ANNUAL REPORT
AND ACCOUNTS 2014
COMMERCIALLY FOCUSED
CREATIVELY LED
Directors’ Report
Strategic Report
01 2014 Financial Highlights
02 Meet the STV family
04 Chief Executive’s Review
– Consumer
12 – Productions
14 Performance Review
17 Principal Risks
19 Corporate Responsibility
Governance
26 Chairman’s Statement
28 Board of Directors
30 Corporate Governance Report
44 Remuneration Report
Financial Statements
64
STV Group plc Consolidated
Financial Statements –
Independent Auditors’ Report
68 Consolidated Income Statement
68
Consolidated Statement
of Comprehensive Income
69 Consolidated Balance Sheet
70
Consolidated Statement
of Changes in Equity
71 Consolidated Statement
of Cash Flows
72
94
Notes to the Financial
Statements
STV Group plc Company
Financial Statements –
Independent Auditors’ Report
96 Company Balance Sheet
97
Notes to the Company
Financial Statements
101 Five Year Summary
Additional Information
102 Shareholder Information
104 Notice of Annual
General Meeting
115 Appendix to the
Notice of Annual
General Meeting
Directors’ Report Strategic Report
2014 FINANCIAL HIGHLIGHTS
Revenue
(£ millions)
Operating Profit
(£ millions)
Pre-tax Profit
(£ millions)*
102.0
2011
102.7
2012
112.1
2013
120.4
2014
15.0
2011
17.1
2012
18.0
2013
19.5
2014
12.7
2011
13.1
2012
15.2
2013
17.3
2014
+7%
+8%
+14%
EPS
(pence)*
Dividends Per Share
(pence)
Net Debt
(£ millions)
34.5
2011
29.5
2012
34.4
2013
38.7
2014
–
2011
–
2012
2
2013
8
2014
54.5
2011
45.3
2012
35.7
2013
29.4
2014
+13%
+300%
-18%
* pre-exceptionals and IAS 19
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
MEET
THE STV
FAMILY
CORE CHANNEL
ON DEMAND
ONLINE
stv.tv
Peaktime audience 3x
most watched commercial
channel in Scotland
14m streams in 2014
3.6m monthly
unique browsers
03
The STV Family of consumer services
showcases our commitment to ensure our
consumers can access STV’s content free
of charge anywhere, anytime.
Through the STV family we are successfully
increasing our commercial market share and
extending the services available to consumers.
CITY CHANNELS
CITY APP
Achieved 1m combined reach
500k monthly browsers
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
CONSUMER
ENGAGING
WITH OUR
CUSTOMERS
Rob Woodward
Chief Executive
A high profile year for
Scotland was a key
driver for STV’s strong
performance in 2014.
In February 2014, the licence renewal
process concluded when we agreed
new terms of our two Channel 3
broadcast licences with Ofcom.
The new licences came into effect
on 1 January 2015 and have
been renewed for the maximum
term of 10 years.
The confirmation of licence renewal
has allowed us to extend our banking
facility with a maturity date of
June 2019, resulting in a lower
interest margin being payable
reflecting the strong trading position
and normalised balance sheet of
the Group.
These factors combine to provide
a solid base from which to develop
our aims and objectives for 2015
and beyond.
05
COVERING SCOTLAND
STV is Scotland’s leading media brand connecting with consumers
and creating opportunities for commercial partners across channels
and platforms at a national, regional and city level.
92%
Network Coverage
Each month STV reaches over
92% of Scots on air
3.6m
viewers
Micro Regions
STV’s micro regions offer advertisers
the opportunity to geo-target their
TV marketing campaigns
£12.6m
regional airtime revenues
City TV
STV Glasgow launched June 2014
STV Edinburgh launched January 2015
1m
reach
City Apps
STV Glasgow, STV Edinburgh,
STV Aberdeen and STV Dundee
available to download for free as Apps
500k
monthly browsers
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
CONSUMER
continued
2014 – what a year!
MARCH
HD service on DSAT
MAY
Dividend resumed
JUNE
STV Glasgow
launched
AUGUST
BBC commissions
40 episodes of The Link
Referendum coverage –
the first live TV debate
between Alex Salmond
and Alistair Darling
FEBRUARY 2014
2013 non-broadcast
earnings reach 19%
APRIL
STV Group plc awarded
Large Scottish plc of the year
JULY
STV Live streaming
Pension funding agreed
STV Glasgow reaches
700,000 viewers in
first month
OCTOBER
STV Appeal raises
record £2.6m
ITV commissions third
series of Catchphrase
Bids submitted for local
TV licences in Aberdeen,
Ayr and Dundee
NOVEMBER
Transmission of Tutankhamun
documentary for BBC
Recommission by BBC
of fifth series of Celebrity
Antiques Road Trip
DECEMBER
STV Player on
Xbox 360 and
Amazon Fire TV
JANUARY 2015
STV Edinburgh
launched
Engaging with our audience
In order to deliver on our ambition
to be a leading consumer focused
business, we need to know our
consumers and their preferences.
Consumer data is a priority metric
for the business and by the end
of the year we had accumulated
one million consumer records,
exceeding our KPI target of 0.8m.
CONSUMER INSIGHTS
(millions)
Why it’s important
Understanding the demographics,
tastes and preferences of our
consumers is key to developing
successful consumer services.
How we measure it
It is the number (in millions) of
unique consumer records held on
our consumer database.
2016 Target
2015 Target
2014 Actual
2014
Target
2013
Actual
2012 Actual
2.4m
1.6m
1.0m
0.8m
0.6m
0.5m
A major contributor to this was
the 2014 FIFA World Cup Brazil which
delivered a high volume of streams
on the STV Player. To coincide with
the matches available on STV,
STV Live via the STV Player and stv.tv,
we introduced mandatory registration
offering an increased insight into the
consumers utilising STV’s range of
services. The World Cup resulted in
480,000 streams on the STV Player
and 171,000 new registrations.
CONSUMER ENGAGEMENT
(mins per day per user)
Why it’s important
These measures indicate the
depth of the consumer base
of the STV Family of services.
How we measure it
It is the monthly average minutes
per day that consumers spend on
each service sourced from BARB
and Comscore.
STV Audience
2016 Target
2014 Actual
2013 Actual
STV Player
2016 Target
2014 Actual
2013 Actual
City TV
2016 Target
2014 Actual 014
2013 Actual
City Apps
2016 Target
Actual 4
Actual
2014
2013
STV.TV
2016 Target
2014 Actual
2013 Actual
41 mins
41 mins
41 mins
41 mins
46 mins
37 mins
10 mins
2 mins
n/a
6 mins
2 mins
2 mins
6 mins
3 mins
3 mins
The successful transformation of
STV into a consumer focused
Company with an integrated offering
required a refreshed approach to
marketing and promotion of our
services. This focus has led to some
organisational changes to ensure
that we have the required level of
support for each of our core products
across the STV Family: STV; City TV;
digital city services; STV Player;
and stv.tv.
Our refreshed KPIs introduced two new
measures for all of the core consumer
platforms within the STV Family to
enable measurement of reach and
engagement with consumers. We are
determined to deliver the highest
quality consumer experience and
these stretching targets ensure that
the business is focused on a strong
multi-channel offering.
The development of the STV
Family has allowed us to create
a recognisable brand family of
services. This was cemented with
a review of branding ahead of the
launch of our first City TV channel,
STV Glasgow, in June.
The latest evolution of the STV brand
creates a unified look and a cohesive
brand family that reflects the
consumer focus of the business.
The branding refresh also incorporated
a redesign of the STV news studios
and sets. This delivered a refreshed
look for viewers across Scotland
demonstrating our focus on high
quality public service broadcasting
and reinforced our commitment
to provide a platform for debate
ahead of the referendum on
Scottish independence in September.
07
CONSUMER REACH
(monthly average millions)
Why it’s important
These measures indicate the
breadth of the consumer base
of the STV Family of services.
How we measure it
It is the monthly average audience
in millions from sources including
BARB and Comscore.
STV Audience
2016 Target
2014 Actual
2013 Actual
STV Player
2016 Target
2014 Actual
2013 Actual
City TV
2016 Target
2014 Actual
2013 Actual
City Apps
2016 Target
2014 Actual
2013 Actual
STV.TV
2016 Target
2014 Actual
2013 Actual
3.6m
3.6m
3.6m
1.0m
0.7m
0.5m
1.0m
0.6m
n/a
1.0m
0.4m
0.2m
3.6m
3.6m
3.0m
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
CONSUMER
continued
Commercially focused
A big year for Scotland resulted
in a big year for STV and the 2014
FIFA World Cup Brazil was just
one of the highlights in the
commercial calendar.
The 2014 Ryder Cup at Gleneagles,
the Commonwealth Games in
Glasgow, and the referendum on
Scottish independence all ensured
that the focus was on Scotland
throughout the year. This offered
opportunities for targeted advertising
campaigns that delivered results
for clients.
Weather sponsor Thomson has
committed to a second year of
sponsorship following a successful
campaign in 2014. The travel
company utilised the daily
sponsorship of STV’s weather
bulletins with additional activity
including interactive competitions
and takeovers on the STV weather
website page to drive brand
awareness.
CONSUMER DIVISION MARGIN
(%)
Why it’s important
Margin improvement across
the period provides evidence
of profitable growth.
How we measure it
It is calculated as underlying
operating profit divided by turnover
and expressed as a percentage.
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012 Actual
18.0%
17.5%
17.8%
16.5%
17.8%
18.3%
The new City TV channels also
attracted new commercial partners,
including STV Glasgow festive
sponsor The St Enoch Centre. The
shopping centre combined its on air
sponsorship with desktop and digital
activity for a targeted campaign at
a key time in the retail calendar.
Innovation
The introduction of a brand new
City TV service, STV Glasgow, was
followed by the launch of STV
Edinburgh in January 2015.
The two City TV channels represent
a significant commitment and
investment for STV as we have been
awarded 12 year licences for each
channel. Each channel is delivered
in conjunction with a higher
education college or university and
offers students the opportunity to
work in a live media environment.
STV Glasgow broadcasts to a
potential audience of two million
viewers in the west of Scotland and
STV Edinburgh has a potential reach
of one million viewers in the east.
Since launch, STV Glasgow and
STV Edinburgh have reached a
combined monthly audience of over
one million with an engaging mix
of news, innovative formats and
classic dramas from the STV archive.
The launch of City TV has also
delivered a strong performance for
the relevant City Apps as we seek to
integrate content across platforms
and create a second screen
experience for viewers to interact
with their local channel. The city sites
experienced an uplift in browsers
of 77% between the first six months
of the year and the last six of 2014,
following the launch of STV Glasgow.
In October, we also confirmed we had
submitted applications to deliver local
TV in Aberdeen, Ayr and Dundee and
are awaiting a final decision from Ofcom.
Digital growth
A strategic focus that has been
embedded in our KPIs is to grow the
non-broadcast share of earnings to
a third. This ambition combines our
digital activity with the growth of the
STV Productions business to diversify
our earnings and reduce dependence
on airtime revenue.
The digital business is delivering
against stretching KPIs and the team
continues to develop and evolve
existing products, create new
products, and explore opportunities
for STV on new platforms. The
number of platforms increased in
2014 with the launch of STV Player
on Amazon Fire TV and Xbox 360
making STV content available for
free to an even wider audience.
NON-BROADCAST
EARNINGS SHARE
(%)
Why it’s important
Our strategy is to diversify the
Group’s earnings from being over
90% driven by broadcast to a more
broadly balanced base.
How we measure it
It is calculated as non-broadcast
operating profit (digital and
productions) divided by total
operating profit and expressed
as a percentage.
2015 Target
2014 Actual
2013 Actual
2012
Actual
33%
21%
19%
11%
The digital margin exceeded the
2014 KPI of 30% with potential for
further growth in this area as we
look to develop the next generation
of key products, including the
STV Player, our news Apps and
digital city services.
The multi-platform approach also
helped boost digital revenues as this
KPI was also met in 2014.
DIGITAL REVENUES
(£ million)
Why it’s important
Digital revenue growth is a key
strategic objective and this measure
tracks its delivery.
How we measure it
It is the value of digital revenues
generated from the STV family
of services.
10.0m
7.7m
5.3m
5.3m
4.3m
3.5m
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012
Actual
DIGITAL MARGIN
(%)
Why it’s important
Margin improvement across
the period provides evidence
of profitable growth.
How we measure it
It is calculated as operating profit
divided by turnover and expressed
as a percentage.
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012
Actual
50%
45%
32%
30%
30%
23%
09
Business model
rtisin g
e
v
d
A
C
o
n
t
e
n
t
onsumers
C
STV Consumer
Delivers unique, high quality
content to attract mass
audiences which are sold
to advertisers to generate
revenues. The content is
delivered across multiple
platforms including digital
terrestrial, cable and
satellite, online and through
connected devices such
as games consoles and
Smart TVs. The business
aims to use its unique
content to create
communities of interest
and to engage consumers.
STV Productions
Creates and produces
high quality content for
broadcast networks in
the UK and overseas.
Profit is made on initial
sale and on the exploitation
of back end rights in
the UK secondary and
overseas markets.
Measurement: The key
corporate KPIs are used
to monitor and measure the
progress of each division
in fulfilling its strategy.
Strategic growth aims to 2017
Target a normalised
EPS CAGR of 10%
across 2014-2017
underpinned by
11 KPI growth targets
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
CONSUMER
continued
Delivering relevant content
A key indicator of the success of our
programming strategy is the aim
to deliver a share in excess of the
ITV Network. This has been achieved
for the fifth consecutive year.
PEAK TIME AUDIENCE
(v ITV Network)
Why it’s important
Our programme strategy results
in more Scottish based content
appearing on screen and it is
important that an audience share
is delivered at least equivalent
to that of the ITV Network.
How we measure it
Peak audience (18:00-22:30)
for all adults is compared to the
ITV Network.
2014 Actual
+0.3 share pts
2013 Actual
+1.5 share pts
2012 Actual
+1.3 share pts
Alongside popular national content,
such as The X Factor and Coronation
Street, we aired a number of strong
home-grown productions for viewers
in Scotland on Channel 3.
We also launched our HD service on
Sky and Freesat in April, making our
content available to viewers within
STV’s licence areas on satellite in high
definition. A regionalised service for
consumers in Dundee on Freesat
and Sky followed in September.
The micro-region approach not only
allows STV to deliver content that
is locally relevant but enables our
advertisers to reach their consumers
with a targeted approach.
Popular sponsored series, such as
Too Good to Waste sponsored by
Greener Scotland of the Scottish
Government and RBS – Finding
Scotland’s Real Heroes, sponsored by
The Royal Bank of Scotland, returned
to the peak-time schedule.
A third series of Animal 999 aired
giving viewers an insight into the
work carried out by Scotland’s
leading animal welfare charity,
the Scottish SPCA.
In October, a brand new series set
out to follow in the footsteps of
broadcaster Tom Weir. On Weir’s Way
with David Hayman brought together
original footage from the Tom Weir
programmes with new footage of
revered Scottish actor David Hayman.
The eight episodes drew an average
audience of 358,000 viewers with
archive episodes repeated on City TV
channel, STV Glasgow, after the new
series on STV.
We also aired a documentary to
commemorate the Scottish women
of World War I on 11th November.
The Women Who Went to War –
A Great Adventure, narrated by Kirsty
Wark, revealed the story of the ladies
of the Scottish Women’s Hospitals
who travelled 2,000 miles to Serbia in
Eastern Europe to deliver medical
assistance.
Sport continues to perform well on
the STV schedule with the 2014 FIFA
World Cup Brazil, UEFA Champions
League and November’s Scotland v
England friendly match attracting
high ratings. The best watched World
Cup match, Uruguay v England,
attracted a share of 44% and an
average audience of 852,000 Scots.
The Scotland v England match
achieved an average audience of
797,000 with a 35% share.
In addition to strong viewing figures,
the STV schedule also drove streams
on the STV Player, bringing a more
diverse profile of viewers to the STV
Family of services. The Player attracts
a higher ABC1 audience and younger
viewers than the traditional STV
audience.
Popular STV Player content included
the soaps, Coronation Street and
Emmerdale, entertainment shows
The X Factor and Britain’s Got Talent,
and sport, such as the Scotland v
England friendly which achieved
35,000 streams. The best watched
individual programme on catch-up
was the first referendum debate;
Salmond & Darling – The Debate
delivered over 73,000 streams.
LONG FORM VIDEO STREAMS
(million)
Why it’s important
Video streams are a key advertising
currency and are directly related to
generating advertising revenues.
How we measure it
Using analytical tools, the number
of video streams across all platforms
can be identified and collated and
this is the annual total in millions.
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012
Actual
21m
18m
14m
14m
11m
5m
In addition to on air programming,
the referendum was covered
extensively online with dedicated
Scotland Decides pages updated
regularly by the online news team.
In order to inform our programming
and bring viewers all the latest
news and analysis, STV News
undertook six polls in conjunction
with research company Ipsos MORI.
The first poll was published on the
18th September 2013 with exactly
one year to go until the referendum,
and the final poll was published
on 17th September 2014, the day
before the vote.
Earlier in the year, we also broadcast
a programme that concluded our
national debating competition for
school pupils in secondary years
five and six. Referendum: The Next
Generation was the result of a
Scotland wide competition that
was open to secondary pupils
offering them the opportunity to
participate in debates on subjects
related to the referendum on Scottish
independence. The competition
was delivered in conjunction with
Debating Matters and engaged schools
from all 32 local authority areas.
STV’s aim to be a leading consumer
focused Company, underpinned by
our renewed licences to deliver PSB
content, is the focus of our business.
A more cohesive STV Family of services
and targets for the key business
areas are now in place and we
believe we are well placed to deliver
sustainable and profitable growth.
Providing a platform for debate
An integrated consumer offering
includes the popular news and
current affairs output delivered
by our news team. Public Service
Broadcasting (‘PSB’) is at the heart of
what we deliver to our consumers
and the role STV played in the run
up the referendum on Scottish
independence is an excellent
example of our multi-platform
approach as we seek to maintain our
position as the ‘voice of Scotland’.
In August, we secured the first live
landmark TV debate between First
Minister Alex Salmond and the leader
of Better Together, Alistair Darling.
The debate was hosted by STV’s
political editor Bernard Ponsonby
from the Royal Conservatoire of
Scotland in Glasgow in front of an
audience of 350 members of the
public that represented views from
all sides. The debate reached a
TV and online audience of over
1.7 million and was the best
performing political debate in
Scotland for over 10 years.
We also hosted a second live TV
debate from the capital with a studio
audience. Yes or No – The Debate saw
three representatives from each side
of the referendum debate discuss
key topics on the 2nd September.
This debate also aired on ITV Border
and was broadcast across the ITV
network later that evening.
With less than a week to the vote,
we delivered the first social media
debate of the referendum in
conjunction with Facebook. Users
were invited to pose questions
in advance and the debate was
hosted live from STV studios and
simultaneously broadcast on
STV Glasgow and streamed live
on Facebook.
11
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CHIEF EXECUTIVE’S REVIEW
PRODUCTIONS
The productions business
continues to secure
returning formats and
develop a strong pipeline
of new commissions
based on a strategy to
diversify genres.
STV Productions business delivered
revenues of £13.3 million, short of
the 2014 KPI of £16.8m, reflecting a
shortfall in deliveries against target.
PRODUCTION REVENUE
(£ million)
Why it’s important
Increasing production revenues is
a key strategic aim which increases
the diversification of the Group’s
revenue sources.
How we measure it
It is the value of revenues generated
from external commissions and
secondary sales.
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012
Actual
23.0m
20.0m
13.3m
16.8m
13.5m
10.2m
Strategic partners
In January, Munich-based Red Arrow
International began its role as STV’s
worldwide distributor for completed
programmes and formats outside
the UK.
An increase in demand for high
quality drama from the new drama
channels ITV Encore and UKTV Drama
has resulted in high UK secondary
sales for our rich archive of content,
such as Rebus and Dr Finlay, and
international sales remains a key
source of income for the business.
Antiques Road Trip is particularly
popular with strong territories
including Scandinavia, Australia
and New Zealand.
A key partnership announced
in 2014 was the agreement with
Warner Bros. International
Television Production to globally
distribute our new format The Link
for the international market.
In May 2014, a jointly developed
action-adventure drama series
based on the life of Rob Roy was
announced in conjunction with
FremantleMedia.
The business also continued to work
with GroupM on a number of
co-produced projects, including the
ITV entertainment series Let Me
Entertain You which aired in spring
2014, and a documentary for
Channel 5, Britain’s Deadliest Roads.
Returning formats
In 2014, the number of hours
produced totalled 138 with a range
of commissions and returning series.
It has been a particularly strong
year for returning formats and
STV has secured commissions
for a new series of Catchphrase,
including celebrity versions, The Lie,
The Link, Antiques Road Trip and
Celebrity Antiques Road Trip.
An initial run of 25 episodes of
The Link was announced in March
and aired from early May on BBC
One. The first series averaged an
audience in excess of one million
viewers per episode, securing a
commission for a second series.
The second series of 40 episodes
was delivered at the end of 2014
and aired in early 2015.
The Lie was recommissioned for
TV3 in Ireland and STV in Scotland.
A deal was also struck with S4C/
Cwmni da for the game format and
eight episodes have been made
for Welsh audiences to air in 2015.
The second run of The Lie totals
60 episodes across the three
broadcasters with strong
international interest and options
secured, particularly in France
where a pilot was produced.
Catchphrase was commissioned for
a further 13 episodes, including
three celebrity episodes, and
continues to deliver strong ratings
for ITV, and ITV2 for repeat
episodes, and an income via the
Catchphrase App.
Antiques Road Trip and Celebrity
Antiques Road Trip also returned
to BBC One and BBC Two with
further series to air following an
announcement for four new series
of Antiques Road Trip and one new
series of the celebrity version. This
takes the total number of series to
12 Antiques Road Trip and four
Celebrity Antiques Road Trip.
A further fifth series of Celebrity
Antiques Road Trip was
commissioned in November.
Diversifying genres
Two successful specialist factual
documentaries aired on BBC One
and BBC Two.
Tutankhamun: The Truth Uncovered
was an international co-production
with STV Productions and Cream
Productions, Canada for BBC One,
Discovery Canada and the
Smithsonian Channel.
Swallowed by the Sea: Ancient Egypt’s
Greatest Lost City aired on BBC Two.
A further transmission pilot was
delivered for Animal Planet in the
US. Life After Chernobyl is due to air
in 2015.
The appointment of Sarah Brown
as head of drama represents a
continuing focus in this genre.
Sarah joins from BBC Drama
Production where she was an
executive producer.
In August, we announced that
STV Productions has secured the
television rights to the bestselling
novel Elizabeth is Missing by Emma
Healey. This title is being developed
by STV Productions as a three
part series.
STV Productions also co-produced a
number of crime documentaries with
BBC ALBA, including The Real Jekyll and
Hyde?, Sgeulachd Deacon Brodie and
Baby Killer? and Sgeulachd Jessie King.
In the entertainment genre a pilot
was filmed for fully interactive
quiz show You Against The Nation.
Two hour long documentaries
were also delivered for Channel 5,
Britain’s Deadliest Roads and Britain’s
Worst Commutes.
The productions business delivered
a margin of 3.0% in 2014.
PRODUCTION MARGIN
(%)
Why it’s important
Margin improvement across
the period provides evidence of
profitable growth.
How we measure it
It is calculated as underlying
operating profit divided by turnover
and expressed as a percentage.
2016 Target
2015 Target
2014 Actual
2014 Target
2013 Actual
2012
Actual
7%
6%
3%
5%
3%
2%
The key ambition for the productions’
business is to drive growth and build
a production business of scale from
a Scottish base. We will continue to
work with our partners in the year
ahead to deliver on this ambition.
13
Returning series
Returning series are a key
part of STV Productions’
business with BBC, ITV, TV3
and STV all ordering new
episodes of content that has
proved popular with audiences:
Catchphrase
The Lie
The Link
Antiques Road Trip and
Celebrity Antiques Road Trip
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
PERFORMANCE REVIEW
There have been several
financial highlights in
2014, including:
• Strong revenue growth,
especially digital revenues
• Significant capital investment
in our news infrastructure and
digital operations
• A return to dividend payments
• A new eleven year pension deficit
funding agreement being concluded
• An amendment and extension
of the Group’s bank facility to
June 2019 on improved terms.
At the same time, we have delivered
another year of strong performance
against the financial KPIs and
continued to reduce net debt which
now stands at 1.4x EBITDA at the
year end.
Revenue
Total revenue was up 7% at £120.4m
(2013: £112.1m) with strong
contributions from national airtime
and digital revenues.
Consumer division revenues were up
9% at £107.1m (2013: £98.6m), with
national revenues again performing
strongly, up 8%, ahead of the
television market.
Digital revenues were up 23% at
£5.3m (2013: £4.3m) meeting their
KPI target and reflecting continued
growth in catch up viewing of long
form video on the STV Player.
Production division revenues were
marginally down at £13.3m (2013:
£13.5m) as the expected growth
from new commissions, particularly
in the drama genre, did not occur.
Operating profit
Operating profit increased by 8%
to £19.5m (2013: £18.0m). This strong
performance was driven by the
Consumer division which increased
operating profits by £1.5m to £19.1m
(2013: £17.6m) and delivered margins
ahead of the KPI target and flat year
on year at 17.8% (2013: 17.8%). This
was a very good performance given
the cost headwinds from higher
network programme costs, carriage on
SkyHD and continued investment in
our digital operations. This investment
in digital continues to be rewarded
with profits from these activities
growing to £1.6m (2013: £1.3m)
generating an operating profit margin
of 30%, in line with the KPI target.
Productions operating profit was
flat at £0.4m (2013: £0.4m) with
a flat margin of 3% (2013: 3%) which
reflected the lack of revenue growth
in 2014.
OPERATING PROFIT
(million)
2014
2013
2012
2011
2010
£19.5m
£18.0m
£17.1m
£15.0m
£14.4m
+8%
Finance costs
Net finance costs fell again in 2014
to £2.2m (2013: £3.7m), mainly due
to a reduction in cash interest costs
as net debt fell and the interest
margin payable also reduced due
to lower debt levels and the lower
interest margin payable under the
amended and extended bank facility.
Statutory result
The statutory result for the year after
tax was a profit of £14.7m (2013:
£12.2m). The Group’s effective tax
rate was unchanged at 15% (2013:
15%) as prior year losses continue to
be utilised. It is now anticipated that
corporation tax payments will
resume in 2016.
Earnings Per Share (EPS)
EPS before IAS19 non-cash pension
interest increased by 13% to 38.7p
(2013: 34.4p) On a statutory basis EPS
also amounted to 38.7p (2013: 32.2p).
Cashflow and net debt
Net debt fell by a further 18% in 2014
to £29.4m (2013: £35.7m). The key
measure of operating profit
converted to free cashflow was lower
than usual at 79% (2013: 94%) due to
the highest level of capital
expenditure investment in the
business since 2006 when the Group
was significantly different in
operations and scale. Capital
expenditure totalled £5.3m and
included over £2.0m of investment in
news cameras and equipment as
well as significant investment in our
digital services and broadcast
infrastructure.
The debt reduction is also after
higher pension deficit funding
payments (£5.8m) and the
recommencement of dividends
(£1.6m). Net debt at 31 December
2014 represented 1.4x EBITDA
(2013: 1.9x) and is on track to meet
the revised goal of sub 1.0x EBITDA
by the end of 2015.
DEBT REDUCTION
(million)
2014
2013
2012
2011
2010
£29.4m
£35.7m
£45.3m
£54.5m
£52.2m
-18%
15
Balance sheet
The principal movements on the
Group’s balance sheet were the
reduction in net debt noted above
and a movement from a pension
surplus to deficit on an IAS19 basis.
The 2013 year end surplus of £1.1m,
net of deferred tax, moved to a deficit
of £11.8m, also net of deferred tax,
due to a fall in the discount rate used
to present value the liabilities and the
inclusion of a future improvement in
life expectancy assumption this year
based on wider industry practice.
In July 2014, we announced an
agreement with the defined benefit
pension schemes’ trustees over the
2012 triennial valuation. This will see
the funding deficit of approximately
£83m being cleared over 11 years by
payments averaging £7m per annum
which are tax deductible. The
significant difference between the
IAS19 deficit and the funding deficit
is due to differing interest rates being
used to discount the liabilities to
present value – the IAS19 basis uses
a higher corporate bond rate while
the funding deficit basis uses a gilt
rate. The next triennial valuation will
take place during 2015.
Dividends
The Group recommenced dividend
payments during 2014 with the first
being the final 2013 dividend of 2.0p
per share which was paid in May
2014. This was followed by the
interim 2014 payment, also of 2.0p
per share, which was paid in October
2014. A final 2014 payment of 6.0p
per share has been declared which,
subject to approval at the AGM in
April, will be paid to shareholders in
May 2015. This would result in total
dividends of 8.0p per share for 2014
– quadruple the 2013 level. We will
continue to follow a progressive
dividend policy and the 2015 total
payment is expected to be 10.0p
per share – an increase of 25% on
2014 levels.
As at 16 March 2015, the Group had been notified of the following interests
of 3% or more in its shares:
Shareholders
Blackrock Inv Mgt
UBS Global Asset Mgt
JP Morgan Asset Mgt
Odey Asset Mgt
Threadneedle Asset Mgt
Crystal Amber Asset Mgt
Artemis Fund Managers Ltd
Miton Group plc
Cavendish Asset Mgt
Slater Investments
AXA Framlington
Shares
3,250,296
3,231,164
3,143,954
3,000,000
2,264,186
2,230,700
2,061,593
1,899,949
1,882,757
1,303,062
1,258,681
%
8.27
8.22
8.00
7.63
5.76
5.68
5.25
4.83
4.79
3.32
3.20
Principal activities
The principal activities of the Group
are the production and broadcasting
of television programmes, internet
services and the sale of advertising
airtime and space in these media.
The Group continues to focus on its
television and digital media business.
Compliance
Part of the information that fulfils
the Companies Act requirements of
the Directors’ Report can be found in
the Performance Review on pages 14
to 16. The Group’s principal operating
subsidiaries are listed in note 2 of the
Company financial statements and
details of the principal risks and
uncertainties facing the Group can
be found on pages 17 and 18.
Independent Auditors and
disclosure of information
So far as the Directors are aware
there is no relevant audit information
(that is information needed by the
Group’s auditors in connection with
preparing their report) of which the
Group’s auditors are not aware. Each
Director has taken all steps that he or
she ought to have taken as a Director
in order to make him or herself aware
of any relevant audit information and
to establish that the Group’s auditor
is aware of that information.
Going concern
The Group continues to review
forecasts to determine the impact
of both the short-term and long-term
liquidity position. After making
appropriate enquiries, and taking
into account the amendment and
extension of the banking facility in
June 2014, the Directors have a
reasonable expectation that the
Group has adequate resources
to continue in operation for the
foreseeable future. Accordingly,
the Group continues to adopt the
going concern basis in preparing its
consolidated financial statements.
