A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
8
S
T
V
G
r
o
u
p
p
l
c
BUILDING A STRONG
FOUNDATION FOR GROWTH
Annual Report and Accounts 2018
Contents
01
02
2018 financial and
operational highlights
Who we are and what we do
Strategic Report
04 Chairman’s statement
06 Operating review
– STV 2020 – introducing our
vision and strategy for long
term growth
– Broadcast
– Digital
– Production
– The STV of the future
26 Corporate responsibility
34
Financial review
36 Risk management
39
Principal risks and uncertainties
Introduction to governance
Governance
41
42 Board of Directors
44 Corporate governance report
54 Remuneration report
62 Directors’ report
Financial Statements
65
71
71
72
73
74
STV Group plc
consolidated financial statements
– independent auditors’ report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated and parent
company balance sheets
Consolidated and parent
company statement of
changes in equity
Consolidated and parent
company statement
of cash flows
Notes to the financial statements
75
100 Five year summary
Additional Information
101 Shareholder information
103
Notice of Annual General Meeting
View our Annual Report and Accounts and other
information about STV at www.stvplc.tv
STV Annual Report and Accounts 2018
01
2018 financial and
operational highlights
TURNOVER
(£ millions)
OPERATING PROFIT*
(£ millions)
£125.9m (+8%)
£20.1m (+6%)
2017: £117.0m
2017: £19.0m
TOTAL ADVERTISING REVENUE
(£ millions)
NON-BROADCAST PROFIT
(£ millions)
£97.4m (+4%)
2017: £93.5m
£4.8m (+30%)
2017: £3.7m
EPS*
(pence)
41.1p (+4%)
2017: 39.6p
DIVIDENDS PER SHARE
(pence)
20.0p (+18%)
2017: 17.0p
+13%
STV share of viewing
+24%
in streams on the STV Player
£2.6m
raised for the STV Children’s Appeal
£2.1m
raised by the Scottish
Children’s Lottery
* Pre-exceptional and IAS19, see note 31.
Dancing on Ice was one of the best
watched programmes on STV in 2018
reaching 2.1 million viewers.
02
Who we are and what we do
We are Scotland’s
home of news and
entertainment
stv.tv
Our website, providing a portal to all
of our content such as News, Sport,
Entertainment, Weather, Competitions,
Video on Demand and STV programme
information with TV listings.
28.2 million
Average monthly page views
increased by 40% in 2018.
STV is our main TV channel, accessible
free-to-air on all the main TV platforms
in Scotland.
22.1%
STV delivered its best share of viewing
performance in a decade in 2018
with a peak time viewing share of
22.1%. This was up 13% on the year
before, the highest increase of any
TV channel in the UK.
STV Player
Our online Video on Demand service,
accessible through the STV website
as well as being available on a variety
of smartphones, tablets, consoles,
set top boxes and Smart TVs.
35million
During 2018 there were 35 million
long form streams on the Player,
24% up on 2017.
DundeeGlasgowDundeeInvernessAberdeenEdinburghLondon: Commercial and ProductionsOverview 03
STV IN A NUTSHELL
> Two Channel 3 licence
areas covering Scotland.
> Exclusive access to all the
big network shows.
> Button 3 in every
Scottish home = STV.
> Scottish news, sport,
current affairs and other
Scottish content.
> Strong share of TV
advertising market and
unique regional ad sell.
> Fast-growing and profitable
digital streaming service.
> Popular websites for news,
sport and entertainment.
> Scotland’s largest
production company.
DundeeGlasgowDundeeInvernessAberdeenEdinburghLondon: Commercial and ProductionsSTV Annual Report and Accounts 2018 04
Chairman’s statement
Baroness Margaret Ford OBE
Chairman
2018 was a year of significant change for
STV starting with the arrival in January of
Simon Pitts who took the helm as Chief
Executive Officer. Following a thorough
review, the new three year strategy was
announced in May, which the Board fully
endorsed and its implementation began
immediately.
Our people
Our staff are integral to the delivery of
the new strategy and the Board is acutely
aware that the success of an organisation
is dependent upon the people and talent
within it. STV is fortunate to have so many
committed staff whose contributions and
drive are key to STV’s achievements. On
behalf of the Board, I would like to thank
all colleagues across the business for their
commitment, patience and hard work
throughout this time.
We are delighted that many career
opportunities have been created in
2018 with over 100 STV people in new
roles. Over 75 staff members have
been internally promoted and the staff
development process is being refocused
and refreshed. I would like to thank
those employees who left STV for
their significant contribution.
News is fundamental to STV and during
the year we launched a comprehensive
change programme that invests in training,
digital and technology to ensure that STV
News remains the most comprehensive,
most popular and most trusted news
service in Scotland.
Driving the Scottish economy
We created the STV Growth Fund in which
we are investing £5m of airtime to support
Scottish businesses and grow future
advertising budgets. Our commitment
to driving economic growth in Scotland
was further strengthened when we joined
forces with Entrepreneurial Scotland to
launch Summit, celebrating a host of
Scottish entrepreneurs and also with the
STV Growth Academy which is designed to
help small and medium sized businesses.
Support for the STV Children’s Appeal
continues to grow in communities up
and down the country with schools, local
businesses and individuals giving their time
and commitment to this hugely important
cause raising £2.6m in 2018. Together with
the Scottish Children’s Lottery, a total of
£4.7m was raised for charitable causes,
nearly 15% more than last year.
Looking forward
In summary, 2018 has been a year of
progress for the business and we are
executing a growth strategy that we
believe will build momentum and enable
us to deliver strong shareholder returns.
The success of STV relies on a strong Board
made up of a diverse range of experience,
skills and perspectives. We were delighted
to appoint David Bergg as a Non-Executive
Director in May who brings his extensive
knowledge of commercial broadcasting.
With a strong and focused CEO, the Board
feels it is well positioned to support the
development of the Company’s culture
and strategy.
I would like to thank my Board colleagues
for their valuable support and wise counsel
during 2018 and we look forward to
supporting Simon and the Management
Team in the coming year. Together we
will continue to maintain a strong and
effective governance structure to enable
the business to deliver its strategy,
generate shareholder value and safeguard
our shareholders’ long-term interests.
On behalf of the Board, I would like to
warmly welcome Lindsay Dixon who
joins as Chief Financial Officer in May
following the resignation of George Watt.
George is leaving after over 20 years with
STV to pursue a non-executive career
and his fellow Directors thank him for
his outstanding contribution to the
success of STV and wish him every
success in the future.
Thank you for your continued support.
STV is a cash generative group with
clear strategic priorities that focus
the organisation on growth.
Strategic Report 05
Royal Television Society Awards
Ben Philip, based in Aberdeen, took
home the award for Young Journalist
presented in memory of George Sinclair.
Ben has been part of the STV News
team for just over a year, taking on the
role of both presenter and reporter on
a daily basis at STV.
Scotland Tonight
The leading Scottish current
affairs programme.
Scottish Children’s Lottery
Raised £3m since launch to support
children and young people’s charities.
STV Appeal
Now in its eighth year,
having raised over £19m.
Celebrity Antiques Road Trip
Long running ratings success for
BBC Two consistently achieving
2 million viewers.
STV Growth Academy
Established to provide SMEs
with business insight.
STV Annual Report and Accounts 2018 06
STV 2020 – introducing our vision
and strategy for long term growth
Simon Pitts
Chief Executive Officer
STV is a company full of talented
and committed people with a strong
brand and a privileged place in the lives
of Scottish TV viewers. We’re the home
of some of the biggest, most popular
shows on television but we also have
a clear public purpose.
Our challenge is to build on these
strengths while recognising that viewing
habits are constantly changing and that
we need to change too to stay relevant.
The ambitious growth strategy we set out
in May is rooted in the many conversations
I had with colleagues, stakeholders and
viewers inside and outside STV when
I joined the business. It is designed to
make the best of STV’s great potential –
to simplify the way we operate, to invest
in the most exciting areas of growth, and
to re-establish STV as an independent
creative force in Scotland and beyond.
Our comprehensive three-year strategy
for creative and digital success is now
well underway and is already delivering
tangible results. We have committed to
investing £15m in original content, news
and digital to put the business on a path
to long term, sustainable growth. The
strategy is fully costed and self-funded
and does not come at the expense of
our progressive dividend policy.
We have attracted fantastic new talent
to the Management Team and this team
is now fully in place. I’m delighted that
we’ve also managed to make a large
number of internal promotions across
the business, recognising the strong
talent already working at STV.
Strong foundations for growth
We’ve made good early progress in
delivering our plan, including agreeing
important new commercial deals across
Broadcast, Digital and Production that set
us up for the future. I’m also delighted that
all parts of the business are now growing.
There is a huge amount to do but we
have a strong foundation on which to
drive further growth:
• TV viewing remains resilient, particularly
in Scotland where people watch an
average of 24 minutes more television
a day than anywhere else in the UK;
• At STV we have the most powerful
marketing shop window in Scotland which
we can use to build both new programme
brands and advertiser brands;
• STV Productions is very well placed to
benefit from the growing demand for
quality content from the nations and
regions from broadcasters striving to
reflect the diversity of Britain;
• And STV’s Digital business, already
profitable, is poised for continued
growth as on demand viewing goes
mainstream and STV’s core audience
catches up with the early adopters.
We have developed a clear vision
for the kind of business STV needs
to be in order to be relevant
and successful in 2020.
STV DIVISIONAL
BOARD STRUCTURE
STV’s new internal governance structure,
with three new clearly defined and
accountable divisional boards.
PLC BOARD
MANAGEMENT BOARD
• Chaired by CEO
• Meets weekly
• Development and implementation of strategy
• Group-wide decision making
• Prioritisation of resources
• Risk management
BROADCAST BOARD
DIGITAL BOARD
PRODUCTION BOARD
• Chaired by divisional MDs
• Meets monthly
• Attendees CEO, CFO plus senior divisional execs
• Drives performance and change
• Approves operational expenditure
• Upwards approval to Management Board where appropriate
Strategic Report 07
Three clear strategic objectives
To deliver our vision we are pursuing
three strategic objectives:
• Firstly, maximising the value of STV’s
broadcast business by delivering high
quality, cost effective news and
entertainment;
• Secondly, driving digital growth through
the STV Player by creating an STV for
everyone; and
• Thirdly, building STV Productions into
a world class production business.
We are focusing the team on the things
that matter – making the best of our
unique broadcast platform, driving digital
growth, and owning more valuable IP.
To do this we’ve created three divisions –
Broadcast, Digital and Production – to
simplify the business and mirror our three
strategic objectives, each with its own
Managing Director, P&L and KPIs, and we
have established clear priorities for each.
These are explained in more detail below.
We have a fourth division – STV ELM – and
more detailed information on this can be
found on page 33.
Read on for more detail on how each of
our new divisions will fulfil our strategic
ambitions for 2020.
Key Performance Indicators (KPIs)
The company has one public KPI which is
to achieve a third of total operating profit
from non-broadcast activities by 2020. In
2018, non-broadcasting profits accounted
for 24% of total operating profit, up from
19% in 2017.
STV BUSINESS MODEL
Broadcast and Digital deliver unique,
high quality content to attract mass
audiences which is sold to advertisers
to generate revenues.
This content is delivered across multiple
platforms. 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.
r t i s i ng
Ad v e
STV
business
model
C
o
n
t
e
n
t
ers
View
OUR VISION FOR 2020
Our vision begins with attracting and retaining the best creative
talent to work with STV and ends with great shows being made
for STV and other broadcasters which are made available
wherever and whenever viewers want to watch.
A magnet
for creative
talent
Agile, creative
and fun place
to work
Making a
range of great
content
Giving back
to Scotland
Clear and
committed
branding
Creating Scotland’s
home of news and
entertainment
Connecting with
audiences and
advertisers
Digital
front and
centre
Embracing
the personalised
future of TV
OUR DIVISIONAL STRATEGIC OBJECTIVES
BROADCAST
Maximise the value of our broadcast
business by delivering high quality,
cost-effective news and entertainment.
SEE PAGE 08
DIGITAL
Drive digital growth by creating an
‘STV for everyone.’
SEE PAGE 14
PRODUCTION
Build a world class production business.
SEE PAGE 20
ELM
Grow Scottish Children’s Lottery sales, generate
more money for good causes and pay down debt.
SEE PAGE 33
STV Annual Report and Accounts 2018 08
Strategic Report
Operating review – Broadcast
BROADCAST
STRATEGIC OBJECTIVE #1:
to maximise the value of our broadcast
business by delivering high quality,
cost-effective news and entertainment
KEY PRIORITIES
> Invest to create a distinctive, cost
> Maximise our share of the
effective, future-facing news organisation
advertising market
> Develop a wider range of new content
for our main channel and STV Player
> Make the most of our unique Channel 3
marketing shop window
> Work in partnership with the TV
platforms to drive more value
STV Annual Report and Accounts 2018
09
I’m a Celebrity… Get Me Out of Here
was the most successful series in the
show’s 17 year history.
The Voice UK achieved a share of
28% and a series reach of 1.2 million.
The Chase is the best watched
daytime show in Scotland.
STV News at Six is now the best watched
news programme in Scotland.
10
Operating review – Broadcast
KEY HIGHLIGHTS
On screen STV had a terrific year in 2018, achieving
its highest viewing share in a decade. At a time when
commentators regularly speculate about Netflix, Amazon
and YouTube eating into TV viewing, STV posted the
highest viewing share growth of any UK channel –
and there are over 500 other channels.
17.1
194
16.5
182
15.9
16.1
16.5
174
174
173
18.6
186
2013
2014
2015
2016
2017
2018
Source: BARB 2009-2018, share and avg aud,
figures incl. HD & +1, 09:00-24:00
+13%
STV all-time
viewing share
+8%
STV all-time
viewing volume
STV was the only broadcaster in the UK to
increase both share and volume of viewing
across every age group in 2018. Volume is
a crucial measure as it describes the total
amount of viewing to STV in terms of
average audiences and minutes watched,
and this went up last year by 8% to record
the highest viewing volume on STV in five
years. This was the case for virtually every
demographic including 16-34s.
It wasn’t just the World Cup or I’m a
Celebrity where the gains were made.
We actually improved our viewing share
in 49 out of 52 weeks in 2018, posting share
gains across all day parts and beating the
rest of the ITV Network by a whole share
point or 5%. I’m happy to say that 2019
also started strongly, with our viewing
share up again on last year, driven by big
dramas like Manhunt and Vera as well as
Dancing on Ice and The Chase.
Translating on-screen success
into commercial success
A strong viewing performance is the key
to maintaining our commercial success.
In audience terms we are nearly four
times bigger than our nearest commercial
competitor, C4, and over five times bigger
than Channel 5, and in 2018 this meant
that we delivered 99% of all commercial
audiences over 500,000 in Scotland, with
Channel 4’s The Great British Bake Off final
the only exception. This is, in a nutshell,
our USP with advertisers. We’re the only
broadcaster to consistently deliver mass
audiences and genuine must-watch TV,
day in, day out.
Our entertainment show I’m a Celebrity…
Get Me Out of Here is a great example.
Amazingly, 18 series in, the last series was
its best ever. It won its slot every night of
its 22-night run, with audience figures up
34% and young audiences up a massive
73%. And online it was a juggernaut,
propelling STV Player to its biggest
revenue month ever in November.
Bobby Hain
Managing Director, Broadcast
Managing Director Bobby Hain
has vast experience across editorial,
commercial and marketing areas in
multiple media both in Scotland and
the wider UK and has been a senior
executive within STV since 2000.
Bobby is responsible for STV’s
broadcast business as well as the key
relationships with ITV, Ofcom and
the major television platforms.
Strategic Report
11
DRIVING THE
SCOTTISH ECONOMY
STV’s unique marketing platform reaches
87% of Scots every month and we want
to use this to boost Scottish business.
STV Growth Fund
The STV Growth Fund launched in May and
has got off to a very promising start.
Television advertising is the most effective
way of building a business and the aim of
the fund is to make TV more accessible and
affordable to SMEs and entrepreneurs
earlier in their business journey.
The Growth Fund has already partnered
with over 100 businesses from right
across Scotland, allocating over £3m of
TV airtime so far. The commercial aim of
the Fund is to maximise STV’s share of the
local advertising market, in particular by
attracting new businesses to TV for the first
time. So far over half the deals are with
clients new to TV, with the remainder lapsed
advertisers coming back to TV or existing
clients increasing their spend with us.
Following the Fund’s early success we have
decided to scale it up further to attract
an even greater range of businesses to
television. We have now announced that
we will be doubling the size of the Growth
Fund to £10m of airtime which we will look
to allocate over the next two years or so,
focusing on three types of commercial deal.
• Firstly, free airtime to entrepreneurs
and start-ups that we hope will be the
successful businesses of tomorrow.
• Secondly, matched funding to a whole
range of small and medium sized
enterprises where an advertiser commits
to a certain amount of spend with us and
we double the size of their campaign.
• And thirdly, deals where STV invests
airtime not for an immediate return
but for a share of future revenues
or an equity share of the business.
STV supporting Scottish entrepreneurs
During 2018, STV and Entrepreneurial
Scotland joined forces to launch Summit
– Celebrating Scottish Entrepreneurship.
The campaign called on innovators,
visionaries and game-changers – no
matter what stage they were at in their
journey – to come forward and take part,
with entries welcomed from anyone
showing an entrepreneurial mindset to
grow a business or organisation, address
a challenge or seize an opportunity.
Summit was an opportunity to connect
entrepreneurs with the unrivalled reach
STV has with consumers across Scotland
and STV was keen to help entrepreneurs
increase awareness of their organisations
in order to support their ongoing growth
and scale-up, as well as inspiring the next
generation of entrepreneurs to take that
next step and start up. Highlighting
these Scottish entrepreneurial stories
showcased and shone a light on the
innovations and achievements across the
country and recognised that the thriving
entrepreneurial community was core to
a real, sustainable positive impact on our
country’s economy and broader society.
