasing by 25% across the year.  This partnership has also created a genuine one-stop-shop for Scottish advertising across linear, VOD and programmatic, with the aim of attracting new, digital-only advertisers who haven’t advertised on TV before.

Across all VOD programming, STV third-party acquired material features strongly in our top 20 – a proven approach which helps us broaden our audience outside of Scotland. Our strategic acquisition of iconic soap, Brookside, delivered vast media profile for the series and it was our number two most watched programme across the year, with c.13m streams in 2023, of which 69% came from outside of Scotland.

STV reaches 2.8m adults each month, more than any other commercial channel, making STV a unique commercial proposition for advertisers. STV also has a higher daily, weekly and monthly reach than any of the subscription streaming services.

Like all businesses, 2023 saw us operating against a very challenging macro-economic backdrop due to high inflation and rising interest rates. This impacted both the national linear advertising performance the most significantly, down 16% year on year, with the Scottish regional ad market continuing to outperform at -9% year on year.  This is down to STV’s Growth Fund, which stands at £30m and makes advertising more affordable and accessible for SMEs. Since launch in 2018 to the end of 2023, we have allocated almost £28m across more than 1200 deals with Scottish companies. 245 deals were secured in 2023 and importantly, over 65% of advertisers have returned from 2022. Within this, we have ring-fenced £1m for an Inclusion Fund, for businesses who support diverse and inclusive practices; and a £1m Green Fund, for businesses with a commitment to sustainability.

For the fifth consecutive year, STV is the most watched peak time channel in Scotland, with our viewing share considerably ahead of BBC One; and the only PSB in Scotland to outperform its UK Network equivalent, tracking ahead of ITV1 in terms of viewing share across all time (1.4 percentage points) and peak time (2.3 percentage points) in 2023.

STV delivered 97% of the top 500 commercial programme audiences last year and was the most watched commercial channel on 361 days in 2023.

Coronation Street and Emmerdale, continue to be schedule favourites with loyal viewers. Other programme highlights for 2023 included new dramas like The Long Shadow, A Spy Among Friends and The Hunt for Raoul Moat; returning dramas, Unforgotten and Vera; and entertainment shows The Masked Singer, Deal or No Deal and The Chase.  I’m A Celebrity… Get Me Out Of Here! again proved our most popular show, with the top rating episode attracting over 800k linear viewers.

Our audience was boosted significantly by large scale sporting events in 2023. STV’s Rugby World Cup coverage reached 2.5m Scots (53%) and attracted some of the highest audiences of the year. Viewing to the England vs Scotland Calcutta Cup match during the Six Nations peaked at 900k – our biggest audience of 2023. 1.3m Scots tuned in to watch the FIFA Women’s World Cup.

STV News at Six has retained its position as the most-watched news programme in Scotland, tracking 7 share points ahead of BBC Reporting Scotland (its highest ever share lead). The STV News website has also had a strong year, with 3.1m unique visitors to the site on average per month. Our Expert Voices training scheme helps ensure we feature a diverse range of contributors on our news and current affairs programmes and so far, 1000+ people have been trained helping us to reach our on-air diversity targets.

In summer 2023, we launched our first ever Sustainable Scotland Week - a seven-day, cross-platform mission which saw STV raising awareness of how climate change is impacting Scotland’s communities and inspiring viewers to live more sustainably. Our dedicated TV content reached 1.5m viewers. ScotPulse research revealed that 72% of those who saw Sustainable Scotland Week activity said it made them more likely to make more environmentally conscious choices. All STV productions are albert certified.

In March 2024, we accepted terms from Ofcom to renew our Channel 3 licences for a further ten-year period from January 2025, providing further long-term certainty to our core business and securing the future provision of commercial public service broadcasting in Scotland, including the country’s highest performing news and current affairs programmes.

STV also welcomed the introduction of the Media Bill at Westminster and its subsequent parliamentary progress. This represents the first major update to UK media legislation for over 20 years and is urgently required to make Public Service Media as prominent on digital platforms as they are today on broadcast platforms, and to ensure STV remains easily available and discoverable for viewers. In late February, Ofcom published their roadmap to support full implementation of the Bill. It’s vital that the Bill now makes its way swiftly through Parliament into law.