Statement of Directors’
Responsibilities
The Directors are responsible for
preparing the Annual Report, the
Directors’ Remuneration Report
and the financial statements in
accordance with applicable law
and regulations.
Company law requires the Directors
to prepare the financial statements
for each financial year. Under that
law the Directors have prepared
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
PERFORMANCE REVIEW
continued
the Group financial statements in
accordance with International
Financial Reporting Standards (IFRSs)
as adopted by the European Union,
and the parent company 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 the affairs of the
Group and the profit and loss of the
Group for that period.
In preparing these 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
• state whether applicable IFRSs as
adopted by the European Union
and applicable UK Accounting
Standards have been followed
subject to any material departures
disclosed and explained in the
Group and parent company
financial statements respectively
• prepare the financial statements
on the going concern basis unless
it is inappropriate to presume that
the Group will continue in business.
The Directors consider that the
annual report and accounts for the
year ended 31 December 2014,
when taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
Company’s performance, business
model and strategy.
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 the
Group and enable them to ensure
that the financial statements and the
Directors’ Remuneration Report
comply with the Companies Act 2006
and, as regards the Group financial
statements, Article 4 of the IAS
Regulation.
They are also responsible for
safeguarding the assets of the
Company and the Group and hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
Directors’ Statement
pursuant to the Disclosure
and Transparency Rules
Each of the Directors, whose names
and functions are listed on pages
28 and 29 confirm that, to the best
of his or her knowledge and belief:
• the Group financial statements
which have been prepared in
accordance with IFRSs as adopted
by the EU, give a true and fair view
of the assets, liabilities, financial
position and profit of the Group
• the Directors’ Report includes a fair
review of the development and
performance of the business and
the position of the Group, together
with a description of the principal
risks and uncertainties that it faces.
The Directors are responsible for the
maintenance and integrity of the
Group’s corporate website and
legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
Directors’ Report Strategic Report
PRINCIPAL RISKS
17
Regulatory environment
Our television business is operated
under licences which are regulated
by Ofcom and on 11 February 2014
both licences were renewed for a
further 10 year term through to 2024.
These Channel 3 licences contain
conditions around contribution to
public service broadcasting,
programme production and
compliance with Ofcom’s codes. As
licensees it is STV’s responsibility to
ensure that the terms of these
licences are adhered to and
measures have been put in place
internally to ensure that this occurs.
In the event of any serious or
repeated breaches, Ofcom has
powers to impose sanctions on
licensees including, in the most
extreme circumstances, financial
penalties or revocation of licences.
Dependence on advertising
STV’s sales, expenses and operating
results could vary from period to
period as a result of a variety of
factors, some of which are outside
STV’s control. These factors include
general economic conditions;
conditions specific to general
advertising markets including: the
commercial television market; trends
in sales; capital expenditure and
other costs; and the introduction
of new services and products by us
or our competitors. In response to
an ever-changing operating and
competitive environment, STV may
elect from time to time to make
certain pricing, service or marketing
decisions that could have a material
adverse effect on sales, results of
operations and financial conditions.
Like most businesses,
STV Group plc is exposed
to a number of risks
which could have an
impact on its operating
results, financial condition
and prospects and there
are rigorous internal
systems to identify,
monitor and manage
any risks to the business.
STV’s risk register has been developed
in a way which allows the key
risks facing STV to be summarised
and actions taken to improve
control tracked.
The risk register sets out the key
risks that have been identified,
allocating an owner to each, together
with the risk impact, likelihood and
score both on a gross and, after
the current mitigating controls have
been taken into account, a net basis.
The effectiveness of the current
mitigating controls is graded as
strong, adequate or weak and any
additional controls required are also
noted. The register is reviewed and
updated on an ongoing basis both
at an operational level and on a
biannual basis by the Board, with
the Audit Committee conducting
an in-depth annual review.
A further in-depth refresh of the Risk
Register will be carried out in 2015.
All of the risks identified have been
fully evaluated and taken into
account in preparing the budgets
and forecasts which support going
concern and impairment
assessments. The risks have also
been reviewed and agreed with both
internal and external auditors.
Performance of the ITV Network
The majority of STV’s programming
content is provided by the ITV
Network. Therefore, its ability to
attract and retain audiences and the
advertising airtime sales
performance of ITV’s sales house
– which is responsible for the sale of
STV’s UK national airtime to
advertisers – are factors that affect
performance. This relationship is
managed closely, with regular
updates on programme and schedule
developments being provided
through STV’s Commercial Director
who manages the sales relationship
with ITV.
Pension scheme shortfalls
We believe that the STV pension
schemes are relatively strong, and
the investment strategy is calculated
to reduce any material market
movement impacts. However, it is
possible that the Group may be
required to increase its contributions
to cover an increase in the cost of
funding future pension benefits or to
cover funding shortfalls which could
have an adverse impact on results
and cash flow. This position is kept
under regular review by the Board.
Financial
The overall financial position of
STV may be constrained by the
Group’s leverage and other debt
arrangements. An increase in LIBOR
interest rates could have an adverse
impact on the financial position and
business results. STV is exposed to
a variety of financial risks that arise
from and apply to its activities:
currency risk; credit risk; liquidity risk;
and cash flow interest rate risk. The
Group’s borrowings are denominated
in Sterling. The Group’s overall risk
management programme focuses
on the unpredictability of financial
markets and seeks to minimise
potential adverse effects on financial
performance.
STV Annual Report and Accounts 2014
c) Liquidity risk
Prudent liquidity management
implies maintaining sufficient cash
and marketable securities, the
availability of funding through an
adequate amount of committed
credit facilities and the ability to close
out market positions. Due to the
nature of the underlying business,
the aim is to maintain flexibility in
funding by keeping committed credit
lines available.
d) Cash flow interest rate risk
STV has no significant interest
bearing assets and its income and
operating cash flows are substantially
independent of changes in market
interest rates. The Group policy is to
hedge 50% of floating rate borrowing
interest risk.
Directors’ Report Strategic Report
PRINCIPAL RISKS
continued
STV uses derivative financial
instruments to hedge certain risk
exposures.
Risk management is carried out
under policies approved by the
Board with financial risks being
identified, evaluated and hedged
in close co-operation with the
operating divisions. The Board
provides written principles for overall
risk management, as well as written
policies covering specific areas,
such as foreign exchange risk,
interest rate risk, credit risk, use of
financial instruments and investing
excess liquidity.
a) Currency risk
STV operates almost wholly within
the UK and is exposed to minimal
currency risk. The Group’s borrowings
are denominated in Sterling. Currency
risk arises primarily with respect
to the Euro and US dollar and from
future commercial transactions
and trade assets and liabilities in
foreign currencies.
b) Credit risk
STV has no significant concentration
of credit risk. It has policies in place
to ensure that sales are made to
customers with an appropriate credit
history. Derivative transaction
counterparties are limited to high-
credit/quality financial institutions.
Directors’ Report Strategic Report
CORPORATE RESPONSIBILITY
19
Rob Woodward
Chief Executive
Our people
As a talent led, consumer focused
Company with creativity at its heart,
our people are the driving force
behind the progress and
achievements delivered in 2014.
During 2014, a programme based
upon the Company’s internal values
– The STV Way - designed to increase
employee engagement, enabled
staff to embrace these values as they
delivered their goals and objectives.
Through The STV Way everyone in
the business is encouraged to be
bold; to stand together; and to strive
to surprise in responding to future
challenges and opportunities. Two
years ago a highly participative series
of employee engagement sessions
were undertaken involving staff from
all areas of the business to define
the values and organisational culture
of STV. Through these sessions
The STV Way was defined.
This behavioural framework has
formed the backdrop of our people
strategy and through this, and the
focus this provides in how we interact
with colleagues across the Company
and with our consumers and external
stakeholders, we have developed a
strong cultural compass and collective
sense of purpose that is at the core
of how staff ensure they are effective
in deepening relationships with our
consumers and commercial partners.
Reward and recognition
We continue to benchmark all areas
of remuneration against a UK-wide
media industry peer group. This
approach has provided a transparent
grading and remuneration banding
framework against which all roles are
evaluated relative to a peer group
and across the wider industry.
This approach has ensured that as
the rate of external recruitment has
increased during 2014, with 22%
growth in permanent staff, the
Company’s market competitive salary
and benefits structure has enabled
staff of a consistently high calibre to
be attracted and for retention levels
to be maintained.
Two years ago the Company
committed that, following a period of
relative salary restraint as the
macro-economic outlook was less
positive and relatively uncertain, it
would seek to address the proportion
of staff positioned on salary bands
below the market rate for their role.
Therefore, in 2014 salary awards in a
range from 1% to 5%, were awarded.
This resulted in an average award of
2.8% for staff, with the exception of
the leadership team. The leadership
team, who have foregone salary
increases over recent years, had
increases to base salary re-instated
with an award of 2% in 2014 to
ensure market competitiveness,
support retention and to reflect
business performance.
Ensuring employee rewards and
benefits remain market competitive,
particularly when recruitment
activity has increased, has resulted
in a review of the Company’s benefits
offering during 2014. STV Benefits
have been repositioned and new
employee benefits have been
introduced including a flexible holiday
plan and a computer purchase scheme.
STV Pulse
To ensure rigour in the measurement
of employee engagement levels, the
Company’s online employee opinion
survey, STV Pulse, was launched in
2014. This ‘pulse’ style employee
opinion survey is designed to provide
staff with regular opportunities to
express their views and opinions on a
wide range of areas whilst providing
the Company with a tracking and
measurement tool.
Within STV Pulse surveys undertaken
to date, a net promoter score
measuring how likely respondents
are to recommend STV as a place to
work is measured and tracked. The
STV Pulse also tracks employee
perceptions of the extent to which
the employee values: to be bold;
stand together; and strive to surprise,
are being applied.
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CORPORATE RESPONSIBILITY
continued
Performance driven culture
As the business maintains a strong
operational focus on achievement
of the KPIs to deliver business plan
targets, this approach is underpinned
by the assignment of individual
performance goals and targets to
all staff. Through this process staff
are provided with a clear vision of the
strategic aims and priorities of the
Company and these are translated
to a team and individual level to
ensure that every employee gains
an understanding of the contribution
they make towards the KPIs.
The employee performance review
and goal setting process has been
reviewed during 2014. Going forward,
appraisal of performance will be
extended beyond assessment
against performance goals to include
an assessment of behaviour and
approach against the values of
The STV Way.
The Company’s culture is founded
on the principle that everyone can
make a difference and should strive
to achieve continuous improvement.
Regular staff briefings are held by
the leadership team to promote
increased understanding and
awareness of the wider business
amongst staff and provide further
opportunities for staff to have
their say. Our senior leadership
management forum, comprising
the staff responsible for key growth
and revenue targets, meets on
a monthly basis to encourage
collaborative working and facilitate
the acquisition of knowledge of
future trends impacting the sector.
The Chief Executive Officer conducts
regular all staff sessions to provide
updates on business performance,
strategy and developments affecting
the business, and to obtain feedback
and suggestions on the development
and growth of the business.
The partnership relationship with
the trade unions, recognised by
the Company for the purposes of
collective bargaining, has continued
to develop and progress during 2014.
This is maintained through the
encouragement and facilitation of
regular briefing on business priorities
and progress.
Learning and development
In addition to individual learning
and development requirements
identified through the annual
employee performance and
development process, through
The STV Way, a programme of
learning opportunities has been
delivered for staff during 2014.
This broad programme ranges
from a leadership development
programme delivered in conjunction
with the Centre for Strategic
Leadership at the University of
Edinburgh, to staff drop in sessions
where an insight can be gained into
other areas of the business.
A theme of open access learning
opportunities delivered during 2014
has been to seek to increase
understanding of technology and
platform developments to enhance
the service delivered to consumers.
This has been supported by a
programme of training in the Agile
project development approach
through to encouraging participation
in Mass Open Online Courses
(MOOCs), each supported by a
business sponsor with a depth of
understanding or knowledge in the
subject area to facilitate and mentor
participants.
The Company continues to foster
close relationships with a broad
network of colleges and universities
to support the development of future
talent to the industry and to support
the Company’s future resourcing
requirements. In particular, during
2014 formal partnerships with
two leading Scottish universities,
Glasgow Caledonian University and
Edinburgh Napier University were
launched to support the delivery
of the new City TV services.
Through these partnerships,
students are being provided with
opportunities to develop their skills
in a live broadcast and production
environment; engage with
consumers, particularly through
social media; and will be provided
with opportunities to showcase
content they develop.
During 2014 we have provided
employment opportunities for
over 600 freelance staff.
As STV Productions continues to
secure recommissions of long
running series, this is contributing
to more stable employment
opportunities for freelance staff
working in television production in
Scotland, deepening the talent pool
and making a positive impact to the
creative economy of Scotland.
Over 60 work placements have been
provided to students in secondary,
further and higher education ranging
from supported placements of
one week to long-term internship
programmes.
The Company also participated in a
pilot programme developed by the
NUJ to provide training leading to a
Modern Apprenticeship. The Modern
Apprenticeship in Digital Journalism is
currently being evaluated and it is the
Company’s aim to increase the scope
of this investment in the future.
21
Equal opportunities and diversity
The Company is committed to a
culture where everyone is treated
with dignity and respect and has
the opportunity to deliver their full
potential. Policies to ensure that the
Company engages effectively with
audiences and consumers and
attracts a diverse pool of creative
talent are monitored on an ongoing
basis. The aim of these policies is
to ensure that all employees and
potential employees are treated in a
fair and equitable manner regardless
of their age, disability, marital status,
family responsibility, race, colour,
ethnic background, nationality,
religion or belief, gender, gender
identity or sexual orientation.
A diverse workforce enables the
Company to respond better to and
reflect our audiences and consumers
in all their diversity and it is important
that a working environment is created
which enables our employees to
thrive and achieve their full potential.
A number of registered disabled
persons are employed, all of whom
have had equivalent access to
training and career development
opportunities as their able-bodied
colleagues. No employees became
disabled during the course of their
employment in 2014.
The Company is fully committed
to fostering talent and supporting
people from all backgrounds
who wish to progress, however,
appointments and promotions are
and will continue to be made, based
on merit and in line with the skills
and attributes identified for each
post, including those identified by
the Nomination Committee for the
Board. Overall, the Company is
committed to appointing the best
available person to a role, regardless
of gender.
The overarching aim in making any
new appointments to the Board
must always be to select the best
candidate to enhance functionality
and to improve decision making as
the primary focus is the strength
of the Board. All appointments will
continue to be based on merit,
measured against objective criteria
and the skills and experience the
individual offers.
Health and safety
STV is committed to compliance
with all workplace health and safety
laws and regulations, to provide
a safe and healthy working
environment. Employee health
and accidents are monitored closely
and health promotion programmes,
designed to reduce health risk and
enhance employee well-being, are
regularly undertaken. A proactive
approach to improve the Company’s
management documentation
systems, to provide suitable and
sufficient information, instruction,
training and supervision is in place.
First Aid training refresher courses are
carried out on a continual basis and
we have a full complement of
54 first aiders located throughout
STV sites. Eleven of our staff at Pacific
Quay are also trained in the use of
the on-site defibrillator and five staff
in Craigshaw where we now have
a defibrillator on-site.
STV has chosen not to target a specific
number or percentage of women for
its Board, but to concentrate its efforts
on encouraging more women to
remain within the Company and
progress through the ranks to senior
positions. Three of the 10 members
of the leadership team are female as
is the Company Secretary and as at
31 December 2014, 49% of STV’s staff
were female, the same as last year.
STV has a proactive and responsible
attitude towards occupational
road risk management with clear
procedures in place that are reviewed
regularly so that they remain
appropriate and to a high standard.
Driving standards and rules are
communicated to staff through
STV’s Drivers Manual and this
helps maintain the Company’s low
accident rates.
Directors
Leadership Team
Employees
2014
Female
Male
2013
Female
Male
66.7% 33.3% 75%
70% 30% 70%
51% 49%
51%
25%
30%
49%
%
change
up 33%
none
none
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CORPORATE RESPONSIBILITY
Continued
We have continued to place our
news and creative teams, and our
new STV Glasgow and STV Edinburgh
channel teams, on safety training
with a Chartered Health and Safety
Consultant who specialises in media
safety training. A total of 32 staff
this year have completed the
safety training.
2014
2013
2012
11
6
29
24
29
12
54% 83% 41%
Total accidents
Number
attributable
to driver error
Percentage
attributable to
driver error
Health and safety performance
in 2014
STV report work-related accidents,
diseases and dangerous occurrences
in compliance with the Reporting of
Injuries, Diseases and Dangerous
Occurrences Regulation 1995
(‘RIDDOR’). Analysis of the causes of
accidents provides valuable
information for implementing
improvements, if and when required,
in working practices and procedures.
Donations
The Company’s policy is not to
make donations which are of a
political nature.
Our environment
STV recognises that its day-to-day
activities can, and do, have an effect
on the environment. The Company’s
environmental policy is aimed at
reducing impacts on the environment
and is part of the culture of the
business. The Company is committed
to the continuous improvement of
its environmental performance and
the reduction of pollution and is a
member of The Prince’s May Day
Network, a collaboration of businesses
addressing climate change which was
founded by HRH The Prince of Wales.
Throughout 2014 we have been
able to recycle 100% of our waste
(with the introduction of Refuse
Derived Fuel (‘RDF’) via our waste
management contractor), resulting
in no waste being diverted to landfill.
STV has a Green Travel Plan at
the Glasgow headquarters to
encourage staff to use more
sustainable means of transport
to commute. To promote cycling,
shower facilities, cycle parking
and lockers are provided for
employees. A car sharing initiative,
matching up employees living
in the same area, enabling them to
travel to work together is managed.
There are currently 30 members
of staff taking part in this initiative.
STV also took part in National Bike
Week and had our own STV Cycle
to Work Day on 24th July with
approximately 25 staff participating.
During 2014 STV started recycling
old mobile phones via SHP. They uplift
all of the redundant mobiles, recycle
them and then send us a cheque
which we then put back into the
STV Appeal. During 2014 we recycled
34 handsets and raised over £200
for the charity.
Reporting greenhouse gas emissions
Assessment parameters
Boundary summary
All entities and all facilities either owned
or under operational control were included
The Facilities Manager is the designated
senior manager responsible for health
and safety matters.
Materiality threshold
Materiality was set at 5%
Intensity ratio
Emissions per £m of revenue
RIDDOR three-day reportable
accidents
2014
2013
2012
Greenhouse
gas emission source
0
3
Scope 1*
Scope 2**
RIDDOR
three-day
reportable
accidents
Total of all
accidents
1
7
FY2014
(tCO2e/£m
revenue)
4.04
17.4
(tCO2e)
486.51
2095.94
(tCO2e)
442.26
1,924.24
FY2013
(tCO2e/£m
revenue)
3.94
17.17
21.11
Statutory total (Scope 1 & 2)
2,582.45
21.45
2,366.50
5
11
* Scope 1: emissions from activities and sources we own and control e.g. cars.
** Scope 2: emissions associated with our consumption of purchased electricity, heat, steam,
and cooling, heating offices etc.
Explanations
Scope 1 Travel
Increase in the travel emissions
due to:
• the increase in staff travelling back
and forth to London – relocation
of staff to the London office
(Sales/Creative) has resulted in
more travel between the offices
• increased Production presence
based in London office
• rail travel has increased. Staff have
been encouraged to travel via rail
rather than air to reduce costs
and emissions
• increase in international travel
during the year – France for D Day
(News), Amsterdam x 2 visits for
Technology Seminar (Technology),
Egypt and Ukraine for new
Production (Content), attendance
at Board meetings for Michael
Jackson, Non-Executive Director
(resident in USA).
Scope 2 Energy
• gas usage has increased –
increase in staff in Glasgow
office and Studio 2 usage for
The Riverside Show
• electricity usage has increased
– increase in staff in Glasgow
office and Studio 2 usage for
The Riverside Show.
Waste
Biffa (previously Shanks) recycle 100%
of our waste via refuse derived fuel
(‘RDF’), so no waste is going to
landfill.
GHG emissions statement
STV has reported on all of the
emission sources required under
the Companies Act 2006 (Strategic
Report and Directors’ Reports)
Regulations 2013.
These regulations require us to
state the annual emissions in tonnes
of carbon dioxide:
i) from activities for which we
are responsible, including the
combustion of fuel and the
operation of our facilities; and
ii) resulting from the purchase
of electricity, heat, steam or
cooling by us for our own use.
There is no prescribed methodology
under the regulations, but the
independent standard we have
chosen to use in order to ensure
effective emissions management
and transparency in reporting, is
the UK Government’s Environmental
Reporting Guidance (2013 version).
STV must also express our emissions
by way of an intensity ratio to allow
the comparison of our performance
over time and also with other similar
types of organisations.
GHG emissions are to be reported as
a gross figure in tonnes of CO2e and
the intensity ration we have chosen is
CO2e per million pounds of revenue.
23
STV Annual Report and Accounts 2014
Directors’ Report Strategic Report
CORPORATE RESPONSIBILITY
continued
2014 was a record year for
the STV Appeal with £2.6 million
raised to help children and young
people affected by poverty.
This money has already been
distributed across all 32 local
authority areas in Scotland to
a range of large and small projects.
The money raised by the STV Appeal
is distributed to provide practical
help like food and warm clothes;
create opportunities for training
and employability; and enable social
and emotional support for those
who need it most.
In its first four years the STV Appeal
has raised over £8.2 million and
fundraising for the STV Appeal 2015
is already underway.
STV
APPEAL
2014
STV Appeal 2014
The STV Appeal is a charity
committed to fighting child poverty
in Scotland. It was launched in 2011
by STV and The Hunter Foundation
and in 2013 The Wood Foundation
pledged its support to the Appeal
for projects in the North East.
Now firmly established as a major
Scottish charity, the STV Appeal has
had a very successful fourth year
and raised the sum of £2.6 million
for children and young people living
in poverty.
Since launch, the STV Appeal has
raised over £8.2 million which has
funded 297 big and small grants to
projects across all 32 local authority
areas in Scotland, providing much
needed support to over 37,000
children.
The money raised by the STV Appeal
helps make a real difference in the
lives of Scotland’s children and young
people by providing practical help like
food and warm clothes; creating
opportunities for training and
employability; and enabling social
and emotional support for those who
need it most.
A fundamental principal of the STV
Appeal is that every single penny
raised by the STV Appeal stays in
Scotland and 100% of donations are
spent on the children who need it
most. All overheads are met by STV
and The Hunter Foundation and in
2014, the Scottish Government once
again committed to match fund the
first £1m raised.
Work is now underway to distribute
this year’s funds to charities across
the country. The STV Appeal
endeavours to work beyond reactive
grant-making, to identify and target
key areas of unmet need. The charity
works alongside experts from across
Scotland to change perceptions and
attitudes towards child poverty and
invest in solutions. Investment is
made in innovative and effective
projects that will make a sustainable
difference to Scotland’s most
disadvantaged children and young
people, and support long-term social
change.
It is part of STV culture that all
members of staff can make a
difference and the Appeal relies on
the support of our employees who
fundraise and volunteer throughout
the year. By climbing Ben Nevis,
cycling between Glasgow and
Edinburgh, and holding various
fundraising events, staff contributed
over £100,000 to the Appeal and
they are able to see the difference
they make when distributing the
grants to projects where they can
meet the project workers and people
the Appeal supports.
Money is raised through individual
donations from STV consumers,
community groups and schools as
well as fundraising led by corporate
partners. Leading businesses,
including The Royal Bank of Scotland,
Optical Express, Lidl and ScottishPower
are proud supporters of the Appeal
and encourage their staff and
customers to support the fundraising
efforts to support the fight against
child poverty in Scotland.
25
The STV Appeal is now in its second
year as charity partner of Freshnlo
Pedal for Scotland. This year, the
number of Pedal for Scotland cycle
events increased and greater
numbers of individuals, staff
members and corporate partners got
on their bikes to support the Appeal.
Freshnlo Pedal for Scotland was
one of the many events celebrated
in a week of dedicated Appeal
programming in 2014. A series
of engaging, entertaining and
celebrity packed programmes were
screened in October, culminating
in a star-studded live show hosted
by Lorraine Kelly where the total
sum raised was revealed.
STV’s Appeal programming
celebrated the many fantastic
fundraising activities taken on by
celebrities and communities across
Scotland. This included Lorraine
Kelly’s Shimmy across Scotland,
a 24 hour dance challenge, and a
Highland Challenge completed by
STV’s own Sean Batty with support
from local schools, communities
and STV staff. Programming also
focussed on inspiring fundraising
stories from across the country
and projects and charities working
tirelessly to improve the lives of
children living in poverty.
Through the distinct schedule of
programming, online platforms and
social media channels, the STV
Appeal can use its privileged position
to raise awareness of the issue of
child poverty, make a real difference
and speak up for those children
who can’t.
Rob Woodward
Chief Executive
STV Annual Report and Accounts 2014
Directors’ Report Governance
CHAIRMAN’S STATEMENT
Baroness Margaret Ford
Chairman
2014 was a significant
year for Scotland and
a year of opportunity,
positive momentum and
progress for STV.
The Company set out its aim to
provide the platform for the ‘voices
of Scotland’ during a landmark year
and I am immensely proud of the
extent to which staff across the
business embraced this opportunity,
increasing the Company’s profile and
position, relevance and reputation.
On taking up my appointment as
Chairman last year, I confirmed the
Company’s strategy to achieve
growth through the diversification of
earnings from its growth businesses
– digital services and STV Productions
– whilst continuing to build the core
business through securing an
increased share of the advertising
revenue market in Scotland. I also
set out my commitment to create
sustainable value and deliver capital
return for shareholders.
I am pleased to confirm that the
Company’s performance during 2014
has enabled both to be delivered and
the progress achieved during the past
year, particularly in the consumer
business, will underpin continued
growth in the future.
Strategic aims
Strong financial performance has
been delivered against our key
measures. We have an ambitious aim
to deliver one third of earnings from
non-broadcast activities by the end
of 2015. Whilst progress has been
made towards this during the past
year, the relative progress being
achieved is diminished as the
resilience of the core business has
continued to strengthen as the
television advertising market
stabilises and STV continues to
outperform the UK TV market.
Looking to the longer term beyond
2015, the Board has announced an
additional growth target to achieve
a normalised EPS Compound Annual
Growth Rate of 10% across the period
from 2014 to 2017.
This aim is stretching and ambitious
and delivery will be underpinned by
pursuit of the current strategic priorities
and achievement of the KPI targets.
Stability and investment certainty
Ensuring the Company has a stable
foundation and environment
conducive to growth are key
objectives of the Board. This has been
an area of strategic focus across the
Company over recent years. During
2014 considerable progress was
made to create stability and certainty
for investors through the successful
management of key regulatory,
financial and political risks.
Most notably, the renewal of the
Channel 3 broadcast licences for a
maximum term of 10 years, effective
from January 2015, and based on the
agreement of new commercial and
contractual arrangements with ITV
and securing STV’s position as an
affiliate of the Channel 3 Network,
provide a stable operating
environment and cost base.
In June the extension until 2019 of
the Group’s banking facilities on
improved terms created further
financial stability. Additionally the
agreement of a long term deficit
recovery plan, through a pension
valuation agreement with the
pension scheme trustees, was
secured.
Finally, through the outcome of the
referendum on independence for
Scotland, a potential risk was settled.
Following the referendum, the
Company engaged with the Smith
Commission seeking that broadcasting
remain a matter reserved for
Westminster. The Smith Commission
has reached this conclusion and this
outcome, securing as it does a
consistent approach to policy
determination and regulation
recognises the requirements of STV
operating as part of a cohesive UK
wide network.
The satisfactory resolution of all of
these key factors provides forecasting
certainty, financial flexibility and
stability and a platform to pursue
sustainable growth.
New consumer connections and
commercial opportunities
Increasing the consumer reach of
the Company through the delivery
of informative, relevant and
entertaining content to support
the growth of commercial market
share are at the heart of the
Company’s activities.
This has been supported during
2014 through the development of
the STV Family of branded consumer
products. Within this portfolio new
consumer products and services,
including the highly innovative City
TV services now launched in Glasgow
and Edinburgh, are successfully
creating new opportunities for
advertisers and commercial partners
whilst extending the consumer reach
of the business.
Through the STV Family, the business
is successfully using its unrivalled
audience connection through core
channel, STV, to launch new non-
broadcast services, further extending
consumer engagement. As the STV
Family of services grows, the business
is well positioned to take advantage
of future changes in the market.
STV Productions
STV Productions has continued to
make progress in securing returning
formats, a key element of the
strategy to grow as a thriving
multi-genre content production
business whilst delivering a flat
performance year on year.
The talented and highly creative
team that has been formed has been
strengthened to bring a refreshed
focus to achieving success in the
drama genre.
Financial performance
Strong financial performance has
been delivered against our key
financial measures. Group revenues
are up 7% to £120.4m (2013:
£112.1m), reflecting an improved
advertising revenue market and
growth in digital activities. Revenues
in STV Productions were broadly flat
year on year.
The continued focus on stabilising
the balance sheet resulted in a
further reduction in net debt, down
18%, at £29.4m (2013: £35.7m) and
below the target ratio of 1.5x net
debt: EBITDA and IAS19 interest.
Profit before tax increased by 21%
to £17.3m (2013: £14.3m).
At the beginning of 2014, new KPI
targets were announced, including
metrics focused on consumer
engagement and reach for each
consumer service. The strong
operational performance achieved
in the past year is reflected in six
of the eight KPIs with a 2014 target
being met or exceeded.
Dividend
The Group returned to dividend
payments during 2014, underpinning
the Board’s confidence in the
robust financial position of the
Group and the strength of the
balance sheet.
The Board will recommend a final
ordinary dividend of 6.0 pence per
share, giving a total dividend for the
year of 8.0 pence per share (2013:
2.0 pence per share). Subject to
shareholder approval at the Annual
General Meeting, the final dividend
will be paid on 22 May 2015.
The Board remains committed to
a progressive dividend policy in
the long term.
27
Board changes
Two new Non-Executive Directors
were appointed to the board during
2014. Christian Woolfenden joined
the board in June and Anne-Marie
Cannon was appointed in November.
Jamie Matheson, Non-Executive
Director, will retire from the board at
the AGM in April 2015 having served
for 8 years during the turnaround
and transformation of the Company.
On behalf of the Board, I would like
to thank Jamie for his valued
contribution and wise counsel
throughout those years.
Conclusion
The Company’s strong track record
of delivery resulted in a transformed
financial position, unparalleled
audience and consumer engagement
which is extending across a growing
family of products and services.
This combined with a strong
brand legacy and a growing
reputation as a content producer
all served to position STV as a
commercially focused, creatively
led business capable of delivering
its strategic aims.
The talent, commitment and drive
of our staff are key contributors
to the success of the Company.