STV created an extensive on-screen
awareness campaign, focusing on
established and up-and-coming
entrepreneurs from a range of backgrounds
and sectors – people and their teams
who not only created jobs and value for
the economy, but also breathed life into
solutions to the biggest challenges and
could shape the future we want to live in.
The on-screen stories brought to life their
passion, innovation, struggles, resilience,
determination and warmth, and were seen
by millions of Scots across the campaign.
The 2018 Summit Entrepreneurship
Awards featured various categories
recognising the increasing scope and
diversity of entrepreneurship within
Scotland and awards were made at a
glitzy ceremony in Glasgow in November.
Winners included Derek Pierce of J&D
Pierce Contracts for Entrepreneur of the
Year and Isla Leslie of Estrela who won
Young Entrepreneur of the Year.
‘ The STV Growth Fund has given me the chance to take
my business on to TV for the first time, when previously
I wouldn’t have been able to even consider it.’
John Paul Reilly JPR Interiors
STV Growth Fund multiplatform marketing
campaign reached 77% of Scots.
Celia Hodson, Founder of Hey Girls won
Social Entrepreneur of the Year at Summit.
TV campaign for STV Growth Fund
member, Cheeky Chompers.
STV Annual Report and Accounts 2018
12
I’M A CELEBRITY
AUDIENCE STATISTICS
AUDIENCE
VIEWING SHARE
REACH
974,000
+34% year on year
45%
Highest ever!
2.8m
Won its slot every night
AUDIENCE AGE
CATCH UP STREAMS
LIVE STREAMS
25-34
1.2m
650,000
+73% year on year
+41% year on year
+30% year on year
Strategic Report 13
Operating review – Broadcast
STV NEWS AT SIX
AUDIENCE SHARE
Investing in news
Our news performance has played a crucial
part in STV’s on-screen success in 2018.
and syndicated content across all
platforms and Nicki McCourt who
became Editor of Newsgathering.
In September 2018, STV News at Six
in the Central Belt was relaunched and
is now dual presented from Glasgow
and Edinburgh.
It is now the best watched news
programme in Scotland.
BBC Breakfast
ITV Lunchtime News
BBC One O’Clock News
5 News at 5
BBC Six O’Clock News
STV News at Six
BBC Reporting Scotland
ITV News
Channel 4 News
ITV News at Ten
BBC Ten O’Clock News
Sky News Channel
BBC News Channel
419K
Source: BARB: weekday news audiences since Central Belt
show was relaunched from 10/09/2018 – 31/12/2018
AUDIENCE
+7%
year on year
SHARE
30%
+3 percentage points
year on year
+10 share points on
ITV London
STV’s ambitious and extensive change
programme has progressed well and
a comprehensive training programme
has been put in place to create a single,
integrated news gathering function
across broadcasting and digital platforms,
reflecting the fact that news habits have
changed faster than virtually any other part
of the TV market. Investment of £2 million
has been made in the development of
journalists and technology to ensure
that STV News is in the strongest position
to meet the needs of a growing digital
audience. The on screen news performance
remains very strong despite all the change.
Steven Ladurantaye was appointed Head
of News and Current Affairs in November to
lead the news organisation and deliver the
transformation programme and a newly
created Editorial Board ensures the content
maintains its high quality and is distinctive
and relevant, securing STV’s leading
position across all platforms. This is chaired
by John MacKay who, in addition to being
widely recognised by journalists across
Scotland as a leader in his profession,
embodies the values of STV News.
Several other promotions from within
the News team were made during the
year, including Linda Grimes who was
appointed Editor, Broadcast Output,
assuming responsibility for programming
across news and current affairs and
David Milne who became Editor, Digital
Output, responsible for digital, social
Ben Philip, who joined the News team in
Aberdeen in 2017 as both presenter and
reporter, took home the award for Young
Journalist of the Year 2018 at the Royal
Television Society Scotland Awards.
On screen, news performance remains
very strong and the re-launch of the main
6pm bulletin provides an exciting and
innovative new programme for the central
belt of Scotland. The reinvigorated STV
News at Six was launched in September,
broadcasting live from Edinburgh and
Glasgow with Kelly-Ann Woodland and
John MacKay sharing links in a dual-
presented section as well as seamlessly
anchoring separate sections comprising
local stories, features, bulletins and sport.
This format is designed to deliver the
combined strength of the presenters and
the whole team of news journalists bring
a fresh, authoritative but friendly approach
to this flagship news programme. It now
includes more original journalism, live
commentary, interaction with viewers
and complementary content can be found
on STV’s social and online platforms.
STV News at Six is now Scotland’s best
watched news programme, recording
its highest viewing share in over 15 years
and beating BBC News. Our investment
in a new multi-platform news model is
starting to pay off: our news audiences
were up a total of 7% across the year with
an audience share of over 30%, compared
to 20% for ITV’s London news.
Scots watched an average
of 214 minutes of television
per adult per day in 2018, 11%
higher than the rest of the UK.
PEAK TIME VIEWING
We are a long way ahead of our
nearest commercial competitors.
5x
4x
bigger than
Channel 5
bigger than
Channel 4
Source: BARB Jan-Dec 2018, peak time
(18:00-22.30), individuals
358
354
107
96
65
38
32
29
22
21
BBC 1
STV
BBC 2
CH4 Channel 5 ITV3
ITV2
E4
Film4
BBC 4
Source: BARB Jan-Dec 2018, peak time (18:00-22:30), individuals
STV Annual Report and Accounts 2018 14
Strategic Report
Operating review – Digital
DIGITAL
STRATEGIC OBJECTIVE #2:
to drive digital growth by
creating an ‘STV for everyone’
KEY PRIORITIES
> Place digital front and centre
in the organisation
> Expand STV Player distribution
and access new revenues
> Upgrade the STV Player to deliver
> Deliver a significantly improved
a TV-like experience
content proposition
> Move to a culture of continuous
improvement and personalisation
of the digital user experience
STV Annual Report and Accounts 2018
15
Unforgotten was STV Player’s most
successful boxset of 2018, generating
more than 700,000 views.
Emmerdale – in 2018 there were 13.2 million
catch up streams for all soaps on STV.
Marcella series 1-2 boxset generated
449,000 streams on the Player.
Britain’s Got Talent achieved a share
of 37% and a series reach of 2.5 million.
16
Operating review – Digital
KEY HIGHLIGHTS
Our new Digital MD Richard Williams has been in post
since October 2018 and has hit the ground running.
His dedicated digital division is now in place and we’re
running STV Player like the real business it has become.
DIGITAL
REVENUE
DIGITAL
PROFITS
DIGITAL PROFIT
MARGIN NOW
+17% +27% 49%
Last year our online streams were up
24% but our users were also watching
for longer creating even faster growth
in advertising impressions of 29%. And
because we’re getting better at selling,
our online revenue is up 39%.
The key to this growth is our strong
exclusive content. The soaps Coronation
Street and Emmerdale, big dramas like
Vera and Marcella, and entertainment
favourites like I’m a Celebrity all make a
big contribution to our online success as
well, of course, as the football World Cup.
New partnerships with Virgin and Sky
In September, a valuable four-year
strategic partnership was agreed with
Virgin under which Virgin will Broadcast
STV in HD across all cabled STV regions
on EPG slot 103 as well as launch the STV
Player app on Virgin Media set top boxes
for the very first time. This partnership will
create additional value for both businesses
and delivers a significantly enhanced
viewing experience across STV and the STV
Player. Virgin have a 17% market share in
Scotland – approximately 400,000 homes
– which is its highest anywhere in the UK,
so this gives the Player’s distribution a
sizeable boost.
Richard Williams
Managing Director, Digital
Managing Director Richard Williams
is an experienced digital leader
having successfully delivered digital
strategies at Virgin, Yahoo, the BBC
and ITV and started with STV in
October 2018.
He most recently ran UKTV’s video
on demand service and is focused on
driving the growth of the STV Player
by maximising the digital potential
of STV’s programming, delivering
a seamless viewing experience,
increasing the reach of the STV
Player and developing a compelling
digital content offer.
Strategic Report 17
1bn
1 billion minutes were
spent watching content
on the STV Player in 2018
34%
November 2018 saw
the highest VoD revenues,
up 34% year on year
The STV Player has almost 3 million
registered users in Scotland and
is one of the fastest growing on
demand platforms in the UK.
This new partnership enhances an
already strong relationship between
the two broadcasters, with STV Player
already available on Sky’s NOW TV.
Additionally, the deal will support
future functionality.
Universal distribution for the first time
In total that means STV Player is now on
nearly 30 platforms and connected TVs
and has universal distribution in Scotland
for the very first time. The pie chart shows
you the consumption split between
mobile, PC and TV, which has shifted
dramatically towards the TV set in recent
years and now stands at 60% of all VoD
streams. Most people will watch a show
on the biggest screen available to them
at the time and with virtually all TVs now
connected to the Internet, television’s
share of VoD will grow and grow over
the next few years, to over 75% of all
VoD viewing by 2022 according to our
forecasts. And that’s good news for us,
because our market share of VoD is much
better on the TV than anywhere else.
STV is also the first UK public service
broadcaster to go exclusively HD on a major
TV platform, which helps to enhance both
the viewing experience and advertising
sell as previously only one of the three
STV regions broadcast by Virgin was
available in HD.
Overall, it’s a partnership that works for
both sides, allowing both to maintain their
respective long-held positions on the issue
of retransmission fees, but results in tangible
incremental value to STV for the long-term.
STV also announced a five-year strategic
partnership with Sky in January 2019,
which will give Sky customers in Scotland
access to STV’s regional variants in full
HD, as well as to the STV Player on their
set top boxes for the first time.
It allows Sky customers in STV’s broadcast
licence areas to catch up on their favourite
STV programmes and classic shows from
the STV archives – on Sky Q and Sky+ set
top boxes, as well as mobile devices via
streaming and offline viewing and will be
available in the second half of 2019. As part
of the deal, all four STV regions will launch in
HD giving all Sky customers across Scotland
access to the right regional variant of STV in
HD for the first time. The new HD variants are
expected to launch in the first half of 2019.
VIDEO ON DEMAND (VoD)
MARKET SHARE BY PLATFORM
STV Player now has universal distribution. By 2022 we expect TV – the
platform where STV does best – to account for over 75% of all VoD viewing.
TV 60%
TV platforms
Mobile 26%
App stores
PC 14%
STV Annual Report and Accounts 2018 18
Operating review – Digital
Operating review – Digital
THE WORLD CUP 2018
FIFA World Cup 2018 was the most watched
sporting event ever on the STV Player, with
nearly 60 million streamed minutes across
2.3 million live streams. The 2018 FIFA World
Cup reached an audience of 3.5 million on
STV while the streams per match increased
to an average of 72,000 in 2018.
WORLD CUP ON TV AND ONLINE
> Viewed by 3.5 million Scots
> Generating 2.3 million live streams on the STV Player
> There were 59.2 million minutes of streams watched
on the STV Player
> The best watched match was Croatia v England
watched by 1.4 million and a 70% viewing share
> Despite Scotland not qualifying (again!), STV tracked
4 share points up on Network for men across all
the World Cup matches
3.5m
2.3m
16%
Scots viewed 2018
FIFA World Cup
live streams on
the STV Player
of all live player
viewing in 2018
Strategic Report Improving the STV Player content offer
We have steadily increased the number
of boxsets available on the platform to
meet the changing demands of our
audience. 2018’s top drama boxset was
our drama Unforgotten with over 700,000
views which would be the equivalent of
7 million UK-wide.
We have also agreed a range of new
content partnerships to bolster our
core genres and target new audiences
across factual, drama, entertainment,
kids and sport. Our partners include
Hopster (children’s), Little Dot Studios
(factual and entertainment), Eleven
Sports (football), Flame (documentaries)
and Jukin Media (entertainment). These
are low risk partnerships as they are
based on sharing the advertising revenue
generated around the content rather than
making upfront payments. During the
course of this year we expect to go from
around 100 hours of partner content on
the Player today to around 400-500 hours,
and we see this as an interesting growth
opportunity for the Player.
The launch of STV Player+
In February 2019 we successfully
launched our new ad-free subscription
version of STV Player, called STV Player+.
It costs £3.99 per month and allows
viewers to watch STV programming
without the advertisements, to download
their favourite shows for offline viewing,
and to watch abroad for the first time. STV
has never been in pay TV, so this is a first,
and it is gives us a low risk foothold in the
very fast-growing subscription VoD market.
19
STV PLAYER PERFORMANCE
STV Player continues to grow strongly,
underpinned by the best exclusive content
and a simple business model.
MORE USAGE =
MORE INVENTORY
=
MORE REVENUE
+24% +29% +39%
=
=
Online Streams
Ad Impressions
Online Revenue
LIVE STREAM CONTENT TIME SPENT
(MINS) 2018 VS. 2017
28% of all streams on STV Player were live.
Total live viewing minutes were up 81% to 370 million.
The 59 million minutes of live World Cup viewing represented
16% of all live Player viewing across 2018.
I’m a Celebrity average live viewing time per stream increased
from 18 minutes in 2017 to 26 minutes in 2018.
2018
2017
70m
60m
50m
40m
30m
20m
10m
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Adobe Analytics Jan-Dec 2017, Jan-Dec 2018.
STV Database Jan-Dec 2017, Jan-Dec 2018.
28%
of all streams
on STV Player
were live
81%
Total live viewing
minutes were up
81% to 370 million
STV Annual Report and Accounts 2018 20
Strategic Report
Operating review – Production
PRODUCTION
STRATEGIC OBJECTIVE #3:
to build a world class production business
KEY PRIORITIES
> Focus on high value returning
series and the nations and
regions growth opportunity
> Use STV channels to pilot and
showcase new ideas and formats
> Expand the pipeline by
placing more creative bets
> Pursue a partnership strategy
to expand internationally
STV Annual Report and Accounts 2018
21
Celebrity Antiques Road Trip – long running
ratings success for BBC Two achieving an
average 8% viewing share.
Britain’s Polar Bear Cub
produced for Channel 4.
Catchphrase and Celebrity Catchphrase
produced for ITV.
The Bank That Almost Broke Britain
produced for BBC2.
22
Operating review – Production
KEY HIGHLIGHTS
2018 was a transitional year for STV Productions
but we still managed to produce high quality
peak time series for BBC, ITV and C4 for the first
time and we are very ambitious for the future.
STV PRODUCTIONS DELIVERED
11 7 115
shows
series
hours of television
The market opportunity
In taking charge of STV’s production
teams in Glasgow and London, David’s
brief is to turn STV into one of the UK’s
leading production companies, focusing
on the development of returning series for
terrestrial and SVoD (subscription video on
demand) players across both scripted and
unscripted programming, and taking full
advantage of the growing demand for
quality programming from the nations
and regions. He is also establishing new
creative production partnerships and
working with the team to pilot a range
of new programme formats on STV,
capitalising on STV’s unique status
as a producer-broadcaster.
While 2018 was a transitional year for
the Production business we still managed
to achieve excellent revenue growth of
60%, delivering 11 shows, including seven
series, and producing over 115 hours of
television for nine different channels.
We have also shifted all of our focus to
developing returnable series and formats
which have the potential to be picked up
nationwide and internationally.
60%
growth in revenue with
new commissions secured
in all genres including a
return to high-end drama
David Mortimer
Managing Director, Production
Managing Director David Mortimer
is a highly respected creative
business leader and has worked
with NBC Universal, Fever Media and
the BBC and prior to joining STV in
November was Director of Content
for Tinopolis, the UK’s largest
independent production group.
David has been responsible for a
number of hit programmes including
Dragon’s Den and Louis Theroux’s
Weird Weekends.
Strategic Report 23
CELEBRATING
SUCCESS
STV had a successful 2018 with
many award nominations, starting
in January with the following at the
National Television Awards:
• Best quiz show for Catchphrase
• Bruce Forsyth Entertainment award
for And They’re Off…
• Best daytime for Antiques Road Trip
This was followed by nominations
in the following categories at the
Royal Television Society Scotland
Awards in May:
• Documentary and Specialist
Factual: History – The Force:
The Story of Scotland’s Police
• Sport: Live Event – Scotland v
England World Cup Qualifier
• News programme – STV North
and STV Central
• On Screen Personality of the Year
– Halla Mohieddeen
• Young Journalist – Ben Phillip
• Professional Excellence: Sound
– John Cobban, for Ross Kemp
Behind Bars: Inside Barlinnie
STV struck gold with STV News at
Six – North and Ben Philip both
winning awards.
Finally, at the BAFTA Scotland awards
in November, STV was nominated
for The Force: The Story of Scotland’s
Police in the Features and Factual
Series category.
As the table below illustrates, we are
already making popular, returnable, peak
time programming for the UK’s biggest
channels. We’ve now made a total of 26
series of Antiques Road Trip and Celebrity
Antiques Road Trip for the BBC and
Catchphrase is in similarly good form,
regularly achieving ITV peak-time
audiences of over 4.5 million.
We are also excited that two brand new
series are about to air. New Scottish drama
The Victim starring Kelly Macdonald and
John Hannah will transmit on BBC1 shortly,
and our first ever peak-time entertainment
show for C4, Sex Tape, will also be on air
shortly in the coveted 10pm slot.
Investing in STV’s creative pipeline
Part of our new strategy is to place
more creative bets on more people to
maximise our chances of developing
hit shows. We already have a deal with
celebrated drama producer Elaine Collins
who produced Vera for ITV and Shetland
for BBC and we recently agreed an
entertainment partnership with Primal
Media, the creators of hit entertainment
shows like Release the Hounds for ITV2,
Carnage for Sky and Bigheads for ITV.
