STV GROUP PLC INTERIM RESULTS

Total revenue increased by 20% to £90.4m (2023: £75.3m), with growth driven primarily by the Studios division, which saw an increase in revenue of £10.3m following positive contributions from Greenbird Media and Two Cities Television. Total advertising revenues (before commission) of £51.9m were up 13% (2023: £45.8m) which reflects the momentum gained in the period, boosted by Euro 2024, set against an H1 2023 that was heavily impacted by the challenging macro-economic environment.

Adjusted operating profit of £10.6m was up 33% year on year as Broadcast profitability rebounded positively following a period of improvement in the advertising markets, with Studios and Digital margins both maintained. The Group realised cost savings of £0.7m in H1 and is on track to achieve the £1.5m target for the full year, as guided.

The adjusted operating profit performance is before adjusting items of £1.8m for costs relating to acquisition and integration activities, and those incurred in execution of the Group’s cost savings plan. This figure also includes a proportion of the earn-out payable to the founders of Greenbird based on anticipated full year 2024 performance, and the amortisation charged on acquisition intangibles. The adjusted operating profit also includes £2.3m for High-End Television (HETV) tax credits, a claim that was made prior to the introduction of the new Audio-Visual Expenditure Credits regime at the start of the year. Under this new regime, the amount claimed is an above the line credit and so this will no longer be an adjusting item going forward. On a statutory basis, the Group generated £6.5m operating profit in the period (2023: nil).

Total finance costs were £3.9m (2022: £2.3m), comprising interest on the Group’s borrowings of £1.7m (2023: £0.8m), and non-cash costs in relation to the Group’s defined benefit pension schemes of £1.1m (2023: £1.3m), interest on lease liabilities of £0.2m (2023: £0.2m) and the unwind of discount in relation to put option liabilities of £0.9m (2023: nil).  The higher interest payable on the Group’s borrowings was driven by higher levels of both interest rates and covenant net debt compared to the previous year, the latter due to the acquisition of Greenbird in July 2023.

The Group recognised £2.3m of other income as an adjusting item in the first half of the year (2023: £nil).  This relates to the step acquisition of Two Cities Television and is the gain on remeasurement to fair value of the original investment in 2020.  Further details can be found in note 15.

The Group was in a net debt position (excluding lease liabilities) of £28.0m (December 2023: £32.3m) comprising drawdowns under its revolving credit facility of £45.5m (December 2023: £38.3m), and production financing of £1.5m (December 2023: £3.3m) partially offset by net cash balances of £19.0m (December 2023: £9.3m).

The Group’s key financial covenants are leverage (ratio of net debt to EBITDA), which must be no higher than 3 times, and interest cover, which must be at least 4 times. At the end of the period, leverage was 1.4 times, (December 2023: 1.2 times) and interest cover was 9.8 times (December 2023: 12.9 times), with significant headroom against covenant thresholds for both.

Across the Group’s two defined benefit pension schemes, the accounting deficit before tax decreased to £45.4m at the half year (31 December 2023: £54.8m). This was driven by an increase in the discount rate due to a rise in corporate bond yields and deficit recovery contributions paid. The next triennial valuation is due at 31 December 2023 and work is progressing well with the Trustees. We expect to conclude on the outcome of the valuation in the second half of the year.

STV Studios has delivered strong creative and commercial momentum in the first half of 2024, with production labels winning several high-value commissions both in the UK and internationally. The business has scaled rapidly and profitably following the acquisition of Greenbird Media in July 2023 and moves ever closer to its objective of becoming the UK’s number 1 nations and regions producer. This has been achieved despite the continuing challenges that exist in the commissioning market. We are on track to deliver on our target of doubling Studios revenue to £140m by the end of 2026, with a 10% margin.

Our production labels have delivered a combination of exciting original format commissions alongside recommissions of multiple existing successful series for broadcasters and global streamers.