On behalf of your Board, I would like
to thank them and the leadership
team for their commitment and
contribution during a successful
year and thank shareholders for
your support for the Company
during 2014.
Baroness Margaret Ford
Chairman
STV Annual Report and Accounts 2014
Directors’ Report Governance
BOARD OF DIRECTORS
Margaret Ford (57)
Chairman3
Appointed to the Board in June 2013,
Margaret Ford has over 20 years
experience as a Non-Executive Director
and Chairman of private and listed
companies and extensive experience
of working with Government. She is
currently a Non-Executive Director of
Taylor Wimpey plc, Segro plc and
Grainger plc and is the former Chairman
of Barchester Healthcare Limited, the
private healthcare provider. From 2009
to 2012, she was a member of the
Olympic Board and Chairman of the
Olympic Park Legacy Company. She was
appointed to the House of Lords in 2006
and sits as an Independent Peer. Margaret
is Chairman of the STV Appeal and in
March 2015 was elected a fellow of the
Royal Society of Edinburgh.
Rob Woodward (55)
Chief Executive
Appointed to the Board in February 2007.
Previously, Rob was Commercial Director
of Channel 4 Television Corporation
and on the main board. He achieved a
dramatic turnaround of legacy businesses
and built a set of successful new media
and digital businesses. Rob was previously
an MD of UBS Warburg and global COO
of corporate finance in Media and
Communications. Prior to this he was
Managing Partner of Deloitte’s European
Telecoms Media and Technology business
and UK strategy consulting practice.
Rob is a trustee of the STV Appeal charity.
Rob was appointed Pro-Chancellor and
Chair of the Council of City University
London in February 2012, is a Trustee of
Nesta and a Non-Executive Director of
Regenersis plc. In November 2014 Rob
was appointed Chairman of the National
Invest in Young People Group, which
will lead work to support employer
involvement in developing Scotland’s
young workforce.
George Watt (47)
Chief Financial Officer
Appointed to the Board in February 2001
as Group Finance Director. George is a
member of the Institute of Chartered
Accountants in Scotland. He joined the
Company in 1998 as Group Financial
Controller and Treasurer and prior to this
worked with KPMG’s audit and assurance
services practice in the UK and also in the
US. George is a Non-Executive Director of
DeltaDNA (formerly GamesAnalytics Ltd)
and SpaceandPeople plc. George is also
an executive committee member of the
Scottish Council for Development and
Industry and a trustee of the STV Appeal.
David Shearer (55)
Senior Independent Director 1,3
Appointed to the Board in February 2007,
David is an experienced board member,
corporate financier and turnaround
specialist and was previously Senior
Partner for Scotland & Northern Ireland
and a UK Executive Board member
of Deloitte LLP. He has recently stood
down as Co-Chairman of Martin Currie
(Holdings) Limited following its sale to
Legg Mason Inc., is Chairman of Aberdeen
New Dawn Investment Trust plc and the
Scottish Edge fund and a Director of
Mithras Investment Trust plc. He was
previously the Chairman of Mouchel Group
and Crest Nicholson plc and a Non-
Executive Director of City Inn Limited in
each case standing down after completing
the successful restructuring of these
businesses. He was also a Non-Executive
Director of Renold plc, Superglass Holdings
plc and Scottish Financial Enterprise and
a Governor of The Glasgow School of Art.
Jamie Matheson (60)
Non-Executive Director 1,2
Appointed to the Board in March 2007.
Jamie’s career spans some 40 years
principally in the financial sector. He was,
for eight years until his retiral in March
2013, Executive Chairman of Brewin
Dolphin Holdings PLC, a leading private
client investment manager. He was
previously a Non-Executive Director of
Scottish Radio Holdings plc until its sale to
EMAP plc, and a Non-Executive Director of
Maven Income and Growth VCT5 PLC from
2001 to 2013. He is a Director of Scottish
Financial Enterprise and he has a number
of charitable interests including being a
Director of The HMS Victory Preservation
29
left to right by row, from top left
Margaret Ford
Rob Woodward
George Watt
Genevieve Shore
Anne Marie Cannon
David Shearer
Jamie Matheson
Michael Jackson
Christian Woolfenden
Company. Jamie is Chairman of the
Beatson Cancer Charity, a Non-Executive
Director of Latchways plc and Chairman
of Saracen Fund Managers Ltd.
Michael Jackson (57)
Non-Executive Director 2
Appointed to the Board in May 2009,
Michael is an advisor, investor and director
for digital and television businesses in the
US and UK. Previously he was President of
Programming at InterActiveCorp, the
internet conglomerate, where he was
responsible for overseeing the
development, acquisition and distribution
of content based websites. Prior to this
Michael was Chairman of Universal
Television Group, in charge of the creative
and strategic direction of the television
business. He served four years as Chief
Executive Officer of Channel 4 Television,
where, in addition to commissioning
programmes, he refocused the channel
to exploit digital opportunities and
launched two new channels, FilmFour
and E4. Before joining Channel 4, Michael
worked as Controller of BBC1 and Director
of Television, and as Controller of BBC2.
He was previously a Non-Executive
Director of EMI Group plc. Michael is a
Non-Executive Director of Nutopia, an
independent TV production company
based in the UK and USA and of Peters,
Fraser & Dunlop, the UK literary agency.
Genevieve Shore (45)
Non-Executive Director 2,3
Genevieve Shore joined the Board in
March 2012. Genevieve has been working
in digital strategy and technology for the
last seven years, most recently as the
CIO and Chief Product Officer for Pearson
PLC where she had responsibility for all
enterprise platforms from the cloud,
finance and data systems to content
delivery and learning services. Previously
Genevieve has held leadership roles with
Pearson Group including Global Digital
Director, Penguin and Group Sales
Director, Penguin. Genevieve is an advisory
board member of Great Fridays, a digital
design services company in San Francisco
and of Scoot & Doodle and the Education
Appstore. She is a Non-Executive Director
of Moneysupermarket.com Group Plc and
of Next 15 Communications Group plc.
Christian Woolfenden (36)
Non-Executive Director 1
Appointed to the Board in June 2014,
Christian Woolfenden has extensive
consumer marketing and digital
experience. He is Managing Director for
Paddy Power, the betting and gaming
operator. Previously Christian was Global
Brand Director for Bacardi, responsible for
marketing and product innovation in over
20 markets worldwide. Christian began
his career at Proctor & Gamble working
in both finance and marketing roles across
key European businesses.
Anne Marie Cannon (57)
Non-Executive Director
Anne Marie Cannon joined the Board in
November 2014 and has over 30 years
experience in the energy industry and
investment banking. For the past 14 years
Anne Marie was a senior advisor at
Morgan Stanley specialising in international
upstream mergers and acquisitions. Anne
Marie has previously held financial and
commercial roles with Shell UK, J Henry
Schroder Wagg and Thomson North Sea
and was an Executive Director on the
Boards of Hardy Oil and Gas and British
Borneo. She served on the Board of Aker
ASA and is currently is a Non-Executive
Director with Premier Oil and Deputy Chair
of Det Norske Oljeselskap.
Key
1 Audit Committee
2 Remuneration Committee
3 Nomination Committee
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
Principles statement
STV Group plc is fully committed to the highest standards of corporate governance, believing that such standards
are vital to overall business integrity and performance, and considers it crucial that it conducts itself honestly,
transparently and responsibly.
The Board has a critical role to play in shaping business performance while creating and delivering long term
return for shareholders. This requires it to determine business strategy and the Company’s appetite for risk;
to monitor management’s performance in delivering against that strategy and ensure that the risk management
measures and internal controls put in place are appropriate and effective. The Board must ensure that the
funding and talent available to the business will support it in the longer term and must remain aware of the
Company’s obligations to its shareholders and other stakeholders, responding to their needs with transparent
reporting and active engagement.
Statement of compliance
The Board considers that, in respect to the financial year ended 31 December 2014, the Company has complied
fully with the UK Corporate Governance Code 2012 (‘the Code’) and this section, together with the report by
the Directors on remuneration, set out on pages 44 to 62, describes in greater detail how the principles and
provisions of the Code have been complied with. The Code is published by the Financial Reporting Council from
whom paper and downloadable versions can be obtained via its website: www.frc.org.uk.
Board of Directors
The membership of the Board throughout the year and up to the date of signing the financial statements
was as follows:
Chairman
Baroness Margaret Ford
Chief Executive Officer
Rob Woodward
Chief Financial Officer
George Watt
Non-Executive Directors
David Shearer (Senior Independent Director)
Jamie Matheson
Michael Jackson
Genevieve Shore
Vasa Babic (retired 23 April 2014)
Christian Woolfenden (appointed 1 June 2014)
Anne Marie Cannon (appointed 1 November 2014)
The powers of the Directors (including in relation to the issue or buy back of shares) are exercisable in accordance
with the Companies Act and the Company’s Articles of Association. Any amendments to the Company’s Articles
of Association require a special resolution in accordance with the Companies Act 2006.
BOARD OF DIRECTORS
11% Chairman
22% Executive Directors
67% Non-Executive Directors
31
Board appointment, balance and independence
The Board has considered the independence of the Non-Executive Directors and regards all of the current Directors
to be of independent character and judgement.
The Non-Executives mix of skills and wide-ranging business experience is a major contribution to the proper
functioning of the Board and its committees, ensuring that matters are debated and that no individual or group
dominates the Board’s decision-making processes. Non-Executive Directors have a particular responsibility for ensuring
that the business strategies proposed are fully discussed and critically reviewed and their collective experience and
broad range of skills gained through a range of sectors means they can constructively challenge management in
relation both to the development of strategy and performance against the goals set by the Board.
The Non-Executive Directors do not participate in any share option or pension scheme of the Company.
Directors have a statutory duty to avoid situations where they have or can have, any interest that conflicts or possibly
may conflict with the interests of the Company. A Director will not be in breach of that duty if the relevant matter has
been authorised in accordance with the Articles of Association by the other Directors. The Directors confirm that there
have been no such conflicts during the year to 31 December 2014.
Directors and officers of the Company and its subsidiaries have the benefit of a Directors’ and officers’ liability insurance
policy. The Company’s Articles of Association also provide that every Director and other officer of the Company is to be
indemnified out of the assets of the Company against any liability he or she incurs in defending any proceedings
brought against them (provided that judgement is not given against them). All Directors have access to the advice and
services of the Company Secretary and, at the Company’s expense, the Company’s legal advisors. The Company
Secretary is an employee of the Company and attends all meetings of the Board and its committees. She is responsible
for making sure that all Board procedures are observed and for advising the Board on corporate governance matters.
She also has responsibility for ensuring the flow of information within the Board, its committees and between senior
management and Non-Executive Directors.
Board responsibilities
There is a well-established division of authority and responsibility within the Company through the separation
of the roles of Chairman and Chief Executive which is set out in writing and has been approved by the Board.
The Chairman is responsible for leadership of the Board, ensuring its effectiveness and that Directors receive accurate,
timely and clear information, as well as setting the agenda. She provides a conduit for communication to and from
shareholders and facilitates the contribution of the Non-Executive Directors while ensuring constructive relations
between the Executive and Non-Executive Directors.
The Board has responsibility for making all key strategic, management and commercial decisions which are necessary
for the conduct of the Company’s business as a whole, including the approval of corporate strategy, annual budgets,
interim and full year financial statements and reports, dividends, accounting policies and all significant capital projects,
acquisitions and disposals. The Chief Executive and his management team are responsible for developing the
appropriate business strategy and, once approved by the Board, for ensuring that the strategy is effectively
implemented in accordance with the approved operating plan and within a sound system of internal controls to
achieve the agreed objectives. He creates a framework of strategy, values, organisation and objectives to ensure the
successful delivery of results, and allocates decision making and responsibilities accordingly. Compliance with policies
and achievement against objectives is monitored by the Board through monthly and quarterly performance reporting
and budget updates.
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
It is the duty of all Directors to promote the success of the Company for the benefit of its members as a whole,
and in doing so, to have regard, amongst other matters, to the:
• likely long term-consequences of any decision
• interests of the Company’s employees
• need to foster the Company’s business relationships
• impact of the Company’s operations on the community and the environment
• desirability of maintaining a reputation for high standards of business conduct
• need to act fairly as between members of the Company.
The Senior Independent Director is available to shareholders should they request a meeting or have concerns
which they have been unable to resolve through normal channels or when such channels would be inappropriate.
He provides a communication conduit between the Chairman and the Non-Executive Directors and is responsible
for leading the Non-Executives discussion on the Chairman’s performance at the annual performance review.
The Board recognises that it is accountable to the Company’s shareholders for good governance to ensure efficient
and effective management in order to deliver shareholder value over the long-term.
Board meetings
Attendance of Board members at Board and Committee meetings held in 2014 is set out below:
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Number of meetings held:
Attendance:
Margaret Ford
David Shearer
Rob Woodward
George Watt
Vasa Babic (resigned 23/04/14)
Jamie Matheson
Michael Jackson
Genevieve Shore
Christian Woolfenden (appointed 01/06/14)
Anne Marie Cannon (appointed 01/11/14)
9
9
9
9
9
3
8
8
9
5
1
3
3*
3
3*
3*
1
2
2
4
3*
2
4
4
2**
2
2
2
1*
2
* Attended at the invitation of the respective Chairman.
** Appointed to Remuneration Committee as Chairman following the resignation of Vasa Babic
The Board meets regularly, at least nine times a year with additional meetings taking place as and when required.
The Board has adopted a schedule of matters reserved for its decision which can be found on the Company’s website
at www.stvplc.tv, the principal matters being approval of:
• financial statements and shareholder circulars; dividend policy; significant changes in accounting policies or practices
• Board and committee appointments and terms of reference; terms and conditions of Non-Executive and
Executive Directors
• the Company’s long-term objectives and commercial strategy; annual operating and capital expenditure budgets
• material contracts and significant variations in terms of the Company’s borrowing facilities
• corporate activity, which is subject to the City Code on Takeovers and Mergers or of a material nature
• major changes to the Company’s pension schemes, share schemes and treasury policy
• risk management, internal control policies and corporate governance arrangements.
33
All Directors attended the annual Strategy Day held in October 2014 and considered it an extremely useful forum
at which to discuss in detail STV’s goals and objectives and its overall strategic direction.
When a Director is unable to attend or dial in to a Board or Committee meeting, he or she receives the papers for
consideration at that meeting and has the opportunity to discuss any issues or make any comments in advance
and, if necessary, follow up with the Chairman of the relevant meeting.
Board focus
The main areas of Board focus during 2014 included:
Operational and financial performance, including monitoring
• receipt of operational and financial updates at each Board meeting
• review of monthly finance reports, including details of performance against budget and the Company’s
financial position
• approval of the Annual Report, its full and half-year financial results and IMS statements made
• approval and declaration of dividend
• approval of the 2015 Budget
• approval of a share premium reduction
• approval of new financial PR advisors.
Strategy
• presentations on initiatives to grow revenue
• approval of the Company’s strategy
• brand refresh.
Corporate development
• agreement of STV’s corporate objectives and values for 2014
• application for the Aberdeen, Ayr and Dundee local TV licences
• planning for the launch in early 2015 of the Edinburgh local TV service.
Governance and risk
• review of reports on risk and the appropriateness of the financial statements being prepared on a going concern basis
• review and approval of the Risk Register
• approval of the internal audit plan for 2015
• approval of the 2015 AGM Resolutions
• approval of the appointment of Christian Woolfenden and Anne Marie Cannon
• performance evaluation
• review and consideration of the pensions deficit and funding plan
• ensuring impartiality during Referendum programming.
Investor relations
• review of institutional feedback following meetings between the Company’s broker and shareholders after both
the full and half year results
• review of the draft analysts’ results presentations, when reviewing the Company’s full and half-year financial results.
Corporate Social Responsibility
• involvement in the STV Appeal 2014.
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
Board committees
The Board is supported by the Audit, Remuneration and Nomination Committees.
Chairman
Board of
Directors
Audit
Committee
Remuneration
Committee
Nomination
Committee
Leadership
Team
Senior Management
Team
Nomination Committee
• Reviews the structure, size
and composition of the Board
• Reviews succession plans
and makes recommendations
to the Board
• Identifies and nominates
candidates for approval
of the Board
• Recommends to the
Board membership of the
Board Committees
Leadership
Board of Directors
• Determines long-term direction and strategic aims
• Sets framework of appropriate and robust controls
• Ensures efficient and effective operation of the business
• Engages with shareholders and stakeholders
Audit Committee
• Monitors the integrity of the
published financial statements
• Reviews the effectiveness of
internal financial controls
• Reviews the operation of the
risk management process
Remuneration Committee
• Determines and agrees with
the Board the framework for
the remuneration policy
• Reviews the ongoing
appropriateness and relevance
of the remuneration policy
• Discusses with the Company’s
• Approves the design of,
auditors, matters arising
from their work
• Reviews the scope of work
and reports produced by the
internal auditors
• Monitors and reviews the
effectiveness of the internal
audit function and the
external auditors
targets for, and payments
from any performance related
pay schemes
• Reviews the design of all share
incentive plans
• Determines the remuneration
packages for Executive Directors
and other senior executives
• Reviews and notes annually
the remuneration trends
across the Company
Page 35
Page 44
Page 35
Audit Committee Report
Remuneration Committee Report
Nomination Committee Report
35
Each of these Committees held an evaluation of their work and effectiveness during the year, the results of which
were reported to the Board by the respective Committee Chairman. The reviews concluded that each Committee
was operating in an effective manner and carrying out its respective delegated duties efficiently. The Board and its
Committees will continue to review critically their procedures, effectiveness and development throughout the year
ahead with any concerns or observations raised with the Chairman.
Remuneration Committee
The members of the Committee during the year were:
Vasa Babic (Chairman, retired 23 April 2014)
Genevieve Shore (Chairman, appointed on 23 April 2014)
Jamie Matheson
Michael Jackson
The activities of the Remuneration Committee are described within the report by the Directors on remuneration which
can be found on pages 44 to 62. The terms of reference of the Remuneration Committee are available on request
and on the Company’s website www.stvplc.tv
Report from the Nomination Committee
The members of the Committee during the year were:
Baroness Margaret Ford (Chairman)
David Shearer
Genevieve Shore
The Nomination Committee has written terms of reference which are available on request and on the Company’s
website www.stvplc.tv
At the start of the year, the Nomination Committee recommended and the Board subsequently agreed, that at least
one additional Non-Executive Director be sought to ensure progressive refreshing of the Board.
Given that a formal tender had been carried out in 2013 in order to select a recruitment consultant to assist STV in its
appointment of a new chairman, it was unanimously agreed that the services of Isabel Bird from Bird & Co Group be
re-engaged for these purposes. Neither Ms Bird nor Bird & Co Group have any other connection with STV.
The process carried out by the Committee was vigorous and robust, firstly evaluating the balance of skills, experience,
independence and knowledge currently on the Board and in light of this, creating a specification of the role sought
including an assessment of the time commitment expected. Consideration was also given to the benefits of diversity
on the Board.
The Committee reviewed the profiles of nine candidates, from which a shortlist was created and the Committee met
with each. After discussion, it was agreed that the appointments of Christian Woolfenden and Anne Marie Cannon as
Non-Executive Directors be recommended to the Board. This was unanimously agreed and Christian and Anne Marie
joined the Board on 1 June and 1 November 2014 respectively.
Report from the Audit Committee
The members of the Committee during the year were:
David Shearer (Chairman)
Vasa Babic (resigned 23 April 2014)
Jamie Matheson
Christian Woolfenden (appointed on 19 June 2014)
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
The Audit Committee, chaired by David Shearer, who has recent and relevant financial experience, is authorised by
the Board to investigate any activity within its terms of reference and to seek any information it requires from any
employee. All employees are directed to co-operate with any request made by the Committee. The Audit Committee
has written terms of reference which are available on request and on the Company’s website www.stvplc.tv
At the invitation of the Committee, meetings are attended by the Chief Executive Officer, Chief Financial Officer
and the Company Secretary as well as the Group Financial Controller. Representatives from both the external and
the internal auditors also attend each meeting and the Committee meets separately with senior management
and the external auditors.
The Chairman of the Audit Committee reports to the subsequent meeting of the Board on the Committee’s work
and the Board receives a copy of the minutes of each meeting. The papers considered by the Committee are available
to any Director who is not a member, should they wish to receive them. The Committee’s effectiveness
is reviewed annually as part of the Board evaluation process.
The Audit Committee and the Board place great emphasis on the objectivity of the Company’s auditors
PricewaterhouseCoopers LLP (‘PwC’) in their reporting. The audit partner and manager attend all Audit Committee
meetings to ensure full communication of matters relating to the audit. The auditors have confirmed to the Committee
that in relation to their services to the Company they comply with UK regulatory and professional requirements,
including Ethical Standards issued by the Auditing Practices Board and that their objectivity is not compromised.
The auditors are required each year to confirm in writing to the Committee that they have complied with the
independence rules of their profession and regulations governing independence having taken into consideration
matters such as the individual independence of members of the engagement team and the firm as whole and the
nature of any non-audit work undertaken. Before PwC takes on any engagement for other services from the Company,
careful consideration is given as to whether the project could conflict with its role as auditors or impair its independence.
This includes consideration of the safeguards which are in place to mitigate the risks to independence.
In general, the auditors may not provide a service which:
a) creates a mutuality of interest
b) places the auditors in a position to audit their own work
c) results in the auditors acting as a manager or employee of STV
d) puts the auditors in the role of advocate for STV.
During the year the Committee reviewed the Company’s interim and full year results prior to publication as well as
its risk management procedures and risk register, incorporating relevant, social, ethical and environmental risks.
Significant issues considered by the Audit Committee in relation to the 2014 financial statements included the following:
Deferred production stock
Deferred production stock forms part of inventory and is stated in the accounts at the lower of cost and net realisable
value. Programme costs are expensed in line with expected future revenues which are a judgemental area. A detailed
forecast of future sales is prepared by management based on historic experience and expected future trends.
Management’s treatment and disclosures in relation to deferred production stock were considered to be appropriate.
Pensions
Following the agreement of the tri-ennial actuarial funding valuation in July 2014, the assumptions adopted by
STV had been updated from those used at 31 December 2013 and the appropriateness of the updated assumptions
was considered by PwC.
37
The assumptions in relation to discount rate, salary increases, RPI and CPI were all within a range that management
considered appropriate and were consistent with assumptions being used by other companies. Although the
assumptions in relation to mortality had historically been lower than were typically used by other companies, STV’s
figures were supported by an independent report obtained by management and were unchanged from 31 December
2013. However, in 2014, the Company has included an allowance for future improvements in life expectancy in line
with industry practice.
Management’s treatment and disclosures in relation to IAS19 were considered to be appropriate.
Goodwill
At least annually management undertakes a detailed formal impairment review of goodwill. The most significant
judgements are in setting the assumptions underpinning the calculation of the value in use of the cash generating unit,
specifically the achievability of the short term financial budget assumptions underlying the valuation process. Specific
focus is also given to the long term growth rate and discount rate. Business Plans and budgets are Board approved and
underpin the cash flow forecasts. In the current year, a detailed review was undertaken of the results of the testing
and underlying assumptions of the impairment model and it was agreed that no impairment was required.
Independence of the external auditor
The Audit Committee is responsible for approving non-audit work and in order to seek to preserve auditor’s objectivity
and independence, the Company has a policy regulating the provision of non-audit services by the auditors. The Chief
Financial Officer must obtain the approval of either the Chairman of the Audit Committee or another Committee
member if the preference is to use the auditors and must provide an explanation as to why the auditors are the most
suitable supplier of services. A case by case decision is therefore necessary and the auditors cannot be engaged for
non-audit work without reference to the Audit Committee. It is felt that this process ensures shareholders receive
value for money and the Audit Committee keeps this policy under review. PwC also has an internal process whereby
pre-engagement approval of all non-audit services is required to be given by the Audit Partner.
During the year under review, the non-audit work carried out by PwC consisted mainly of advice in relation to tax
developments and tax compliance. Given that much of the information was derived from the audited financial records,
the Audit Committee agreed that PwC was the most suitable supplier. There will always be projects for which the
external auditor is best placed to perform the work to the extent that its skills and experience along with its knowledge
of the Company makes it the most appropriate provider. While it is important that the independent role of external
auditors in reporting to shareholders is not compromised, it is equally important that the Company is not deprived
of expertise when and where it is needed.
External audit effectiveness
With regard to the requirement for the Audit Committee to assess the effectiveness of the external audit process,
a formal framework is now in place whereby a questionnaire is completed annually by each member of the Audit
Committee and by the Chief Financial Officer. Feedback is also sought from STV’s finance team. The comprehensive
questionnaire covers various aspects of the external audit process, including the audit team; how the audit is both
planned and executed; the role of management; and communication. Once completed, the feedback from the process
is considered by the Audit Committee and thereafter provided both to the auditors and to management. Following this
process, the Audit Committee concluded that the external audit process operated effectively and efficiently.
Internal audit
Deloitte LLP (‘Deloitte’) are the Company’s internal auditor and the primary focus of its comprehensive internal audit
programme is to provide assurance over key revenue streams and operating costs. Deloitte review systems and
processes and ensure that the Company is operating effectively, efficiently and economically and in accordance with
legislative requirements and professional standards. Its work is designed to provide insights into the internal control
environment and efficiencies of key processes, as well as providing feedback on the effectiveness of interfaces between
the business and enabling functions.
Business plans and budgets are Board approved and underpin the cash flow forecasts. In the current year, PWC
undertook a detailed review of the results of the testing and underlying assumptions of the impairment model and
agreed that no impairment charge was required.
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
Deloitte attends all meetings of the Audit Committee and provides update reports on which specific areas have been
reviewed in terms of the planned internal audit for the year, together with an evaluation of the current controls and
the key findings and recommendations.
The Board reviews the internal control process and its effectiveness on an ongoing basis to ensure it remains robust
and to identify any control weaknesses and can confirm that no significant failings or weaknesses were identified in
relation to the review.
Committee activities
The principal activities undertaken by the Board Committees during 2014 included:
Month
January
January
February
March
August
October
October
October
December
Committee
Nomination
Activity
Succession Planning
Remuneration
Performance Evaluation (2013)
Audit
Review of Year End Results
Review of Auditor report on Year End Results
Review of Prelim Announcement
Review of Annual Report
Review of Independence of Auditors
Review of external audit/non-audit fees
Approval of Internal Audit Plan for the year
Review of internal controls/risk management
Remuneration
Approval of Remuneration Report
Audit
Audit
Nomination
Remuneration
Remuneration
Review of Half Year Results
Review of Auditor report on Half Year Results
Internal Audit update
Review of internal controls/risk management
In depth Business Risk Review
Internal Audit Update
Performance Evaluation
Succession Planning
Performance Evaluation
Review of Executive Remuneration Policy
Review of Remuneration Policy
Performance Evaluation (2014)
Approval of Executive Director:
– Bonuses
–
– Bonus Plan targets
Salary and bonus for 2015
Leadership team
The Leadership Team comprises the Executive Directors; Director of Channels; Deputy Director of Channels;
Director of Content; Commercial Director; Director of Corporate Development; HR & Communications Director;
Chief Technology and Platforms Officer; and the Head of Legal and Regulatory Affairs. The purpose of the team
is to drive the implementation of the Company’s strategic priorities while addressing critical business issues
and opportunities. The team meets weekly and is focused on group-wide performance with the emphasis on
collaboration and teamwork and ensures that there are clear lines of accountability.
39
Senior Management Team
The Senior Management Team is made up of approximately 35 managers from around the Group who meet monthly
to discuss strategy, share knowledge and address specific issues.
Diversity
STV takes the concept of diversity seriously and further details can be found on page 21.
Achieving the right mix of talent, skills and experience on the Board is critical for business and STV’s aim is to have
an appropriate level of diversity in the Boardroom to support the achievement of its strategic objectives. Diversity
of perspective is vital and having Directors from different backgrounds and with different skill sets ensures that
decisions are challenged in a credible manner and ‘group think’ is avoided. Each person is different and diversity
is about recognising, respecting and valuing these differences.
BOARD BY GENDER
67% Men
33% Women
STV has chosen not to target a specific number or percentage of women for its Board, although one third of its
Directors is female, but to concentrate its efforts on encouraging more women to remain within the Company and
progress through the ranks to senior positions. The number of female staff remained the same as last year, at 49%.
Training and development
All Directors are given a comprehensive introduction to the Company’s businesses and continuing development is
provided through briefing sessions in the course of regular Board meetings, covering business specific and broader
regulatory issues and including presentations from members of senior management. Directors are also provided
with and encouraged to take up opportunities to meet major shareholders.
Development and training of Directors is an ongoing process. Throughout their period in office the Directors are
regularly updated on the Company’s business; legal matters concerning their role and duties; the competitive
environments in which the Company operates; and any other significant changes affecting the Company and the
market sector of which it is a part. In addition, the Board regularly receives presentations from senior managers within
the Company to ensure that Directors’ knowledge, skills and familiarity with the Company’s businesses and people are
updated and maintained. Board training and development is considered as part of the annual performance evaluation
exercise and during the year the Chairman confirmed with each Director that they were content with the level of
training and development given with no Director requesting additional training.
Performance evaluation
The effective functioning of the Board is key to the success of the Company and STV recognises that Board evaluation is
extremely valuable in contributing to Board effectiveness: a formal appraisal encourages all Directors to reflect on
what the Board has accomplished, as well as on what it should be doing, how it operates and whether any
improvements can be made.
Accordingly, each year evaluation is undertaken in order to assess the Board, its committees, the Directors and
the Chairman. The process aims to enhance effectiveness and also provides an opportunity for the Non-Executive
Directors – through their exposure on other Company boards – to draw on their experience and to suggest areas
of best practice. As in previous years, this is an internal exercise led by the Chairman and the Board considers this
to be a sufficiently rigorous process.
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
The Chairman spoke with each of the Directors individually to canvass their respective opinions on a wide range
of matters including Board composition, Board meetings and processes, Board performance, the performance
of individual Directors as well as the Board’s communication both with external stakeholders and the Company’s
senior management.
With regard to the evaluation of the Chairman’s performance, the Senior Independent Director spoke with each
Director individually.
On completion of the 2014 performance evaluation, each Director was found to make an effective contribution and
was well prepared and informed regarding items to be considered by the Board. The mix of skills and experience
of Directors was felt to be appropriate and the Board continued to meet in full its obligations to support management,
to monitor performance across a wide area, and to maintain its strategic oversight. Accordingly, the process concluded
that the Board provides the effective leadership and control required for a listed company and in particular,
the smooth process in place regarding the appointment of the two new Non-Executive Directors was noted.
The evaluation process further concluded that the Board was made up of strong and independent minded
Non-Executive Directors who made a significant contribution to the overall success of the Company and who
demonstrated full commitment in their respective roles. All were able to allocate sufficient time to the Company
enabling them to discharge their responsibilities effectively.