Together we’ll pitch large-scale
entertainment formats to UK and
international networks with the aim that
these are then co-produced in Scotland.
We’re also broadening our creative
pipeline in drama. Alongside our drama
The Victim we’ll be producing a second
9pm drama for BBC1 later this year –
Elizabeth is Missing – based on the
best-selling novel by Emma Healey.
We also recently announced exclusive
deals to option two further best-selling
books from Scottish authors, Maggie &
Me and Fishnet. Alongside our two drama
commissions we have a burgeoning slate
of new drama projects, with 8-10 different
dramas at script stage and under active
consideration by broadcasters.
Alongside the digital business we continue
to view production as a significant growth
opportunity for STV. This will take time,
but there is a sound basis for optimism
here. The surge in demand for nations
and regions programming is real and we’re
already seeing evidence of it in the market.
Last month we confirmed two new
commissions for the new BBC Scotland
channel. The BBC recently raised its nations
and regions production quota to 50% of all
its output, and C4 has confirmed the same.
In November, C4 announced its move to
Leeds and that it will also open a creative
hub in Glasgow where commissioning
decisions will be taken.
Our ambition is clear. We want to
re-establish STV as a real creative force,
making the very best of local Scottish
creative talent, producing in Scotland,
but targeting not just a Scottish but
a UK-wide and global audience.
STV PRODUCTIONS SHOWS IN 2018
Network shows produced for other channels.
Catchphrase (ITV/STV)
Catchphrase Celebrity Special (ITV/STV)
Antiques Road Trip Series 16 (BBC1)
Britain’s Biggest Warship (BBC2)
Britain’s Polar Bear Club (Channel 4)
Antiques Road Trip Series 17 (BBC1)
Celebrity Antiques Road Trip Series 8 (BBC2)
The Bank That Almost Broke Britain (BBC2)
Lucy Worsley’s Fireworks For A Tudor Queen (BBC4)
Killed Abroad (BBC Scotland)
Tuas a’Bhradain Series 4 (BBC Alba)*
* Not BARB audited
Source: BARB Jan-Dec 2018, UK, Individuals
Average
audience
4.2m
3.4m
2.6m
2.2m
1.8m
1.7m
1.6m
1.4m
678k
281k
–
STV Annual Report and Accounts 2018 24
Operating review – Production
INVESTING IN THE SCOTTISH
CREATIVE ECONOMY
As Scotland’s largest indigenous production
company, STV Productions is well positioned to
serve the increased demand for productions
made in the nations and regions.
Antiques Road Trip
By the end of 2018:
• 450 episodes of ART
• 150 episodes of CART (2009-2018)
• Sold to 40 territories
Antiques Road Trip and its sister show,
Celebrity Antiques Road Trip is shown
on almost every weekday and is often
in the top three rated shows of the day.
The programmes were commissioned
by the BBC and Antiques Road Trip is
in its 18th series while series 9 of the
celebrity version is currently being shown.
Series 19 and 20 of Antiques Road Trip
will be delivered in 2019.
As a returning series, many episodes
are made each year – approximately
70 during 2018 and between 50 and
60 people are employed almost on a
year-round basis because of this volume.
As the programmes are based here in
Glasgow with about two-thirds of the
team being Scots, as a returning show,
this can put several million pounds a
year back into the local economy.
2018
60 episodes produced
employing 50-60
people year round
Strategic Report The Victim
This is STV Productions first drama series
commission for BBC One and is a four part
thriller set in Edinburgh within Scotland’s
unique legal system starring Kelly
Macdonald and John Hannah. It is told
through the eyes of the plaintiff and the
accused and offers a constantly surprising
and twisting perspective on who really is
‘The Victim’.
This modern day courtroom crime thriller
created 100 new jobs in the Scottish
production sector, 86 of which were taken
by Scots or people permanently living
in Scotland. It is the type of potentially
returning drama series that STV wants to
do more of and that Scotland needs more
of to make that telling contribution to the
UK creative economy. It is a show made in
Scotland by Scots but has universal appeal
as it deals with themes that will not just
resonate with the rest of the UK but
potentially globally too.
100
New jobs created in the
Scottish production sector
25
The STV of the future
2018 has been a year of significant change
and progress at STV. We have a positive
vision for the future which involves us
investing to re-establish STV as an
independent creative force in Scotland
and beyond. There is a clear plan in place
to deliver the vision, a first class team,
and we are making good early progress,
though there is much to do.
We want the STV of the future to be:
• A truly multi-platform media company
with a balanced profit base across
broadcast, production and digital
• A brand famous for a wider range
of programming
• As many Scots as possible, at home and
abroad, with our apps on their devices
• A magnet for the best creative talent
from Scotland and beyond
• A leading UK producer, making
world class series for domestic
and international players
• Working in partnership to drive the
Scottish economy and showcase
Scotland to the world.
In short, we want to be Scotland’s
home of news and entertainment.
2019 has started well with continued
growth evident in the regional advertising
market and a strong digital performance.
Both of these are providing an offset to
the more cautious national advertising
market, which is reflecting the wider
macro-economic conditions.
STV Productions growth trajectory
has also continued in early 2019 with
approximately half of the revenue
achieved in 2018 already secured.
The key to our future success will be our
ability to attract, retain and develop the
best people, both on and off screen. With
a refocused and reinvigorated organisation
and team, and clear goals and priorities
to deliver the growth plan and returns
to shareholders, we have set strong
foundations for future growth.
Antiques Road Trip
series 19 and 20 and
Celebrity Antiques Road
Trip series 9 secured
for delivery in 2019.
STV Annual Report and Accounts 2018 26
Corporate responsibility
People
Our people strategy
A compelling vision where
everyone knows how they
contribute to STV success
Strategy and organisation
Attracting, developing
and retaining the best
talent, on and off screen
People
Our culture
Communication
and engagement
Honest, two-way
communication
celebrating success
with a fun tone
Work
environment
Modern, flexible work
environment where our
people feel valued and
part of a TV company
The strategic vision for 2020 sets our
people at the heart of its success and
begins with attracting and retaining
the best creative talent.
With the re-structuring of the business
concluded in late 2018, the implementation
of a range of cultural changes was started
across the company.
2018 involved extensive organisational
change to transition to a structure that
simplifies the way we operate, enables
focus on the areas of the business with
greatest growth potential and ensures
we can make STV an agile, creative and
fun place to work.
The opinions and suggestions of
colleagues on their views of STV, both as
a place to work and their thoughts on the
future strategic direction of the business,
were sought by Simon Pitts when he
joined the business. In addition to
holding meetings with every team and
encouraging one to one meetings to
solicit views, ‘STV Ideas’ was set up to
provide an opportunity for anyone to
put forward confidential proposals and
give their feedback on any aspect of the
business. Many of these insights and
suggestions were incorporated into the
strategic plan. In early 2019 an employee
opinion survey will be undertaken to
provide us with feedback and a baseline
for measurement of our progress in
implementing the new culture.
Career development
As the new organisation has been
formed, new talent has been attracted
to the company, particularly in key senior
positions, whilst new career opportunities
have been created for one in five colleagues
across the business. These new roles are
providing development and progression
opportunities.
Internal promotions were most extensive
within the news team as the future news
strategy was implemented and new roles
and responsibilities defined. These internal
appointees have been supported in their
new roles with a significant investment
in training and skills acquisition and
investment in new technology.
Aligning our goals
A refreshed focus on career development
is at the core of the new culture. New
ways of working have been introduced
across a number of areas of the business,
in particular within STV News to embrace
digital output, and within the Digital
business to ensure the development teams
are aligned to our digital products and
growth priorities to deliver the strategy.
At the beginning of 2019 a new approach
to goal setting, performance tracking
and career development planning was
introduced. ‘CheckIn’ will provide everyone
with a clear set of objectives and goals for
the year, each aligned to the performance
targets of their business area and, more
widely, to the strategic growth plan.
Through this approach everyone will
have at least three opportunities each
year for a formal structured discussion
with their manager on their progress
and career development.
A new development framework is also
being designed. The first phase of this will
be targeted at increasing the company’s
leadership capability and supporting
colleagues identified with potential
to grow beyond their current roles.
Additionally it will provide development
support for newly promoted managers.
Finally, an element focused on supporting
colleagues at early stage career will form
part of the first stage of this framework.
Future talent
Partnerships with universities and
colleges to invest in the talent of the
future are highly valued. During 2018
we have continued to provide students
with opportunities for work experience,
internships, industry insights and career
planning. We are committed to continuing
to strengthen these relationships and in
early 2019 will announce a significant
multi-year investment in an STV Bursary
Scheme, to be delivered in partnership
with the Royal Television Society.
Our support of Modern Apprenticeships
has continued to provide a successful
entry route direct from secondary
education, contributing to diversity and
widening opportunities to secure a career
in the sector. In 2019 we will extend
this commitment with the introduction
of Graduate Apprenticeships in our
digital business.
Diversity and inclusion
Our focus on diversity and inclusion
is aimed at creating an environment
where everyone can thrive, develop and
succeed. Our commitment to ensuring
all colleagues are treated with dignity,
respect and fairness is fulfilled through
creating a culture based on merit and
equality of opportunity.
A range of programmes and activities
have continued during 2018 to widen
access routes into STV and more widely
to the creative industries sector.
Strategic Report 27
Mean and median gender pay gap
MEAN
20.5%
10% improvement
year on year
The mean gender pay gap is the
difference in average hourly rates of
pay between men and women as at the
snapshot date of 5 April 2018, expressed
as a percentage of male earnings.
MEDIAN
18.5%
7% up year on year
The median gender pay gap shows the
difference in the midpoints of the ranges
of hourly rates of pay for men and women
by ordering individual rates of pay from
lowest to highest and comparing the
middle value.
Understanding our profile
The Company’s mean gender pay gap
is 20.5%, an improvement of 10% year
on year.
In common with many organisations, the
mean gender pay gap arises as a result of
a higher proportion of men than women
in senior roles. The Company has set a
target to achieve a 50:50 profile across
the top 25% of roles by seniority by 2023.
To support attainment of this, a range of
measures are in place to encourage more
women to remain with the Company and
progress through the organisation to
these roles.
Gender pay report
The Company’s second Gender Pay Report,
based on the statutory reporting date of
5 April 2018, records data of 612 colleagues
in employment on that date. The gender
profile on the reporting date was 52%
men and 48% women.
The company supports the objectives of
gender pay reporting which are consistent
with our broader ambition to achieve
diversity and inclusivity across all areas
of our business. The company is open and
transparent about the challenges faced
in achieving diversity and recognises this
requires meaningful and sustained change
– across all protected characteristics. This
will require proactivity, continued focus
by everyone in the business, and, where
appropriate, targeted action. The Company’s
‘Open Access’ charter sets out the activities
already underway to improve diversity and
secure equality of opportunity for all.
Gender split and gender pay gap by level
Gender pay gap (mean)
78%
7
68%
13
22%
2
32%
6
52%
301
48%
283
20.5%
612
13.7%
603
11.8%
584
Gender split
Management Board
Senior management
All staff
Men
Women
As at the end of April 2018, 40% of senior
and leadership roles were held by women,
up 6% year on year.
Removing these roles from the calculation
of mean gender pay significantly reduces
the gap to 11.8% (across 584 colleagues).
Including senior management roles
(19 colleagues) represents a gap of an
additional 2%, resulting in a gender pay
gap of 13.8%. Adding the management
board (9 colleagues), represents a gap
of a further 6.8% (bringing the reportable
mean gender pay gap to 20.6%).
STV Annual Report and Accounts 2018 28
Corporate responsibility
Mean gender pay gap and
proportion of women and men
in each pay quartile
Analysis of the mean gender pay gap
by pay quartile shows the main reason
for the Company’s gender pay gap is the
balance of men and women in senior
management and leadership team roles.
In the upper quartile, with a gender profile
of 63% men and 37% women, the mean
gender pay gap is 11.9%. Across the other
three quartiles, the overall gender profile is
balanced with 48% men and 52% women.
Other factors contributing to the
Company’s gender pay gap include
differing levels of skills and experience
in colleagues undertaking otherwise
comparable roles, the impact of market
factors during recruitment, and salary
progression arising from length of service.
We are confident that continued focus
on progression of women through the
organisation to achieve gender balance in
the top 25% of roles by earnings by 2023.
This has improved over the past year with
a 23% increase in the number of women
employed in these roles.
Lower
Lower middle
1.9%
1.2%
43% Men
57% Women
42% Men
58% Women
Upper middle
Upper
0.6%
11.9%
61% Men
39% Women
63% Men
37% Women
Bonus gender pay gap
The Company’s bonus gender pay profile
is also influenced by a higher proportion
of men than women holding senior roles.
These roles, which attract higher levels
of remuneration, have a higher bonus
opportunity.
We are confident that colleagues
undertaking equivalent roles have
equivalent bonus opportunity,
regardless of gender or any other
personal characteristic.
Within the first two bonus pay quartiles,
there is a reverse bonus pay gap, that is
bonus earned by female colleagues is
greater than bonus earned by male
colleagues. However, in the upper middle
and upper bonus pay quartiles, which
includes senior roles, there is a mean
bonus gender pay gap of 21% and 19%
respectively; however, if the management
board are excluded from the upper
quartile, there is a reverse gender pay
gap of 17.5% in the upper quartile.
This is illustrated below.
Upper middle
Upper
21%
19%
25% Men
75% Women
72% Men
28% Women
Mean and median bonus
gender pay gap
MEAN
40%
28% improvement
year on year
MEDIAN
33%
3% improvement
year on year
The mean bonus gender pay gap is the
difference in average bonus payment
between men and women in the year
to 5 April 2018.
The median bonus gender pay gap shows
the difference in the midpoints of the
ranges of bonus pay for men and women
by ordering individual payments from
lowest to highest and comparing the
middle value.
Proportion of men and women
awarded a bonus
This is the percentage of men and women
who were awarded a bonus payment in
the 12 months leading up to the snapshot
date of 5 April 2018.
MEN
11%
WOMEN
7%
Strategic Report 29
Health and Safety
performance in 2018
STV reports 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.
The Facilities Manager is the designated
senior manager responsible for health
and safety matters.
2018
2017
2016
Seven-day reportable
accidents
Total of all accidents
0
7
0
2
0
11
Modern Slavery Act
The Company is committed to preventing
human trafficking and slavery in its
corporate activities and ensuring that
it acts ethically and with integrity in all
business relationships. Through the
approach set out in the Company’s
anti-slavery statement, effective
systems and controls are implemented
and enforced to ensure human trafficking
and slavery do not take place within the
business or across any of its supply chains.
An annual assessment of the Company’s
operations and supply chains, which is
incorporated into the risk assessment
processes, is undertaken. This has not
identified any activities that are deemed
to represent a high level of potential for
human trafficking or slavery.
The Company’s anti-slavery initiatives
include:
• the proactive review of policies and
operating processes to ensure these
provide protection against discrimination,
a fair working environment and fair
trading conditions that do not violate
human rights;
• a rigorous process to identify, monitor
and manage the principal risks that have
been identified through the business
and its supply chains and which are
set out in the Company’s risk register;
• training which is delivered to staff
on an ongoing basis to ensure that
responsibilities to achieve compliance
with the company’s policies are
understood and fulfilled. Specifically,
during 2018, staff with responsibilities
for procurement of suppliers undertook
training designed to support a response
human trafficking and slavery risks.
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 wellbeing 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 refreshers are carried
out on a rolling basis and we have a full
complement of 44 first aiders located
throughout STV sites. There are
defibrillators on site at Pacific Quay
and Craigshaw and our First Aiders
are trained in their use.
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.
We have continued to place our News and
Creative teams on safety training with a
Chartered Health and Safety Consultant
who specialises in media safety training.
A total of 20 staff have completed the safety
training in 2018. A further two staff have
completed Hostile Environment Training.
In 2016, we implemented an online training
system BeSafe, which has a number of
modules that are tailored to individual
job roles. Training continued in 2018, with
modules including Manual Handling, Office
Safety and Fire Wardens, being covered.
2018
2017
2016
14
10
16
10
14
7
71% 62% 50%
Total vehicle accidents
Number attributable
to driver error
Percentage
attributable to
driver error
STV Annual Report and Accounts 2018
30
Corporate responsibility
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.
Throughout 2018 we have again been
able to recycle 100% of our waste (with
the introduction of RDF via our waste
management contractor), resulting in
no waste being diverted to landfill.
STV’s Green Travel Plan at the Glasgow
headquarters encourages 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 and there
are currently 45 members of staff taking
part in this initiative.
During 2018, STV continued recycling
old mobile phones via ICT Reverse and
10 handsets were recycled in this way.
Any money raised from ICT Reverse is
donated to the STV Children’s Appeal.
Additional info:
• The electric car charging bays that were
installed are proving very successful and
are utilised every day by approximately
10 staff and we continue to promote
use of electric vehicles throughout
the business
• Since enlisting the assistance and
guidance from ESOS (Energy Savings
Opportunity Scheme), STV continues to
take on many of their recommendations
to lower our CO2 emissions
• We have reviewed STV pool vehicles
and leased vehicles and new vehicles
will be of a lower CO2 rating
Reporting greenhouse gas emissions
Assessment parameters
Boundary summary
All entities and all facilities either owned or under operational
control were included
Materiality threshold
Materiality was set at 5%
Intensity ratio
Emissions per £m of revenue
Greenhouse gas
emission source
Scope 1
Scope 2
Statutory total
(Scope 1 & 2)
FY2018
(tCO2e/£m
revenue)
FY2017
(tCO2e/£m
revenue)
(tCO2e)
(tCO2e)
3.47
433.89
3.71
501.46
(tCO2e)
437.27
1,251.94
9.94
2,055.77
17.57
2,039.95
1,689.21
13.41 2,489.66
21.28
2,541.41
FY2016
(tCO2e/£m
revenue)
4.16
16.94
21.10
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.