Early in 2024, we confirmed a number of important drama commissions, which will contribute significantly to our revenues through to 2026. STV Studios Drama won our first commission for global streamer, Netflix, The Witness, a three-part series based on the memoir and experiences of Alex Hanscome, whose mother Rachel Nickell was murdered on Wimbledon Common. This is currently in production. Our Northern Ireland label, Two Cities, won a third and fourth series of their critically acclaimed police drama, Blue Lights, from BBC One. Series 2 aired in H1 2024 and delivered an audience 35% above the slot average on BBC One. This team is also currently in production with Sky original drama, Amadeus, with Will Sharpe (White Lotus) in the lead role. In August, we announced that critically acclaimed drama, Criminal Record, our co-production with Tod Productions and starring Peter Capaldi and Cush Jumbo, has been recommissioned by Apple TV+ for a second series following the global success of series 1.

Returning series provide increased certainty around income and enable us to provide more reliable employment and training opportunities for the freelance community. STV Studios has multiple returning series in production in 2024 across Unscripted and Entertainment, including:

• A 40-episode commission from Warner Bros. Discovery UK & Ireland to produce new series of The Yorkshire Auction House, Celebrity Yorkshire Auction House and spin-off show, The Derbyshire Auction House, for the Really channel. The Yorkshire Auction House remains Really’s most-watched programme
• Recommission from the BBC for a third series of The Travelling Auctioneers; a 29th series of Antiques Road Trip and a 13th series of Celebrity Antiques Road Trip
• Quiz shows Bridge of Lies and Celebrity Bridge of Lies have both been recommissioned
• STV Studios Entertainment signed a major deal with Sony’s Game Show Network for a US version of Bridge of Lies, which saw us co-produce 100 episodes in LA
• Tuesday’s Child’s The Fortune Hotel was swiftly re-commissioned by ITV in July following a successful launch in H1. They also delivered a new series of international success, The Hit List, for BBC One
• Owl Power was commissioned to deliver an 8^th series of Gone Fishing for BBC; and Hello Mary won a second series of The Royals: A History of Scandals for More 4

Our strategy of acquiring stakes in high potential production companies continues to deliver for the business. In H1, STV Studios increased its stake in Two Cities Television (moving to majority), Tuesday’s Child and Crackit Productions (the latter two already majority holdings). Today we’ve announced that we will take a majority (51%) share in Glasgow-based Hello Halo Productions, a deal which is earnings enhancing from day one. This team has a strong track record in children’s and formatted factual programming, and in July won a commission from Channel 4 for a new format, The Game of Wool.

Importantly, our forward order book is stronger than ever at £101m, as is the development pipeline across the STV Studios’ family of production labels. At this level, the orderbook is £15m higher than the previously reported June figure of £86m and reflects £19m of revenue recognised and £34m of new commission wins in the two months to end July.

STV remains the best watched peak-time channel in Scotland, with a higher audience than the next eight commercial channels combined. This success is largely down to a schedule of high-quality network and regional programming and a strong connection with our audience. Traditional broadcasters are still attracting significant audiences to their programming, delivering ‘event’ television, and valued public service broadcasting. In H1, 99% of the top 500 transmitted programmes on commercial TV channels in Scotland were on STV. 77% of the top 500 episodes across all broadcast and SVOD channels were on STV.

The profitability of the broadcast business has bounced back in H1, with divisional revenues +12%, due to improvements in the wider advertising market and a strong programme offering. The UEFA Euros 2024 were a jewel in the crown of STV’s 2024 schedule, with the opening match between Germany and Scotland scoring the channel its best watched programme in 2024 and the biggest audience for any channel in Scotland by that point in the year, peaking at 1.38m viewers. The overall reach of the tournament on STV was 3.1m, with a 48% viewing share across our matches, tracking +3 share points higher than the ITV network. The tournament helped drive audience growth across hard-to-reach commercial audiences with upmarket men and upmarket U45’s showing growth of +7% and +15% (H1 2024 v H1 2023).

STV’s news and current affairs output is at the heart of our Public Service Broadcasting remit. Our flagship programme, STV News at Six, is the best-watched news programme in Scotland for the 7th year running. With an average audience of 374k and 33% share, we have increased the gap between STV News and our main competitor (Reporting Scotland, BBC One) to over 100k, the widest gap in the last 7 years. In a year of political turbulence, STV was proud to air the first Scottish leaders’ debate of the UK General Election campaign. The 90-minute programme tracked 4 share points ahead of the network and reached 430k viewers. STV’s news team achieved industry recognition at the 2024 RTS Scotland Awards, with STV News at Six (North) winning the News Award, and reporter Ronnie Charters crowned Best Young Journalist.