The Chairman reported the results of the evaluations at the Board meeting held on 24 February 2015. The Nomination
Committee confirmed to the Board that the contributions made by the Directors offering themselves for re-election at
the AGM in April 2015 continue to be effective and that the Company should support their re-election.
Re-election
Directors stand for election by shareholders at the first Annual General Meeting following their appointment and
thereafter for re-election at intervals of no more than three years. At each AGM, at least one third of the Directors
are required to retire. Copies of the Non-Executives’ letters of appointment are available for inspection at the
Company’s registered office and will be available at the Annual General Meeting.
The Chairman and other members of the Board recommend that the Directors retiring be re-elected and their
biographies can be found on pages 28 and 29. The Chairman has confirmed that the Directors retiring and seeking
re-election have been subject to performance evaluation, apart from Anne Marie Cannon who joined the Board
on 1 November 2014, and as part of this evaluation the Chairman confirms that they continue to demonstrate
commitment to their role and continue to fulfil their functions responsibly.
TENURE OF NON-EXECUTIVE DIRECTORS AND CHAIRMAN
29% more than 6 years
14% 4-6 years
14% 2-4 years
43% 1-2 years
Risk management and internal control
Risk is inherent in the Company’s business and activities and the review of risk and risk management is embedded
throughout the Company. The ability to identify, assess, monitor and manage each type of risk to which the Company
is exposed is an important factor in its financial soundness, performance, reputation and future success. The
management of risk is considered to be of vital importance and as such, it is a matter for the full Board and not
delegated to a committee. Accordingly, the Directors have overall responsibility for establishing and maintaining an
adequate system of internal controls and risk management policies and also for reviewing the effectiveness of each.
41
This is communicated to the Leadership Team and each member is accountable for all risks assumed in their respective
areas of responsibility and for the execution of appropriate risk management discipline.
These reviews included an assessment of internal controls (in particular, financial, operational and compliance
controls) and risk management together with their effectiveness and were supported by reports from the internal
auditors as well as from the external auditors on matters identified in the course of their statutory audit work.
During 2014, the following reviews were carried out by the internal auditors: (i) broadcasting revenue assurance;
(ii) health and safety governance; (iii) freelance staff management; and (iv) social media controls.
The system is designed to manage rather than eliminate risk and in pursuing these objectives, internal control
can only provide reasonable and not absolute assurance against material misstatement or loss. All points raised
by the internal auditor were addressed and executive management believes that the control environment has
been strengthened further by the actions taken. A follow up review is carried out by the internal auditor of the work
performed by management to implement the recommendations raised during the internal audit which will involve
liaising with members of staff across the business who would have been allocated the responsibility of executing
the recommendations raised and this will be supported by detailed testing where required. A key element of the risk
management process is the method of profiling risk. This determines the threats to the achievement of business
objectives and day-to-day operations in terms of likelihood and consequence at a residual level, after taking account
of mitigating and controlling actions.
In addition to both the external and the internal audit, the following key controls are in place:
• a comprehensive financial review cycle, which includes a detailed budgeting process where business units
prepare budgets for approval by the Board, monthly reporting of trading results for review and, where necessary,
corrective action as well as detailed and regular re-forecasting
• clearly defined management structure and delegation of authority to committees of the Board, subsidiary
boards and associated business units
• high recruitment standards and formal career development and training to ensure the integrity and
competence of staff
• regular reviews of key performance indicators and business risks and consequent steps to manage
any matters arising
• procedures for the approval of capital expenditure
• monthly monitoring and re-forecasting of results against budget, with major variances followed up
and management action taken where appropriate
• ongoing procedures to identify, evaluate and manage significant risks faced by the business and procedures
to monitor the control systems in place to reduce these risks to an acceptable level
• provision to the Board and management of relevant, accurate and timely information based on comprehensive
management information systems, which are continually being improved and updated.
A highly detailed review process conducted on a multi-level basis ensures that the consolidated group accounts are
prepared having taken into account the internal control procedures and risk management strategies outlined above.
The presentation and content of the Risk Register has been developed in a way which allows:
• the key risks facing STV to be summarised
• actions taken to improve control to be tracked
• changes to the risk portfolio to be monitored.
STV Annual Report and Accounts 2014
Directors’ Report Governance
CORPORATE GOVERNANCE REPORT
continued
The Risk Register comprises risks specific to the different areas of the business and is reviewed and updated on an
ongoing basis both at an operational level and on a bi-annual basis by the Board, with the Audit Committee conducting
an annual review. The Register sets out the key risks that have been identified, allocating an owner to each, together
with the risk impact, likelihood and score both on a gross and, after the current mitigating controls have been taken
into account, a net basis. The effectiveness of the mitigating controls is graded as either strong, adequate or weak and
any additional controls required are also noted.
The Company has a strong internal control and risk management system in place in relation both to the financial
reporting process and the process for preparing the consolidated accounts. The purpose of these is to ensure that the
internal and external financial statements are presented in accordance with the relevant reporting standards and the
disclosure requirements for listed companies, as well as to ensure that the financial statements give a true and fair
view, free from material misstatement.
The Board is satisfied that these responsibilities are met through applying the following procedures which are
supported by the Group’s system of internal control:
• using an appropriate system of accounting records, capable of operating with reasonable accuracy to be compliant
with financial and legal reporting requirements. The basis used to prepare STV’s financial statements is the
International Financial Reporting Standards (‘IFRS’) as adopted by the European Union. The Company financial
statements and Directors’ Remuneration Report are prepared in accordance with applicable law and United Kingdom
Generally Accepted Accounting Practice
• using IFRS to ensure a true and fair view of the state of affairs of the Group, including the profit or loss for the period
• applying appropriate accounting policies within the framework of IFRS and ensuring these are consistently applied
• making judgements and preparing estimates that are reasonable and prudent
• operating within the guidelines of all the disclosure advice provided by UK statute
• considering whether adoption of the going concern basis is appropriate
• maintaining robust assurance processes and controls over financial reporting procedures
• extending these principles to half-yearly reports and other reports in the public domain.
Identified risks are mitigated through unambiguous business processes with integrated risk management activities,
segregation of duties and appropriate delegation of authority. Each role within the Company is well-defined with clear
responsibilities and a transparent reporting structure. The Company’s business processes include financial controls
regarding the approval and accounting of business transactions and the financial reporting process has controls
regarding recognition, measurement and disclosure. These include the application of critical accounting policies and
estimates, in individual subsidiaries as well as in the consolidated accounts.
Regular review is vital to ensure that the risk culture continues to be embedded throughout the Company and that the
risk framework is operating effectively. It also provides the Board and the Audit Committee with an overall view of the
Company’s risk profile, identifying any major exposures and mitigating actions.
The Company has in place a Whistleblowing Policy through which staff can, in confidence, raise concerns about
possible improprieties either in the conduct of others in the business or in the way the business is run. Concerns can
relate to actual or potential breaches of law or Company policy, including those relating to accounting, risk issues,
internal controls, auditing issues and related matters. All matters raised will be investigated and reported to the Audit
Committee. No such concerns were raised by staff during the year.
The risk management framework and internal controls system across the Company, which are subject to continuous
development, provides the basis on which the Company has complied with the Code provisions on internal control.
43
Relations with shareholders
STV’s corporate website at www.stvplc.tv has information for institutional and private shareholders alike and
shareholders seeking information may contact the Company directly throughout the year. In addition, STV has an
electronic communication facility to allow shareholders to receive information more quickly and in a manner more
convenient for them.
The Board recognises the importance of having an ongoing relationship with its shareholders and other stakeholders
and fully supports the principles of the Code which encourage open dialogue between companies and their
shareholders. The Board welcomes and encourages the participation of all shareholders at the Company’s Annual
General Meeting which all Directors attend. Shareholders also have the opportunity to meet with Directors and ask
questions after the formal business of the meeting has been concluded.
SHAREHOLDERS BY TYPE
97% Institutionals
2% Board of Directors
1% Other individuals (excl. dirs)
Institutional shareholders
STV undertakes a comprehensive programme of meetings and events for institutional investors and research analysts
throughout the year and the Board are kept fully informed of feedback given to the Chief Executive and Chief Financial
Officer in the course of their extensive round of investor meetings. The Board routinely receives updates on significant
movements on the share register, analysts’ consensus forecasts and market sentiment.
The Chairman, the Senior Independent Director and other Non-Executive Directors are available to meet with
shareholders to discuss governance and strategy, and develop a balanced understanding of their issues and concerns
and various meetings have taken place with shareholders during the year. Discussions at these meetings are conveyed
to all Directors in order that each can develop an understanding of major shareholders’ views on the Company.
Communication with major shareholders, analysts and the financial press is maintained throughout the year and
feedback from major shareholders is regularly sought and reviewed by the Board. Copies of analysts’ research relating
to the Company are circulated to all Directors upon publication and a brief analysis of the shareholder register is
prepared quarterly and made available to the Board.
Detailed reviews of the Company’s performance and financial position are included in the Chairman’s statement,
the Chief Executive Officer’s and Chief Financial Officer’s reviews, which the Board uses to present a balanced and
comprehensive assessment of the Company’s position and prospects. Such communication is designed to establish
a mutual understanding of objectives.
Private shareholders
We are always pleased to hear the views of our private shareholders and to answer queries by telephone or in writing
through emailing our Company Secretary jane.tames@stv.tv. We encourage shareholders to make maximum use of
our website to access Company reports, notices of meetings and general shareholder information. Shareholders can
also check their shareholding at any time by visiting the Registrar’s website at www.capitashareportal.com.
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
Genevieve Shore
Chairman of the Remuneration Committee
ANNUAL STATEMENT
On behalf of the Board, I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 December
2014. With our existing remuneration framework due to expire at the end of 2015 we have taken this opportunity to
review our plans and present them in a timely manner.
The Committee reconfirmed the key principles which should underpin the executive remuneration framework as:
• closely aligning rewards with the delivery of Company strategy
• ensuring a significant proportion of the awards are based upon long term success criteria
• reflecting changes in best practice and governance
• simplifying and streamlining the framework for clarity and effectiveness
• ensuring market competitiveness.
Aligning remuneration to our strategy
As set out earlier in this report, the Board has a clear strategic vision to achieve growth and create shareholder value.
As we diversify earnings through our digital and production businesses, we will also continue to focus upon growing our
share of our core businesses and advertising revenues.
A key objective for the Committee in the review was to simplify the arrangements, improve the level of alignment with
the strategy outlined above and reflect areas of best practice, but all within the existing reward opportunities.
Proposed changes to our Remuneration Policy
Following the review, we are now proposing the following key changes:
• introduction of a simplified annual bonus framework under which 20% of any bonus earned must be deferred for
three years under a new Deferred Bonus Plan (‘DBP’). The annual opportunity will remain unchanged at 125% of
salary and continue to be based on stretching performance targets (currently operating profit, cash flow and
personal objectives aligned to the KPI targets). The new bonus framework will apply from 2016 onwards (to replace
the existing Bonus Plan which expires at the end of 2015)
• introduction of a new Long Term Incentive Plan (‘LTIP’) which will provide annual awards of shares, up to a maximum
of 100% of salary, which vest after three years based on stretching performance targets. For the 2015 award,
vesting will be based on a combination of EPS growth, relative TSR and non-broadcast earnings growth targets.
These measures are closely aligned to our strategic aims for the next three years and the interests of our shareholders.
The LTIP will replace the Value Creation Plan which is due to expire at the end of 2015
• we will introduce comprehensive recovery provisions to reduce or reclaim incentives in certain circumstances and
which will apply to all elements of variable remuneration.
45
An extensive shareholder consultation on the new arrangements was conducted in early 2015 and I would like
to thank those who took part for providing valuable input which was taken into account by the Committee in finalising
the proposals. The majority of the shareholders consulted have been highly supportive of the approach the Committee
has adopted.
To implement the changes above, we will be seeking shareholder approval at the 2015 AGM for a revised Remuneration
Policy set out on pages 46 to 54 of this report and the new DBP and LTIP share plans. With this revised framework in
place and aligned to our strategic objectives, the Committee expects the new Policy to remain in place until a further
vote is required in 2018.
In reviewing the Policy, the Committee considered the time horizons in the incentive framework in the context of the
stated views of some investors. The Committee concluded that a vesting/performance period of three years remains
appropriate for STV in the context of our business model, talent markets, shareholding requirements and the current
shareholdings of our Executive Directors. The Committee will keep this area under review.
Summary of the framework
Following the changes, we now have a simple and transparent remuneration framework aligned with our strategy and
the interests of our shareholders, as summarised below:
Salary/ Benefits/Pension
New bonus framework
LTIP
– Market competitive fixed pay
– Salary increases 2% for 2015
– Fixed benefits allowance (£16k)
and cash pension allowance
(20% of salary)
– Applicable from 2016 onwards
– Maximum: 125% of salary
– 20% of any bonus deferred for three years
– Linked to challenging performance targets
(currently operating profit,
cash flow and personal objectives)
– First awards after 2015 AGM
– Maximum: 100% of salary
– Shares vest after three years based on
the delivery of stretching performance
target ranges
– 50% EPS growth
– 30% Non-broadcast operating profit
– 20% relative TSR vs FTSE Small Cap
Recovery provisions – apply to bonus and LTIP awards
Shareholding guidelines – Executive Directors to build holding of 100% of salary
The Executive Directors received salary increases of 2% with effect from 1 January 2015. The average salary award to
staff was 2.8% and it was agreed that this increase, the first increase to base salary levels of the Executive Directors
since 2007, was appropriate to ensure alignment with the market.
2014 outcomes
As a result of the strong financial performance delivered in 2014, payments have been triggered under the Bonus Plan
through achievement of operating profit, PBT and personal objectives targets. The Executive Directors received bonus
payments of 58% of salary (48% of bonus potential maximum). The performance achieved and the payment levels
achieved against plan targets are set out in the table on page 55.
No long-term incentives vested during the year and the next vesting date for a long-term incentive plan will be in 2016
for the 2013 Value Creation Plan which expires at the end of 2015. As a result of the improved share price performance
since grant, the Value Creation Plan is on track to generate rewards at the end of the performance period.
The Annual Report on Remuneration provides additional detail on the payments and awards made to the Directors in
the year and on our intentions for 2015. The Annual Report on Remuneration together with this Annual Statement is
subject to an advisory shareholder vote at the AGM on 30 April 2015.
I look forward to receiving your support for all of the remuneration related resolutions at our AGM.
Genevieve Shore
Chairman of the Remuneration Committee
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
DIRECTORS’ REMUNERATION POLICY
This Remuneration Policy (‘the Policy’), determined by the Company’s Remuneration Committee (‘the Committee’), will
be effective following shareholder approval at the 2015 Annual General Meeting.
The Committee reserves the right to make any remuneration payments and payments for loss of office (including
exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line
with this Policy where the terms of the payment were agreed (i) before the Policy came into effect or (ii) at a time when
the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not
in consideration for the individual becoming a Director of the Company. For these purposes ‘payments’ includes the
Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the
payment are ‘agreed’ at the time the award is granted.
The Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation) without obtaining shareholder approval.
Policy table for Executive Directors
Operation
Maximum
opportunity
Objective and
link to strategy
Base salary
The Committee
sets salaries as
a retainer for the
Executive Directors
to recognise status
and responsibility
to deliver the
strategy
Benefits
To provide
competitive levels
of employment
benefits consistent
with role
When determining the salary of the
Executive Directors, the Committee
takes into consideration a number
of factors including:
• the scale and complexity of the
Company and the scope and
responsibilities of the role
• the skills, experience and performance
of the individual
• the Committee’s assessment of the
competitive environment including
consideration of similar positions
in organisations of broadly similar
size and complexity, in particular
companies within the media sector
• pay and conditions throughout
the Company
Salaries are normally reviewed annually,
with any changes effective from
1 January in the financial year
Executives are entitled to receive
a taxable cash allowance in lieu of
benefits in kind, including car and private
medical insurance. This cash benefits
allowance is excluded from the
calculation of any other benefit provided
by the Company
The Executive Directors are eligible
to participate in the Company’s all
employee share plans, as offered from
time to time, on the same terms as
all employees
Performance
conditions
None
There is no prescribed maximum salary
In general, any salary increase for
Executive Directors will be in line with
other employees in the Group
The Committee retains discretion to
award larger increases where considered
appropriate to reflect the factors
described in this table
Salaries with effect from 1 January 2015
are set out on page 55
None
Benefit values vary year-on-year,
depending on premiums, and
the maximum potential value
is the cost of the provision of the
benefits outlined
Participation in all employee share
plans is subject to HMRC plan rules
and limits
Objective and
link to strategy
Pension
To provide
competitive
levels of
retirement
benefit
Objective and
link to strategy
Annual bonus
Aligns reward to
the delivery of
annual financial
and strategic
performance
measures. Deferral
creates long term
alignment with
shareholders
47
Operation
Maximum
opportunity
Performance
conditions
The maximum pension contribution
or taxable cash allowance in lieu
of pension is 20% of salary
None
The Group operates a defined benefit
(‘DB’) scheme (closed to new members),
a defined contribution (‘DC’) scheme
and a group personal pension plan.
Executive Directors have the option
to receive a taxable cash allowance
in lieu of pension benefits
George Watt was a participating member
of the Scottish and Grampian Television
Retirement Benefits Scheme, which is an
approved defined benefits occupational
pension scheme, until 31 March 2010,
when he became a deferred member.
No benefits accrued under this scheme
during 2014
Operation
Maximum
opportunity
Performance conditions
and assessment
125% of
salary
This framework will apply with effect
from the 2016 financial year (the
Bonus Plan described on page 49
will apply in 2015)
Provides an opportunity for additional
reward (up to a maximum specified
as a % of salary) based on annual
performance against targets set
and assessed by the Committee
A proportion of any bonus (20%) is
deferred into Company shares under
the terms of the STV Deferred Bonus Plan
(‘DBP’) and normally vest over three years,
subject to continued employment
Recovery and dividend equivalent
provisions apply (see explanatory notes)
Payment is determined by reference to
performance assessed over one financial
year based on a range of financial and
strategic performance measures
These measures currently include:
• operating profit
• cash flow
• personal objectives
As well as determining the measures and
targets, the Committee will also determine
the weighting of the various measures,
which will normally be weighted towards
the financial measures
At threshold and target performance
12.5% and 50% of base salary, respectively,
is currently payable
The Committee has discretion to use
different or additional measures, weightings
or payout schedules to ensure that the
bonus framework appropriately supports
the business strategy and objectives for the
relevant year
The Committee has the discretion to adjust
targets for any exceptional events that may
occur during the year
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Objective and
link to strategy
Long Term
Incentive Plan
Aligns reward
to the delivery
of long-term
financial
performance
delivered for
shareholders
Shareholding
requirement
To strengthen
long term
alignment with
shareholders
Operation
Maximum
opportunity
Performance conditions
and assessment
The
maximum
award in
respect of
a financial
year is 100%
of salary
Awards are made under the terms
of the STV Long Term Incentive Plan,
subject to approval by shareholders
at the 2015 Annual General Meeting
Awards are normally in the form of a
right to acquire shares in the Company
for a zero or nominal amount
Awards vest over a period of at least
three years, subject to the satisfaction
of performance conditions
A post-vesting holding period may apply
Recovery and dividend equivalent
provisions apply (see explanatory notes)
Vesting is determined by reference to
performance assessed over a period of at
least three years, based on performance
measures which the Committee consider to
be aligned with the delivery of strategy and
long term shareholder value. For awards to
be made in 2015, the measures are:
• earnings per share (‘EPS’) – 50%
• non-broadcast operating profit – 30%
• relative total shareholder return – 20%
The Committee has discretion to use
different or additional measures or
weightings to ensure that the LTIP remains
appropriately aligned to the business
strategy and objectives
The Committee has the discretion to adjust
targets for any exceptional events that may
occur during the year
The threshold level of vesting is 20% of the
maximum award
Executive Directors are required
to hold shares equivalent to 100%
of their annual salary
None
The
required
level of
holding
is 100%
of salary
Notes to the Policy table
Changes to remuneration policy from previous policy
The following changes have been made to the previous Policy:
• introduction of a new bonus framework to replace the Bonus Plan with effect from 2016. This includes an element
of deferral under the DBP
• introduction of a new LTIP to replace the VCP
• introduction of recovery provisions.
Recovery provisions
Awards of variable remuneration made under the Policy Table for Executive Directors are subject to recovery provisions
which allow the Committee to reduce or cancel unvested DBP/LTIP awards, or seek to reclaim paid or deferred cash or
DBP/LTIP awards, in certain circumstances.
The recovery provisions for the annual bonus apply for three years from the date of payment of the bonus/grant of
deferred shares, and two years from the date of vesting under the LTIP. The circumstances which may trigger the
recovery provisions are as follows:
• a material misstatement of the Company’s (or any Group members) audited financial results
• misconduct on the part of the participant
• an error in assessing a performance condition
• action by a participant or participants which resulted in a material breach and subsequent loss of the Company’s
Channel 3 licence(s).
49
Dividend equivalents
The Committee may determine that the number of shares to which a participant’s DBP or LTIP award relates shall
increase to take account of dividends that would have been paid on vested shares on such terms as it determines,
or that an equivalent amount should be paid in cash.
Performance measures and targets
The Committee selects performance measures for the annual bonus which appropriately support the business strategy
and objectives for the relevant year. The financial metrics used (such as operating profit) are the key metrics used by
the Directors to oversee the operation and performance of the business. Personal measures allow the Committee to
reward the delivery of key strategic objectives. The performance measures for the LTIP are aligned with the delivery of
strategy and long term shareholder value. The performance targets are determined annually by the Committee, and
are set at an appropriately stretching level taking into account relevant business forecasts.
Discretion
The Committee has discretion in several areas of policy as set out in this report. The Committee may also exercise
operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules.
Differences in remuneration policy for all employees
All employees of STV are entitled to base salary, pension and benefits. The maximum opportunity available is based
on the seniority and responsibility of the role. Long-term incentive awards are only available to the leadership team
and key senior staff by invitation.
Legacy incentive plans
The table below summarises the terms of the incentive plans approved by shareholders at the AGM on 24 April 2013
(and contained in the Remuneration Policy approved by shareholders at the AGM on 23 April 2014). These
arrangements are due to expire based on performance up to the end of 2015 and no further awards will be made
under these plans.
Objective and
link to strategy
Bonus Plan
The Bonus
Plan aligns
reward to key
strategic objectives
over the short-
medium term
Operation
Maximum
opportunity
Performance conditions
and assessment
The Maximum Annual
Contribution is 125% of salary
for all Executive Directors
At threshold performance
bonus payable is equivalent
to 12.5% of base salary and
at target performance, bonus
payable is equivalent to 50%
of base salary
The Bonus Plan operates in
respect of three Plan Years
(2013, 2014 and 2015)
Contributions to each
participant’s Bonus Plan
account are made following
the publication of the audited
financial statements, based
on the satisfaction of the
performance targets
Following the end of each of
the three Plan Years, 50%
of the balance in the account
is paid out. The remaining 50%
is deferred as shares
The balance of the account
pays out in the fourth year
(payable upon confirmation
of 2016 full year results)
A forfeiture provision applies
such that 50% of the account
balance is forfeited if a minimum
threshold target is not met in
any financial year
Performance targets will be
set annually based on a range
of financial and strategic
measures including:
• Operating profit
• Cash flow
• Personal objectives
As well as determining the
measure and targets, the
Committee will also determine
the weighting of the various
measures to ensure that they
support the business strategy
and objectives for the
relevant year
The Committee has the discretion
to adjust targets or performance
measures for any exceptional
events that may occur during
the year
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Objective and
link to strategy
Value
Creation Plan
The Value
Creation Plan
(‘VCP’) was
implemented to
align the interests
of the Executive
Directors with
those of
shareholders
by focusing
on delivering
superior returns
to shareholders
Operation
Maximum
opportunity
Performance conditions
and assessment
The number of Performance
Units allocated to Executive
Directors was:
R Woodward
G Watt
330,000
170,000
The aggregate number of
Performance Units under
option as a result of the
VCP is limited to one million.
Performance Units were
granted to Executive Directors
on 11 March 2013. No further
awards have or will be made
to the Executive Directors
Subject to the performance
criteria being met at the
end of a three year performance
period (which ends on
31 December 2015), these
Performance Units will convert
into a Nil-Cost Option over
sufficient shares to deliver
the participant’s share of the
Maximum Incentive Value
The Nil-Cost Option may
be exercised until the tenth
anniversary of the date of
grant of the Performance Units
The Maximum Incentive Value
for all participants will be
conditional upon achieving an
average share price of £1.50 or
higher over the last 30 days of
the three year performance
period (the Measurement Price).
The share price at date of grant
on 1 January 2013 was £1.00.
Provided the Measurement
Price is above £1.50, a percentage
of the additional value created
is used to create a pool (the
Incentive Value) in line with
the table below:
Measurement
price
Below £1.50
£1.50-£2.00
Above £2.00
Contribution
percentage1
0%
5%
7.5%
1 The contribution percentage is
the proportion of the value created
allocated to participants
The Incentive Value, calculated
in accordance with the table
above will be multiplied by the
number of shares in issue at the
Measurement Date to determine
the Maximum Incentive Value
for all participants.
51
Non-Executive Directors
The table below sets out the key elements of the policy for non-Executive Directors:
Objective and
link to strategy
To attract
Non-Executive
Directors with
the requisite skills
and experience
Operation
The fees of the Non-Executive Directors are determined
by the Board based upon recommendations from the
Chairman and Chief Executive Officer (or, in the case of
the Chairman, based on recommendations from the
Senior Independent Non-Executive Director and the Chief
Executive Officer)
The fee for Non-Executive Directors encompasses a basic
fee and may also include supplementary fees for committee
or other duties
The Chairman receives a single fee for all duties
Fees are normally reviewed annually with changes effective
from 1 January
Fees are paid in cash
The Chairman and Non-Executive Directors do not participate
in any bonus or share incentive scheme, nor do they
participate in any pension arrangements
Maximum
opportunity
Fees are set at a level which
reflects skills, experience, time
commitment and appropriate
market data
Fees are set within the
limits set by the Articles
of Association
Fees with effect from
1 January 2015 are set out
on page 56
Illustrations of application of remuneration policy
The graphs below seek to demonstrate how pay varies with performance for the Executive Directors based
on the Policy Table for Executive Directors.
Rob Woodward
£000
£481
100%
£1,353
28%
36%
36%
£820
11%
30%
59%
George Watt
£000
£469
11%
30%
59%
£278
100%
£769
28%
36%
36%
Minimum
On Target
Maximum
Minimum
On Target
Maximum
LTIP
Annual bonus
Fixed pay (salary, benefits, pension)
LTIP
Annual bonus
Fixed pay (salary, benefits, pension)
Assumptions used in determining the level of pay-out under given scenarios are as follows:
• Minimum – reflects fixed pay only (base salary as at 1 January 2015, benefits, and cash in lieu of pension
contributions at 20% of salary).
• Target – reflects fixed pay, target bonus (62.5% of salary) and LTIP awards (100% of salary) vesting at threshold
performance (25% of maximum).
• Maximum – reflects, maximum bonus (125% of salary) and LTIP awards vesting in full (100% of salary).
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Recruitment remuneration policy
The Committee’s approach to recruitment remuneration is to pay no more than it considers necessary to secure
appropriate candidates to the role.
The principle is that the pay of any new recruit would be assessed following the same principles as for the Executive
Directors. The structure of the remuneration package would therefore normally include the components, and be
subject to relevant maxima, as set out in the Policy Table for Executive Directors. Salaries would typically be set at
an appropriately competitive level to reflect skills and experience. They may be set at a level to allow future salary
progression to reflect performance in role. The Executive Director would be eligible to participate in the annual bonus
and LTIP for the year subject to a maximum level of variable remuneration which may be awarded (excluding any
compensatory awards referred to below) at 225% of salary.
Where an individual forfeits remuneration with a previous employer as a result of appointment to the Company, the
Committee may make compensatory payments or awards to facilitate recruitment. In determining the structure of
these commitments, the Committee will normally seek to replicate, as far as practicable, the timing and performance
requirements of remuneration foregone. Such payments or awards could include cash (where cash-based remuneration
is forfeited) as well as share awards. There is no limit on the value of such compensatory awards, but the Committee’s
intention is that the value awarded would be no more generous than a broadly equivalent economic value of the
forfeited remuneration.
In instances where the new Executive Director relocates from one workbase to another, the Company may provide
compensation to reflect the cost of relocation. The level of relocation package will be assessed on a case by case basis
but will take into consideration any cost of living differences, housing allowance and schooling in accordance with the
Company’s normal relocation package for employees.
Where an existing employee is promoted to the Board, the policy would apply from the date of promotion but there
would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration
arrangements. Accordingly, existing elements of the remuneration package of the employee would be honoured
and form part of the ongoing remuneration for the person concerned.
Service contracts
When setting notice periods the Committee has regard to market practice and corporate governance best practice.
Notice periods will not be greater than 12 months.
Director
Executive
R Woodward
G Watt
Director
Non-Executive
Baroness Ford
D Shearer
J Matheson
M Jackson
G Shore
C Woolfenden
A M Cannon
Date of contract/
letter of appointment
Unexpired term
Notice period by
Company or Director
28 February 2007
27 February 2001
Rolling contract
Rolling contract
12 months
12 months
Date of contract/
letter of appointment
Date(s) of
(re)appointment
Unexpired as at
March 2015
1 June 2013
28 February 2007
5 March 2007
1 May 2009
1 March 2012
1 June 2014
1 November 2014
23 April 2014
23 April 2014
24 April 2013
23 April 2014
18 April 2012
–
–
2 years 11 months
2 years 11 months
1 year 11 months
2 years 11 months
11 months
2 years 3 months
2 years 8 months
53
Policy on payment for loss of office
When determining any loss of office payment the Committee will always seek to minimise cost to the Company whilst
seeking to reflect the circumstances in place at the time.
In the event of termination by the Company, there will be no compensation for loss of office due to misconduct or
normal resignation. In other circumstances Executive Directors may be entitled to receive compensation for loss of
office which will be paid monthly for a maximum of twelve months. Such payments will be equivalent to the monthly
salary, pension supplements, and benefits that the Executive would have received if still in employment with the
Company. Executive Directors will be expected to mitigate their loss within a 12 month period of their departure from
the Company.
The treatment of incentive awards would be determined by the relevant plan rules. If the individual is a ‘good leaver’,
the treatment of awards will be as set out in the table below (which also describes the Committee’s areas of discretion).
The ‘good leaver’ circumstances are death, ill-health, injury, disability, the sale of the business or entity that employs
the participant out of the Group, or for any other reason at the Committee’s discretion (redundancy, and retirement
by agreement with the Company are also ‘good leaver’ terms under the Bonus Plan and VCP). If the individual is not
a good leaver, unvested awards will lapse in full. It is the Committee’s policy to only apply its discretion to determine
an individual is a ‘good leaver’ where the circumstances at the time are, in its opinion, sufficiently exceptional, and to
provide a full explanation to shareholders where discretion is exercised.