Please note: Our carbon footprint has been restated for all years in order to account for material
changes to the conversion factors provided by Defra for company reporting purposes.
Explanations
SCOPE 1 Travel & Transport
Increase in the travel and transport
emissions due to:
• During 2018 there was a slight increase
in air travel and transport mileage
associated with Productions.
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).
SCOPE 2 Energy
There was less than 1% increase in this
area, so we have managed to maintain
the previous year levels by continuing to
replace lighting with LED lights (rather than
halogen) and continuing to review the BMS
programming to minimise electricity use.
Waste
J&M Murdoch Ltd recycles 100% of any
of our waste via RDF (refuse derived fuel),
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.
STV must also express its 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.
FTSE Russell
FTSE Russell (the trading name of FTSE
International Limited and Frank Russell
Company) confirms that STV Group has
been independently assessed according
to the FTSE4Good criteria, and has satisfied
the requirements to become a constituent
of the FTSE4Good Index Series. Created
by the global index provider FTSE Russell,
the FTSE4Good Index Series is designed to
measure the performance of companies
demonstrating strong Environmental,
Social and Governance (ESG) practices.
The FTSE4Good indices are used by a wide
variety of market participants to create
and assess responsible investment funds
and other products.
Strategic Report
31
Programming
Across the year, STV produced a series
of TV programmes to support the work
of the Appeal, shining a light on the issues
faced by so many people across Scotland.
In March, STV Children’s Appeal: Where
Your Money Went revealed how the Appeal
makes a real difference to communities
across the country with STV presenters
visiting projects who receive funding
and support.
In the autumn, STV broadcast a series of
programmes to highlight the work carried
out by the Appeal to support children
and young people across Scotland.
The line-up of programmes featured
a thought-provoking and revealing
half-hour documentary looking at the
impact of Adverse Childhood Experiences
on young people across Scotland and the
fundraising efforts culminated in the
annual televised STV Children’s Appeal
Live Show, hosted by Lorraine Kelly and
Ross King, who announced the total sum
raised in 2018.
Employee engagement
In 2018 STV employees continued to be
great ambassadors for the Appeal. Chief
Executive, Simon Pitts, led an STV team
who participated in Mark Beaumont’s
gruelling round-the-world cycle.
In 2018, STV staff raised £20,000 for
the Appeal which was matched by the
Company to make a £40,000 donation.
Throughout the year, employees were
invited to visit projects which benefit from
Appeal funding – a valuable opportunity
to see at first-hand the difference their
fundraising efforts make in the community.
Charitable partnerships
Since its launch the Appeal has formed
strong partnerships with high-profile
corporate partners including Royal Bank
of Scotland, Lidl, Optical Express, Quality
Meat Scotland and Tunnock’s.
Organisations such as Wholesale
Domestic Bathrooms, Loganair and
Glasgow Taxis have, this year, extended
their support for the Appeal and continue
to raise hundreds of thousands of pounds
and help raise the profile of an issue
affecting so many people across Scotland.
Since the Appeal was launched, the Scottish
Government has match funded the monies
raised each year. In 2018, the Scottish
Government once again committed to
match fund the first £1 million raised
by the STV Children’s Appeal.
Community
STV Children’s Appeal in 2018
The STV Children’s Appeal was launched
in 2011 by STV and The Hunter Foundation
with a commitment to making a difference
to the lives of Scotland’s children and
young people. In 2013, The Wood
Foundation pledged its support for
projects in the North East of Scotland.
In just eight years the STV Children’s
Appeal has raised over £19 million. This
has enabled the charity to make 1,102
large and small awards to charitable
projects across all 32 local authority
areas in Scotland, providing much-needed
support and assistance to over 79,000
children and young people. The funding
helps make a real difference to young lives
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.
The STV Children’s Appeal is proud to
guarantee that all the money it raises is
invested in Scotland. All of the charity’s
overheads are met by STV and The Hunter
Foundation so that every penny of
donations goes directly to helping
those in need.
Connecting with communities
In 2018, the Appeal continued to engage
with communities across Scotland to
encourage individuals, schools, businesses
and community groups to get involved
with the charity at a local level.
Community-based fundraising for the
Appeal took place throughout the year –
a testament to the public support
generated for the charity – with events
ranging from a major cross-Scotland
challenge led by Mark Beaumont, and
Sean Batty’s Tea Party in Shetland raising
money for Scotland’s children. Schools,
businesses and sports teams across the
country were invited to host their own Big
Scottish Breakfast events to raise money
and help give Scotland’s children the best
start in life. The STV Children’s Appeal is
fundraising partner for Kiltwalk and
thousands donned their walking boots
to take part to raise money.
STV Annual Report and Accounts 2018 32
Corporate responsibility
Street Soccer
The STV Children’s Appeal has
supported Street Soccer’s success
over recent years.
Concept Soccer Sevens
Concept Soccer Sevens is run by the
Scottish Schools Football Association –
a new partnership for the Appeal in 2018.
Big Scottish Breakfast
Lorraine Kelly and Ross King supported
the Big Scottish Breakfast.
Mark Beaumont
Over 80 cyclists joined Mark Beaumont
going round the world in a day.
Tunnock’s Tea Party
Sean Batty’s Tunnock’s Tea Party,
supported by Loganair, saw Sean
joining Shetland locals for tea parties.
Strategic Report 33
• Belville Community Garden Trust
(£24,000). This Greenock charity provides
an open-access, urban growing facility,
teaching food growing skills, cookery
and construction to young people from
disadvantaged backgrounds and acting
as a first stepping stone to employability.
The grant from the Scottish Children’s
Lottery has allowed the charity to
continue offer long-term placements
to young people, and work with local
schools to create an exciting outdoor
growing space.
Increasing awareness
The Scottish Children’s Lottery promoted its
£3 million milestone, as well as the awards
distributed to charities across Scotland,
through targeted media relations activities
aimed at national and regional news titles
and charitable sector publications.
Engagement with MSPs and MPs
helped further raise public awareness
and encourage online applications from
eligible charitable organisations and
groups across the country. In April 2018,
a successful Holyrood event sponsored by
Rona McKay MSP provided an opportunity
to further build relationships with
parliamentarian contacts and
beneficiaries from the third sector.
Baroness Margaret Ford OBE
Chairman
The STV External Lottery
Manager (ELM)
Established in late 2016, the STV
External Lottery Manager (ELM) provides
operational services, including ticket
sales and marketing, to charitable society
lottery, the Scottish Children’s Lottery.
The ELM also provides wider benefits to
the Group including access to consumer
data, transactional service capabilities
and data analysis capabilities.
The ELM operates on a breakeven basis,
invoicing operating costs to the Scottish
Children’s Lottery. The Group recoups
costs incurred from operating both the
ELM and the STV Children’s Appeal. The
ELM purchases regional airtime from the
consumer division. Any profit generated
by the Group from the sale of regional
airtime, after recouping costs, is donated
to The Group’s main social investment
activity, the STV Children’s Appeal.
In 2018, online lottery ticket sales and
new customer sign-ups continued to
grow, and the launch of a retail sales
opportunity in early 2019 will further
support increased ticket sales.
The strategically significant target of
cashflow breakeven for the Scottish
Children’s Lottery was achieved on
1 January 2019, in line with previous
guidance. The debtor balance of
£11.6 million gross (£6.6 million net)
is expected to be repaid over the
next six years.
The funds generated by the Scottish
Children’s Lottery – thanks to the support
of subscribed players all over Scotland –
are used to help children and young
people’s charities and projects across
four key areas: early years’ intervention,
education and health, employment skills
and employability, and community
development and citizenship.
To enable funding to be channelled
directly into appropriate good causes,
helping children and young people across
these vital areas, the funding awards are
distributed through four Scottish Charitable
Incorporated Organisations: Chance to
Flourish, Chance to Study, Chance to
Succeed, and Chance to Connect.
The Scottish Children’s Lottery achieved
a major landmark in 2018, with £3 million
raised to support children and young
people’s charities working in all 32 local
authorities across Scotland. Since launch up
to 31 December 2018, a total of £3.5 million
has been raised to support good causes.
Distributing to deserving causes
138 grants ranging from £1,000 to
£50,000, totalling over £2.2m, were
distributed to Scottish charities during
2018, with over 51,000 young people
directly benefiting from the awards.
Examples of the charities and projects
which have received funding include:
• The Yard (£31,022). The charity, based
in Fife, Dundee and Edinburgh, provides
creative adventure play experiences that
encourage disabled children and young
people to have fun, take risks and build
friendships. The charity also supports
families by offering information, advice
and a place to relax. With an ethos of
child-centred and child-led play, The
Yard supports over 1,000 families across
the east of Scotland.
• Moving On Employment Project
(£20,000). The Shetland charity
provides employability support
and helps individuals build up their
confidence, skills and knowledge. With
a growing demand for support for young
people in Shetland, including those with
learning difficulties, social, emotional and
behavioural difficulties and those who
are looked after, the award from the
Scottish Children’s Lottery has helped
fund the charity’s Transition service,
which helps young people with additional
support needs in the local community.
• Balivanich Community Leisure Area
Group (£21,653). Located in the rural
and remote town of Balivanich on the
Isle of Benbecula in the Western Isles,
the charity is committed to replacing
the equipment at the local play park,
and funding from the Scottish Children’s
Lottery has helped to provide local
children, young people and families with
a safe, stimulating and well equipped
space to play and develop, improving
their overall health and wellbeing.
• Home-Start Wigtownshire (£15,204).
The charity, in Dumfries & Galloway,
offers support to families with children
under the age of five, who may be
going through difficult times due to
physical illness, mental health issues,
postnatal illness, disability and social
or geographical isolation. The Scottish
Children’s Lottery funding has helped
the charity offer practical and emotional
support to local families throughout
Wigtownshire.
STV Annual Report and Accounts 2018 34
Financial review
For the year ended 31 December 2018
The Group uses non-statutory measures
of performance to give shareholders a
better understanding of the underlying
performance of its operations and cash
generation. The principal adjustments
made to the statutory results are for
IAS19 interest, as this is a significant
non-operational non-cash item, and
for exceptional items, due to their
non-recurring and often non-cash
nature. A reconciliation of the adjusted
results to the statutory results is included
at note 31. These are also the first results
reported under the new divisional
structure and comparative figures
have been restated where appropriate
to aid comparison between periods.
Revenue
Total revenue increased by 8% to £125.9m
(2017: £117.0m) reflecting strong regional
revenue, digital revenue and productions
revenue growth.
Broadcast division revenues were up 3%
at £94.5m (2017: £92.0m) due to regional
airtime growing by 24% as a result of the
success of the STV Growth Fund. National
airtime revenues were broadly flat as a
weak December market offset the impact
of the World Cup earlier in the year.
The newly established Digital division grew
revenues by 17% to £9.6m (2017: £8.2m)
reflecting a very strong STV Player
performance.
Production division revenues also grew
strongly – up 60% to £16.3m (2017:
£10.2m) as higher value productions,
particularly new drama The Victim,
were delivered.
The STV ELM invoiced £5.5m of costs
to the Scottish Children’s Lottery (SCL)
(2017: £6.6m) and the division continues
to operate on a breakeven basis.
Operating profit
Operating profit, before exceptional items,
increased by 6% to £20.1m (2017: £19.0m).
Operating profit after exceptional items
decreased to £9.0m (2017: £18.2m).
Broadcast division operating profit was flat
at £15.3m (2017: £15.3m) with the growth
in revenue offset by higher sales bonus
costs due to significant outperformance
against targets and increased transmission
costs. The operating margin of the
Broadcast division also fell slightly
to 16.2% (2017: 16.6%) caused by the
lower profitability on higher revenues.
Digital division operating profits grew by
27% to £4.7m (2017: £3.7m) with margins
also expanding to 49.0% (2017: 45.1%)
caused by high margin incremental STV
Player revenue.
Production division operating profit
amounted to £0.1m (2017: £nil).
The STV ELM operates on a breakeven
basis as noted above and had a loss after
exceptional items of £4.2m (2017: £1.6m)
primarily due to provisions made for the
risk of not achieving a full recovery of the
debtor due from the SCL.
Exceptional items
A total of £11.1m cash and non-cash
exceptional charges have been made
in 2018 related to the closure of STV2,
GMP equalisation and the organisational
restructure which has taken place. These
include £3.3m of cash exceptional costs
which principally related to redundancy
costs (£2.3m) arising from the closure of
STV2 and restructuring of the business.
There are non-cash exceptional costs
of £7.8m, with the two largest items
being a writedown to the value of STV
Productions’ stock following the closure
of STV2 (£4.6m) and the impact of GMP
(guaranteed minimum pension)
equalisation (£1.6m).
Finance costs
Net finance costs increased to £7.1m
(2017: £3.5m) due largely to an increase in
impairment losses against the SCL debtor
to the ELM to £4.2m (2017: £0.8m) offset
by the non-cash IAS19 finance charge
decreasing to £1.8m (2017: £2.5m). Cash
interest costs increased to £1.1m (2017:
£1.0m) due to slightly higher average
interest rates.
Statutory result
The statutory result for the year after
tax, exceptional items and IAS19 interest
was a profit of £1.6m (2017: £11.7m).
The Group’s effective tax rate increased
to 17% (2017: 14%) due to a reduced level
of prior year losses utilisation.
Earnings Per Share (EPS)
EPS before exceptional items and IAS19
interest was up 4% at 41.1p (2017: 39.6p)
reflecting the growth in operating profit
partly offset by a higher effective tax
rate of 17% (2017: 14%). On a statutory
basis, EPS amounted to 4.2p (2017: 30.1p).
A reconciliation is included in note 31 in
the Notes to the Financial Statements.
Cashflow and net debt
Net debt, as defined in our banking
covenants, at 31 December increased by
£0.8m to £36.3m (2017: £35.5m) with the
net debt:EBITDA ratio at 1.36x (2017: 1.41x),
within the target range of 1.0x-1.5x on a
covenant basis. There was a significant
working capital inflow as sums due from
ITV under the Network Affiliate Agreement
(NAA) and Advertising Sales Agreement
(ASA) related to 2017, amounting to
£3.6m, were received in Q3.
The SCL had a need for further working
capital of £2.7m in 2018 but following
changes to the cost base from 1 January
2019, the SCL has reached cashflow
breakeven and the Group will see a cash
inflow in 2019 as the ELM’s debtor balance
of £6.6m net begins to be repaid.
Strategic Report 35
Viability statement
The Group has a strategic plan for the next
three financial years which the Directors
review at least annually. The three year
plan reflects the Group’s strategy as set out
on pages 6 to 40. The plan also includes a
number of important assumptions about
the necessary capital investments to
implement the strategy and models the
expected cash flows including dividends
as well as other key financial and
performance indicators over the period.
The Directors have used this planning
period as the basis to assess the ongoing
viability of the Group over the next three
years, although the Group’s business model
is open-ended and there is no known threat
to its viability beyond that period.
In making the viability statement the
Directors have also considered the
resilience of the Group to a number of
severe but plausible scenarios. These
scenarios took into account the aspects
of the principal risks disclosed on pages 39
and 40. Accordingly, the Directors have a
reasonable expectation that the Company
will be able to continue in operation and
meet its liabilities as they fall due over
the three year period of the assessment.
Other major outflows in 2019 included
pension deficit funding cash payments of
£8.8m, dividends of £6.9m, £3.4m of capital
expenditure, £2.4m of reorganisation costs
and £3.9m of share purchases through
the buyback programme and into the
Employee Benefit Trust.
The Group’s preferred measure of operating
profit converted to free cashflow, defined
as operating profit plus depreciation,
amortisation and share based payments,
less working capital movements (excluding
STV ELM) and capital expenditure,
increased to 125% (2017: 64%) due to
the NAA and ASA timing impact and other
working capital movements noted above.
The Group’s £60m revolving credit and
overdraft facility matures in June 2022
and provides good medium term
funding certainty.
Pensions
The IAS deficit increased to £78.5m
(2017: £70.6m) pre-tax, £50.2m (2017:
£58.6m) post-tax. The assumptions
underpinning the deficit calculation are
detailed in note 29 in the Notes to the
Financial Statements. The 31 December
2017 triennial valuation process is ongoing.
Balance sheet
The principal movements on the Group’s
balance sheet were the movement in the
IAS19 pension deficit and the debtor and
creditor movements in working capital
following the exceptional charges taken
in 2018, all of which are discussed above.
STV Annual Report and Accounts 2018 36
Risk management
Risk appetite
STV’s risk appetite can best be demonstrated through the following table:
Risk category
Reputation
Compliance & regulatory
Financial
Technology
Opportunities
TV Market
Operational
Pensions
People & culture
Unacceptable to take risks
Higher willingness to take risks
1
2
3
4
5
6
7
8
9
10
<
<
<
<
<
>
<
<
<
>
>
>
>
>
<
>
>
>
Reputation
STV places great importance on upholding
its high reputation and therefore has a low
appetite for risk in conducting any activities
that puts its reputation in jeopardy, could
lead to undue adverse publicity or could
lead to loss of confidence by the Scottish
and UK political establishments or by its
shareholders and stakeholders.
Compliance and regulatory
It is critical that STV conducts itself
in a compliant manner at all times,
particularly in relation to its broadcasting
and UK Gambling Commission licences
and it has no appetite for any breaches
of statute or regulation.
Financial
STV aims to maintain its long term
financial viability and overall financial
strength although recognises that
sometimes taking a small amount of risk
is necessary. However, STV is comfortable
in accepting this risk provided always that
the potential benefits and risks are fully
understood before developments are
authorised and sensible measures to
mitigate risk are established.
The above statements take priority
over the statements made below
Technology
STV is reliant upon various forms of
technology for the transmission of its
programmes and the successful operation
of its business and has a low appetite for
risk in these areas.