In H1 2024, STV aired the best-watched entertainment programme, quiz show, drama, and soap across Scotland. Four-part series, Mr Bates v the Post Office was STV’s biggest new drama since 2021 (The Pembrokeshire Murders) and indeed the biggest drama launch across all channels and streamers in H1, delivering an average audience of 929k. It had a considerable societal impact, bringing a story of national interest to the attention of millions and effecting change at a government level, further emphasising the importance and potential of well-funded public service broadcasting.

STV has unrivalled reach in Scotland and delivers mass impact. The STV Growth Fund, which makes advertising affordable and accessible for SMEs, has attracted over 400 new advertisers since it launched in 2018. We also continue to support sustainable and diverse businesses in their TV marketing journey via our Green and Inclusion Funds.

Our streaming service, STV Player, delivered its most successful first half-year ever in 2024, with online streams up 4% to 73.1m. This success was partly driven by Euro 2024, which delivered record breaking numbers for the business. The tournament was STV Player’s most-watched sporting event ever, up 61% compared with Euro 2020, and delivering 2.3m total viewing hours across the tournament. The semi-final between the Netherlands and England broke streaming records for a single match, generating 617k steams across the game. The Euros also helped provide a new record month for live viewing in June 2024, coming in at 2.8m hours.

We are now 18 months into our commercial partnership with ITV through which they are our exclusive agent for digital advertising. Positive from its inception, this deal continues to deliver, with VOD advertising revenues up 13% in H1 compared with the same period in 2023.

Our deal with ITV also makes new ITVX premiere content exclusively available on STV Player in Scotland. This high-quality, original content complements a bank of network shows, carefully selected programming from across the world, with a focus on high quality drama series, and popular archive material from our extensive video library, ensuring a rich and varied on-demand offering for viewers across the UK.

Our content has helped deliver strong audiences in H1, with eight of our top ten titles exceeding 1m hours of viewing in the first half of the year. Soap giants Coronation Street and Emmerdale retained the top 2 positions, and top performing dramas on STV Player include Red Eye, After the Flood, Trigger Point and Mr Bates v The Post Office. The hotly anticipated return of Celebrity Big Brother delivered almost 900k views.

A key acquisition for our streaming service has been iconic soap, Brookside, which is a top 3 title on STV Player for H1. The series has been streamed over 20 million times since it launched in February 2023, equating to over 7m hours of viewing. STV Player has relaunched the show from the start, with five episodes made available each week. Other acquired titles in the top 20 include US thriller, Betrayal, and legal drama, The Fix. These two titles are part of a 10-series scripted box-set deal with Disney, with the remaining titles available in H2.

Consumption (viewing hours) are tracking 5% down year on year due to changes in our content mix.  In H1, the availability of live sport and entertainment meant fewer drama box sets were available, which has impacted viewing times. Winter is traditionally the season when STV airs more dramas and we expect these to positively impact consumption in H2.

We continue to improve and enhance the look and user journey of the STV Player and in H1 we launched new ‘watch live’ functionality to our Sky Glass, Sky Q and Virgin Media apps.

STV’s Channel 3 licences have been renewed for a further 10 years to 2034, securing the provision of public service broadcasting in the north and central regions of Scotland, including the country’s most-watched news and current affairs programmes.

We are pleased that the UK Government Media Act is now enshrined in law and will guarantee prominence for STV Player on all major digital platforms, ensuring our PSB content is easy for viewers to find. It is important that Ofcom, who are now consulting on the implementation of the Bill, have the power to ensure this requirement is duly enforced.

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

• Regulatory environment
• Market volatility and impact on revenue generation
• Reliance on ITV for quality network programming and effective national sales
• Changing viewing habits
• Cyber-attack or data 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 2023 Annual Report and Accounts, a copy of which is available at www.stvplc.tv.