Treatment of awards for a ‘good leaver’
Annual bonus
(2016 onwards)
The Committee has discretion to make a payment under the annual bonus in respect of the year of
cessation. This would reflect performance in the year and be pro-rated to reflect the period worked
in that year.
DBP
LTIP
Legacy plans
Bonus Plan
VCP
Unvested DBP awards will usually continue, unless the Committee determines that the award should
vest as soon as reasonably practicable following the date of cessation.
An award will normally vest in full but the Committee retains discretion to determine the extent to which
it vests, taking account of the period of time that has elapsed since the award was granted until the date
on which the participant ceases to hold office or employment with the Group.
Unvested LTIP awards will usually continue, unless the Committee determines that the award should
be released as soon as reasonably practicable following the date of cessation. The Committee will decide
the extent to which an unvested award vests in these circumstances, taking into account the extent to
which any performance condition is satisfied and, unless the Committee in its discretion determines
otherwise, the period of time that has elapsed since the award was granted until the date of cessation.
The Company will make a distribution to the Executive Director of the whole of the plan account at
the date of cessation. Further, on the next normal Measurement Date, if the Board determines that
a Bonus Plan Contribution should be made, then the Executive’s Contribution will be pro-rated to reflect
the period worked in that performance year.
The Committee may use its discretion to determine that all or a proportion of the Performance Units
shall convert on the Measurement Date. The Committee has the discretion whether to pro-rate the
number of Performance Units that may convert into Nil-Cost Options at the normal Measurement Date.
For Performance Units that are converted on termination, the Committee can determine the period
over which the Nil-Cost Options may be exercised. On termination of employment after the Measurement
Date, the Executive Director will be entitled to exercise their Nil-Cost Options at any time during the
period permitted by the Committee.
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
There is no contractual provision agreed prior to 27 June 2012 that could impact the quantum of payment.
The Committee reserves the right to make additional payments where such payments are made in good faith in
discharge of an existing legal obligation (or by way of damages for breach of such obligation); or by way of settlement
or compromise of any claim arising in connection with the termination of an Executive Director’s discharge of office
or employment.
Change of control
DBP
LTIP
Legacy plans
Bonus Plan
VCP
An award will normally vest in full but the Committee retains discretion to determine the extent to which
it vests, taking account of the period of time that has elapsed since the award was granted until the date
on which the participant ceases to hold office or employment with the Group.
Awards will vest, taking into account the extent that any performance condition has been satisfied, and,
unless the Committee determines otherwise, the period of time which has elapsed between the grant
date and the relevant event. Alternatively, the Committee may permit participants to exchange awards
for equivalent awards which relate to shares in a different company.
The value of Participant’s Plan Account will be released. The Committee will take into account such
factors as it considers relevant in relation to the Bonus Plan Contribution for the year in which the event
occurs, including the proportion of the Bonus Plan Year elapsed at the date of the event.
The three year performance period will end on a change of control. Performance Units may convert into
Nil-Cost Options immediately prior to the change of control, based on the satisfaction of the performance
criteria. In exceptional circumstances the Committee may, in its absolute discretion, determine the
proportion of the Performance Units which shall be capable of conversion shall be reduced to take
account of the period from the date of Change of Control as a proportion of the period from the award
date until the original Measurement Date.
Consideration of employment conditions elsewhere in the Company
In making annual pay decisions the Committee gives consideration to pay and employment conditions in the rest of
the Company. The Committee is provided with data on the remuneration structure for the Executive leadership team,
and uses this information to work with the HR team to ensure consistency of approach throughout the Company.
To appraise itself of conditions elsewhere in the Company, the Committee invites the HR & Communications Director
to present on the proposals for salary increases for the employee population generally, and on any other changes to
remuneration policy within the Company.
The Committee actively considers the relationship between general changes to employees pay and conditions and
any proposed changes in the remuneration packages for Executive Directors to ensure it can be sufficiently robust
in its determinations in light of the position of the Company as a whole.
Although the Committee takes into account the pay and conditions of other employees, the Company did not consult
with employees when developing the Policy. No comparison metrics were used by the Committee.
Consideration of shareholder views
The views of the Company’s shareholders are very important and the Committee welcomes constructive feedback
with respect to the remuneration policies or structure which we take on board to formulate our arrangements.
The Committee consulted with its major shareholders in early 2015 to receive feedback on the remuneration policy
and the introduction of the new bonus framework and LTIP. The major shareholders consulted were supportive of
the proposed introduction of the new incentive arrangements and overall remuneration policy.
55
ANNUAL REPORT ON REMUNERATION
This section of the report sets out how the Policy will be implemented in 2015 and how it was implemented during
2014. Some sections of this report, where indicated, have been audited.
Statement of implementation of remuneration policy for 2015
Executive Directors
The salaries for 2015 are set out below:
Executive Director
R Woodward
G Watt
2014 Salary
£000
2015 Salary
£000
%
increase
380
214
388
218
2%
2%
Salary levels of employees throughout the Company were increased by an average of 2.8% in 2015. The base salary
increases for the Executive Directors represent the first increase since 2007 and this will continue during 2015.
Benefits and pension will be provided for as set out in the Policy Table for Executive Directors.
In 2015, the Executive Directors will participate in the Bonus Plan as described in the table on page 49. This will
represent the final year of participation in this plan (from 2016 the Executive Directors will participate in the new
annual bonus framework as described in the Policy Table for Executive Directors on page 47. The bonus will be based
on stretching targets set for the performance measures in the table below. The Committee is of the opinion that the
performance targets for the Bonus Plan are commercially sensitive, and that it would be detrimental to the interests
of the Company and its shareholders to disclose them at this time. It is the Committee’s intention to disclose the
targets after the end of the financial year if the Committee is satisfied they are no longer sensitive.
Performance
measure
Operating profit
Cash flow
Personal objectives
Totals
Weighting
50%
25%
25%
Threshold
bonus
contribution
(% of salary)
Maximum
bonus
contribution
(% of salary)
6.25%
3.125%
3.125%
12.5%
62.5%
31.25%
31.25%
125%
In 2015, subject to shareholder approval at the AGM, the Executive Directors will receive awards under the LTIP
as described in the Policy Table for Executive Directors on page 48. Awards to Executive Directors will be made
at the level of 100% of salary and will vest after three years subject to the following performance targets:
Performance
measure
Calibration of targets
Weighting
Threshold vesting
(25% of maximum)
Maximum
vesting
EPS
Annualised growth in adjusted EPS from FY14 to FY17
Non-broadcast
operating profit
Relative TSR
Operating profit for non-broadcast activities in FY17
Ranked position of the Company’s total shareholder
return (‘TSR’) against the constituents of the FTSE
Small Cap Index (using 3 month averaging)
50%
30%
20%
7%
£4.0m
Median
12%
£9.0m
Upper
quartile
There is no vesting for below threshold performance and straight-line vesting between threshold and maximum.
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Non-Executive Directors
The fees for the Chairman and Non-Executive Directors effective at 1 January 2015 will remain unchanged from 2014:
Executive Director
Chairman fee
Basic NXD fee
Additional fees:
SID
Sitting on the Company’s Audit and/or Remuneration Committees
Chairing the Audit or Remuneration Committee
£
95,000
32,500
12,500
5,000
2,500
Single total figure of remuneration
Executive Directors (audited)
The table below sets out the single total figure of remuneration for each Executive Director
for the 2014 financial year. Comparative figures for 2013 are also shown.
Executive Director
R Woodward
G Watt
Salary
(£000)
380
380
214
214
Taxable
benefits
(£000)
Annual
bonus
(£000)
Long-term
incentives
(£000)
16
16
16
16
189
129
106
73
n/a
n/a
n/a
n/a
2014
2013
2014
2013
Pension
Total
76
76
43
43
661
601
379
346
Notes
Taxable Benefits – Includes a taxable cash allowance in lieu of benefits-in-kind, including car and private medical insurance.
Annual Bonus – this includes the value of bonus earned in respect of the relevant financial year (including any amount deferred under
the Bonus Plan and re-valued in accordance with the plan rules).
Long-term incentives – No long-term incentives vested by reference to either financial year. Pension – Both Executive Directors receive
a taxable cash allowance in lieu of pension. George Watt is a deferred member of the defined benefits scheme and as such no additional
value was accrued by him under this plan during the year.
57
Non-Executive Directors (audited)
The table below sets out the single total figure of remuneration for each non-Executive Director. Non-Executive
Directors do not participate in any of the Company’s incentive arrangements nor do they receive any benefits.
Non-Executive Director
Financial year
Basic fees
£
Additional fees1
£
Total fees
£
Baroness Ford
D Shearer
V Babic2
J Matheson
M Jackson
G Shore
C Woolfenden3
A M Cannon3
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
95,000
55,416
43,333
40,000
10,000
30,000
31,667
30,000
31,667
30,000
31,667
30,000
15,958
5,417
–
–
7,500
7,500
2,500
7,500
5,000
5,000
5,000
5,000
5,000
5,000
3,000
–
95,000
55,416
50,833
47,500
12,500
37,500
36,667
35,000
36,667
35,000
36,667
35,000
18,958
5,417
Notes
1 Additional fees relate to a fee of £5,000 per annum for sitting on one or more of the Company’s Audit and Remuneration Committees
and an additional fee of £2,500 per annum to reflect the additional duties involved in chairing the Audit and Remuneration Committees.
2 Vasa Babic retired by rotation in April 2014.
3 Christian Woolfenden was appointed on 1 June 2014 and Anne Marie Cannon was appointed on 1 November 2014.
Annual bonus (audited)
The table below sets out the targets and achieved performance against the performance targets for the Bonus Plan
for the year ended 31 December 2014.
Annual contribution
(% salary)
Performance
targets
Weighting Threshold Maximum Threshold Maximum
Contribution
to Plan
account
for 2014
(% salary)
Actual
performance
outcome
Contribution
to Plan
account
for 2014
(£000)
25% 3.125% 31.25% £17.1m £21.8m
£19.5m
18%
25% 3.125% 31.25% £14.8m £18.9m
25% 3.125% 31.25% £12.6m £16.1m
£17.3m
£11.8m
25% 3.125% 31.25%
See below
100%
12.5%
125%
-
-
-
21%
19%
58%
R Woodward
G Watt
70
78
39
45
Target not met
71
219
40
124
Performance
condition
Operating
Profit
Group
PBT
Cash flow
Personal
objectives
Total
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
The personal objectives were set at the start of the year by the Committee. These targets related to key strategic
business targets, specifically the growth of the digital and Production businesses; reduction of key strategic risks to
increase financial stability and investment certainty and progress against KPIs. The Committee assessed performance
against these targets and concluded that they had been partially satisfied at the end of the financial year, resulting in a
bonus payment equal to 18.75% of salary to each Executive Director. The Committee considers that the actual
performance targets and outcomes relating to the personal objectives are commercially sensitive at this current time
and are therefore not disclosed.
Bonus deferred under the Bonus Plan (audited)
Under the Bonus Plan, the earned bonus for the year is added to each individual Executive Director’s plan account.
Half of the balance on the plan account at the end of the financial year is released and 50% deferred in accordance
with the terms of the plan (see page 49). The deferred balances on each Executive Director’s plan account are
set out below.
A
B
C
D
E
F
G
H
Plan
account
brought
forward
£
Contribution
into plan
account
for 2014
£
Plan account
balance
following
contribution
for 20141
£
Amount
released
following
contribution
for 2014
£
Amount
released from
plan account
for 2014
(50% of
column C)
£
Plan
account
carried
forward
£
129,086
219,609
377,452
188,726
109,805
188,726
72,764
123,791
212,765
106,383
61,896
106,382
Plan
account
brought
forward
(shares)
43,245
24,376
Plan
account
carried
forward
(shares)
51,705
29,145
Executive
Director
R Woodward
G Watt
1 Plan account balance following contribution for 2014 includes revaluation of plan account brought forward (‘b’) as per plan rules.
The plan account balance carried forward is subject to an annual performance condition related Forfeiture Threshold.
Where the Forfeiture Threshold is not achieved in the following Bonus Plan year, 50% of the balance of the plan
account earned in respect of previous Bonus Plan years but not paid will be forfeited.
The Committee considered the Forfeiture Threshold and determined that none of the plan account should lapse.
Scheme interests awarded in 2014 financial year (audited)
No scheme interests were awarded to the Executive Directors during 2014.
Payments to past Directors (audited)
No payments to past Directors were made during the year.
Payments for loss of office (audited)
No payments for loss of office were made during the year.
59
All employee share plans
The Savings Related Share Option Plan (‘SAYE’) which was launched in 2011, reached maturity on 1 September 2014.
Rob Woodward and George Watt exercised their options over 7,337 shares respectively which had been awarded,
under the scheme, at a price of 123p.
A new three year SAYE plan was launched in November 2014 at a price of 338p. Rob Woodward was granted 2,662
options and George Watt was granted 5,325 options.
Statement of Directors’ shareholding and share interests (audited)
Executive Directors are required to build up a shareholding equal to 100% of salary. The table below summarises
the Directors’ interests in shares and the extent to which the shareholding requirements have been achieved.
The Non-Executive Directors are not subject to a shareholding guideline.
Number of
beneficially
owned
shares1
519,322
265,769
25,958
100,000
12,500
–
16,063
–
–
Number of
deferred
Bonus Plan
shares
subject to
conditions
51,705
29,145
–
–
–
–
–
–
–
Number of
SAYE
options
subject to
conditions
Total
interests
held at
31 Dec 2014
Shareholding
requirements
2,662
5,325
519,322
265,769
Met
Met
–
–
–
–
–
–
–
25,958
100,000
12,500
–
16,063
–
–
–
–
–
–
–
–
–
Director
Executive
R Woodward
G Watt
Non-Executive
Baroness Ford
D Shearer
J Matheson
M Jackson
G Shore
C Woolfenden
A M Cannon
Notes
1 Beneficial interests include shares held directly or indirectly by connected persons.
Dilution
The following table sets out the current level of dilution against the limits in the Bonus Plan and VCP and sets out
the commitments to issue shares made during the financial year reported:
Maximum
10% dilution in ten years
5% dilution in ten years
Current dilution
Additional dilution during
the year in question
6.07
4.29
1.93
1.37
The DBP and LTIP will be subject to a limit of 10% in ten years.
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Performance graph and table
The graph below shows the Company’s performance, measured by total shareholder return (‘TSR’), compared with
the performance of the FTSE Small Cap and FTSE Small Cap Media indices. The FTSE Small Cap index will be used
for performance measurement under the new LTI and the FTSE Small Cap Media index provides a comparison
of performance in the media sector.
500
450
400
350
300
250
200
150
100
50
0
2008
2009
2010
2011
2012
2013
2014
FTSE Small Cap index
FTSE Small Cap Media index
STV Group plc
The table below shows the Chief Executive Officer’s remuneration over the past six years.
Year
2014
2013
2012
2011
2010
2009
Single figure of total
remuneration
(£000)
R Woodward1
Bonus pay-out
(as % maximum
opportunity)1,2
Long-term incentive
vesting rates
(as % maximum
opportunity)
661
601
696
958
472
472
46
54
31
15
90
–
–
–
100%
–
–
–
Notes
1 2011 single figure of remuneration of £958,000 includes deferred bonus payment
of £427,500 from 2010 bonus plan which carried performance conditions.
2 Maximum potential bonus opportunity has varied in the period between 2009
and 2014 and therefore this is not a like-for-like comparison.
61
Percentage change in Chief Executive Officer’s remuneration
The table below shows the percentage increase in the salary, benefits and annual bonus of
the Chief Executive Officer and all employees (on a per capita basis) between 2013 and 2014.
Chief Executive Officer
All employees
Salary
2%
2.8%
Taxable
benefits
0%
0%
Bonus
46%
n/a
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2014 and 2013 financial years.
These were the most significant outgoings for the Company in the last financial year.
Significant distributions
Overall spend on pay
Dividend or share buyback
2014
£19.4m
£1.6m
2013
% change
£16.5m
–
17%
–
Consideration by the Directors’ of matters relating to Director’s remuneration
Members of the Committee
During the year, the Committee comprised of the following Independent Non-Executive Directors: Vasa Babic,
Michael Jackson, Jamie Matheson and Genevieve Shore (who replaced Vasa Babic as Chairman of the Committee
when he stepped down from the Board on 23 April 2014). The Committee met four times during the year.
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and
the senior management and for setting the remuneration packages for each Executive Director. The Committee
also has oversight of the remuneration policy and packages for other senior members of staff. The Committee
has formal terms of reference which describes its full remit and which can be downloaded from the STV website.
STV Annual Report and Accounts 2014
Directors’ Report Governance
REMUNERATION REPORT
continued
Advisors to the Committee
The Committee seeks independent advice to assist in considering executive remuneration. This includes updating the
Committee on trends in compensation and governance matters and advising the Committee in connection with the
design and operation of the Company’s incentive arrangements.
During the year, the Committee received advice from PricewaterhouseCoopers LLP, who had been selected by the
Committee in 2008 (as Halliwell Consulting) through a competitive tendering process. In September 2014, following
a competitive tendering process, the Committee appointed Deloitte LLP to advise on the development of the new
incentive framework.
Both PricewaterhouseCoopers LLP and Deloitte LLP are members of the Remuneration Consultants’ Group and have
signed up to that Group’s Code of Conduct on executive remuneration consulting. On that basis, the Committee is
satisfied that the advice received was objective and independent. PricewaterhouseCoopers LLP was also the Company’s
statutory auditors during the period. The Committee reviewed the nature of the services provided and was satisfied that
no conflict of interest existed in the provision of these services, and that the advice provided was objective and independent.
In the course of its deliberations during the period under review, the Committee sought the assistance of the Chairman
and Chief Executive Officer on matters relating to Directors’ performance and remuneration. The Chairman, Chief
Executive Officer and the HR & Communications Director attend meetings by invitation except when their individual
remuneration arrangements are discussed.
Statement of voting at general meeting
The table below shows the remuneration related votes at the AGM held on 23 April 2014.
Votes for
%
Votes against
% Total votes cast
Votes withheld*
2013 Remuneration Report
2013 Remuneration Policy
24,974,079
25,210,955
92.92
93.80
1,901,634
1,666,713
7.08
6.20
26,875,713
26,877,668
3,746
1,791
* A vote withheld is not a vote in law and counts neither for nor against a resolution.
Genevieve Shore
Remuneration Committee Chairman
16 March 2015
Financial Statements
64
STV Group plc Consolidated
Financial Statements –
Independent Auditors’ Report
68 Consolidated Income Statement
68
Consolidated Statement
of Comprehensive Income
69 Consolidated Balance Sheet
70
Consolidated Statement
of Changes in Equity
71 Consolidated Statement
of Cash Flows
72
94
Notes to the Financial
Statements
STV Group plc Company
Financial Statements –
Independent Auditors’ Report
96 Company Balance Sheet
97
Notes to the Company
Financial Statements
101 Five Year Summary
Additional Information
102 Shareholder Information
104 Notice of Annual
General Meeting
115 Appendix to the
Notice of Annual
General Meeting
63
STV Annual Report and Accounts 2014
Financial Statements
STV GROUP PLC CONSOLIDATED
FINANCIAL STATEMENTS
Independent Auditors’ Report to the Members of STV Group plc
Report on the group financial statements
Our opinion
In our opinion, STV Group plc’s group financial statements
(the ‘financial statements’):
• give a true and fair view of the state of the group’s
affairs as at 31 December 2014 and of its profit and
cash flows for the year then ended;
• have been properly prepared in accordance with
International Financial Reporting Standards (‘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.
What we have audited
STV Group plc’s financial statements comprise:
• Consolidated Balance Sheet as at 31 December 2014;
• Consolidated Income Statement and Consolidated
Statement of Comprehensive Income for the year
then ended;
• Consolidated Statement of Cash Flows for the year
then ended;
• Consolidated Statement of Changes in Equity for
the year then ended; and
• the notes to the financial statements, which include
a summary of significant accounting policies and
other explanatory information.
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in the notes
to the financial statements. These are cross-referenced
from the financial statements and are identified
as audited.
The financial reporting framework that has been
applied in the preparation of the financial statements
is applicable law and IFRSs as adopted by the
European Union.
Our audit approach
Overview
• Overall group materiality:
£865,000 which represents
5% of profit before tax
Materiality
Audit scope
Area of focus
• We performed audit work over
all segments of the business
• Taken together, the segments and
functions where we performed
our audit work accounted for 100%
of group revenues and 100% of
group profit before tax
• Retirement benefit obligations
• Production inventory carrying value
• Goodwill impairment assessment
The scope of our audit and our areas of focus
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
(‘ISAs (UK & Ireland)’).
We designed our audit by determining materiality and
assessing the risks of material misstatement in the
financial statements. In particular, we looked at where
the Directors made subjective judgements, for example
in respect of significant accounting estimates that
involved making assumptions and considering future
events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of
internal controls, including evaluating whether there was
evidence of bias by the Directors that represented a risk
of material misstatement due to fraud.
The risks of material misstatement that had the greatest
effect on our audit, including the allocation of our
resources and effort, are identified as ‘areas of focus’
in the table below. We have also set out how we tailored
our audit to address these specific areas in order to
provide an opinion on the financial statements as a
whole, and any comments we make on the results of
our procedures should be read in this context. This is not
a complete list of all risks identified by our audit.
65
Area of focus
How our audit addressed the area of focus
Retirement benefit obligations
Refer to page 35 (Audit Committee Report),
page 72 (Significant Accounting Policies) and
page 88 (notes).
The group has a net retirement benefit obligation
of £14.9m that is significant in the context of
the group balance sheet and is dependent on
key judgemental assumptions, including discount
rate, inflation rate and mortality rates adopted
by the Directors in the actuarial valuation.
Slight movements in these assumptions can
have a significant impact on the overall obligation.
In particular, the mortality assumption was
outside the range that we would typically expect
to see and hence additional focus was placed
on the consideration of this assumption.
Productions inventory carrying value
Refer to page 35 (Audit Committee Report),
page 72 (Significant Accounting Policies) and
page 84 (notes).
Production inventory of £14.8m relates to
associated costs incurred in the production of
programming which is deferred on the Balance
Sheet at the point of initial sale and charged to
the income statement in line with the associated
forecast future revenue. The charge to the income
statement and the carrying value of the deferred
production inventory are therefore based on
judgements made by the Directors of associated
future revenue.
Goodwill impairment assessment
Refer to page 35 (Audit Committee Report),
page 72 (Significant Accounting Policies) and
page 82 (notes).
The Group goodwill balance of £7.9m at the
year-end relating to the Production business is
tested for impairment by the Directors, at least,
on an annual basis. This requires the Directors
to prepare a value in use calculation that
incorporates a number of significant judgements
about the future profitability of the Productions
business. The audit risk that we focused on is
that the goodwill balance may be overstated and
that an impairment charge may be required.
We considered the reasonableness of the key assumptions used in
the actuarial valuation, being the discount rate, inflation rate (based
on the Retail Price Index and the Consumer Price Index) and mortality
rates, assessing if they were within our expected range.
All actuarial assumptions, with the exception of the mortality
assumptions, fell within our expected range based on our knowledge
and experience. For the mortality assumptions we used our specialist
knowledge and experience to challenge the Directors on their rationale
and what evidence they had to support it. Taking into account factors
relating to the specific industry and location of the business, which the
Directors evidenced through mortality studies they had commissioned,
we agreed that the judgements made by the Directors were reasonable.
We analysed the Directors’ assessment of each production in the
catalogue to determine, based on the past history of sales and licence
periods, the appropriateness of their projected future revenues for each
production individually, which are expected to be generated through
associated sales in the UK and overseas.
We considered the actual sales in 2014 against last year’s forecast
to establish the level of accuracy in the Directors’ forecasting, and
also re-performed calculations of forecast revenues to arrive at a
net present value.
Finally, we performed sensitivities on the key assumptions for future
revenue to satisfy ourselves that no impairment of inventory was
required. We concluded that there was sufficient headroom and
that the carrying value of inventory was not greater than its net
realisable value.
From the testing performed, we consider that the judgements
exercised by the Directors are reasonable and appropriate, and that
the carrying value of deferred production inventory is not materially
misstated.
We evaluated the Directors’ cash flow forecasts and their underlying
assumptions, including comparing them to the latest Board approved
budgets, and testing the underlying calculations. We then performed
sensitivity analysis over the key drivers and assumptions, being the
discount rate and growth rate as well as the underlying cash flows,
considering the headroom under various scenarios. We determined
that although significant growth is required in order to support the
carrying value of goodwill, actual cash flows would need to be less than
half what is being forecast by the Directors before an impairment
would be required, which we deem unlikely.
We challenged the discount rate by assessing the cost of capital for
the company and comparable organisations and found it to be in line
with our expectations.
We also consider the long term growth rate of 2% beyond the three
year cash flows as being in line with our expectations.
STV Annual Report and Accounts 2014
Financial Statements
STV GROUP PLC CONSOLIDATED
FINANCIAL STATEMENTS
Independent Auditors’ Report to the Members of STV Group plc
continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account
the geographic structure of the group, the accounting
processes and controls, and the industry in which the
group operates.
We performed audit work over all segments of
the business.
Taken together, the segments and functions where we
performed our audit work accounted for 100% of group
revenues and 100% of group profit before tax.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative
considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements,
both individually and on the financial statements as
a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole
as follows:
Overall group materiality
£865,000 (2013: £717,000)
How we determined it
5% of profit before tax
Rationale for
benchmark applied
Consistent with last year,
we applied this benchmark,
a generally accepted auditing
practice, in the absence
of indicators that an
alternative benchmark
would be appropriate.
We agreed with the Audit Committee that we would
report to them misstatements identified during our audit
above £42,000 (2013: £35,900) as well as misstatements
below that amount that, in our view, warranted reporting
for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the
Directors’ statement, set out on page 15, in relation to
going concern. We have nothing to report having
performed our review.
As noted in the Directors’ statement, the Directors have
concluded that it is appropriate to prepare the financial
statements using the going concern basis of accounting.
The going concern basis presumes that the group has
adequate resources to remain in operation, and that the
Directors intend it to do so, for at least one year from the
date the financial statements were signed. As part of our
audit we have concluded that the Directors’ use of the
going concern basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as to
the group’s ability to continue as a going concern.
Other required reporting
Consistency of other information
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.
ISAs (UK & Ireland) reporting
Under ISAs (UK & 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
– otherwise misleading.
• the statement given by the Directors
on page 16, in accordance with
provision C.1.1 of the UK Corporate
Governance Code (‘the Code’), that
they consider the Annual Report
taken as a whole to be fair, balanced
and understandable and provides the
information necessary for members
to assess the group’s performance,
business model and strategy is
materially inconsistent with our
knowledge of the group acquired in
the course of performing our audit.
• the section of the Annual Report
on page 38, as required by provision
C.3.8 of the Code, describing the
work of the Audit Committee does
not appropriately address matters
communicated by us to the
Audit Committee.
We have no
exceptions to
report arising
from this
responsibility.
We have no
exceptions to
report arising
from this
responsibility.
We have no
exceptions to
report arising
from this
responsibility.
67
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to
report to you if, in our opinion, we have not received all
the information and explanations we require for our
audit. We have no exceptions to report arising from this
responsibility.
• 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.
Directors’ remuneration
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, and under
the Listing Rules we are required to review certain
elements of the report to shareholders by the Board on
Directors’ remuneration. We have no exceptions to report
arising from these responsibilities.
Corporate governance statement
Under the Listing Rules we are required to review the part
of the Corporate Governance Statement relating to the
company’s compliance with nine provisions of the UK
Corporate Governance Code. We have nothing to report
having performed our review.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 15, the Directors are
responsible for the preparation of the 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 financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What an audit of financial statements involves
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:
We primarily focus our work in these areas by assessing
the Directors’ judgements against available evidence,
forming our own judgements, and evaluating the
disclosures in the financial statements.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or
a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report 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.
Other matter
We have reported separately on the company
financial statements of STV Group plc for the year
ended 31 December 2014 and on the information in
the Directors’ Remuneration Report that is described
as having been audited.
Kenneth Wilson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
17 March 2015
a) The maintenance and integrity of the STV Group plc website is the
responsibility of the Directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may
have occurred to the financial statements since they were initially
presented on the website.
b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
STV Annual Report and Accounts 2014
Financial Statements
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2014
Revenue
Net operating expenses
Operating profit
Finance costs – borrowings
– IAS 19 pension
Profit before tax
Tax charge
Profit for the year
Earnings per share
Basic
Diluted
Note
2014
£m
2013
£m
5
6
8
8
9
120.4
112.1
(100.9)
(94.1)
19.5
18.0
(2.2)
–
(2.2)
(2.8)
(0.9)
(3.7)
17.3
14.3
(2.6)
(2.1)
14.7
12.2
11
11
38.7p
37.6p
32.2p
31.2p
The notes on pages 72 to 93 are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2014
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Remeasurement on defined benefit pension schemes
Deferred tax credit/(charge)
Other comprehensive (expense)/income for the year net of tax
Total comprehensive (expense)/income for the year
Note
2014
£m
2013
£m
14.7
12.2
27
21
(22.1)
4.4
(17.7)
21.2
(4.9)
16.3
(3.0)
28.5
Financial Statements
CONSOLIDATED BALANCE SHEET
at 31 December 2014
69
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments
Deferred tax asset
Retirement benefit asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity attributable to owners of the parent
Ordinary shares
Share premium
Merger reserve
Other reserve
Accumulated losses
Total equity
Non-current liabilities
Borrowings
Derivative financial instruments
Retirement benefit obligations
Provisions
Current liabilities
Borrowings
Trade and other payables
Provisions
Total liabilities
Total equity and liabilities
Note
2014
£m
2013
£m
12
13
14
15
21
27
16
17
18
23
23
20
19
27
22
20
19
22
7.9
1.6
8.8
1.2
7.4
–
7.9
0.7
6.7
0.9
5.1
1.3
26.9
22.6
18.3
23.1
19.8
61.2
17.6
21.4
8.8
47.8
88.1
70.4
19.6
101.8
173.4
0.6
(291.9)
3.5
19.5
112.0
173.4
0.3
(297.6)
7.6
49.2
0.2
14.9
0.6
64.9
–
19.3
0.4
19.7
–
–
–
0.8
0.8
44.5
16.9
0.6
62.0
84.6
62.8
88.1
70.4
The notes on pages 72 to 93 are an integral part of these consolidated financial statements.