Opportunities
New opportunities, projects, collaborations,
joint ventures, mergers and acquisitions are
periodically considered by STV as means of
growing its business and these inevitably
involve some element of risk. STV has a
strong appetite for the development of
such opportunities provided always that
the potential benefits and risks are fully
understood and that appropriate
mitigation measures are in place.
Pensions
There are shortfalls in STV’s two defined
benefit pension schemes and while the
investment strategy is calculated to reduce
any material market movement impacts,
various measures are being taken to reduce
the deficit. STV has a low risk appetite in
respect of its pension deficits.
People and culture
STV’s Directors and staff are the driving
force behind its progress and achievements
to date and accordingly it aims to employ
the right people for the right job while
developing the full potential of all staff.
In this regard it considers equality, diversity,
dignity and respect to be of paramount
importance together with employee
development and the health and safety
of employees. It has a low appetite for any
deviation from its standards in these areas.
TV market
Various aspects of the TV market are,
to an extent, beyond the control of STV,
such as advertising revenue; Video on
Demand (VoD); and pay TV but are vital
to STV’s success. Accordingly, STV has
a modest appetite for risk in activities
within this area.
Operational
STV faces various operational risks
(inadequate or failed procedures, systems
or policies) in the running of its business
and accepts a medium level of risk around
such areas provided that potential benefits
and risks are fully understood and sensible
measures are put in place to mitigate these.
Strategic Report Risk management and internal control
Identify risks
<
Measure, control
and monitor
<
<
Assess and
analyse risks
<
Implement risk
management actions
<
Develop risk
management plan
The Board considers risk management
to be a key business discipline designed
to balance risk and reward and to protect
the Group against uncertainties that
could threaten the achievement of
business objectives.
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.
This is communicated to the Management
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.
During the year a thorough review of
STV’s Group risk register was carried out,
designed to challenge and update the
current STV risk profile through:
(i)
(ii)
(iii)
identifying any new or emerging
risks to STV’s objectives reflecting
the current environment and
strategic priorities
assessing and prioritising the
impact and likelihood of the most
significant risks
considering the presence and
operating effectiveness of key
controls.
This has ensured that the risk register
continues to be a current and relevant
document allowing:
• the key risks facing STV to be easily
identified and summarised
• actions taken to improve controls
to be tracked
• changes to the risk portfolio to be
monitored.
The Board has approved a formal risk
management policy, which defines the
objectives of and commitment to risk
management. The policy sets out the
Group’s risk appetite together with how
identified risks are managed and monitored
as well as detailing how risk management
is embedded within the Group.
During 2018, the following reviews
were carried out by the internal auditors:
(i) GDPR implementation, planning and
project management; (ii) Core financial
control framework testing; (iii) Cyber
risk, phase II, extending coverage and
assessment to other parts of STV’s IT
infrastructure and operations; and (iv)
follow up on GDPR including LIAs and
records of processing activities.
STV has a separate cyber risk register
which is reviewed twice a year.
The system is designed to manage
rather than eliminate risk and internal
control can only provide reasonable and
not absolute assurance against material
misstatement or loss. All points raised
by the internal auditors were addressed
and executive management believes
that the control environment has been
strengthened further by the actions taken.
The Company has planned a complete
refresh of the risk register which will be
facilitated by Deloitte and will involve
the full Management Team.
37
In addition to 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 with
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 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.
STV Annual Report and Accounts 2018 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.
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. These have
been put in place in order that the Board
can satisfy itself that management
has understood the risks and has
implemented and monitored appropriate
policies and controls, enabling the Board
to be provided with timely information
so that it can discharge its own
responsibilities.
Baroness Margaret Ford OBE
Chairman
38
Risk management
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 IFRS
• 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.
Strategic Report
39
Principal risks and uncertainties
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 sets out the key risks
that have been identified throughout the
business, allocating an owner to each.
The impact and likelihood of each risk is
considered and risks are scored 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.
The Directors confirm they have carried
out a robust assessment of the principal
risks facing the Company and during 2018
two additional risks were added to the
register: one relating to the General Data
Protection Regulations (‘GDPR’) which came
into force in May 2018 and the other relating
to cyber security, which was considered a
principal risk. The level of risk has increased
slightly when compared to last year.
More information on the cyber risk is set
out below and with regard to the GDPR
risk, STV has put in place various policies
and procedures as well as defining roles
and responsibilities to manage this risk.
A Data Security Group has been established
together with a Data Governance Manager
and each business function now has its
own Data Champions to promote GDPR
awareness, implement procedures and
train staff.
All of the risks identified have been fully
evaluated and taken into account in
preparing the budgets and forecasts which
support going concern, viability statement
and impairment assessments. The risks
have also been reviewed and agreed with
the internal auditors. A full refresh of the
risk register, facilitated by Deloitte LLP,
will be carried out during 2019.
Regulatory environment
STV’s television business is operated under
licences which are regulated by Ofcom,
and the key Channel 3 licences have a
term that runs to the end of 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.
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 and sponsorship to advertisers –
are factors that affect performance.
This relationship is managed closely,
with regular updates on programme and
schedule developments being provided and
through STV’s Commercial Director who
manages the sales relationship with ITV.
The terms of the Airtime Sales Agreement
with ITV were amended and simplified in
December 2016 to provide improved
efficiency, transparency and stability.
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 STV or its 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.
Brexit
While there is no immediate or specific
risk to STV, the general macroeconomic
risk of the UK’s departure from the
European Union (‘Brexit’) could affect the
UK’s economic performance which in turn
would affect advertising and would have
an adverse impact upon the Group’s
revenue due to STV’s dependence on
advertising as set out above.
To the extent that this involves a decline
in national advertising revenues, then
the Group receives a partial offset to this
impact through its arrangements with
ITV plc in the Network Affiliate Agreement
and Advertising Sales Agreement.
Cyber
Cyber risk commonly refers to any risk
of financial loss, disruption or damage
to a company’s reputation resulting from
the failure of its information technology
systems. STV is dependent on technology
for the smooth running of its business
and a cyber-security incident could lead
to a loss of commercially sensitive data,
a loss of data integrity within our systems
or loss of financial assets through fraud.
Vulnerability to an external attack is a
growing worldwide issue and cyber risk
has been subject to increased focus by
the Audit Committee. An initial review of
cyber risk was undertaken by the internal
auditors, Deloitte LLP, in 2017, and a cyber
risk register was established which is
reviewed and updated regularly. A further
wider review was carried out in the second
half of 2018, the results of which were
reported to the Audit Committee in
November. It was found that STV was
in a good position compared with other
similar organisations.
Pension scheme shortfalls
The STV pension schemes’ investment
strategy is calculated to reduce any
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. The trustees appointed River
& Mercantile Solutions (formerly PSolve)
as investment manager for the schemes’
assets and this is intended to increase
returns and meet the schemes’ long-term
funding objectives.
STV Annual Report and Accounts 2018 40
Principal risks and uncertainties
Reputational and financial
risk of lottery operation
The Scottish Children’s Lottery was
launched in October 2016. The Lottery
engages the services of an External
Lottery Manager, STV ELM Limited, which
is a subsidiary of STV Group plc, to deliver
the lottery product to consumers.
The Lottery was awarded licences by the UK
Gambling Commission and while operated
independently of STV, in accordance with
the requirements of these licences, it is
provided with financial support by STV,
which amounted to a debtor of £11.6m
gross (£6.6m net) at 31 December 2018.
This debtor is expected to be recovered
by 2025 and cashflow breakeven was
achieved on 1 January 2019.
Although responsibility for operating the
Lottery and ensuring that the terms of the
licence are adhered to lies with STV ELM
Limited, there is a reputational risk to STV,
as the holding company, from any issues
related to the operation of the Lottery.
Internal controls have been put in place
to ensure that the terms of the operating
licence are adhered to, as the Gambling
Commission has powers to impose
sanctions on licensees in the event of any
serious or repeated breaches, including
financial penalties or revocation of licence.
In the event that the Lottery was
unsuccessful then the recoverability of
the Scottish Children’s Lottery debtor
would be at risk.
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 which is also
the Group’s intra-UK net currency flow.
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 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 which is also the Group’s
intra-UK net currency flow. 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 apart from the £11.6m gross
(£6.6m net) debtor from the SCL noted
above. 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.
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. Interest
rate hedges are maintained to reduce the
impact of changes in market interest rates
on the Group’s borrowings.
Strategic Report
41
Introduction to governance
Accountability
Risk is inherent in the Company’s
business and activities and the Board has
responsibility for establishing a framework
of prudent and effective controls to
enable risk to be assessed and managed.
The review of risk and risk management
is embedded throughout the Company
and further information can be found
in the Risk Management section of the
Strategic Report on pages 36 to 38.
Remuneration
The Remuneration Committee, chaired
by Anne Marie Cannon, ensures that our
remuneration framework is appropriately
structured, in a fair and responsible
manner. The report from the Committee
denotes the approach taken to executive
remuneration and the work done on
revising the Company’s Remuneration
Policy as well as other work carried out
during the year on this high profile topic.
The Remuneration Policy was approved
by shareholders at the AGM last year and
the Committee expects it to remain in
place until a further vote is required in
2021. Our annual report on remuneration,
which will be subject to an advisory vote,
can be found on pages 56 to 61.
Relationship with Shareholders
The AGM provides an opportunity for
shareholders to meet the Board and to
ask questions. Our 2019 AGM is scheduled
for 23 April 2019 at Pacific Quay and we
look forward to meeting the shareholders
who are able to attend.
Compliance with the UK Corporate
Governance Code
The Board considers that, in respect of the
financial year ended 31 December 2018,
the Company has complied fully with the
UK Corporate Governance Code 2016 (the
Code) and this section, together with the
report by the Directors on remuneration,
set out on pages 54 to 61, 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.
Baroness Margaret Ford OBE
Chairman
Board of Directors
STV is committed to maintaining
the highest standards of corporate
governance and has created a working
culture where honesty, openness and
fairness are valued.
The Board is responsible for the overall
leadership and control of STV and there
is a formal schedule of matters reserved
for decision by it. This includes approval
of strategy, annual budgets, financial
statements, significant capital
expenditure, changes to capital structure,
Board appointments and STV’s corporate
governance arrangements and system
of internal control.
The Board also delegates some of its
responsibilities to Board Committees,
details of which are set out on pages
47 to 51.
Diversity
All Board appointments are based on
merit and candidates will be considered
against appropriate criteria, as the prime
consideration is to maintain and enhance
the Board’s overall effectiveness.
Diversity means positive recognition of
the differences individuals can bring to the
Company and how these individuals work
together to exploit these differences for
the benefit of the business. Information
on the Group’s approach to diversity and
inclusion is set out in the Strategic Report
on pages 6 to 40 and further information
on the number of women within the
organisation can be found on page 27.
Effectiveness
The Board is collectively responsible for
the long-term success of the Group with
the over-arching aim of safeguarding
shareholders interests and the STV culture
requires that Directors and employees act
with integrity and conduct themselves to
the highest ethical standard to promote
and maintain trust.
Performance evaluation of the Board,
its Committees and individual Directors
takes place on an annual basis and the
2018 evaluation was internally facilitated.
Further details on the process can be
found on page 52 but the overall
conclusion was that the Board and its
Committees were working in an effective
and constructive manner.
The Board is mindful of the tenure of the
Non-Executive Directors and the benefits
of refreshing the experience, skills and
diversity present on the Board and further
details of the work of the Nomination
Committee can be found on page 48.
STV Annual Report and Accounts 2018 42
Board of Directors
At 14 March 2019
left to right by row,
from top left
Baroness Margaret Ford OBE
Simon Pitts
George Watt
Christian Woolfenden
Anne Marie Cannon
Ian Steele
Simon Miller
David Bergg
Baroness Margaret Ford OBE
Chairman
Appointed: June 2013
Committees: Nomination (Chair)
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
Chairman of NewRiver REIT plc and was
previously a non-executive director of
Taylor Wimpey plc and Segro plc and the
former chairman of Grainger plc, May
Gurney plc and Barchester Healthcare
Limited. Margaret is a trustee of the British
Olympic Association and National President
of the British Epilepsy Association. 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 Children’s Appeal
and in March 2015, was elected a Fellow
of the Royal Society of Edinburgh.
Simon Pitts
Chief Executive
Appointed: January 2018
Previously, Simon was a member of the
executive board of ITV plc, holding the
position of Managing Director, Online, Pay
TV, Interactive & Technology. Over a 17 year
career there, Simon held a range of senior
roles and, as Director of Strategy, was one
of the main architects of the company’s
transformation under Archie Norman and
Adam Crozier and also oversaw strong
growth in ITV’s digital businesses. Simon
was also on the board of news provider ITN
for 8 years and prior to ITV, worked in the
European Parliament. He is Vice Chair of
the trustees of the Royal Television Society
and a trustee of the STV Children’s Appeal.
George Watt
Chief Financial Officer
Appointed: February 2001
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 non-executive
Chairman of SpaceandPeople plc, a former
non-executive director of DeltaDNA Limited
and is also an executive committee
member of the Scottish Council for
Development and Industry.
Governance 43
Ian Steele
Non-Executive Director
Appointed: November 2015
Committees: Audit (Chair); Remuneration;
Nomination
Ian qualified as a CA in 1980 with Arthur
Young McClelland Moores. His subsequent
career involved time with The British Linen
Bank, Touche Ross, Rutherford Manson
Dowds and Deloitte. Ian recently retired
as Senior Partner for Deloitte in Scotland
and Northern Ireland. Prior to retiring, he
had been on the UK Board of Deloitte LLP
for over eight years. Ian was a Corporate
Finance Advisory Partner with Deloitte and
was Head of Global Advisory for some three
years and has recently joined the Council
of The Institute of Chartered Accountants
of Scotland. Ian is a non-executive director
of Killinchy Aerospace Holdings Limited,
the principal trading subsidiary of which
is Martin-Baker Aircraft Company Limited
and is Chairman of Iomart Group plc.
David Bergg
Non-Executive Director
Appointed: May 2018
Committees: Remuneration; Audit
David has worked in the broadcasting
industry for over 30 years – at ITV, the
BBC, Sky, TV-am and Channel Five. David
started his broadcasting career in a
number of ITV regional audience research
teams (including Grampian Television
in the late 1980s), before moving into
marketing and programme acquisition
roles and then embarking on a succession
of senior scheduling positions. David was
Director of Programme Strategy at ITV
for 20 years from 1997 to 2017. He retains
extensive contacts at senior levels in the
broadcasting and programme production
sectors in the UK and USA.
Anne Marie Cannon
Non-Executive Director
Appointed: November 2014
Committees: Remuneration (Chair); Audit
Anne Marie has over 35 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
is currently a non-executive director at
Premier Oil plc, Aker ASA and Aker Energy
AS and is Deputy Chair of Aker BP ASA.
Simon Miller
Senior Independent Director
Appointed: December 2016
Committees: Nomination
Simon is an experienced director and
chair with exposure to a wide range of
financial, commercial and manufacturing
businesses, holding executive and non
executive roles. He is currently chairman
of Brewin Dolphin Holdings PLC; chairman
of Blackrock North American Income
Trust plc; chairman of JP Morgan Global
Convertibles Income Fund Ltd and formerly
a non-executive director of Scottish
Friendly Assurance Limited. Simon read
Law at Cambridge and is a Barrister at Law.
Christian Woolfenden
Non-Executive Director
Appointed: June 2014
Committees: Audit
Christian has extensive operational,
consumer marketing and digital
experience and is currently Managing
Director of Photobox. Previously, he was
CMO for Lyst.com and Managing Director
of Paddy Power and prior to that has held
both finance and marketing roles across
key European businesses. Christian is a
non-executive director of Rentify Ltd.
STV Annual Report and Accounts 2018 44
Corporate governance report
Governance structure
External auditors
Elected at the AGM. Review the
financial statements to ensure they provide
a ‘true and fair’ account of past financial
performance and current financial position.
<>
Audit Committee
Monitors the integrity of the
financial statements and reviews
internal financial controls.
<>
Internal Audit
Provides independent assurance
that risk management, governance
and internal control processes are
operating effectively.
>
<
>
>
Shareholders in general meetings
The Company’s highest
decision-making body. Exercises
its authority via these meetings.
<>
The Board of Directors
Elected by shareholders, the Board
led by the Chairman,is responsible for
the Company’s organisation and
the administration of its affairs.
<>
<
<
<
Executive Directors
Manage the Company’s operations within the
framework of rules established by the Board.
<>
Nomination Committee
Nominates Board and
Committee members.
Remuneration Committee
Sets the policy for remuneration
of executives and determines the
total remuneration package for
each Executive Director.
Management Team
Drives the implementation of the Company’s strategic priorities
while addressing critical business issues and opportunities.
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.
During the financial year ending 31 December 2018, the Company was subject to the provisions of the UK Corporate Governance
Code (2016 Code) and the Board considers that it has complied with all relevant provisions of the 2016 Code.
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.
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 OBE
Chief Executive Officer
Simon Pitts (appointed 3 January 2018)
Chief Financial Officer
George Watt
Non-Executive Directors
Simon Miller (Senior Independent Director)
Christian Woolfenden
Anne Marie Cannon
Ian Steele
David Bergg (appointed 1 May 2018)
George Watt is leaving STV on 30 April 2019. Lindsay Dixon will be appointed Chief Financial Officer in May 2019.
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
12.5% Chairman
25%
62.5% Non-Executive Directors
Executive Directors
Governance 45
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-Executive Directors’ 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.
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
The roles of Chairman and Chief Executive are separate with a clear division of responsibility between them, which is set out in
writing and approved by the Board. The Board delegates responsibility for the day to day running of the business through the Chief
Executive to executive management while the Board provides constructive challenge to management which is necessary to
create accountability and drive performance. This results in an environment that creates and preserves value for shareholders.