The consolidated financial statements on pages 68 to 93 were approved by the Board on 16 March 2015 and were
signed on its behalf by:
Rob Woodward
Chief Executive
George Watt
Chief Financial Officer
STV Annual Report and Accounts 2014
Financial Statements
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Year ended 31 December 2014
Ordinary
shares
£m
Equity attributable to owners of the parent
Share
premium
£m
Merger
reserve
£m
Other
reserve
£m
Accumulated
losses
£m
Total
Equity
£m
Balance at 1 January 2014
19.5
112.0
173.4
0.3
(297.6)
7.6
Profit for the year
Remeasurement loss
Deferred tax thereon
Total comprehensive expense for the year
Share premium reduction
Issue of share capital
Own shares acquired
Value of employee services
Equity-settled share-based payments
Dividends
Balance at 31 December 2014
–
–
–
–
–
0.1
–
–
–
–
19.6
–
–
–
–
(11.0)
0.8
–
–
–
–
101.8
–
–
–
–
–
–
–
–
–
–
173.4
Balance at 1 January 2013
19.5
112.0
173.4
Profit for the year
Remeasurement gain
Deferred tax thereon
Total comprehensive income for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
0.6
0.4
–
–
–
–
Equity-settled share-based payments
Balance at 31 December 2013
–
19.5
–
112.0
–
173.4
(0.1)
0.3
0.1
(297.6)
14.7
(22.1)
4.4
(3.0)
11.0
–
(0.9)
0.2
–
(1.6)
(291.9)
14.7
(22.1)
4.4
(3.0)
–
0.9
(0.9)
0.2
0.3
(1.6)
3.5
(326.2)
(20.9)
12.2
21.2
(4.9)
28.5
12.2
21.2
(4.9)
28.5
–
7.6
Financial Statements
CONSOLIDATED STATEMENT
OF CASH FLOWS
Year ended 31 December 2014
Operating activities
Cash generated by operations
Interest paid
Pension deficit funding – recovery plan payment
Net cash generated by operating activities
Investing activities
Purchase of investment
Capitalised web development and branding spend
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Net borrowings drawn/(repaid)
Dividends paid
Net cash generated from/(used by) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
24
71
2014
£m
2013
£m
20.9
(1.8)
(5.5)
18.3
(2.5)
(4.2)
13.6
11.6
(0.3)
(1.0)
(4.0)
(0.3)
(0.7)
(0.7)
(5.3)
(1.7)
4.3
(1.6)
(5.0)
–
2.7
(5.0)
11.0
8.8
24
19.8
4.9
3.9
8.8
Although not required under IFRS the Directors have provided the following reconciliation of net debt for further
clarity. Net debt represents Group borrowings less cash and cash equivalents.
Reconciliation of movement in net debt
Year ended 31 December 2014
Opening net debt
Net increase in cash and cash equivalents
Movement in debt financing
Closing net debt
Note
2014
£m
(35.7)
11.0
(4.7)
2013
£m
(45.3)
4.9
4.7
24
(29.4)
(35.7)
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
1. General information
STV Group plc (‘the Company’) and its subsidiaries (together, ‘the Group’) is listed on the London Stock Exchange
and incorporated and domiciled in the UK. The address of the registered office is Pacific Quay, Glasgow, G51 1PQ.
The principal activities of the Group are the production and broadcasting of television programmes, internet
services and the sale of advertising airtime and space in these media.
2. Adoption of new and revised standards
The following new standards, amendments to standards or interpretations are mandatory for the first time
for accounting periods beginning on or after 1 January 2014:
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 15
IAS 32 (amendment)
IAS 36 (amendment)
IAS 39 (amendment)
Financial instruments: classification and measurement
01 January 2018
Effective date
Consolidated financial statements
Joint arrangements
Disclosure of interests in other entities
Revenue from contracts with customers
Financial instruments: presentation on offsetting
financial assets and financial liabilities
Impairment of assets: Recoverable amount disclosures
for non-financial assets
Financial instruments: Recognition and measurement
on the novation of and the continuation of hedging
01 January 2014
01 January 2014
01 January 2014
01 January 2017
01 January 2014
01 January 2014
01 January 2014
01 January 2014
IFRIC 21
Levies
The above list of standards were either not relevant for the Group or had no material impact on the financial
statements of the Group.
3. Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented.
Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRS and IFRS Interpretations
Committee (IFRS IC) interpretations, as adopted by the European Union (EU) and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements
have been prepared under the historical cost convention and on a going concern basis.
In adopting the going concern basis for preparing the financial statements, the Group continues to review
forecasts to determine the impact of both the short-term and long-term liquidity position. After making
appropriate enquiries, and taking into account the amendment and extension of the banking facility in June 2014,
the Directors have a reasonable expectation that the Group has adequate resources to continue in operation
for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing its
consolidated financial statements.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the consolidated financial statements are disclosed in note 4.
Consolidation
The financial statements comprise a consolidation of the financial statements of the Company and all its
subsidiaries up to 31 December each year. Subsidiaries include all entities over which the Group has the power to
73
govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which the Group
has the power to control and de-consolidated from the date that control ceases. On consolidation, intercompany
transactions, balances and unrealised gains on transactions between Group companies are eliminated. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used
in line with those used by the Group on consolidation.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business, net of discounts and VAT. Revenue
from the sale of goods is recognised when the Group has transferred the significant risks and rewards of ownership
and control of the goods sold and the amount of revenue can be measured reliably. Key classes of revenue are
recognised on the following basis:
Airtime revenue
Sponsorship
on transmission
evenly over the life of the contract
Programme production
on delivery
Revenue on barter transactions is recognised only when the goods or services being exchanged are
of a dissimilar nature.
Dividends
Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are approved and paid.
Pensions
For defined benefit pension schemes, the difference between the fair value of the assets and the present value of
the defined benefit obligation is recognised as an asset or liability in the balance sheet. The defined benefit
obligation is actuarially calculated using the projected unit credit method.
The defined benefit cost is made up of three categories:
The service cost of providing retirement benefits to employees during the year, together with the cost of any
benefits relating to past service, is charged to operating profit in the year.
The net interest expense or income is recognised within finance costs. Net interest expense includes a credit
representing the expected return on the assets of the retirement benefit schemes and a charge representing the
expected increase in the liabilities of the retirement benefit schemes during the year.
Actuarial gains and losses are recognised immediately in the statement of comprehensive income.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the consideration transferred and the amount of any
non-controlling interest in the acquiree over the fair value of the identifiable assets and liabilities (including
intangible assets) of the acquired entity at the date of acquisition. Goodwill is recognised as an asset and assessed
for impairment annually or more frequently as triggering events occur. Any impairment is recognised immediately
in the income statement.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP
amounts subject to being tested for impairment. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been restated and is not included in determining any subsequent profit or loss on disposal.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
Other intangible assets
Other intangible assets are held at cost less accumulated amortisation and any provision for impairment. Included
within intangible assets are assets in the course of construction which comprise primarily web development
projects including directly attributable costs to bring the assets into use and may include capitalised borrowing
costs. Amortisation is provided at the following rates per annum to write off the costs of other intangible assets,
less residual value, on a straight line basis from the date on which they are brought into use:
Internally generated software
between 10% and 25%
Property, plant and equipment
The Group’s policy is to state property, plant and equipment at cost less accumulated depreciation and any
recognised impairment loss. Cost includes the original purchase price of the asset and the costs attributable
to bringing the asset to its working condition for its intended use.
Depreciation is provided to write off the cost of tangible non-current assets, less estimated residual values,
by equal annual instalments as follows:
Leasehold buildings
between 5% and 10%
Plant, technical equipment and other
between 10% and 20%
Residual values and useful economic lives are reviewed annually. Depreciation is charged on all additions
to, or disposals of, depreciating assets in the year of purchase or disposal.
Any impairment in value is charged to the income statement.
Impairment
Assets that have an indefinite useful life are not subject to amortisation and are tested at least annually or
whenever there is an indicator of impairment. Assets that are subject to amortisation or depreciation are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised in the income statement for the amount by which the asset’s
carrying value exceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. In assessing
value-in-use, the estimated future cash flows are discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
Leasing
All leases are operating leases and the costs in respect of operating leases are charged on a straight-line basis
over the lease term. The value of any lease incentive received to take on an operating lease (for example, a rent
free period) is recognised as deferred income and is released over the life of the lease.
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost comprises direct materials, and where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Net realisable value represents the estimated selling price less estimated costs
of completion and the estimated selling costs.
Recorded programmes and films
Recorded programmes are valued at direct cost including labour and overheads, less appropriate provisions,
and are written off after the first transmission or sale. Programming made for third parties is valued at cost,
less appropriate provisions, and is charged to the income statement against related income.
75
The carrying value of inventory is assessed each year at the balance sheet date.
Provisions
Provisions are recognised when the Group has a present obligation as a result of past events, it is probable that
the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the
obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the
obligation at the balance sheet date.
Onerous contracts
Provisions for onerous contracts are recognised when the Group has a detailed forecast of future losses from
the contract.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based
payments are measured at fair value of the equity instruments at the grant date. The fair value excludes the effect
of non market-based vesting conditions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually
vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected
to vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit and loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to the equity-settled employee benefits reserve.
Fair value is measured by use of the Black & Scholes model or Monte Carlo model as relevant. The expected lives
used in the model have been adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations.
Foreign currencies
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date.
Taxation
Taxation expense comprises current and deferred tax. Tax is recognised in the income statement, except to the
extent it relates to items recognised in other comprehensive income or directly in equity, in which case the related
tax is also recognised in other comprehensive income or directly in equity.
Current tax is based on taxable profits for the financial period using tax rates that are in force during the period.
Taxable profit differs from net profit as reported in the income statement because it excludes items of income or
expense that are taxable or deductible in other financial years and it further excludes items that are never taxable
or deductible.
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax is
calculated using tax rates that have been enacted or substantially enacted at the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the deferred tax liability settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences . Deferred tax liabilites are
recognised for taxable temporary differences arising on investments in subsidiaries, except where the reversal
of the temporary difference can be controlled by the Group and it is probable that the difference will not reverse
in the foreseeable future.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which
the deductible 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 profits will
be available to allow all or part of the asset to be recovered.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income
taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there
is an intention to settle the balances on a net basis.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes
a party to the contractual provisions of the instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts. A provision is established for trade receivables if there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms
of the receivables.
Investments
Investments are measured at reporting dates at cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of
changes in value.
Bank borrowings
Interest-bearing bank loans and overdrafts are initially recorded at fair value being the proceeds received, net of
direct issue costs. They are subsequently measured at amortised cost using the effective interest rate. Finance
costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accruals basis to the income statement and are added to the carrying amount of the instrument to the extent
that they are not settled in the period in which they arise.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its exposure to fluctuations in interest. Instruments
accounted for as hedges are designated as a hedge at the inception of contracts.
In order to qualify for hedge accounting, the Group is required to document in advance the relationship between
the item being hedged and the hedging instrument. The Group is also required to document and demonstrate
an assessment of the relationship between the hedged item and the hedging instrument, which shows that the
hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at the end of each
quarter end to ensure that the hedge remains highly effective.
77
The fair value of interest rate swaps is based on the market price (LIBOR) of comparable instruments at the
measurement date.
The fair value of the interest rate swap contracts are calculated on a discounted cash flow basis using market
forward rates. Gains or losses arising from the movement to fair value are taken to the income statement.
4. Critical accounting estimates and judgements
In the application of the Group’s accounting policies, which are described in note 3, management are required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units
to which the goodwill has been allocated. The value-in-use calculation requires the entity to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the
present value. Details of the impairment testing are set out in note 12.
Pension benefits
The present value of the pension obligations depends on a number of factors that are determined on an actuarial
basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions
include the discount rate. Any changes in these assumptions will impact the carrying amount of pension
obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be
used to determine the present value of estimated future cash outflows expected to be required to settle the
pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that
have terms to maturity approximating the terms of the related pension liability.
Other key assumptions for pension obligations are based in part on current market conditions. Additional
information is disclosed in note 27.
Inventory
Deferred production stock forms part of inventory and is stated in the accounts at the lower of cost or net
realisable value. Programme costs are expensed in line with expected future revenues . A detailed forecast of
future sales is prepared by management based on historic experience and expected future trends. £1.4m was
written off as an expense during the year (2013: £2.1m).
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
5. Business segments
The Group’s Chief Executive, the chief operating decision maker, considers the business primarily from a product
perspective. Under IFRS 8, the reportable segments are therefore Consumer and Productions.
The performance of the segments is assessed based on a measure of operating profit.
Segment revenues
Consumer
Productions
Revenue in 2014 includes £0.8m of revenues from sources outside the UK (2013: £1.2m).
Segment result
Consumer
Productions
Operating profit
Financing
Profit before tax
Tax charge
Profit attributable to owners of the parent
Operating profit in 2014 includes £0.4m arising outside the UK (2013: £0.6m).
External sales
2014
£m
2013
£m
107.1
13.3
120.4
98.6
13.5
112.1
2014
£m
19.1
0.4
19.5
2013
£m
17.6
0.4
18.0
(2.2)
(3.7)
17.3
(2.6)
14.7
14.3
(2.1)
12.2
Segment assets and liabilities
Consumer
Productions
Total of all segments
Unallocated corporate
Consolidated
Assets
Liabilities
2014
£m
39.2
32.5
71.7
2013
£m
22.2
37.4
59.6
2014
£m
13.5
3.9
17.4
2013
£m
11.7
3.5
15.2
16.4
10.8
67.3
47.6
88.1
70.4
84.7
62.8
79
5. Business segments (continued)
Other segment information
Capital additions
Depreciation
Consumer
Productions
2014
£m
5.0
2.0
2013
£m
1.4
2.1
2014
£m
2013
£m
–
–
–
–
Segment assets consist primarily of goodwill, property, plant and equipment, inventories and trade and other
receivables and cash and bank deposits.
Segment liabilities comprise operating liabilities including trade and other payables and provisions. They exclude
Group borrowings, retirement benefit obligations, tax liabilities and other non-current liabilities.
All the net assets in 2013 and 2014 were held in the UK and therefore operate in a single geographical segment.
6. Operating expenses by nature
Programming costs
Staff costs
Other external charges
Depreciation
Operating lease charges
Other operating charges
Services provided by the Group’s auditors
During the year the Group obtained the following services from the Company’s auditors:
Group
Fees payable to Company auditors for the audit of parent company
and consolidated financial statements
Fees payable to the Company’s auditors and it’s associates for other services:
– The audit of Company’s subsidiaries pursuant to legislation
– Audit-related assurance services
– Tax advisory services
– Tax compliance services
– Other services
2014
£m
2013
£m
55.0
23.2
18.4
2.0
2.1
0.2
100.9
54.7
21.2
14.1
2.1
1.9
0.1
94.1
2014
£000
2013
£000
77
21
24
91
41
51
305
75
15
25
110
91
68
384
Included in the audit fees payable is £5,000 (2013: £5,000) paid in respect of the parent company.
Other services comprise employee benefit advisory services.
Fees in respect of STV Group plc pension schemes
Audit
2014
£000
2013
£000
21
20
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
7. Staff
The average monthly number of employees (including Executive Directors) was:
Consumer and Productions
Established
Contract
Contract staff numbers consist of employees on fixed-term contracts.
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Included within the 2013 other pension costs is an interest cost of £0.9m.
Details of Directors’ remuneration is provided in the Remuneration Report on pages 44 to 62.
8. Finance costs
Bank borrowings
Pension finance charge
2014
Number
2013
Number
411
34
445
372
24
396
2014
£m
19.4
1.8
2.0
23.2
2014
£m
2.2
–
2.2
2013
£m
16.5
1.6
3.1
21.2
2013
£m
2.8
0.9
3.7
9. Tax charge
Current tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 21)
Tax charge for the year
The charge for the year can be reconciled to the profit per the income
statement as follows:
Profit before tax
Tax at the UK corporation tax rate of 21.5% (2013: 23.25%)
Tax effects of:
Other expenses not deductible for tax purposes
Movement in tax losses and other temporary differences
Impact of changes in tax rates
Adjustments in respect of prior years
Tax charge for the year
10. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2013 of 2.0p
(2012: nil) per share
Interim dividend for the year ended 31 December 2014 of 2.0p
(2013: nil) per share
Proposed final dividend for the year ended 31 December 2014
of 6.0p (2013: 2.0p) per share
81
2014
£m
2013
£m
–
–
–
2.6
2.6
–
–
–
2.1
2.1
2014
£m
2013
£m
17.3
14.3
3.7
3.3
0.1
–
(0.2)
(1.0)
2.6
0.2
(0.1)
0.4
(1.7)
2.1
2014
£m
2013
£m
0.8
0.8
1.6
–
–
–
2.4
0.8
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
11. Earnings per share
Basic earnings per share (‘EPS’), is calculated by dividing the profit attributable to equity shareholders by the
weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by
the Company and held as treasury shares.
In order to calculate diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares. The Company has one type of dilutive potential ordinary shares
namely share options granted to employees.
2014
Weighted
average
number of
shares
(m)
Earnings
£m
2013
Weighted
average
number of
shares
(m)
Per share
Pence
Per share
Pence
Earnings
£m
EPS:
Earnings attributable to
ordinary shareholders
14.7
38.0
38.7p
12.2
37.8
32.2p
Basic EPS
14.7
38.0
38.7p
12.2
37.8
32.2p
Potential dilutive ordinary shares
1.1
1.3
Diluted EPS
12. Goodwill
14.7
39.1
37.6p
12.2
39.1
31.2p
Goodwill at 1 January and 31 December 2014 was £7.9m (2013: £7.9m). It comprises capitalised goodwill on
acquisitions completed since 1 January 1998 and the cost and impairment provision is split £10.6m and £2.7m
respectively.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might
be impaired.
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment.
All goodwill recognised at the year end and previous year end relates to Productions.
The recoverable amount of a CGU is determined based on value-in-use calculations. The key assumptions used
for value-in-use calculations are as follows:
Revenue and margin growth (short term) Based on approved financial budgets
Growth rate (long term)
Discount rate
2%
11%
These calculations use pre-tax cash flow projections based on financial budgets approved by management
covering a three year period. A terminal value is calculated for cash flows beyond the three year period. The
growth rate is not considered to exceed the long-term average growth rate for the media business in which the
CGU operates.
The Group has conducted a sensitivity analysis on the impairment test of the CGU’s carrying value. A change in
the discount rate to 21% would result in the carrying value of goodwill being reduced to its recoverable amount.
Management determined Net Cash Flow based on past performance and its expectations of market development.
No impairment charge is considered to have arisen this year.
13. Other intangible assets
Cost
At 1 January 2013
Additions
At 1 January 2014
Additions
At 31 December 2014
Accumulated depreciation and impairment
At 1 January 2013 and 1 January 2014
Depreciation
At 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
14. Property, plant and equipment
Cost
At 1 January 2013
Additions
Write offs
At 1 January 2014
Additions
Write offs
At 31 December 2014
Accumulated depreciation and impairment
At 1 January 2013
Charge for year
Disposals
At 1 January 2014
Charge for year
Write offs
At 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
83
Web
development
and branding
£m
–
0.7
0.7
1.0
1.7
–
0.1
0.1
1.6
0.7
Total
£m
26.4
0.7
(2.2)
24.9
4.0
(1.6)
27.3
18.2
2.1
(2.1)
18.2
1.9
(1.6)
18.5
8.8
6.7
Plant,
technical
equipment
and other
£m
Leasehold
buildings
£m
0.2
–
(0.1)
0.1
–
–
0.1
0.1
–
–
0.1
–
–
0.1
–
–
26.2
0.7
(2.1)
24.8
4.0
(1.6)
27.2
18.1
2.1
(2.1)
18.1
1.9
(1.6)
18.4
8.8
6.7
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
15. Investments
Cost
At 1 January 2014
Additions
At 31 December 2014
16. Inventories
Recorded programmes and films
17. Trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
£m
0.9
0.3
1.2
2014
£m
2013
£m
18.3
17.6
2014
£m
14.0
8.4
0.7
23.1
2013
£m
10.9
10.0
0.5
21.4
As of 31 December 2014, trade receivables of £1.5m (2013: £0.8m) are past due. These are net of a provision for
bad debts of £nil (2013: £nil). Trade receivables relate to a number of independent customers for whom there is
no recent history of default.
The ageing analysis of the trade receivables is as follows:
Up to 3 months
Gross
£m
14.0
2014
Provision
£m
–
Gross
£m
10.9
2013
Provision
£m
–
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All
receivables are expected to be recovered.
18. Cash and cash equivalents
Cash and cash equivalents
2014
£m
2013
£m
19.8
8.8
19. Trade and other payables
Current
Trade payables
Accrued expenses
Social security and other taxes
Other payables
Non-current
Derivative financial instruments (note 29)
85
2013
£m
2.8
10.4
3.5
0.2
16.9
–
–
2014
£m
2.9
12.2
4.0
0.2
19.3
0.2
0.2
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
20. Borrowings
Bank loans
The borrowings are repayable as follows:
Expiring within 1 year
Expiring in 2 to 5 years
2014
£m
2013
£m
49.2
44.5
–
44.5
49.2
–
All undrawn committed borrowing facilities are repayable within 2 to 5 years (2013: within one year).
The amount of bank loans is net of £0.4m amortised borrowing costs.
The effective interest rates were as follows:
Bank loans (floating)
2014
%
2013
%
3.4
4.1
At 31 December 2014, the Group had revolving credit and overdraft bank facilities in place totalling £60.0m. The
facility previously consisted of a term facility and a revolving credit and overdraft facility (£25.0m and £32.5m
respectively at 31 December 2013). At 31 December 2014, £50.0m of the facility was drawn down.
The amendment and extension to the bank facility was agreed on 4 June 2014 and the £60.0m revolving credit
and overdraft facility has a maturity date of June 2019. Security is provided to the debt providers by way of cross
guarantees and a share pledge.
The Group has hedged its exposure to fluctuations in interest rates with interest rate swaps of £15.0m (2013:
£24.0m). The notional principal amount of the outstanding interest rate swap contracts at 31 December 2014 was
£15.0m (2013: £24.0m). A fair value on the interest rate swaps of £0.2m (2013: £nil) has been recognised at 31
December 2014.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
21. Deferred tax
The analysis of the current deferred tax balances is as follows:
Deferred tax asset:
Deferred tax to be recovered after more than one year
Deferred tax to be recovered within one year
Net deferred tax asset
Deferred tax asset not recognised
2014
£m
(4.7)
(2.7)
(7.4)
2013
£m
(3.7)
(1.4)
(5.1)
(7.4)
(5.1)
(8.1)
(9.1)
A deferred tax asset has been recognised in respect of these temporary differences as it is probable that the Group
will generate sufficient taxable profits in the future against which these temporary differences can be offset.
The deferred tax asset of £8.1m (2013: £9.1m) which has not been recognised relates to a combination of trading
tax losses and non-trade debits.
The movement in deferred tax assets and liabilities during the year, taking into consideration the offsetting of
balances within the same tax jurisdiction, is as follows:
At 1 January 2014
Charge to income
Credit to equity
Tax
trading
losses
£m
Other
temporary
differences
£m
Accelerated
tax deprec-
iation
£m
Retirement
benefit
obligations
£m
(3.3)
0.7
–
(0.3)
0.1
–
(1.7)
0.2
–
0.2
1.1
(4.4)
Total
£m
(5.1)
2.1
(4.4)
At 31 December 2014
(2.6)
(0.2)
(1.5)
(3.1)
(7.4)
22. Provisions
At 1 January
Provided during the year
Utilised during the year
At 31 December
The provisions are expected to be utilised:
Within one year
Greater than one year
Onerous lease provisions
2013
£m
2014
£m
1.4
–
(0.4)
1.0
1.6
0.5
(0.7)
1.4
Onerous lease provisions
2013
£m
2014
£m
0.4
0.6
1.0
0.6
0.8
1.4
23. Share capital and premium
At 1 January 2014
Share premium reduction
Issued during the year
At 31 December 2014
87
Number
of shares
(thousands)
Ordinary
shares
£m
Share
premium
£m
Total
£m
39,050
19.5
112.0
131.5
–
248
39,298
–
0.1
19.6
(11.0)
0.8
101.8
(11.0)
0.9
121.4
The total authorised number of ordinary shares is 63 million shares (2013: 63 million shares) with a par value
of £0.50 per share (2013: £0.50 per share). All issued shares are fully paid.
On 20 February 2014, the Court of Session granted a reduction in the share premium account of £11.0m.
24. Notes to the consolidated statement of cash flows
Operating profit
Adjustments for:
Depreciation
Depreciation of intangible assets
Share based payment expense
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated by operations
Analysis of movements in net debt
2014
£m
2013
£m
19.5
18.0
1.9
0.1
0.3
2.1
–
–
21.8
20.1
(0.7)
(1.7)
1.5
20.9
0.9
(2.5)
(0.2)
18.3
Cash and cash equivalents (note 18)
Bank borrowings (note 20)
Net debt
Non-cash movements relate to the amortisation of borrowing costs.
At
1 January
2014
£m
Cash flow
£m
Non-cash
movements
£m
At
31 December
2014
£m
8.8
(44.5)
(35.7)
11.0
(4.3)
6.7
–
(0.4)
(0.4)
19.8
(49.2)
(29.4)
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
25. Operating lease commitments
At 31 December the Group had minimum commitments in respect of non-cancellable operating leases for
leasehold buildings payable as follows:
Within one year
Between two and five years
After five years
2014
£m
1.7
6.1
7.8
15.6
2013
£m
1.6
6.7
9.3
17.6
26. Transactions with related parties
During the year £16,000 (2013: £13,000) income was received from related parties and a balance of £2,400 was
owed by related parties at 31 December 2014 (31 December 2013: £3,500). These amounts relate to fees received
from the Group’s investment companies.
Key management personnel are deemed to be the Executive and Non-Executive Directors of the Group, as they
have authority and responsibility for controlling the Group’s activities.
Key management remuneration is detailed as follows:
Short-term employee benefits*
*See Remuneration Report pages 56 and 57 for details.
2014
£m
2013
£m
1.3
1.3
There have been no other transactions with key management personnel as defined under IAS 24.
27. Retirement benefit schemes
Defined contribution schemes
The Group operates two money purchase schemes, the STV Pension Scheme and the Pearl & Dean Cinemas
Pension Scheme, for which the pension cost charge for the year amounted to £0.9m (2013: £0.7m).
Defined benefit schemes
The Group operates two defined benefit pension schemes. The schemes are trustee administered and the
schemes’ assets are held independently of the Group’s finances. Pension costs are assessed in accordance with
the advice of an independent professionally qualified actuary.
The schemes are the Scottish and Grampian Television Retirement Benefit Scheme and the Caledonian Publishing
Pension Scheme. They are closed schemes to new entrants and therefore under the projected unit method the
current service cost will increase as the members of the scheme approach retirement.
A full actuarial valuation of the schemes was carried out at 1 January 2012 and resulted in an actuarial deficit
to be funded by the Group of £83.0m as at 31 March 2014. A recovery plan period of 11 years was agreed with
payments of £5.5m in 2014 and between £7.0m and £7.75m from 2015 to 2025 inclusive. These payments are
tax deductible.
89
The 1 January 2012 valuation has been updated to 31 December 2014 by a qualified independent actuary.
The major assumptions used by the actuary were:
Key assumptions:
2014
2013
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Rate of price inflation (RPI)
Mortality assumptions:
1.00%
2.90%
3.60%
2.90%
1.00%
3.35%
4.55%
3.35%
Assumptions regarding future mortality experience are set based on advice, published statistics and experience
in each scheme.
The average life expectancy in years of a pensioner retiring at age 65 is as follows:
Retiring at balance sheet date:
Male
Female
Retiring in 25 years:
Male
Female
2014
Years
15.5
18.0
18.6
21.4
2013
Years
14.3
17.1
16.6
19.5
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate,
expected salary increase and mortality. The sensitivity analysis below has been determined based on reasonably
possible changes of the assumptions occurring at the end of the reporting period assuming that all other
assumptions are held constant:
Assumption
Change in assumption
Impact on scheme liabilities
Discount rate
Rate of price inflation (RPI)
Rate of mortality
Increase/decrease by 0.25%
Increase/decrease by 0.25%
Decrease by 1 year
Decrease/increase by 3%
Increase/decrease by 2%
Increase by 3%
Amounts recognised in the income statement in respect of these defined benefit schemes is as follows:
Current service cost – defined benefit
Net interest credit/(expense)
2014
£m
(1.1)
–
(1.1)
2013
£m
(1.5)
(0.9)
(2.4)
Of the total charge £1.1m (2013: £1.5m) has been included in operating expenses and £nil (2013: £0.9m charge)
has been included in finance costs (see note 8).
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
27. Retirement benefit schemes (continued)
Amounts recognised in the statement of comprehensive income are as follows:
2014
£m
2013
£m
Actuarial (losses)/gains arising from changes in financial assumptions
(22.1)
21.2
The amounts recognised in the balance sheet were as follows:
Present value of defined benefit obligations
Fair value of schemes’ assets
(Deficit)/surplus in the schemes
2014
£m
2013
£m
(336.2)
321.3
(14.9)
(295.7)
297.0
1.3
A related offsetting deferred tax credit of £3.1m (2013: charge £0.2m) is included under non-current assets.
Therefore the net pension scheme deficit amounts to £11.8m at 31 December 2014 (£1.1m surplus at
31 December 2013).
The movement in the defined benefit obligation over the year is as follows:
At 1 January
Current service cost
Interest cost
Contributions from plan participants
Remeasurement losses/(gains):
Actuarial gains and losses arising from changes in financial assumptions
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from experience adjustments
Benefits paid from plan
At 31 December
The movement in the fair value of the schemes’ assets during the year is as follows:
2014
£m
2013
£m
295.7
0.3
13.1
0.1
28.3
15.9
(0.2)
(17.0)
302.4
0.3
12.8
0.1
(4.2)
–
–
(15.7)
336.2
295.7
2014
£m
2013
£m
297.0
13.1
279.4
11.9
21.9
7.0
(0.8)
0.1
(17.0)
17.0
5.5
(1.2)
0.1
(15.7)
321.3
297.0
£m
154.8
166.5
321.3
2014
%
48
52
100
£m
150.5
146.5
297.0
2013
%
51
49
100
At 1 January
Interest income
Remeasurement gain/(loss):
Return on plan assets (excluding interest income)
Contributions from the employer
Administrative expenses paid from plan assets
Contributions from plan participants
Benefits paid from plan
At 31 December
Plan assets comprised the following:
Equities
Debt instruments and cash
91
28. Share-based payments
The long-term incentive plan is for Executive Directors and other Senior Executives. The performance criteria for
this scheme are based on a combination of earnings growth and total shareholder return and as such have been
valued using a Monte Carlo model.
29. Financial instruments
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
The capital structure of the Company consists of debt, which includes the bank loans disclosed in note 20, cash
and cash equivalents and equity attributable to equity holders of the parent, comprising issued share capital,
reserves and retained earnings.
The Group monitors capital on the basis of the gearing ratio.
Gearing ratio
This ratio is calculated as net debt divided by total capital.
Total borrowings (note 20)
Cash and cash equivalents
Net Debt
Total equity
Total capital
Covenants
2014
£m
49.2
(19.8)
29.4
3.5
32.9
2013
£m
44.5
(8.8)
35.7
7.6
43.3
89%
82%
The Group is subject to two financial covenants in respect of its committed borrowing facilities at the balance
sheet date. The terms of the Facility Agreement contain the following covenants (i) the ratio of average net debt to
adjusted earnings (pre exceptional) before interest, tax, depreciation and amortisation (EBITDA) and (ii) the ratio of
adjusted EBITDA to cash interest, both of which are tested quarterly. The Group complied with all the covenants in
each of the test periods to the balance sheet date.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
continued
29. Financial instruments (continued)
Derivative financial instruments
The Group’s policy is to minimise the exposure to interest rates by ensuring an appropriate balance of floating and
fixed rates. The Group’s primary funding is at floating rates through its bank facilities. In order to manage its
associated interest rate risk, the Group uses interest rate swaps to vary the mix of fixed and floating rates. Interest
rate swap contracts of £15.0m (2013: £24.0m) were entered into on 9 July 2014 and expire in July 2016. Fair value
is based on the market price of these instruments at the balance sheet date. In accordance with IFRS 7, the
interest rate swaps are considered to be level 2 with the fair value being calculated at the present value of the
estimated future cash flows using market interest rates.
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: currency risk, credit risk, liquidity risk and cash flow
interest rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses
derivative financial instruments to hedge certain risk exposures.
Risk management is carried out under policies approved by the Board with financial risks being identified,
evaluated and hedged in close co-operation with the Group’s operating divisions. The Board provides written
principles for overall risk management, as well as written policies covering specific areas, such as currency risk,
interest rate risk, credit risk, use of financial instruments and investing excess liquidity.
Currency risk
The Group operates almost wholly within the UK and is exposed to minimal currency risk. The Group’s borrowings
are denominated in Sterling. Currency risk arises primarily with respect to the Euro and the US dollar and from
future commercial transactions and trade assets and liabilities in foreign currencies. No further active
management of currency risk is required.
The Group has minimal exposure to currency risk and it is Group policy to ensure that all material payments or
receipts are fully hedged. At 31 December 2014 the Group had no forward foreign currency contracts in place
(2013: £nil).
Credit risk
Credit risk is the risk of losses due to the failure of the Group’s customers to meet their payment obligations
towards the Group. The Group has no significant concentration of credit risk. It has policies in place to ensure that
sales are made to customers with an appropriate credit history. Independent credit ratings are sought for all
potential customers and based on the outcome of the feedback from the ratings agency a judgement is made on
the appropriate level of credit to be given. Derivative transaction counterparties are limited to high-credit/quality
financial institutions.
93
29. Financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its payment obligations. Prudent liquidity
management implies maintaining sufficient cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the ability to close out market positions. Due to the nature of
the underlying business, the aim is to maintain flexibility in funding by keeping committed credit lines available.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprises of the undrawn borrowing
facility (note 20) and cash and cash equivalents (note 18)) on the basis of expected cash flow. This is generally
carried out at a group level. In addition, the Group’s liquidity management policy includes projecting cash flows
and considering the level of liquid assets necessary to meet these: monitoring balance sheet liquidity ratios
against internal targets and bank facility requirements; and maintaining debt financing plans.
Cash flow interest rate risk
As the Group has no significant interest bearing assets, the Group’s income and operating cash flows are
substantially independent of changes in market interest rates.
The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at short-term floating rates
expose the Group to cash flow interest rate risk. Group policy is to maintain between 30% and 50% of its core
borrowings in hedged instruments.
A monthly sensitivity analysis is carried out, and on the level of borrowings of the Group at 31 December 2014, a
movement of 0.25% in interest rates would change the level of interest paid in the year by +/- £0.1m (2013: £0.1m).
0.25% is considered a reasonably possible change.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate
swaps have the economic effect of converting borrowing from floating rates to fixed rates. Generally, the Group
raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if
the Group borrowed at fixed rate directly. Under the interest rate swaps, the Group agrees with other parties to
exchange, at specific intervals (mainly quarterly), the difference between fixed contract rates and floating rate
interest amounts calculated by reference to the agreed notional principal amounts. An interest rate swap was
entered into on 9 July 2014 and expires in July 2016.
STV Annual Report and Accounts 2014
Financial Statements
STV GROUP PLC COMPANY
FINANCIAL STATEMENTS
Independent Auditors’ Report to the Members of STV Group plc
Report on the company financial statements
Our opinion
In our opinion, STV Group plc’s company financial
statements (the ‘financial statements’):
Adequacy of accounting records and information and
explanations received
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• give a true and fair view of the state of the company’s
affairs as at 31 December 2014;
• 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.
What we have audited
STV Group plc’s financial statements comprise:
• Company Balance Sheet as at 31 December 2014; and
• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied
in the preparation of the financial statements is
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
Other required reporting
Consistency of other information
Companies Act 2006 opinion
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.
ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and
Ireland) (‘ISAs (UK & 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 company
acquired in the course of performing our audit; or
• otherwise misleading.
We have no exceptions to report arising from this
responsibility.
• we have not received all the information and
explanations we require for our audit; or
• adequate accounting records have not been kept by the
company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the financial statements and the part of the Directors’
Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Directors’ remuneration
Directors’ remuneration report –
Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
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. We have no
exceptions to report arising from this responsibility.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 15, the Directors are
responsible for the preparation of the 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
financial statements in accordance with applicable law
and ISAs (UK & Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for
and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
95
Other matter
We have reported separately on the group financial
statements of STV Group plc for the year ended 31
December 2014.
Kenneth Wilson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
17 March 2015
a) The maintenance and integrity of the STV Group plc website is the
responsibility of the Directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may
have occurred to the financial statements since they were initially
presented on the website.
b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs
(UK & Ireland). 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
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.
We primarily focus our work in these areas by assessing
the Directors’ judgements against available evidence,
forming our own judgements, and evaluating the
disclosures in the financial statements.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures
or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report 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.
STV Annual Report and Accounts 2014
Financial Statements
COMPANY BALANCE SHEET
at 31 December 2014
Fixed assets
Investments
Current assets
Debtors
– due within one year
– due after one year
Creditors: amounts falling due within one year
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Other reserve
Shareholders’ funds
Note
2014
£m
2013
£m
2
3
3
4
5
5
5
5
48.4
28.2
25.4
129.3
154.7
39.9
138.2
178.1
(56.1)
(67.6)
98.6
110.5
147.0
138.7
19.6
101.8
25.0
0.6
147.0
19.5
112.0
6.9
0.3
138.7
The accompanying notes are an integral part of this balance sheet.
The company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the
parent company profit and loss account. The profit for the parent company for the year was £9.4m (2013: £10.5m).
The financial statements on pages 96 to 100 were approved by the Board on 16 March 2015 and were signed
on its behalf by:
Rob Woodward
Chief Executive
George Watt
Chief Financial Officer
Financial Statements
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 December 2014
97
1. Accounting policies
Accounting convention and basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. The
separate financial statements have been prepared in accordance with all applicable UK Accounting Standards and
have been prepared consistently from year to year, under the historical cost convention, in accordance with
applicable accounting standards on a going concern basis.
Basis of consolidation
As permitted under Section 408 of the Companies Act 2006, no separate profit and loss account for the holding
company is presented. The consolidated financial statements as presented within the Annual Report include
the results of STV Group plc, the holding company, and all of its subsidiaries and associated undertakings up to
31 December 2014.
Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is
contained in the Performance Review on page 14.
Investments
Fixed asset investments are stated at cost, less any provision for impairment.
Impairment
Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in
the profit and loss account for the amount by which the asset’s carrying value exceeds its recoverable amount.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based
payments are measured at fair value of the equity instruments at the grant date. The fair value excludes the effect
of non market-based vesting conditions.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in
the Group is treated as a capital contribution. The fair value of employee services received, measured by reference
to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary
undertakings, with a corresponding credit to equity.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually
vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to
vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit and loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to the equity-settled employee benefits reserve.
Fair value is measured by use of the Black & Scholes model or Monte Carlo model as relevant. The expected lives
used in the model have been adjusted, based on management’s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural considerations.
Full disclosure of share-based payment awards is provided within the Group financial statements.
Dividends
The liability for final dividends is recorded when the dividends are approved by the Company’s shareholders.
For interim dividends, the liability is recorded when the dividends are paid.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 December 2014
continued
1. Accounting policies continued
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates enacted or substantially
enacted by the balance sheet date.
Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to
pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in tax
computations in periods different from those in which they are included in the financial statements. Deferred tax
assets and liabilities are not discounted.
The taxation liabilities of certain group companies are reduced wholly or in part by losses surrendered by other
group companies. The tax benefits arising from group relief are recognised in the accounts of the surrendering and
recipient companies.
Bank borrowings
Interest-bearing bank loans and overdrafts are initially recorded at the proceeds received, net of direct issue costs.
They are subsequently measured at amortised cost using the effective interest rate. Finance costs, including
premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to
the profit and loss account and are added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.
2. Investments
Cost
At 1 January 2014
Additions
At 31 December 2014
Provisions for impairment
At 1 January and 31 December 2014
Net book value at 31 December 2014
Net book value at 31 December 2013
Subsidiaries
£m
Other
£m
27.3
20.0
47.3
–
47.3
27.3
1.1
–
1.1
–
1.1
0.9
Total
£m
28.4
20.0
48.4
–
48.4
28.2
Additions during the year relate to a £20.0m increase in the investment in STV News Services brought about by
£20.0m of the £100.0m loan being converted to equity and repaid (see note 3).
Subsidiary undertakings
The Directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of
excessive length. The following information relates to the subsidiary undertakings whose results or financial
position, in the opinion of the Directors, principally affect the results of the Group:
Undertaking
STV Central Limited
STV North Limited
STV Productions Limited
Solutions.tv Limited
Ginger Television Productions Limited
STV Glasgow Limited
Country of incorporation
or registration and operation
Principal activity
Scotland
Scotland
Scotland
Scotland
England
Scotland
Television broadcasting
Television broadcasting
Programme production
Television technical facilities
Programme production
Television broadcasting
99
2. Investments continued
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
None of the above investments are held directly by STV Group plc. The investments are stated in the balance sheet
at cost less amounts written off for impairment in value. All shares are ordinary shares. All of the above
investments are 100% shareholdings within the Group.
A full list of subsidiary undertakings is included in the Annual Return.
3. Debtors
Due within one year
Amounts owed by group undertakings
Prepayments and accrued income
Deferred tax (note 6)
Due after one year
Amounts owed by group undertakings
2014
£m
22.5
1.0
1.9
25.4
2013
£m
37.0
0.8
2.1
39.9
129.3
138.2
Included within amounts owed by group undertakings due after one year is a loan of £80.0m to a subsidiary
undertaking. Interest on the loan accrues at a rate of 9% and is payable from 1 April 2010. Interest accrued is
capitalised and added to the principal amount. Interest will also accrue on interest which is capitalised in this way.
The loan is repayable on 31 March 2020. On 23 February 2014, £20.0m of the loan was converted to equity and repaid.
All remaining amounts owed by group undertakings are unsecured, interest free and have no fixed date of repayment.
4. Creditors
Amounts falling due within one year:
Trade creditors and accruals
Bank loans
Amounts owed to group undertakings
2014
£m
–
–
56.1
56.1
2013
£m
0.8
44.5
22.3
67.6
Amounts owed to group undertakings are unsecured, interest free and have no fixed date of repayment.
STV News Services Limited, a fellow subsidiary undertaking, became the new principal borrower when the
amendment and extension of the bank facility was agreed on 4 June 2014. The bank loan was accordingly
transferred from STV Group plc to STV News Services Limited on that date.
STV Annual Report and Accounts 2014
Financial Statements
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
for the year ended 31 December 2014
continued
5. Reserves and movements in shareholders’ funds
Called up
share
capital
£m
Share
premium
account
£m
Profit
and loss
account
£m
Other
reserve
£m
Total
£m
At 1 January 2013
19.5
112.0
(11.0)
0.4
120.9
Profit for the year
Pension transferred to a fellow group undertaking
Equity settled share based payments
–
–
–
–
–
–
10.5
7.3
0.1
–
–
(0.1)
10.5
7.3
–
At 1 January 2014
19.5
112.0
6.9
0.3
138.7
Profit for the year
Share premium reduction
Issue of share capital
Own shares acquired
Value of employee services
Equity-settled share based payments
Dividends
At 31 December 2014
–
–
0.1
–
–
–
–
19.6
–
(11.0)
0.8
–
–
–
–
101.8
9.4
11.0
–
(0.9)
0.2
–
(1.6)
25.0
–
–
–
–
–
0.3
–
0.6
9.4
–
0.9
(0.9)
0.2
0.3
(1.6)
147.0
The Caledonian pension scheme was transferred during 2013 to STV Television Limited when it became sponsoring
employer of the pension scheme.
On 20 February 2014, the Court of Session granted a reduction in the share premium account of £11.0m.
6. Deferred taxation
Deferred taxation is provided as follows:
At 1 January 2014
Provided in year
At 31 December 2014
Deferred tax asset not recognised
Refer to note 3 for the above deferred tax asset.
7. Transactions with related parties
Tax losses
£m
2.1
(0.2)
1.9
1.4
There were no transactions with any related parties during the year other than those exempt from disclosure
under FRS 8.
Financial Statements
FIVE YEAR SUMMARY
For the year ended 31 December 2014
101
Results
Revenue
Continuing operations
Discontinued operations
Profit from operations before exceptional items
Continuing operations
Discontinued operations
Profit on ordinary activities before taxation
and exceptional items
Assets
Non-current assets
Current assets
Total assets
Equity and liabilities
Current liabilities
Non-current liabilities
Equity
Total equity and liabilities
Key statistics
Earnings per ordinary share* – basic
– diluted
Dividends per ordinary share
IFRS
2010
£m
Restated**
2012
£m
2011
£m
2013
£m
2014
£m
104.8
6.9
111.7
102.0
–
102.0
102.7
–
102.7
112.1
–
112.1
120.4
–
120.4
14.4
–
14.4
15.0
–
15.0
17.1
–
17.1
18.0
–
18.0
19.5
–
19.5
12.5
14.0
11.7
14.3
17.3
29.1
69.9
99.0
35.4
83.4
(19.8)
99.0
34.3p
32.9p
–
32.9
53.8
86.7
82.3
34.1
(29.7)
86.7
38.0p
36.1p
–
28.2
41.9
70.1
22.5
68.5
(20.9)
70.1
13.0p
12.5p
–
22.6
47.8
70.4
62.0
0.8
7.6
70.4
32.2p
31.2p
2.0p
26.9
61.2
88.1
19.7
64.9
3.5
88.1
38.7p
37.6p
8.0p
* The 2010 earnings per ordinary share figures have been restated to exclude ordinary shares purchased by the Company from the weighted
average number of ordinary shares calculation.
** The 2012 results have been restated to disclose amendments resulting in applying updated IAS19 and also for investments previously held
in current assets.
STV Annual Report and Accounts 2014
Additional Information
SHAREHOLDER INFORMATION
Registrars
Capita Asset Services
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
Tel: 0871 664 0300*
Tel: (overseas) +44 20 8639 3399
Fax: +44 (0) 1484 600 911
Email: shareholderenquiries@capita.co.uk
Website: www.capitashareportal.com
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
141 Bothwell Street
Glasgow G2 7EQ
Solicitors
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2HS
Burness Paull & Williamsons LLP
120 Bothwell Street
Glasgow G2 7JL
Principal bankers
Santander UK plc
2 Triton Square
Regent’s Place
London NW1 3AN
Stockbrokers
Peel Hunt
Moor House
120 London Wall
London EC2Y 5ET
Secretary and registered office
Jane E A Tames
STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3074
Email: jane.tames@stv.tv
Company registration number
SC203873
Annual Report on internet
The 2014 Annual Report of STV Group plc including the financial statements is available at: www.stvplc.tv
103
Amalgamation of accounts
Shareholders who receive duplicate sets of Company mailings because they have multiple accounts should write
to the Registrars to have the accounts amalgamated.
Investor relations
For investor enquiries please contact:
Eleanor Marshall
PR Manager
STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3670
Email: eleanor.marshall@stv.tv
Share price information
The share price of STV Group plc is published in most newspapers and the current price of the Company’s shares
(delayed by up to 15 minutes) can be obtained from the Company’s website www.stvplc.tv
Individual Savings Accounts (ISAs)
The Company has Maxi and Mini ISAs which offer United Kingdom resident shareholders a simple, low–cost and
tax–efficient way to invest in the Company’s shares. Full details and an application form are available from Stocktrade,
a division of Brewin Dolphin Securities Limited, on: 0131 240 0441.
Dividend Reinvestment Plan
STV Group plc operates a Dividend Reinvestment Plan to provide United Kingdom shareholders with a facility to
invest cash dividends by purchasing further STV Group plc shares. Further details are available from the Registrar on:
0871 664 0381*.
Your shareholding
You can check your shareholding at any time by visiting the Registrar’s website at: www.capitashareportal.com
Capita share dealing services
Capita offer a quick and easy share dealing service to buy or sell STV Group plc shares. An online telephone dealing
facility is available providing STV Group plc shareholders with an easy to access and simple to use service. There is
no need to pre-register and there are no complicated forms to fill in. The online and telephone dealing services allow
you to trade ‘real time’ at a known price which will be given to you at the time you give your instruction. For further
information on this service, or to buy and sell shares, please contact: www.capitadeal.com (online dealing);
0871 664 0454** (telephone dealing).
* Calls cost 10p per minute plus network extras. Lines are open 8:30am-5:30pm, Monday to Friday.
** Calls cost 10p per minute plus network extras. Lines are open 8am-4:30pm, Monday to Friday.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
THIS INFORMATION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to the action you should take, you should seek your own advice from a stockbroker,
bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial
Services and Markets Act 2000.
If you have sold or transferred all of your shares in STV Group plc (the ‘Company’), please pass this document,
together with the accompanying documents to the purchaser or transferee or to the person who arranged the
sale or transfer so they can pass these documents to the person who now holds the shares.
The Annual General Meeting is an important opportunity for all shareholders to express their views by asking questions
of the Directors and voting on the resolutions.
The Directors consider that each of the proposals detailed in the Notice of Annual General Meeting will be of benefit to
and are in the best interests of the Company and the shareholders as a whole. The Directors therefore unanimously
recommend that shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own
holdings of shares in the Company.
Notice is hereby given that the Annual General Meeting of the Company will be held at Pacific Quay, Glasgow G51 1PQ
on Thursday 30 April 2015 at 11 am for the purpose of considering and, if thought fit, passing the resolutions below.
Resolutions 1 to 14 (inclusive) will be proposed as ordinary resolutions and Resolutions 15 to 18 (inclusive) shall be
proposed as special resolutions.
Ordinary resolutions
1.
To receive the annual accounts of the Company for the financial year ended 31 December 2014 which includes
the reports of the Directors and the report by the auditors on the annual accounts and the auditable part of
the Directors’ remuneration report.
2.
To approve the Directors’ remuneration report, other than the part containing the Directors’ remuneration
policy in the form set out on pages 55 to 62 of the Annual Report and Accounts for the financial year ended
31 December 2014.
As required by the Directors’ Remuneration Report Regulations 2002, the Company’s auditors,
PricewaterhouseCoopers LLP, have audited those parts of the Directors’ remuneration report capable
of being audited.
3.
To approve the Directors’ remuneration policy, in the form set out on pages 46 to 54 of the Annual Report
and Accounts for the financial year ended 31 December 2014.
Resolution 3 seeks approval (on a binding basis) of the remuneration policy governing Directors’ remuneration.
Whilst the Directors’ remuneration policy was approved by a binding resolution of the Company at the last Annual
General Meeting, the Directors consider it appropriate to seek re-approval of the remuneration policy in light of
the proposed implementation of the Company’s Deferred Bonus Plan and Long Term Incentive Plan (subject to
Resolutions 13 and 14 below being passed). If the remuneration policy is approved and remains unchanged, it
will be valid for up to three financial years without a new shareholder approval. If the Company wishes to change
the Directors’ remuneration policy, it will need to put the revised policy to shareholders to vote on before it can
implement any new policy.
105
4. To declare a final dividend of 6.0p per ordinary share for the year ended 31 December 2014.
The Board proposes a dividend of 6.0p per ordinary share for the year ended 31 December 2014. If approved,
the recommended dividend will be paid on 22 May 2015 to all holders of ordinary shares who are on the register
of members of the Company at close of business on the record date of 17 April 2015.
5.
To elect Christian Woolfenden as a Director of the Company, having been appointed since the last
Annual General Meeting.
Christian Woolfenden is standing for election following his appointment as a Non-Executive Director on 1 June
2014. The Articles of Association require that a Director appointed by the Board since the last Annual General
Meeting should retire at the next Annual General Meeting and stand for election to the Board in order to give
shareholders a chance to confirm the appointment.
Biographical details of Christian Woolfenden can be found on page 29 and the Board confirms that he meets
the independence criteria as set out in B.1.1 of the UK Corporate Governance Code.
6.
To elect Anne Marie Cannon as a Director of the Company, having been appointed since the last
Annual General Meeting.
Anne Marie Cannon is standing for election following her appointment as a Non-Executive Director on 1 November
2014. The Articles of Association require that a Director appointed by the Board since the last Annual General
Meeting should retire at the next Annual General Meeting and stand for election to the Board in order to give
shareholders a chance to confirm the appointment.
Biographical details of Anne Marie Cannon can be found on page 29 and the Board confirms that she meets the
independence criteria as set out in B.1.1 of the UK Corporate Governance Code.
7. To re-elect Rob Woodward as a Director of the Company.
The Articles of Association require that every year a proportion of our Directors retire and that all Directors have to
stand for re-election on the third anniversary of their election or re-election. This gives you the chance to confirm
their appointments.
Biographical details of Rob Woodward can be found on page 28 and following formal performance evaluation,
Mr Woodward’s performance continues to be effective and to demonstrate commitment to the role.
8. To re-elect Genevieve Shore as a Director of the Company.
The Articles of Association require that every year a proportion of our Directors retire and that all Directors have to
stand for re-election on the third anniversary of their election or re-election. This gives you the chance to confirm
their appointments.
Biographical details of Genevieve Shore can be found on page 29 and the Board confirms that she meets the
independence criteria as set out in B.1.1 of the UK Corporate Governance Code. Following formal performance
evaluation, Ms Shore’s performance continues to be effective and to demonstrate commitment to the role.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
continued
9. To re-elect Michael Jackson as a Director of the Company.
The Articles of Association require that every year a proportion of our Directors retire and that all Directors have to
stand for re-election on the third anniversary of their election or re-election. This gives you the chance to confirm
their appointments.
Biographical details of Michael Jackson can be found on page 28 and the Board confirms that he meets the
independence criteria as set out in B.1.1 of the UK Corporate Governance Code. Following formal performance
evaluation, Mr Jackson’s performance continues to be effective and to demonstrate commitment to the role.
10. To re-appoint PricewaterhouseCoopers LLP as the auditors of the Company to hold office until the conclusion
of the next general meeting at which accounts are laid.
11. To authorise the Audit Committee to fix the remuneration of the auditors of the Company.
12. That for the purpose of Section 551 of the Companies Act 2006, the Directors be and are hereby generally
and unconditionally authorised to exercise all the powers of the Company to allot equity securities (within
the meaning of Section 560 of that Act):
(a) up to an aggregate nominal amount of £6,549,705.
(b)
up to an aggregate nominal amount of £6,549,705 in connection with a rights issue in favour of the ordinary
shareholders of the Company where the equity securities respectively attributable to the interests of all
ordinary shareholders are proportionate (as nearly as may be) to the respective number of ordinary shares
held by them in the Company, or in favour of the holders of other equity securities as required by the rights of
those securities, subject to such exclusions or other arrangements as the Directors may deem necessary or
expedient to deal with treasury shares, fractional entitlements or legal or practical problems arising under the
laws of any overseas territory or the requirements of any regulatory body or stock exchange or by virtue of
shares being represented by depositary receipts or any other matters, provided that this authority shall expire
on the date of the next Annual General Meeting of the Company after the passing of the resolution, but so
that the Directors may at any time prior to such expiry make an offer or agreement which would or might
require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant
to any such offer or agreement as if the authority conferred by this resolution had not expired; and all
unexercised authorities previously granted to the Directors to allot equity securities are revoked.
The Directors require the authority of shareholders to allot the Company’s shares and the first part of this
resolution extends for a further year the general authority for the Directors to allot a limited number of
ordinary shares (13,099,410 being shares representing one third of the ordinary issued share capital of the
Company as at 16 March 2015, excluding treasury shares, none of which are held by the Company) to provide
the flexibility to take advantage of business opportunities as they arise. The second part of this resolution
allows the Directors to allot a limited number of ordinary shares (13,099,410 being shares representing one
third of the ordinary issued share capital of the Company as at 16 March 2015, excluding treasury shares, none
of which are held by the Company) pursuant to a fully pre-emptive rights issue of the Company. The authority
will terminate at the next Annual General Meeting of the Company, which must be held no later than 30 June
2016. The Directors do not have any present intention of exercising this authority except to satisfy awards of
shares under the Company’s employee share schemes and no issue of ordinary shares will be made which
would effectively alter control of the Company without the prior approval of the Company in general meeting.
The Directors confirm that, if this further authority were utilised during the year, they intend to follow the
guidance of The Investment Association and would all stand for re-election at the next Annual General
Meeting of the Company.
107
13. That the STV Group plc Deferred Bonus Plan (the ‘DBP’), the principal terms of which are summarised in the
Appendix to this Notice and the Rules of which are produced to the Annual General Meeting and signed by the
Chairman for the purpose of identification, be and are hereby approved and adopted and the Directors of the
Company be and are hereby authorised to do all such acts and things as they may deem necessary or expedient
to carry the same into effect.
The DBP will provide the facility to grant deferred share awards for the purpose of deferring 20% of any
annual bonus earned for a period of three years under the new and simplified annual bonus framework
as described in the Remuneration Policy section of the Directors’ Remuneration Report.
14. That the STV Group plc Long Term Incentive Plan (‘LTIP’), the principal terms of which are summarised
in the Appendix to this Notice and the Rules of which are produced to the Annual General Meeting and signed
by the Chairman for the purpose of identification, be and is hereby approved and adopted and the Directors
of the Company be and are hereby authorised to do all such acts and things as they may deem necessary
or expedient to carry the same into effect.
The LTIP will allow annual awards of shares which will vest after a period of at least three years based on
performance against targets aligned to the delivery of the Company’s strategy and long term shareholder value.
The performance targets for the awards to be made to Executive Directors in 2015 are set out in the Directors
Remuneration Report.
Special resolutions
15. That subject to the passing of Resolution 12, the Directors be and are hereby empowered, pursuant to Section 570
of the Companies Act 2006 to allot equity securities (within the meaning of Section 560 of that Act) for cash either
pursuant to the authority conferred by Resolution 12 or by way of a sale of treasury shares as if Section 561 of that
Act did not apply to any such allotment, provided that this power shall be limited to:
(a)
the allotment of equity securities in connection with an offer of securities (but in the case of the authority
granted under paragraph (b) of Resolution 12 by way of rights issue only) in favour of ordinary shareholders
of the Company and other persons entitled to participate therein where the equity securities respectively
attributable to the interest of all such holders are proportionate (as nearly as may be practicable) to the
respective numbers of ordinary shares held or deemed to be held by them, subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient to deal with treasury shares, fractional
entitlements or legal or practical problems arising under the laws of any overseas territory or the
requirements of any regulatory body or any stock exchange or by virtue of shares being represented by
depositary receipts or any other matter.
(b)
the allotment of equity securities (otherwise than pursuant to paragraph (a) above) having a nominal value
not exceeding in the aggregate £982,455,
and shall expire on the conclusion of the next Annual GeneralMeeting of the Company after the passing of this
resolution, save that the Company may before such expiry make offers or agreements which would or might
require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant
to any such offer or agreement as if the authority conferred by this resolution had not expired.
When ordinary shares are issued for cash, they normally have to be offered, in the first instance, to existing holders
of ordinary shares in proportion to their respective shareholdings. This resolution extends for a further year the
authority granted to the Directors to allot a limited number of ordinary shares (1,964,911 ordinary shares,
representing 5% of the ordinary issued share capital of the Company as at 16 March 2015) other than to existing
shareholders in proportion to their existing shareholdings.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
continued
It also allows the Directors to allot shares up to a nominal amount of £13,099,410 (representing two thirds of
the Company’s issued share capital) on an offer to existing shareholders on a pre-emptive basis. However, unless
the shares are allotted pursuant to a rights issue, the Directors may only allot shares up to a nominal value of
£6,549,705 (representing one third of the Company’s issued share capital). The authority will terminate at the next
Annual General Meeting, which must be held no later than 30 June 2016. No issue of ordinary shares will be made
which would effectively alter control of the Company without the prior approval of the Company in general
meeting. The Board also confirms that no more than 7.5% of the issued share capital would be issued on a non
pre-emptive basis in any three-year period.
16. That the Company be and is hereby generally and unconditionally authorised pursuant to Section 701 of the
Companies Act 2006 to make market purchases (as defined in Section 693(4) of that Act) of ordinary shares
of 50p each in the capital of the Company (‘Shares’) and the Directors be and are hereby generally and
unconditionally authorised to exercise all the powers of the Company to purchase the Shares, provided that:
(a)
the maximum number of Shares acquired pursuant to this authority shall not exceed 3,929,823 Shares,
the aggregate nominal value of which is £1,964,911.
(b)
the minimum price (excluding expenses) which may be paid by the Company for a Share purchased pursuant
to this authority shall be 50p.
(c)
(d)
the maximum price (excluding expenses) which may be paid by the Company for a Share purchased pursuant
to this authority shall not be more than the higher of: (i) 5% above the average of the middle market
quotations for a Share derived from the London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which such Share is purchased; and (ii) the price stipulated by Article 5(1)
of the Buy–Back and Stabilisation Regulation (EC2273/2003).
unless renewed, the authority conferred by this resolution shall expire on the earlier of the conclusion
of the next Annual General Meeting of the Company after the passing of this resolution and the expiry of
12 months from the date of passing this resolution, save that the Company may before such expiry make
a contract to purchase which will or may be executed wholly or partly after the expiry of such authority and
the Company may make a purchase of such Shares after such expiry pursuant to such contract.
This resolution seeks the authority of shareholders to allow the Company to purchase its own shares. The authority
sought extends to 3,929,823 Shares, representing 10% of the ordinary share capital of the Company in issue as
at 16 March 2015. The maximum price, which may be paid per Share, amounts to not more than 5% above the
average of the middle market quotations of the Company’s shares for the five business days immediately
preceding the date of purchase. The power will only be used if the Board is satisfied that it will be in the best
interests of the shareholders generally.