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
performance reporting and budget updates.
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-Executive Directors’
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. Each Director is able to devote the time necessary to
discharge their respective responsibilities effectively.
STV Annual Report and Accounts 2018 46
Corporate governance report
Board meetings
Attendance of Board members at Board and Committee meetings held in 2018 is set out below:
Number of meetings held:
Attendance:
Baroness Margaret Ford OBE
Simon Pitts
George Watt
Simon Miller
Michael Jackson (retired 26 April 2018)
Anne Marie Cannon
Christian Woolfenden
Ian Steele
David Bergg (appointed 1 May 2018) **
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
8
8
8
8
8
2
8
8
8
5
3
1*
3*
3*
1*
–
3
3
3
2
3
2*
1*
–
–
2
3
–
3
1
4
4
1*
–
4
–
–
–
4
–
* Attended at the invitation of the respective Chairman.
** Appointed to the Remuneration Committee and Audit Committee on 28 June 2018.
The Board meets regularly, at least eight 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.
All Directors attended the 2018 annual Strategy Day in November and in addition to a presentation from the Executive Directors
looking ahead to 2019, a presentation on the latest viewing trends and their implications for STV was given. Richard Williams, MD of
Digital and David Mortimer, MD of Production each shared their early thoughts on their new roles, the market and early priorities and
Commercial Director, Peter Reilly provided greater insight into the new revenues being considered by his team. Suzanne Burns, HR
and Communications Director presented the steps planned to bring about cultural change within STV, covering people, organisation,
working environment and communication. Directors agreed that with the highly engaged Management Team in place together with
dedicated staff, the Company was well positioned to realise its future growth potential and continue to deliver to shareholders.
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 2018 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 and the full and half-year financial results
• approval and declaration of dividends
• approval of the 2019 Budget
• approval of viability statement
Strategy
• presentations on initiatives to grow revenue
• approval of the Company’s strategy
• discussion on various regulatory issues
• approval of the three year plan
Governance 47
Corporate development
• agreement of STV’s corporate objectives and values for 2018
Governance and risk
• consideration of 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 2019
• approval of the 2019 AGM Resolutions
• approval of the Gender Pay Report
• approval of the appointment of David Bergg
• approval of the appointment of Lindsay Dixon
• performance evaluation
• consideration of the Group’s risk appetite and risk management
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 Children’s Appeal 2018
Board committees
The Board is supported by the Audit, Remuneration and Nomination 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
• Discusses with the Company’s 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
• Considers the Group’s risk appetite
Remuneration Committee
• Determines and agrees with the
Board the framework for the
remuneration policy
• Reviews the ongoing appropriateness
and relevance of the remuneration
policy
• Approves the design of, 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
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 taking
diversity into account
• Recommends to the Board
membership of the Board Committees
>
>
>
Page 49
Audit Committee Report
Page 54
Remuneration Committee Report
Page 48
Nomination Committee Report
An evaluation of the work and effectiveness of each of these Committees during the year was conducted, the results of which
concluded that each 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.
STV Annual Report and Accounts 2018 48
Corporate governance report
Remuneration Committee
The members of the Committee during the year were:
Anne Marie Cannon (Chairman)
Michael Jackson (retired 26 April 2018)
Ian Steele
David Bergg (appointed 28 June 2018)
The activities of the Remuneration Committee are described within the report by the Directors on remuneration which can be
found on pages 56 to 61. The written terms of reference of the Remuneration Committee set out various considerations when
determining the Company’s remuneration policy, such as ensuring:
• Executives are provided with appropriate incentives to encourage enhanced performance which is in line with the risk appetite
of the Company and its long term strategic goals;
• individuals are rewarded in a fair and responsible manner for their individual contributions to the success of the Company
without being paid more than is necessary and having regard to the views of shareholders and other stakeholders;
• a significant proportion of Executive Director remuneration is structured so as to link rewards to corporate and individual
performance and is designed to promote the long-term success of the Company.
The Committee is obliged to ensure that contractual terms on termination and any payments made are fair, that failure is not
rewarded and that the duty to mitigate loss is fully recognised. It will review and note annually the remuneration trends across
the Group taking these into account when setting remuneration for the Executive Directors especially with regard to salary
increases. Copies of the terms of reference 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 OBE (Chairman)
Simon Miller
Ian Steele
The Nomination Committee has written terms of reference which are available on request and on the Company’s website
www.stvplc.tv
The Nomination Committee’s focus in the first half of the year was the appointment of an additional Non-Executive Director as
Michael Jackson was stepping down at the AGM in April 2018. Bird & Co., which has no other connection with STV, was appointed
to assist with the process, the result of which was the appointment of David Bergg on 1 May 2018. David has extensive knowledge
of commercial broadcasting and brings a wealth of experience after a stellar executive career which began in the television
industry in Scotland in the 1980s. His sector knowledge and insight will be hugely valuable as STV’s business grows.
It was announced that George Watt, Chief Financial Officer would be leaving in March 2019 and accordingly the process of finding
a new CFO was commenced. Ridgeway Partners, which has no other connection with STV, was appointed to lead the search for
suitable candidates. The Committee considered the alignment of Board composition with Company strategy and a vigorous
and robust process thereafter began whereby the specification for the role and the main attributes required by the successful
candidate were discussed and agreed. The need to ensure that the Board as a whole had the necessary skills to secure its long
term success was agreed to be vital and following a series of interviews with several exceptional quality candidates, a short list
was agreed. While all were considered to be high calibre individuals, the preferred candidate was Lindsay Dixon. The Committee’s
recommendation of this appointment to the Board was unanimously agreed and Lindsay Dixon will join the Company during
May 2019 from William Grant & Sons Limited where she holds the role of Group Financial Controller.
Diversity
STV believes that diversity is wider than simply gender and aims to hire the best candidates with the widest range of skills
and experience, whatever their background or gender. A range of programmes and activities continued during 2018 to increase
access routes into STV and the wider creative industries sector. The Board is committed to improving diversity in its membership
in the broadest sense as a diverse Board provides a range of perspectives, insights and challenges that are needed to support
good decision making.
STV takes the concept of diversity seriously and further details can be found on page 26. Diversity is about recognising, respecting
and valuing the differences each person can bring and the Board appreciates that it is crucial to the achievement of the Group’s
strategic objectives. Diversity of perspective on the Board is vital and having Directors from different backgrounds with the right
mix of talent, skills and experience ensures that decisions are challenged in a credible manner and ‘group think’ is avoided.
Governance 49
Board
Management Team
Staff
25% Women
75% Men
22% Women
78% Men
48% Women
52% Men
During 2018, STV set a target to achieve gender balance across the top 25% of roles by earnings over the next five years.
Report from the Audit Committee
The members of the Committee during the year were:
Ian Steele (Chairman)
Christian Woolfenden
Anne Marie Cannon
David Bergg (appointed 28 June 2018)
The Audit Committee is chaired by Ian Steele who has recent and relevant financial experience.
The Committee 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 and these are available on request and on the Company’s website www.stvplc.tv
At the invitation of the Committee, meetings are attended by the Chairman, Chief Executive Officer, Chief Financial Officer and
the Group and Corporate Finance Manager. 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. PwC were appointed auditor in 2013 following a tender process and KPMG has carried out tax work
for the Company since 2016.
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 auditor or impair its independence or infringe the EU Audit rules. This includes consideration
of the safeguards which are in place to mitigate the risks to independence.
In general, the auditor may not provide a service which:
(a)
(b)
(c)
(d)
creates a mutuality of interest
places the auditor in a position to audit their own work
results in the auditor acting as a manager or employee of STV
puts the auditor 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 the revised risk register, incorporating relevant, social, ethical and environmental risks.
STV Annual Report and Accounts 2018
50
Corporate governance report
Significant issues considered by the Audit Committee in relation to the 2018 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 is a judgemental area. An impairment review was
carried out following management change in June 2018 and an impairment of £4.6m was recorded. This was based on a detailed
forecast of future secondary sales prepared by management, taking into account historic experience and expected future trends.
A further review was performed at the year end and an additional impairment of £0.4m was recorded. Management’s treatment
and disclosures in relation to deferred production stock were considered to be appropriate.
Pensions
The assumptions in relation to discount rate, salary increases, RPI and CPI were reviewed and were all within a range that
management considered appropriate as well as being consistent with assumptions being used by other companies. A formal
health study was undertaken in 2016 by a third party covering approximately 40% of the pensioner members of the Group’s two
defined benefit pension schemes. This provided information for the triennial valuation process and year end mortality assumptions.
Management’s treatment and disclosures in relation to IAS19 were considered to be appropriate.
SCL debtor recoverability
As a new venture which has received significant financial backing from the Group, the assumptions around the future expected
progress of the SCL were considered. In particular, the key objective of reaching cashflow breakeven in 2018 was reviewed and
considered to have a reasonable expectation of being achieved. The cashflow breakeven point was reached on 1 January 2019.
The disclosure of the debtor balance due from the SCL as non current was also deemed appropriate given the timing of breakeven
and the likely recoupment of the debtor balance over the following five years from 2019. The change in the timing and probability
of the recoverability of the debtor resulted in an additional IFRS9 provision of £4.2m being required. Management’s treatment and
disclosures in relation to the SCL debtor were considered to be appropriate.
Independence of the external auditor
The Audit Committee is responsible for approving non-audit work and in order to preserve the 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 bearing in mind the EU Audit
rules. 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 solely of covenant reporting and 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, feedback is
sought from the Audit Committee, the Chief Financial Officer as well as STV’s finance team. This 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. Comments are considered by the Audit Committee and relayed 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 auditors and the primary focus of their 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.
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.
Governance 51
Committee activities
The principal activities undertaken by the Board Committees during 2018 included:
Month
January
February
February
Committee
Nomination
Activity
NXD succession
Remuneration
Consideration of performance under 2017 Bonus Plan
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
Approval of Internal Audit Plan for the year
Review of internal controls/risk management
Committee Performance Evaluation
February
Remuneration
Approval of Remuneration Report, 2018 remuneration
and Committee Performance Evaluation
April
June
August
Nomination
Nomination
Audit
Approval of NXD appointment
Appointment of NXD to sub committees
Review of Half Year Results
Review of Auditor report on Half Year Results
Internal Audit update
Review of internal controls/risk management
November
Audit
Annual Business Risk Review
November
December
Internal audit update
Nomination
CFO succession planning
Remuneration
Review of Remuneration Policy and NXD fees
Performance Evaluation
Management Team
The Management Team comprises the Executive Directors; the Managing Directors of Broadcast, Digital and Productions;
Commercial Director; Director of Operations and Delivery; HR & Communications Director; 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.
Training and development
All Directors are given a comprehensive introduction to the Company’s business 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 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.
STV Annual Report and Accounts 2018 52
Corporate governance report
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,
the 2018 process was an internal exercise facilitated by the Company Secretary and it has been agreed to have an external
facilitator for the 2019 annual performance evaluation.
The evaluation is conducted using a detailed questionnaire which canvasses the opinions of the Directors 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.
Directors were asked to complete the questionnaire and return it to the Company Secretary who collated and anonymised the
results before providing a comprehensive and detailed report to the Chairman. The report covered all comments and suggestions
made together with the rating allocated to each question by Directors. Thereafter, the Chairman held one to one meetings with
the Non-Executive Directors to discuss the results. The Senior Independent Director spoke with all Directors individually to
evaluate the Chairman’s performance.
On completion of the 2018 performance evaluation, the performance of each Director was found to be effective and the mix
of skills and experience on the Board was felt to be appropriate.
Measured against the principal duties expected of it, and building upon the progress of previous years, the Board continued to
operate effectively and 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. It was recognised that there was open dialogue between all Directors enabling issues to be raised
and dealt with and meetings were well chaired with an appropriate level of involvement outside formal meetings. It was suggested
that Board meetings be longer to allow more in depth reviews into specific areas of the business and that additional opportunities
for interaction with the Management Team be arranged.
The evaluation process further concluded that the Board was made up of strong and independent minded Non-Executive Directors
each of whom 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 17 December 2018. The Nomination
Committee confirmed to the Board that the contributions made by the Directors offering themselves for re-election at the AGM in
April 2019 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-Executive Directors’ terms and conditions 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 46 and 47. The Chairman has confirmed that the Directors retiring and seeking re-election have been subject
to performance evaluation 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
More than 6 years
n/a
50% 4-6 years
33% 2-4 years
1-2 years
n/a
Less than 1 year
17%
Governance 53
Relations with shareholders
STV believes that open and regular dialogue with investors is the basis for a trusted relationship. Its corporate website
(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 continual engagement with its shareholders 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 at which the Chief Executive provides a detailed
presentation on the activities and performance of the Group over the preceding year. All Directors attend the AGM so shareholders
have the opportunity to meet with them to discuss particular areas of focus and ask any questions.
Shareholders by type
97%
1%
2%
Institutionals
Board of Directors
Other individuals (excl. Directors)
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 for each Board meeting.
Detailed reviews of the Company’s performance and financial position are included in the Chairman’s statement, the Chief
Executive’s review and the Performance Review, 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.
Significant minority voting
At the 2018 Annual General Meeting (‘AGM’), a significant minority of shareholders opposed resolution 13 which dealt with
approval for the allotment of an additional 5% of the issued share capital on a non-pre-emptive basis, to be used for the
purposes of acquisition funding.
Of the votes cast, 75.34% of shareholders voted in favour of this resolution and in accordance with guidelines, a letter was sent
to the Investment Association for inclusion in its Public Register. STV noted that the resolution was entirely standard as had been
confirmed by its lawyers and that a recommendation to vote against it had been made by PIRC on the basis that best practice
would be to seek a specific authority from shareholders in relation to a specific transaction if such situation arose.
STV appreciates that some shareholders generally oppose share issuances without pre-emptive rights above 5% and therefore
the vote against this resolution was not specific to STV. However, STV has decided not to put this particular resolution before
shareholders at the 2019 AGM.
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.signalshares.com
STV Annual Report and Accounts 2018
54
Remuneration report
Annual Statement
I am pleased to introduce the Directors’ Remuneration Report for 2018. This was an important year for the Company with key
changes to the executive team and the undertaking of a strategic review of the business. The Board are fully supportive of the
new three-year strategic plan, announced in May, and the Remuneration Committee are satisfied the current remuneration policy
and framework is aligned with the new strategic priorities whilst delivering an appropriate incentive structure to support delivery
of the plan and shareholder expectations.
In addition to the wider changes across the Company during 2018, it was also a significant year for the Remuneration Committee
as we consulted with shareholders on the triennial review of the Remuneration Policy. This was voted upon and overwhelmingly
approved at the AGM in April 2018. The Committee are highly aware of the increased focus on executive remuneration. We continue
to closely monitor developments in guidance and principles to ensure that our approach meets shareholders’ expectations.
Board appointments
At the beginning of 2018 Simon Pitts took up his appointment as CEO. Full details of his remuneration, including details of the
arrangements to compensate for incentive awards forfeited from his previous employer, which were fully in line with our Recruitment
Remuneration Policy, were set out in last year’s report. All of these awards and payments have been made during 2018 and are
covered in this report.
Further pending Board changes were announced in late 2018 as long-serving CFO, George Watt, confirmed his intention to embark
upon a non-executive portfolio career following 20 years with the Company. George will serve his full contractual notice period,
continuing to support Simon Pitts in implementing the strategic growth plan.
2018 incentive outcomes
Despite a backdrop of extensive organisational change and challenging market conditions, the financial performance of the
business was strong. Additionally, considerable progress was achieved by all of the executive team in implementing the change
process to enable the formation of an organisation capable of delivering the new strategic plan.
This performance and progress has resulted in payments being triggered under the annual bonus plan. Full details of the
performance outcomes and associated awards are set out in the report.
Finally, we remain committed to open and ongoing dialogue with our shareholders and are confident that our current incentive
structure is appropriately aligned with the new strategy and growth ambitions for the Company.
Anne Marie Cannon
Chairman of the Remuneration Committee
14 March 2019
Governance 55
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (‘the Policy’), determined by the Company’s Remuneration Committee (‘the Committee’), was
approved by shareholders at the 2018 Annual General Meeting and is available in full on the Company’s website: www.stvplc.tv
or from the Company Secretary. Full details of votes cast in relation to remuneration at the 2018 AGM, including the Directors’
Remuneration Policy, are set out on page 61 of this report.
Illustrations of application of remuneration policy
The graphs below demonstrate how pay varies with performance for the Executive Directors based on the Remuneration Policy
for Executive Directors.
In October 2018, it was announced that George Watt will step down as Chief Financial Officer to pursue a portfolio career. George
Watt will leave the Company’s employment and resign from the Board in April 2019, having served his contractual notice period
of six months and supported a smooth succession process.
Lindsay Dixon has been appointed Chief Financial Officer to succeed George Watt and will take up the role and join the Board
during May 2019. Her remuneration package was determined in accordance with the Remuneration Policy and is set out in
the undernoted illustration of the application of the policy.
Chief Executive Officer – Simon Pitts
Chief Financial Officer – Lindsay Dixon
£1.6m
£1.4m
£1.2m
£1.0m
£0.8m
£0.6m
£508,700
£1,433,450
28%
36%
£868,325
12%
30%
£0.4m
£0.2m
£0
100%
59%
36%
£0.8m
£0.7m
£0.6m
£0.5m
£0.4m
£0.3m
£0.2m
£0.1m
£0
£779,100
28%
36%
£462,850
12%
29%
£261,600
100%
59%
36%
LTIP
Annual bonus
Fixed pay
Minimum
On target
Maximum
Minimum On target
Maximum
Assumptions used in determining the level of pay-out under given scenarios are as follows:
• Minimum – reflects fixed pay only. For the Chief Executive Officer this comprises base salary as at 1 January 2019, benefits
allowance (£15.5k), and cash in lieu of pension contributions at 20% of salary. For the Chief Financial Officer this will comprise
base salary on appointment, benefits allowance (£15.5k) and cash in lieu of pension contributions at 7% of salary in accordance
with the 2018 amendment to the Remuneration Policy.