In exercising the authority to purchase the Company’s shares, the Directors intend to cancel any shares purchased
but may, however, treat the shares that have been bought back as held in treasury and to the extent that any such
shares are held in treasury, earnings per share will only be increased on a temporary basis, until such time as the
shares are resold out of treasury stock.
As at 16 March 2015 warrants and options to subscribe for 450,731 ordinary shares in the capital of the Company
were outstanding, representing 1.15% of the Company’s issued ordinary share capital as at 16 March 2015
(excluding treasury shares held by the Company). If the authority to purchase the Company’s ordinary shares
was exercised in full, these warrants and options would represent 1.27% of the issued ordinary share capital of
the Company (excluding treasury shares held by the Company).
109
17.
That the Company be entitled to hold general meetings of the shareholders of the Company (with the exception
of annual general meetings) on the provision of 14 clear days’ notice to the Company’s shareholders.
The Companies Act 2006 (following the implementation of the EU Shareholder Rights Directive) permits the
holding of general meetings on 14 clear days’ notice provided a special resolution is passed at the Company’s
Annual General Meeting approving this notice period. The shorter notice period would not be used as a matter
of routine for such meetings but only where this was merited by the nature or urgency of the business of the
meeting and was thought to be to the advantage of shareholders as a whole.
18. That:
(a)
(b)
the final dividend of the Company in respect of the year ended 31 December 2013 paid on 23 May 2014
of 2.0 pence per ordinary share which was paid in technical breach of the Companies Act 2006 (the ‘2013
Dividend’), be treated and hereby ratified and confirmed as a loan to the shareholders of the Company who
received such dividend (the ‘Recipients’).
the Directors of the Company be and are hereby authorised to appropriate distributable profits of the
Company (as shown in the interim accounts of the Company made up to 31 March 2014 and filed with
the Registrar of Companies on 30 July 2014) to the payment of a new dividend, which shall be in an amount
equal to the 2013 Dividend (the ‘Rectification Dividend’).
(c) the Rectification Dividend shall be made to the Recipients of the 2013 Dividend.
(d)
(e)
(f)
the Rectification Dividend shall not be satisfied in cash but shall be satisfied by the release of each shareholder
of the Company who was a recipient of the 2013 Dividend (or the personal representatives or their successors
in title (as appropriate) of his/her estate if he/she is deceased) from the liability to repay the amount already
paid to each such shareholder in the respect of the 2013 Dividend.
any and all claims which the Company may have in respect of the payment of the 2013 Dividend and/or
the Rectification Dividend against its shareholders who received the relevant 2013 Dividend (or the personal
representatives and their successors in title of the estate of any deceased shareholders) be waived and
released and deeds of release in favour of such shareholders (or the personal representatives and their
successors in title of their estates in the case of any deceased shareholders) be entered into by the Company
in the form of the deeds produced to the Annual General Meeting and signed by the Chairman for the purpose
of identification.
any breach of duty committed by the Directors of the Company (both past and present) arising out of or
in connection with the approval, declaration or payment of the 2013 Dividend be and is hereby ratified and
that any and all claims which the Company may have against its Directors (both past and present), arising
out of or in connection with the approval, declaration and payment of the 2013 Dividend be waived and
released and that a deed of release in favour of each of the Company’s relevant Directors be entered into by
the Company in the form of the deeds produced to the Annual General Meeting and signed by the Chairman
for purposes of identification.
This resolution deals with a technical issue which has come to light in respect of the dividend paid in May 2014
by the Company to its shareholders (the ‘2013 Dividend’). As required by the Companies Act 2006 (the ‘Act’),
the Company had prepared interim accounts, which confirmed that the Company had distributable reserves of
£20,200,000, sufficient to pay the 2013 Dividend. Although the Company’s interim accounts were prepared in
advance of the proposal to pay the 2013 Dividend, they were not filed with Companies House until 30 July 2014.
The failure to file the interim accounts prior to the declaration of the 2013 Dividend renders the payment of the
2013 Dividend an ‘unlawful distribution’ in technical breach of the Act.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
continued
18. continued
Consequently, the Company may have a claim under the Act against past and present shareholders who received
the 2013 Dividend to recover the amounts paid in technical infringement of the Act. The Company may also have
a claim against those Directors who participated in the relevant board meeting at which the decision was taken
to pay the 2013 Dividend. It is clearly not the Company’s intention to make any such claim against either its
shareholders or its Directors. The Company has been advised by its external legal advisors that this matter can be
rectified by the passing by the shareholders of the Company of a special resolution to ratify these breaches and to
put the shareholders and Directors into the position which was always intended. This will be effected by (i) treating
all of the 2013 Dividend as a loan to each of the shareholders who received it, and (ii) the shareholders’ obligation
to repay their respective loans will be satisfied by the declaration and approval at the Annual General Meeting of
new dividends of the Company equal to the amount of the loans received by each shareholder. In effect, the new
dividends will be netted off against the loans so that no further payment will be required to be made to or by the
shareholders in respect of the 2013 Dividend or the new dividends so declared.
Resolution 18 will therefore be proposed as a special resolution at the Annual General Meeting to:
• treat the 2013 Dividend as a loan to the shareholders who received it
• approve a new dividend of the Company which is (i) of an amount equal to the 2013 Dividend, (ii) payable
to the shareholders who received the 2013 Dividend (in the same proportions as such dividend) and (iii) shall
be satisfied by the release of each recipient shareholder from their liability to repay the amount already paid
to them in the form of the 2013 Dividend
• waive any rights of the Company against the shareholders who received the 2013 Dividend (or their estates
in respect of any deceased shareholders)
• waive any rights of the Company against both past and present Directors who approved the payment
of the 2013 Dividend and ratify their breaches of duty
• approve the Company entering into a deed of release in favour of such shareholders and the relevant Directors
(or their estates in respect of deceased shareholders or Directors as the case may be) in respect of the 2013
Dividend. A draft form of the deed is available for inspection at the Company’s registered office until the time
of the Annual General Meeting and at the place of the meeting from 15 minutes before the Annual General
Meeting until it ends.
The Company has drawn the attention of HM Revenue & Customs (‘HMRC’) to the circumstances surrounding
the payment of the 2013 Dividend and to the steps that are now proposed to rectify the position. HMRC has
confirmed that the tax position of UK shareholders is not affected by any irregularity in the dividends. Thereafter,
if shareholders approve this resolution submitted for their approval, it should have no effect on their UK tax
position. If any non-UK resident shareholder has any doubts about their tax position, they should consult their
own professional advisers.
As a result of their interest in its subject matter, the Directors who are also shareholders (holding beneficially in
aggregate approximately 2.39% of the issued share capital of the Company as at 16 March 2015) will not vote on
this resolution.
By order of the Board
Jane E A Tames
Company Secretary
STV Group plc
Pacific Quay
Glasgow G51 1PQ
16 March 2015
111
Notes
1.
Information regarding the meeting, including the contents of this notice, details of the total number of shares
in respect of which members are entitled to exercise voting rights at the meeting, details of the totals of the
voting rights that members are entitled to exercise at the meeting and, if applicable, any members’ statements,
members’ resolutions or members’ matters of business received by the Company after the date of this notice,
is available from the Investor Centre at www.stvplc.tv.
2.
3.
4.
5.
6.
7.
Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on
their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General
Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held
by that shareholder.
A proxy need not be a shareholder of the Company but must attend the meeting to represent you. Your proxy
could be the Chairman or other person who has agreed to attend to represent you. Your proxy will vote as you
instruct and must attend the meeting for your vote to be counted. Details of how to appoint the Chairman or
another person as your proxy using the proxy form are set out in the notes to the proxy form.
A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice.
If you do not have a proxy form and believe that you should have one, or if you require additional forms, please
contact Capita Asset Services on 0871 664 0300 or shareholderenquiries@capita.co.uk (calls cost 10p per minute
plus network extras; lines are open 8.30am to 5.30pm Monday to Friday). Alternatively, you may appoint a proxy
electronically at www.capitashareportal.com. Please see the notes to the form of proxy for further details.
To be valid any proxy form or other instrument appointing a proxy must be received by post or online or
(during normal business hours only) by hand at Capita Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4ZF no later than 11.00am on 28 April 2015 or 48 hours before the time of any
adjournment of the meeting.
The return of a completed proxy form, in writing or online or any CREST Proxy Instruction (as described in
paragraph 11 below) will not prevent a shareholder attending the Annual General Meeting and voting in person
if he/she wishes to do so.
A copy of this notice has been sent for information only to persons who have been nominated by a member to
enjoy information rights under Section 146 of the Companies Act 2006 (a ‘Nominated Person’). The right to appoint
a proxy cannot be exercised by a Nominated Person. However, a Nominated Person may, under an agreement
between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
8.
To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the
Company of the votes they may cast), Shareholders must be registered in the Register of Members of the Company
at 6pm on 28 April 2015 (or, in the event of any adjournment, at 6pm on the date which is two days before the
time of the adjourned meeting). Changes to the Register of Members after the relevant deadline shall be
disregarded in determining the rights of any person to attend and vote at the meeting or the adjourned meeting.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
continued
9.
As at 16 March 2015 (being the last business day prior to the publication of this Notice) the Company’s issued
share capital consists of 39,298,231 ordinary shares of 50p each, carrying one vote each. The Company does
not hold any ordinary shares in the capital of the Company in treasury. Therefore, the total voting rights in the
Company as at 16 March 2015 are 39,298,231.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so by using the procedures described in the CREST Manual on the Euroclear website (www.euroclear.com).
CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed
a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
11. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (‘a CREST
Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (‘EUI’)
specifications, and must contain the information required for such instructions, as described in the CREST Manual.
The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received
by the Company’s registrars, Capita Asset Services (IDRA10) by 11.00am on 28 April 2015 or 48 hours before the
time of any adjournment of the meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s
agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any
change of instructions to proxies appointed through CREST should be communicated to the appointee through
other means.
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that EUI does
not make available special procedures in CREST for any particular message. Normal system timings and limitations
will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed
a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are
referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.
14. To change your proxy instructions simply submit a new proxy appointment using the methods set out above.
Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended
instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions
using another hard-copy proxy form, please contact Capita Asset Services on 0871 664 0300 or
shareholderenquiries@capita.co.uk (calls cost 10p per minute plus network extras; lines are open 8.30am
to 5.30pm Monday to Friday). If you submit more than one valid proxy appointment, the appointment received
last before the latest time for the receipt of proxies will take precedence.
113
15. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods:
• By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Capita
Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. In the case of a member which
is a company, the revocation notice must be executed under its common seal or signed on its behalf by an
officer of the company or an attorney for the company. Any power of attorney or any other authority under
which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with
the revocation notice
• By sending an e-mail to shareholderenquiries@capita.co.uk.
In either case, the revocation notice must be received by Capita Asset Services no later than 8am on 30 April 2015
or 3 hours before the time of any adjourned meeting thereof. If you attempt to revoke your proxy appointment
but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy
appointment will remain valid. Appointment of a proxy does not preclude you from attending the Annual General
Meeting and voting in person. If you have appointed a proxy and attend the Annual General Meeting in person,
your proxy appointment will automatically be terminated.
16.
The Company must answer any question asked which relates to the business being dealt with at the
meeting unless:
• answering the question would interfere unduly with the preparation for the meeting or involve the disclosure
of confidential information
• the answer has already been given on a website in the form of an answer to a question
• it is undesirable in the interests of the Company or the good order of the meeting that the question
be answered.
17.
Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company
under Section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement
setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the
conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected
with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and
reports were laid in accordance with Section 437 of the Companies Act 2006.
The Company cannot require the shareholders requesting any such website publication to pay its expenses. Where
the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, it must
forward the statement to the Company’s auditors not later than the time when it makes the statement available
on the website. The business which may be dealt with at the Annual General Meeting includes any statement that
the Company has been required under Section 527 of the Companies Act 2006 to publish on a website.
18. Members satisfying the thresholds in Section 338 of the Companies Act 2006 may require the Company to give,
to members of the Company entitled to receive notice of the Annual General Meeting, notice of a resolution
which those members intend to move (and which may properly be moved) at the Annual General Meeting.
A resolution may properly be moved at the Annual General Meeting unless (i) it would, if passed, be ineffective
(whether by reason of any inconsistency with any enactment or the Company’s constitution or otherwise);
(ii) it is defamatory of any person; or (iii) it is frivolous or vexatious. The business which may be dealt with at the
Annual General Meeting includes a resolution circulated pursuant to this right. A request made pursuant to this
right may be in hard copy or electronic form, must identify the resolution of which notice is to be given, must be
authenticated by the person(s) making it and must be received by the Company not later than 6 weeks before
the date of the Annual General Meeting.
STV Annual Report and Accounts 2014
Additional Information
NOTICE OF ANNUAL GENERAL MEETING
continued
19. Members satisfying the thresholds in Section 338A of the Companies Act 2006 may request the Company
to include in the business to be dealt with at the Annual General Meeting any matter (other than a proposed
resolution) which may properly be included in the business at the Annual General Meeting. A matter may properly
be included in the business at the Annual General Meeting unless (i) it is defamatory of any person or (ii) it is
frivolous or vexatious. A request made pursuant to this right may be in hard copy or electronic form, must identify
the matter to be included in the business, must be accompanied by a statement setting out the grounds for the
request, must be authenticated by the person(s) making it and must be received by the Company not later than
6 weeks before the date of the Annual General Meeting.
20. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its
behalf, all its powers as a member provided that no more than one corporate representative exercises powers
over the same share.
21. Copies of Executive Directors’ service agreements and copies of the letters of appointment of Non-Executive
Directors are available for inspection at the Company’s registered office during normal business hours from
the date of this notice until the close of the Annual General Meeting (Saturdays, Sundays and public holidays
excepted) and will be available for inspection at the place of the meeting for at least 15 minutes prior to and
during the meeting.
22. Except as provided above, members who have general queries about the Annual General Meeting should call
our shareholder helpline on 0871 664 0300.
You may not use any electronic address provided either:
• in this notice of Annual General Meeting
• any related document (including the chairman’s letter and proxy form), to communicate with the Company
for any purposes other than those expressly stated.
Additional Information
APPENDIX TO THE NOTICE OF
ANNUAL GENERAL MEETING
115
SUMMARY OF THE DEFERRED BONUS PLAN (‘DBP’)
1. Eligibility
Any employee (including an Executive Director) of STV Group Plc (the ‘Company’) or any of its subsidiaries will
be eligible to participate in the DBP at the discretion of the Remuneration Committee.
2. Form of awards
Awards under the DBP may be in the form of:
2.1 a conditional right to acquire ordinary shares in the Company (‘Shares’) at no cost to the participant
(‘Conditional Award’)
2.2 an option to acquire Shares at no cost to the participant (‘Nil-Cost Option’)
2.3 a right to receive a cash amount which relates to the value of a certain number of notional Shares (‘Cash Award’)
and Conditional Awards, Nil-Cost Options and Cash Awards are together referred to as ‘Awards’ and each an ‘Award’.
References in this summary to Shares include notional Shares to which a Cash Award relates, where appropriate.
3. Grant of awards
Awards may only be granted within the six week period following the approval of the DBP by the Company’s
shareholders, the announcement of the Company’s results for any period, or on any day on which the Remuneration
Committee determines that exceptional circumstances exist.
An Award may only be granted to an employee who has earned a bonus for the Financial Year immediately preceding
the Financial Year in which the Grant Date occurs.
4. Terms of awards
Awards may be granted over newly issued Shares, treasury Shares or Shares purchased in the market. Awards are not
transferable (other than on death). No payment will be required for the grant of an Award. Awards will not form part
of pensionable earnings.
5. Dividends
The Remuneration Committee may determine that the number of Shares to which a participant’s Award relates shall
increase to take account of dividends that would have been paid on vested Shares on such terms as it determines,
or that an equivalent amount should be paid in cash.
6. Overall limits
The number of Shares which may be issued under the DBP and under any other employees’ share plan adopted by
the Company in any ten year period may not exceed 10 per cent of the issued ordinary share capital of the Company
in issue at that time.
Treasury Shares will be treated as newly issued for the purpose of these limits until such time as guidelines published
by institutional investor representative bodies determine otherwise.
STV Annual Report and Accounts 2014
Additional Information
APPENDIX TO THE NOTICE OF
ANNUAL GENERAL MEETING
continued
7. Reduction for malus and clawback
Where, at any time prior to the third anniversary of the grant date, there is:
• a material misstatement of the Company’s (or any Group member’s) audited financial results
• misconduct on the part of the participant
• an error in assessing a performance condition applicable to the Award or in the information or assumptions
on which the Award was granted or vests
• action by a participant or participants which resulted in a material breach and subsequent loss of the
Company’s CH3 licence(s).
Awards may be subject to forfeiture or additional conditions, or, to the extent that Awards vest early on death or
cessation of employment, repayment (as the case may be), to the extent determined by the Remuneration Committee.
Where there is an ongoing investigation on such third anniversary the Remuneration Committee may extend
this period.
8. Vesting and exercise
Awards will usually vest on the third anniversary of the grant date (or on such other date as the Remuneration
Committee determines). Nil-Cost Options will then normally be exercisable until the tenth anniversary of the
grant date.
The vesting of a Conditional Award or the exercise of a Nil-Cost Option is subject to obtaining any necessary approvals
or consents from the United Kingdom Listing Authority, the Company’s share dealing policy and any other applicable
laws or regulations.
At any time before the point at which an Award (which is not a Cash Award) has vested, or a Nil-Cost Option has
been exercised, the Remuneration Committee may decide to pay a participant a cash amount equal to the value
of the Shares he would otherwise have received.
Any Shares or cash that are to be issued, transferred or paid (as appropriate) to a participant in respect of a vested
Award or an exercised Nil-Cost Option (including a Cash Award) will be issued, transferred or paid (as appropriate)
as soon as practicable thereafter.
9. Cessation of employment
If a participant dies, an unvested Award will, unless the Remuneration Committee determines otherwise, vest in full as
soon as reasonably practicable after the participant’s death. A participant’s personal representatives will normally have
12 months to exercise any vested Nil-Cost Options.
If a participant ceases to hold office or employment with the Group by reason of ill-health, injury, disability, or the sale
of the business or entity that employs him out of the Group, or for any other reason at the Remuneration Committee’s
discretion (except where a participant is summarily dismissed) his unvested Award will usually continue, unless the
Remuneration Committee determines that the Award will vest as soon as reasonably practicable following the date
of cessation.
An unvested Award will usually vest in full in these circumstances, unless the Remuneration Committee determines
otherwise, in which case it will take account of the period of time that has elapsed since the Award was granted until
the date on which the participant ceases to hold office or employment. Where Awards vest in these circumstances
(or have already vested on cessation), Nil-Cost Options will normally be exercisable for six months.
If a participant ceases to hold office or employment with the Group in any other circumstances, an Award (whether
or not vested) shall lapse on the date on which the participant ceases to hold that office or employment.
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10. Corporate events
In the event of a change of control of the Company, Awards will usually vest in full, unless the Remuneration
Committee determines otherwise, in which case it will take into account the period of time which has elapsed
between the grant date and the relevant event. Nil-Cost Options will then be exercisable for a period of one month.
Alternatively, the Remuneration Committee may permit participants to exchange Awards for equivalent awards
which relate to shares in a different company. If the change of control is an internal reorganisation of the Group
or if the Remuneration Committee so decides, participants will be required to exchange their Awards (rather than
Awards vesting).
If other corporate events occur such as a winding-up of the Company, demerger, delisting, special dividend or other
event which, in the opinion of the Remuneration Committee, may affect the current or future value of Shares, the
Remuneration Committee may determine that Awards will vest in full, unless it determines otherwise, in which case
it will take into account the period from the grant date to the date of the relevant event. The Remuneration Committee
will determine in these circumstances the length of time during which Awards structured as Nil-Cost Options can then
be exercised.
11. Adjustments
In the event of a variation of the Company’s share capital or a demerger, delisting, special dividend, rights issue or
other event, which may, in the Remuneration Committee’s opinion, affect the current or future value of Shares, the
number of Shares subject to an Award and/or any performance condition attached to Awards, may be adjusted.
12. Amendment and termination
The Remuneration Committee may amend the DBP or the terms of any Award at any time, provided that prior approval
of the Company’s shareholders in a general meeting will be required for amendments to the advantage of eligible
employees or participants relating to eligibility, limits, the basis for determining a participant’s entitlement to, and
the terms of, the Shares or cash comprised in an Award and the impact of any variation of capital.
However, any minor amendment to benefit the administration of the DBP, to take into account legislative changes,
or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made by the
Remuneration Committee without shareholder approval.
No amendment may be made to the material disadvantage of participants in the DBP unless consent is sought
from the affected participants and given by a majority of them.
The DBP will usually terminate on the tenth anniversary of its approval by shareholders, but the rights of existing
participants will not be affected by any termination.
13. Legal entitlement
Participation in the DBP does not form part of the terms of a participant’s contract of employment and participants
have no rights in respect of DBP benefits.
14. Governing law
The DBP will be governed in accordance with the laws of Scotland and the parties submit to the exclusive
jurisdiction of the Courts of Scotland.
15. Documents on display
The rules of the DBP will be available for inspection from 27 March 2015 until 30 April 2015 at Peel Hunt,
Moor House, 120 London Wall, London EC2Y 5ET and at the place of the AGM for at least 15 minutes before
and also during the meeting.
STV Annual Report and Accounts 2014
Additional Information
APPENDIX TO THE NOTICE OF
ANNUAL GENERAL MEETING
continued
SUMMARY OF THE LONG TERM INCENTIVE PLAN (‘LTIP’)
1. Eligibility
Any employee (including an Executive Director) of STV Group Plc (the ‘Company’) or any of its subsidiaries will
be eligible to participate in the LTIP at the discretion of the Remuneration Committee.
2. Form of awards
Awards under the LTIP may be in the form of:
2.1 a conditional right to acquire ordinary shares in the Company (‘Shares’) at no cost to the participant
(‘Conditional Award’)
2.2 an option to acquire Shares at no cost to the participant (‘Nil-Cost Option’)
2.3 a right to receive a cash amount which relates to the value of a certain number of notional Shares (‘Cash Award’)
and Conditional Awards, Nil-Cost Options and Cash Awards are together referred to as ‘Awards’ and each an ‘Award’.
References in this summary to Shares include notional Shares to which a Cash Award relates, where appropriate.
3. Performance conditions
Unless the Remuneration Committee determines otherwise, Awards will be subject to the satisfaction of a
performance condition which will determine the proportion (if any) of the Award which will vest at the end of a
performance period of at least three years. Awards granted to the Company’s Executive Directors under the rules
of the LTIP would also be granted within the parameters of the Company’s prevailing remuneration policy (‘Policy’).
Awards which are not subject to a performance condition will vest three years from grant.
Any performance condition may be amended or substituted if one or more events occur which cause the
Remuneration Committee to consider that an amended or substituted performance condition would be more
appropriate. Any amended or substituted performance condition would not be materially less difficult to satisfy.
4. Holding period
Awards may be granted subject to an additional holding period, which will begin on the day immediately after the
last day of the performance period and ending at least one year later.
The Remuneration Committee does not currently intend to make Awards subject to a holding period, but it may apply
a holding period to future Awards.
5. Individual limits
Awards will not be granted to a participant under the LTIP over Shares with a market value (as determined by the
Remuneration Committee) in excess of 100 per cent of salary in respect of any financial year. The Remuneration
Committee may, in its discretion, grant Awards above this level in circumstances in which it considers a higher limit
to be appropriate (Awards granted to Executive Directors would be made within the limits set out in the Policy).
6. Grant of awards
Awards may only be granted within the six week period following the approval of the LTIP by the Company’s
shareholders, the dealing day after the day on which the Company makes an announcement of its results for any
period, or on any day on which the Remuneration Committee determines that exceptional circumstances exist.
7. Terms of awards
Awards may be granted over newly issued Shares, treasury Shares or Shares purchased in the market. Awards are not
transferable (other than on death). No payment will be required for the grant of an Award. Awards will not form part of
pensionable earnings.
119
8. Dividends
The Remuneration Committee may determine that the number of Shares to which a participant’s Award relates will
increase to take account of dividends that would have been paid on vested Shares on such terms as it determines,
or that an equivalent amount should be paid in cash.
9. Overall limits
The number of Shares which may be issued under the LTIP and under any other employees’ share plan adopted by
the Company may not exceed 10 per cent of the Issued ordinary share capital of the Company in issue at that time.
Treasury Shares will be treated as newly issued for the purpose of these limits until such time as guidelines published
by institutional investor representative bodies determine otherwise.
10. Reduction for malus and clawback
Where, at any time prior to the fifth anniversary of the grant date, there is:
• a material misstatement of the Company’s (or any Group member’s) audited financial results
• misconduct on the part of the participant
• an error in assessing a performance condition applicable to the Award or in the information or assumptions
on which the Award was granted or vests
• action by a participant or participants which resulted in a material breach and subsequent loss of the
Company’s CH3 licence(s).
Awards may be subject to forfeiture, additional conditions or repayment (as the case may be), to the extent
determined by the Remuneration Committee. Where there is an ongoing investigation on such fifth anniversary,
the Remuneration Committee may extend this period.
11. Vesting and exercise
Awards that are subject to a performance condition will normally vest as soon as practicable after the end of any
performance period (or on such later date as the Remuneration Committee determines) and then only to the extent
that any performance condition has been satisfied. Awards that are not subject to a performance condition will usually
vest on the third anniversary of the grant date.
If a holding period does not apply to an Award, it will be released (or, in the case of a Nil-Cost Option become
exercisable) immediately on vesting. However, if Awards are subject to an additional holding period, vested shares
will not usually be released to the participant until the end of the holding period.
Nil-Cost Options will then normally be exercisable from release until the tenth anniversary of the grant date.
The release of a Conditional Award or the exercise of a Nil-Cost Option is subject to obtaining any necessary approvals
or consents from the United Kingdom Listing Authority, the Company’s share dealing policy and any other applicable
laws or regulations.
At any time before the point at which an Award (which is not a Cash Award) has been released or a Nil-Cost Option has
been exercised, the Remuneration Committee may decide to pay a participant a cash amount equal to the value of the
Shares he would otherwise have received.
Any Shares or cash that are to be issued, transferred or paid (as appropriate) to a participant in respect of an Award will
be issued, transferred or paid (as appropriate) a s soon as practicable thereafter.
STV Annual Report and Accounts 2014
Additional Information
APPENDIX TO THE NOTICE OF
ANNUAL GENERAL MEETING
continued
12. Cessation of employment
If a participant dies, his Award will, unless the Remuneration Committee determines otherwise, vest (if unvested) and
be released as soon as reasonably practicable after the participant’s death. An unvested Award will vest to the extent
that the Remuneration Committee determines, taking into account the satisfaction of any performance condition and
the period of time that has elapsed since the Award was granted until the date of death as a proportion of the vesting
period. A participant’s personal representatives will normally have 12 months from the participant’s death to exercise
any Nil-Cost Options.
Cessation prior to the vesting date
If a participant ceases to hold office or employment with the Group before the vesting date by reason of ill-health,
injury, disability, or the sale of the business or entity that employs him out of the Group or for any other reason at the
Remuneration Committee’s discretion (except where a participant is summarily dismissed), his unvested Award will
usually continue, unless the Remuneration Committee determines that the Award will be released as soon as
reasonably practicable following the date of cessation.
The Remuneration Committee will decide the extent to which an unvested Award vests in these circumstances, taking
into account the extent to which any performance condition is satisfied and, unless the Remuneration Committee in
its discretion determines otherwise, the period of time that has elapsed since the Award was granted until the date
on which the participant ceases to be an officer or employment as a proportion of the vesting period.
If a participant ceases to hold office or employment with the Group in any other circumstances, an Award will lapse
on the date on which the participant ceases to hold that office or employment.
Cessation during any holding period
If a participant ceases to hold office or employment with the Group during the holding period, his vested Award will
usually continue (unless he is summarily dismissed, in which case his Award will lapse), or unless the Remuneration
Committee determines that it should be released early.
Exercise of Nil-Cost Options on cessation
Where Nil-Cost Options vest and are released in these circumstances (or if have already been released, but not
been exercised prior to cessation) they will normally be exercisable for a period of six months thereafter.
13. Corporate events
In the event of a change of control of the Company, Awards will vest taking into account the extent that any
performance condition has been satisfied, and unless the Remuneration Committee determines otherwise, the
period of time which has elapsed between the grant date and the relevant event as a proportion of the vesting
period. Nil-Cost Options will then be exercisable for a period of one month.
Alternatively, the Remuneration Committee may permit participants to exchange Awards for equivalent awards
which relate to shares in a different company. If the change of control is an internal reorganisation of the Group or
if the Remuneration Committee so decides, participants will be required to exchange their Awards (rather than
Awards vesting).
If other corporate events occur such as a winding-up of the Company, demerger, delisting, special dividend or other
event which, in the opinion of the Remuneration Committee, may affect the current or future value of Shares, the
Remuneration Committee may determine that Awards will vest taking into account the satisfaction of any relevant
performance condition and, unless the Remuneration Committee determines otherwise, the period from the grant
date to the date of the relevant event as a proportion of the vesting period. The Remuneration Committee will
determine in these circumstances the length of time during which Awards structured as Nil-Cost Options can then
be exercised.
121
14. Adjustments
In the event of a variation of the Company’s share capital or a demerger, delisting, special dividend, rights issue or
other event, which may, in the Remuneration Committee’s opinion, affect the current or future value of Shares, the
number of Shares subject to an Award and/or any performance condition attached to Awards, may be adjusted.
15. Amendment and termination
The Remuneration Committee may amend the LTIP or the terms of any Award at any time, provided that prior approval
of the Company’s shareholders in a general meeting will be required for amendments to the advantage of eligible
employees or participants relating to eligibility, limits, the basis for determining a participant’s entitlement
to, and the terms of, the Shares or cash comprised in an Award and the impact of any variation of capital.
However, any minor amendment to benefit the administration of the LTIP, to take into account legislative changes,
or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made by the
Remuneration Committee without shareholder approval.
No amendment may be made to the material disadvantage of participants in the LTIP unless consent is sought
from the affected participants and given by a majority of them.
The LTIP will usually terminate on the tenth anniversary of its approval by shareholders, but the rights of existing
participants will not be affected by any termination.
16. Legal entitlement
Participation in the LTIP does not form part of the terms of a participant’s contract of employment and participants
have no rights in respect of LTIP benefits.
17. Governing law
The LTIP will be governed in accordance with the laws of Scotland and the parties submit to the exclusive jurisdiction
of the Courts of Scotland.
18. Documents on display
The rules of the LTIP will be available for inspection from 27 March 2015 until 30 April 2015 at Peel Hunt,
Moore House, 120 London Wall, London EC2Y 5ET and at the place of the AGM for at least 15 minutes before
and also during the meeting.
STV Annual Report and Accounts 2014
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STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3000
www.stv.tv
Company Registration Number SC203873