• 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 fixed pay, maximum bonus (125% of salary) and LTIP awards vesting in full (100% of salary).
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
S Pitts
G Watt
L Dixon
Director
Non-Executive
Baroness Ford
S Miller
C Woolfenden
A M Cannon
I Steele
D Bergg
Date of contract/letter of appointment
Unexpired term
Notice period by Company/Director
3 January 2018
27 February 2001
4 December 2018
Rolling contract
Rolling contract
Rolling contract
12 months/6 months
12 months/6 months
12 months/6 months
Date of contract/letter of appointment
Date(s) of (re)appointment
Unexpired as at March 2018
1 June 2013
2 December 2016
1 June 2014
1 November 2014
1 November 2015
1 May 2018
26 April 2018
25 April 2017
25 April 2017
25 April 2017
26 April 2018
–
2 years 1 month
1 year 1 month
1 year 1 month
1 year 1 month
2 years 1 month
–
STV Annual Report and Accounts 2018 56
Remuneration report
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. An extensive consultation
with shareholders was undertaken in early 2018 in advance of the renewal of the Remuneration Policy at the 2018 AGM.
Annual Report on Remuneration
This section of the report sets out how the Policy will be implemented in 2019 and how it was implemented during 2018.
Some sections of this report, where indicated, have been audited.
As noted in the Chairman’s Annual Statement, George Watt will step down in April 2019. His successor, Lindsay Dixon, will take
up her appointment in May 2019. Her remuneration arrangements, as set out below, are in line with the Remuneration Policy
as approved by shareholders at the 2018 AGM.
Statement of implementation of remuneration policy for 2019
Executive Directors
The salaries for 2019 are set out below:
Executive Director
S Pitts
G Watt
L Dixon
2018 salary
£000
2019 salary
£000
% increase
400
230
–
411
237
230
2.75%
2.75%
–
Salary levels of employees throughout the Company were increased by an average of 2.75% in January 2019.
Benefits and pension will be in line with the Remuneration Policy. As a new executive appointment, Lindsay Dixon’s pension
will be set at the reduced level of 7% of salary, in line with pension benefits provided to employees across the business.
For 2019, Simon Pitts will participate in the annual bonus which will operate in line with the Remuneration Policy. The maximum
opportunity is 125% of salary.
Lindsay Dixon’s participation in the plan will be pro-rated to reflect the date of commencement of employment. George Watt will
not participate in the annual bonus in 2019. The annual bonus will operate in line with the Remuneration Policy. The maximum
bonus opportunity for Executive Directors is 125% of base salary.
The bonus will be based on stretching targets set for the performance measures in the table below.
Performance measure
Operating profit*
Cash flow**
Personal objectives
Total
* Operating profit pre exceptional items.
** Cash generated by operations.
Weighting
Maximum bonus contribution
(% of salary)
50%
25%
25%
62.5%
31.25%
31.25%
125%
The Committee is of the opinion that the personal objectives are commercially sensitive, and that it would be detrimental
to the interests of the Company and its shareholders to disclose them in full at this time. However, the objectives will relate
to key success factors in progressing and delivering the strategic growth plan, including:
• Maximising the value of the Broadcast business by delivering high quality, cost effective news and entertainment;
• Driving digital growth through the STV Player;
• Building STV Productions into a world class production business.
It is the Committee’s intention to disclose the targets and performance measures in full after the end of the financial year
if the Committee is satisfied the targets are no longer sensitive.
In 2019, Simon Pitts and Lindsay Dixon will receive awards under the LTIP at the level of 100% of salary. George Watt will not
participate in the LTIP for 2019. These will vest after three years and will be subject to a two-year holding period post vesting.
Governance
57
Non-Executive Directors
The fees payable in 2019 are set out below. Fees were increased by 2.75% in January 2019 in line with the increase applied
to employees across the Company:
Non-Executive Director
Chairman fee
Basic Non-Executive Director fee
Additional fees: Senior Independent Director
Chairing the Audit or Remuneration Committee
£000
128
39
13
5
Single total figure of remuneration
Executive Directors (audited)
The table below sets out the single total figure of remuneration for the Executive Directors for the 2018 financial year.
Historical data covering the past ten years is set out on page 60.
Executive Director
Financial
year
Salary
£000
Taxable
benefits
£000
Annual
bonus
£000
Long-term
incentives
£000
Pension
£000
S Pitts
G Watt
2018
2017
2018
2017
400
–
230
226
16
–
16
16
359
–
207
90
–
–
30
23
80
–
45
45
Sub total
excluding
buy-out
£000
855
–
528
400
Other
£000
645
–
–
–
Total
£000
1,500
–
528
400
Notes
Taxable Benefits – Includes a taxable cash allowance in lieu of benefits-in-kind, including life assurance and private medical insurance.
Annual Bonus – This includes the value of bonus earned in respect of the relevant financial year. For 2018, 20% of this will be deferred into shares
for three years for Simon Pitts.
In accordance with the terms of his departure, the annual bonus payment earned by George Watt in 2018 will be paid in cash.
Pension – Both Executive Directors receive a taxable cash allowance in lieu of pension and life assurance.
Other – This relates to Simon Pitts’ buy-out package paid to compensate for forfeited remuneration from his previous employer. As disclosed in last
year’s Directors’ Remuneration Report, this constitutes an immediate cash payment of £187,000, a share award to the value of £56,000 and awards
of STV Group plc deferred shares, which vest in phases over the period to 2021. The shares have been valued based on a share price of 309.5p, being
the share price on the date of grant.
Annual bonus (audited)
The table below sets out the targets and performance achieved against these for the year ended 31 December 2018.
Annual contribution (% salary)
Performance targets
Actual performance outcome
Performance condition
Weighting
Threshold
Maximum
Threshold
Maximum
(£m)
(% salary)
S Pitts
G Watt
Operating profit*
Cash flow**
Personal objectives
50%
25%
25%
6.25%
62.5%
£17.1m
£21.8m
£20.1m
43% £173,246
£99,928
3.125%
31.25%
£21.4m
£27.4m
£24.8m
20%
£80,007
£46,148
3.125%
31.25%
See below
27% £106,250
£61,285
Total
100%
12.5%
125%
89% £359,503
£207,361
* Operating profit pre exceptional items.
** Cash generated by operations.
The personal objectives relate to key strategic priorities of the business; progression of the business plan and delivery of
shareholder value.
The key personal objective assigned to Simon Pitts was the development and implementation of a refreshed strategy. This plan,
designed to deliver sustainable, profitable growth, was developed in early 2018 and announced to stakeholders in May 2018.
Related to the development of a new strategy was an objective to implement an organisational structure and culture capable
of delivering the refreshed strategy whilst maintaining strong commercial and delivery focus across all areas of the business.
Significant progress has been made against this objective by the end of 2018, with a new organisational structure successfully
established, key appointments have commenced employment and begun to implement the growth plan. A number of important
commercial deals have been secured which will, in relation to the wider long-term aims of the new strategy, set the business up
to deliver the growth plan.
Overall significant progress was achieved against all personal objectives, resulting in awards against this element of the bonus
plan at 85% of bonus potential (27% of base salary).
STV Annual Report and Accounts 2018 58
Remuneration report
Long-term Incentive Plan (audited)
The table below sets out the achieved performance for the 2016 Long-term Incentive Plan:
EPS
(50% of award)
Non-broadcast operating profit
(30% of award)
Relative TSR vs. FTSE Small Cap
(20% of award)
Performance period
Annualised
growth
1/1/16-31/12/18
Not achieved
Final year
performance
FY2018
Vesting
Ranked TSR vs.
Group
£6.7m
65%
Below median
Vesting
Nil
Vesting
Nil
Overall
vesting
19.7%
The 2016 Long-term Incentive Plan will vest in June 2019. Awards will vest at 19.7% as only one of the performance targets –
non-broadcast operating profit which accounts for 30% of the total award – was achieved. George Watt participated in this plan
and will receive an award of 11,962 shares on the release date (2 June 2019) and will be exercisable for 6 months thereafter.
Scheme interests awarded in 2018 financial year (audited)
The table below shows awards made to the Executive Directors during 2018 under the LTIP. As George Watt was under notice
at the date of grant of award, he did not participate in the 2018 plan.
Executive Director
Award type
Basis of award
Face value of award
Threshold vesting
Performance period
S Pitts
LTIP
LTIP
100% of salary
*£400,000
25% of maximum
1/1/18-31/12/20
Buy-out
**£402,000
25% of maximum
Various**
Calculated using the closing share price 323 pence on the date prior to the date of award.
*
** Calculated using the closing share price 309.5 pence on the date prior to the date of grant, will vest in tranches as follows.
24,196 shares vest in March 2019, 75,228 shares vest in March 2020 and 30,372 shares vest in March 2021.
The awards granted under the LTIP in 2018 will vest after three years subject to the following performance targets:
Performance measure
Calibration of targets
EPS
Annualised growth in adjusted EPS from FY17 to FY20
Non-broadcast
operating profit
Relative TSR
Operating profit for non-broadcast activities in FY20
Ranked position of the Company’s total shareholder
return (‘TSR’) against the constituents of the FTSE
Small Cap Index (using 3 month averaging)
Weighting
Threshold vesting
(25% of maximum)
Maximum
vesting
12%
£11.0m
7%
£4.0m
Median
Upper quartile
50%
30%
20%
There is no vesting for below threshold and straight-line vesting between threshold and maximum.
Payments for loss of office (audited)
No payments for loss of office were made during the year.
George Watt will leave the Company’s employment and step down from the Board in April 2019 and will be afforded good leaver
status in respect of all elements of remuneration. George Watt will receive contractual benefits of base salary, benefits allowance
and pension allowance until the date of termination of employment. As he is under notice of resignation, George Watt will not
participate in the 2019 annual bonus plan nor will he be included in the grant of award of the 2019 LTIP.
Payments to past Directors (audited)
No payments were made to past Directors during the year.
All employee share plans
A new three year Save As You Earn Option Plan (‘SAYE’) was launched in October 2018 at a price of 360 pence per share. Neither
of the Executive Directors participated.
External appointments
During 2018, George Watt received £25k as a non-executive director of SpaceandPeople plc. In accordance with the Company’s
policy, Executive Directors are entitled to retain their fees.
Governance 59
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
Baroness Ford
C Woolfenden
A M Cannon
I Steele
S Miller
D Bergg
Financial
year
Basic fees
£
Additional fees
£
Total fees
£
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
125,000
125,000
38,250
32,500
38,250
32,500
38,250
32,500
38,250
40,833
25,500
–
–
–
–
5,000
5,000
7,500
5,000
5,000
12,750
3,334
–
–
125,000
125,000
38,250
37,500
43,250
40,000
43,250
37,500
51,000
44,167
25,500
–
Notes
Additional fees in 2018 relate to the fee structure whereby the basic Non-Executive fee was £38,250 per annum with an additional fee of £5,000
per annum payable for chairing either the Audit or Remuneration Committees and an additional fee of £12,750 per annum payable to the Senior
Independent Director.
Statement of Directors’ shareholding and share interests (audited)
Under the current policy, Executive Directors are required to build up a shareholding equal to 150% of salary. Non-Executive
Directors are required to build up a shareholding equivalent to their basic fee over a three-year period. The table below summarises
the Directors’ interests in shares and the extent, where applicable, to which the shareholding requirements have been achieved.
Number of
beneficially
owned
shares*
Number
of nil cost
options
Number of
SAYE options
subject to
conditions
Number of
unvested
LTIP
awards at
31/12/18
Total
interests
held at
31/12/18
Monetary
value of
shares at
31/12/18**
Shareholding
requirements
(% salary)
Current
shareholding
(% salary/
basic fee)
Requirement
met***
Director
Executive
S Pitts
G Watt
9,589
–
271,321
40,000
Non-Executive
Baroness Ford
25,958
C Woolfenden
A M Cannon
I Steele
S Miller
D Bergg
9,092
9,042
8,000
5,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
464,297
9,589
34
122,780
311,321
1,102
–
–
–
–
–
–
25,958
9,092
9,042
8,000
5,000
–
92
32
32
28
18
–
150
150
100
100
100
100
100
100
9
477
72
84
74
65
35
–
n/a
Yes
n/a
n/a
n/a
n/a
n/a
n/a
* Beneficial interests include shares held directly or indirectly by connected persons.
** Value in £000; share price as at 31/12/18 was 354 pence per share.
*** Not applicable as three-year period to acquire is ongoing.
STV Annual Report and Accounts 2018 60
Remuneration report
Dilution
The following table sets out the current level of dilution against the limits in the Bonus Plan 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
9.16
4.40
0
0
The bonus plan and the long term incentive plan are subject to a limit of 10% in ten years.
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 All Share Media indices. The FTSE Small Cap index will be used for performance
measures under the new LTIP the FTSE All Share Media index provides a comparison of performance in the media sector.
800
700
600
500
400
300
200
100
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FTSE Small Cap index
FTSE All Share Media Index
STV Group plc
Single figure of total remuneration
The table below shows the Chief Executive Officer’s remuneration over the past 10 years.
Chief Executive Officer
Single figure of total
remuneration
(£000)
Bonus pay-out
(as % maximum
opportunity)
Long-term incentive
vesting rates
(as % maximum
opportunity)
S Pitts
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
855*
697
807
2,269
661
601
696
958
614
418
72
32
29
49
46
54
31
15
75
–
–
13.8%
–
100%
–
–
100%
–
–
–
Year
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
* Excludes buy-out, see page 57.
Governance
61
Percentage change in Chief Executive Officer’s remuneration
The table below shows the percentage change in the salary, benefits and annual bonus of the Chief Executive Officer and all
employees (on a per capita basis) between 2017 and 2018.
Chief Executive Officer
All employees
Salary
2.75%
2.75%
Taxable
benefits
–
–
Bonus
n/a
n/a
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2016 and 2017 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 buy back
2018
2017
% change
£23.5m
£20.4m
£7.5m
£6.8m
15%
16%
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; Anne Marie Cannon (Chairman);
Michael Jackson (retired 26 April 2018); Ian Steele; and David Bergg (appointed 28 June 2018). The Committee met three times
during the year.
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors and the senior
management board 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 Company’s website, www.stvplc.tv.
Advisers 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 connections with the design and operations
of the Company’s incentive arrangements.
During the year, the Committee received advice from Deloitte LLP. Deloitte LLP is a member of the Remuneration Consultants’
Group and has 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. Deloitte LLP was also the Company’s internal auditor during
that 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. The total fees paid to Deloitte LLP
during the year for advice to the Committee were £15,900.
In the course of its deliberations during the period under review, the Committee sought the assistance of the Chairman on matters
relating to the Directors’ performance and remuneration.
The Chairman, Chief Executive Officer and the HR & Communications Director attend meetings by invitation.
Statement of voting at general meeting
The table below shows the remuneration related votes at the AGM held on 26 April 2018.
2017 Remuneration Report
2017 Remuneration Policy
29,280,853
23,755,066
98.79
80.15
358,891
5,884,715
19.85
Votes for
% Votes against
%
1.21
Total votes cast
Votes withheld*
29,641,192
29,641,192
1,448
1,411
* A vote withheld is not a vote in law and counts neither for nor against a resolution.
Anne Marie Cannon
Chairman of the Remuneration Committee
14 March 2019
STV Annual Report and Accounts 2018 62
Directors’ report
The Directors present the Directors’ report, together with the audited accounts for the year ended 31 December 2018. The
Directors’ report comprises pages 62 to 64 and the sections of the annual report incorporated by reference are set out below:
Directors during 2018 financial year – See page 44
Greenhouse gas emissions – See page 30
Employee diversity and inclusion – See page 26
Principal risks – See pages 39 and 40
Risk management – See pages 36 to 38
Corporate governance report – See pages 41 to 53
Employee involvement – See page 26
Dividends
The proposed total dividend for 2018 is 20.0p per share – an increase of 18% on 2017 (17.0p). During 2018 the final 2017 dividend
of 12.0p per share was paid together with the interim dividend for 2018 of 6.0p per share. A final dividend of 14.0p per share has
been declared which, subject to approval at the AGM in April, will be paid on 31 May 2019, to shareholders on the register at
12 April 2019.
Share capital
The Company announced a share buyback programme on 22 September 2017 and as at 14 March 2019 the Company has
completed the buyback of 356,094 ordinary shares of 50p each, the aggregate consideration of which was £1,255,279. Each of
these shares was cancelled upon purchase. Consequently, on 14 March 2019 there were 39,192,137 ordinary shares of 50p each
in issue, each with one vote and no shares are held in treasury.
The rights and obligations to the Company’s shares are set out in its Articles of Association. Details of Directors interests in shares
can be found on page 59.
As at 14 March 2019, the Group had been notified of the following interests of 3% or more in its shares:
Shareholders
Crystal Amber Advisers
Slater Investments
Columbia Threadneedle Asset Mgt
UBS Global Asset Mgt
Chelverton Asset Mgt
Schroder Inv. Mgt
Majedie Asset Mgt
Cavendish Asset Mgt
Shares held
7,197,893
3,750,743
3,661,029
2,339,842
2,100,000
2,065,693
2,000,000
1,429,100
%
18.37
9.57
9.34
5.97
5.36
5.27
5.10
3.05
Principal activities
The principal activities of the Group are the production and distribution of content across multiple devices and platforms, including
television broadcasting, and the sale of advertising airtime and space in these media. The Group continues to focus on its television
and digital media businesses and is also involved in supporting charitable activities including the operation of STV ELM to provide
services to the Scottish Children’s Lottery.
Compliance
Part of the information that fulfils the Companies Act requirements of the Directors’ Report can be found in the Financial Review
on pages 34 and 35. The Group’s subsidiaries are listed in note 17 of the Company financial statements and details of the principal
risks and uncertainties facing the Group can be found on pages 39 and 40.
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).
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 2018.
Governance 63
Annual General Meeting
Details of the 2019 AGM, together with the Notice of AGM can be found on pages 103 to 108.
Directors
The Directors of the Company and their profiles are detailed on pages 42 and 43. All of these Directors served throughout the
year under review with the exception of David Bergg who was appointed to the Board as a Non-Executive Director on 1 May 2018.
The Articles of Association of the Company require Directors to submit themselves for re-election every three years. In addition
all Directors are subject to election at the first opportunity after their appointment to the Board.
Donations
The Group made no political donations during the year (2017: £nil).
Voting rights and restrictions on transfer of shares
None of the ordinary shares carry any special rights with regard to control of the Company. There are no restrictions on transfers
of shares other than certain restrictions which may from time to time be imposed by laws or regulations such as those relating
to insider dealing and pursuant to the Company’s share dealing code, whereby the Directors and designated employees require
approval to deal in the Company’s shares.
The Company is not aware of any arrangements between shareholders that may result in restrictions on the transfer of securities
or voting rights. Further details of the rights, restrictions and obligations attaching to the share capital of the Company, including
voting rights, are contained in the Company’s Articles of Association. The Articles may only be amended by special resolution
at a general meeting of shareholders. Copies are available by writing to the Company Secretary and are also open to inspection
at Companies House.
The STV Group plc Employee Benefit Trust, which is used to acquire and hold shares in the Company for the benefit of employees,
waives its right to vote and to dividends on the shares it holds which are unallocated.
Change of control
All of the Company’s employee share plans contain provisions relating to a change of control. On a change of control, options and
awards granted to employees under the Company’s share plans may vest and become exercisable, subject to the satisfaction of
any applicable performance conditions at that time. Certain of the Company’s credit facilities and banking arrangements contain
change of control clauses under which lenders may cancel their commitments and declare all outstanding amounts immediately
due and payable.
The Channel 3 broadcasting licences require STV, as the license holder, to notify Ofcom on a change of control. Ofcom would
thereafter require to determine that any proposed new license holder was a fit and proper person to hold the licence. There are
no other significant agreements that would take effect, alter or terminate upon a change of control following a takeover bid.
The Scottish Children’s Lottery, which holds licences awarded by the UK Gambling Commission, engages the services of STV ELM
Limited, which is a subsidiary of STV Group plc, to deliver the lottery product to consumers. Although the lottery is operated
independently of STV, in accordance with the requirements of these licences, STV provides financial support and if there is a
change of control of STV, STV ELM is obliged to notify the UK Gambling Commission who may thereafter review the licences.
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 the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union. 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 Company and the profit and loss of the
Group and Company 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 ending 31 December 2018, when taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
STV Annual Report and Accounts 2018
64
Directors’ report
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 in the
prevention and detection of fraud and other irregularities.
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.
Directors’ Statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on pages 42 and 43 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; and
• the Strategic 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 website and legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Baroness Margaret Ford OBE
Chairman
14 March 2019
Governance 65
STV Group plc consolidated financial statements
Independent auditors’ report to the members of STV Group plc
Report on the audit of the financial statements
Opinion
In our opinion, STV Group plc’s group financial statements and
parent company financial statements (the ‘financial statements’):
Our audit approach: Overview
Materiality
• Overall group materiality: £857,306 (2017: £775,000), based
on 5% of profit before tax and exceptional items.
• give a true and fair view of the state of the group’s and of
the parent company’s affairs as at 31 December 2018 and of
the group’s profit and the group’s and the parent company’s
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, as regards the parent company’s
financial statements, as applied in accordance with the
provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within
the Annual Report and Accounts (the ‘Annual Report’), which
comprise: the consolidated and parent company balance sheets
as at 31 December 2018; the consolidated income statement
and consolidated statement of comprehensive income, the
consolidated and parent company statements of cash flows, and
the consolidated and parent company statements of changes in
equity for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company.
Other than those disclosed in note 7 to the financial statements,
we have provided no non-audit services to the group or the parent
company in the period from 1 January 2018 to 31 December 2018.
• Overall parent company materiality: £420,000 (2017: £420,000),
based on 1% of Total Assets (capped to an allocation of overall
group materiality).
Audit scope
• We performed audit work over all four segments of the business.
• Taken together, the entities where we performed our audit
work accounted for 99% of Group revenue and 96% of Group
profit before tax.
Key audit matters
• Retirement benefit obligations (Group and parent).
• Deferred programme production costs carrying value (Group).
• Recoverability of External Lottery Management’s (‘ELM’) other
receivable (Group).
• Classification of Exceptional Items (Group).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed 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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group, we identified that the
principal risks of non-compliance with laws and regulations relate
to those laws and regulations that have a direct impact on the
financial statements such as the Companies Act 2006, the Listing
Rules and UK tax legislation. We also considered compliance with
industry regulation (OFCOM). We evaluated management’s
incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls),
and determined that the principal risks were related to posting
inappropriate journal entries to increase revenue or profit.
Audit procedures performed included:
• Discussions with management and internal audit,
including consideration of known or suspected instances
of non-compliance with laws and regulations and fraud or
matters reported on the Group’s whistleblowing helpline;
• Evaluation of management’s controls designed to prevent
and detect irregularities;
• Review of Board minutes;
• Challenging assumptions and judgements made by
management in its significant accounting estimates, including
in relation to the classification of costs as exceptional;
• Identifying and testing journal entries, in particular any journal
entries posted by senior management, postings to exceptional
items and unusual account combinations.
There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely we would become aware of it.
In addition, the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion.
STV Annual Report and Accounts 2018 66
STV Group plc consolidated financial statements
Independent auditors’ report to the members of STV Group plc
We did not identify any key audit matters relating to
irregularities, including fraud. As in all of our audits we also
addressed the risk of management override of internal controls,
including testing journals and evaluating whether there was
evidence of bias by the directors that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context
of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete
list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Retirement benefit obligations: Group and parent
(Refer to page 78 (Significant accounting policies) and page 96
(Retirement benefit schemes)).
The Group has a net retirement benefit obligation of £78.5m
(2017: £70.6m) and the Parent company an obligation of
£40.5m (2017: £30.6m). These balances are significant in the
context of the Group and Parent company balance sheets and are
dependent on key judgemental assumptions, including discount
rate, inflation rate and mortality rates adopted by the Directors in
the actuarial valuations. Given the judgements involved and that
slight movements in these assumptions can have a significant
impact on the overall obligations, this was an area of significant
focus in our audit.
Deferred programme production costs carrying value: Group
(Refer to page 77 (Significant accounting policies) and page 90
(Inventories)).
Production inventory of £10.3m (2017: £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. This is an area of focus because the
carrying value of the deferred programme production costs,
and hence the charge to the income statement, are based on
judgements made by the Directors in respect of associated
future revenue.
Recoverability of ELM Other receivable: Group
(Refer to page 77 (Significant accounting policies) and page 90
(Trade and other receivables)).
The net receivable from ELM of £6.6m (2017: £8.2m) relates
to start up and running costs recoverable from the Scottish
Children’s Lottery in accordance with the contract between ELM
and the Lottery. The total amount recoverable as at the year-end
was £11.6m against which an expected credit loss provision of
£5m has been recorded. The recoverability of these costs is
dependent on the future growth of the lottery and its ability
to generate future positive cash flows.
We considered the reasonableness of the key assumptions used
in the actuarial valuation, being the discount rate, inflation rate
and mortality, assessing if they were within our expected range.
All actuarial assumptions, with the exception of the mortality,
fell within our expected range based on our knowledge and
experience.
We used our specialist knowledge and experience and engaged
our actuarial experts to challenge the Directors in relation to the
mortality assumptions selected, as they were initially below our
expectation although consistent with the prior year. Following
discussions with management and their, and our, actuarial
experts, management agreed to an increase in the mortality
assumptions applied to certain member categories. As a result
of this we concluded that the final assumptions selected by the
Directors were reasonable, taking into account the nature of the
schemes and scheme experience.
We also reviewed the disclosures relating to the pension schemes
for compliance with accounting standards and to ensure they
agreed to the actuaries report and the testing performed.
We analysed the Directors’ assessment of each significant
production in the catalogue to determine, based on the past
history of sales, forecasting accuracy and contracted revenues,
the appropriateness of their projected future revenues for each
production selected.
We performed sensitivities on the key assumptions for future
associated sales to satisfy ourselves that no material impairment
of inventory, in addition to the amount determined by
management, was required.
There were no material issues arising from the work performed.
Management performed a whole of life probability weighted
impairment review under IFRS 9 and identified a provision of
£5m was required.
The key assumptions in determining the appropriate level of
provision relate to future growth of lottery ticket sales. We
challenged management’s assumptions through comparing
forecast with current sales and plans to extend sales to new
channels. We then challenged the probabilities assigned to
each scenario through doing our own assessment.
We concluded that the approach taken by management
was reasonable and that the provision was within an
acceptable range.
Financial Statements 67
Key audit matter
How our audit addressed the key audit matter
Classification of Exceptional Items: Group
Refer to page 84 (Exceptional items).
Exceptional items of £15.3m (2017: £1.6m) relate to the
restructuring within STV Group during 2018, the sale of STV2
entities, GMP equalisation, deferred production stock write
down and impairment of the lottery debtor.
This is a key focus area for our audit as management use
operating profit before exceptional items as an alternative
performance measure in their external reporting of financial
performance and for remuneration purposes.
In addition to auditing the accuracy of each exceptional item,
we have challenged management as to whether or not they are
exceptional in accordance with their stated accounting policy.
We also considered whether or not there were any items, in
particular gains, that were not recorded as exceptional items,
but should be. Lastly, we reviewed the associated disclosure in
the financial statements to ensure they appropriately described
the nature of the exceptional items.
We reported to the Audit Committee that there were no matters
arising from this work.
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 structure of
the group and the parent company, the accounting processes
and controls, and the industry in which they operate.
Several subsidiary entities within the Group require an audit of
their own financial information and coverage from these audits
was included as part of the scoping exercise. Entities which
were individually financially significant, or contained individually
significant balances, were included in the overall scope. All audits
were carried out by the Group engagement team and we
performed work over all segments of the business.
A full scope audit was performed on the Parent entity.
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 on the individual financial
statement line items and disclosures and in evaluating the
effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Taken together, the segments and functions where we
performed our audit work accounted for 99% of Group
revenues and 96% of Group profit before tax.
Overall materiality
£857,306 (2017: £775,000).
£420,000 (2017: £420,000).
Group financial statements
Parent company financial statements
How we determined it
5% of profit before tax and exceptional items
Rationale for benchmark
applied
Consistent with last year, we have applied
this benchmark, a generally accepted auditing
practice, in the absence of indicators that an
alternative benchmark would be appropriate.
We also believe the measure of profit before
tax and exceptional items is the measure
most commonly used by the shareholders
to measure the performance of the Group.
1% of Total Assets (capped to an allocation
of overall materiality)
Consistent with last year, we considered the most
appropriate benchmark for the Parent company
to be total assets as it is a holding company,
however, this resulted in a materiality that was
significantly higher than Group materiality
therefore all audit work was performed using
an allocation of Group materiality.
STV Annual Report and Accounts 2018 68
STV Group plc consolidated financial statements
Independent auditors’ report to the members of STV Group plc
For each component in the scope of our group audit, we allocated
a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between
£110,105 and £857,306. Certain components were audited to a
local statutory audit materiality that was also less than our
overall group materiality.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
£42,865 (Group audit) (2017: £39,000) and £21,000 (Parent
company audit) (2017: £21,000) as well as misstatements
below those amounts that, in our view, warranted reporting
for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We have nothing material to
add or to draw attention to.
However, because not all future
events or conditions can be
predicted, this statement is
not a guarantee as to the
group’s and company’s ability
to continue as a going concern.
For example, the terms on
which the United Kingdom may
withdraw from the European
Union, which is currently due
to occur on 29 March 2019, are
not clear, and it is difficult to
evaluate all of the potential
implications on the group’s
trade, customers, suppliers
and the wider economy.
We have nothing to report.
We are required to report if we
have anything material to add
or draw attention to in respect
of the directors’ statement
in the financial statements
about whether the directors
considered it appropriate to
adopt the going concern basis
of accounting in preparing the
financial statements and the
directors’ identification of any
material uncertainties to the
group’s and the company’s
ability to continue as a going
concern over a period of at
least twelve months from
the date of approval of the
financial statements.
We are required to report if the
directors’ statement relating to
Going Concern in accordance
with Listing Rule 9.8.6R(3) is
materially inconsistent with
our knowledge obtained in
the audit.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and
Corporate Governance Statement, we also considered whether
the disclosures required by the UK Companies Act 2006 have
been included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, the Companies Act 2006
(CA06) and ISAs (UK) require us also to report certain opinions
and matters as described below (required by ISAs (UK) unless
otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic Report
and Directors’ Report for the year ended 31 December 2018
is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
(CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in the Strategic Report and Directors’ Report. (CA06)
Financial Statements 69
Corporate Governance Statement
Other Code Provisions
As a result of the directors’ voluntary reporting on how they
have applied the Code, we are required to report to you if,
in our opinion:
• The statement given by the directors, on page 63, that
they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information
necessary for the members to assess the group’s and parent
company’s position and performance, business model and
strategy is materially inconsistent with our knowledge of
the group and parent company obtained in the course of
performing our audit.
• The section of the Annual Report on page 49 describing the
work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The directors’ statement relating to the Parent company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified,
under the Listing Rules, for review by the auditors.
We have nothing to report in respect of this responsibility.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 44 to 53) about internal controls and
risk management systems in relation to financial reporting
processes and about share capital structures in compliance
with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and
Transparency Rules sourcebook of the Financial Conduct
Authority (‘DTR’) is consistent with the financial statements
and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course
of the audit, we did not identify any material misstatements
in this information. (CA06)
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 44 to 53) with respect to the parent
company’s corporate governance code and practices and
about its administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3 and
7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility
to report if a corporate governance statement has not been
prepared by the parent company. (CA06)
The directors’ assessment of the prospects of the group
and of the principal risks that would threaten the solvency
or liquidity of the group
As a result of the directors’ voluntary reporting on how they
have applied the UK Corporate Governance Code (the ‘Code’),
we are required to report to you if we have anything material
to add or draw attention to regarding:
• The directors’ confirmation on page 39 of the Annual Report
that they have carried out a robust assessment of the
principal risks facing the group, including those that would
threaten its business model, future performance, solvency
or liquidity.
• The disclosures in the Annual Report that describe those
risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 35 of the Annual Report
as to how they have assessed the prospects of the group,
over what period they have done so and why they consider
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the group
will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary
qualifications or assumptions.
We have nothing to report having performed a review of
the directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and
statement in relation to the longer-term viability of the
Group. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering
the directors’ process supporting their statements; checking
that the statements are in alignment with the relevant
provisions of the UK Corporate Governance Code (the ‘Code’);
and considering whether the statements are consistent with
the knowledge and understanding of the Group and Parent
company and their environment obtained in the course of
the audit. (Listing Rules).
STV Annual Report and Accounts 2018 70
STV Group plc consolidated financial statements
Independent auditors’ report to the members of STV Group plc
Other required reporting
Companies Act 2006 exception reporting
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; or
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• the parent company 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.
Appointment
Following the recommendation of the audit committee, we
were appointed by the directors on 4 March 2004 to audit the
financial statements for the year ended 31 December 2004 and
subsequent financial periods. The period of total uninterrupted
engagement is 15 years, covering the years ended 31 December
2004 to 31 December 2018.
Michael Timar (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
14 March 2019
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only
for the parent 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.
Financial Statements Consolidated income statement
Year ended 31 December 2018
Revenue
Net operating expenses
Operating profit
Analysed as:
Operating profit before exceptional items
Exceptional items
Operating profit
Finance costs – borrowings
– IAS 19 pension
Impairment losses – exceptional ELM provision
Profit before tax
Tax charge
Profit for the year
Earnings per share
Basic
Diluted
71
Note
6
7
9
10
10
10
2018
£m
2017
£m
125.9
117.0
(116.9)
(99.6)
9.0
17.4
20.1
(11.1)
9.0
(1.1)
(1.8)
(4.2)
(7.1)
19.0
(1.6)
17.4
(1.0)
(2.5)
–
(3.5)
1.9
13.9
12
(0.3)
(2.2)
1.6
11.7
13
13
4.2p
4.1p
30.1p
29.6p
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated statement of comprehensive income
Year ended 31 December 2018
Profit for the year
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension schemes
Deferred tax credit/(charge) thereon
Write (down)/up of investment to market value
Other comprehensive (expense)/income
Note
29
23
17
2018
£m
1.6
(13.3)
2.0
(0.5)
(11.8)
2017
£m
11.7
12.7
(2.4)
0.6
10.9
Total comprehensive (expense)/income
(10.2)
22.6
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
STV Annual Report and Accounts 2018
72
Consolidated and parent company balance sheets
At 31 December 2018
Group
2018
£m
Note
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Deferred tax asset
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity attributable to owners of the parent
Ordinary shares
Share premium
Capital redemption reserve
Merger reserve
Other reserve
Accumulated (losses)/profit
Total equity
Non-current liabilities
Borrowings
Retirement benefit obligations
Provisions
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Total liabilities
Total equity and liabilities
15
16
17
23
19
18
19
20
25
25
22
29
24
21
24
2017
£m
2.6
8.6
1.4
18.4
8.2
39.2
20.6
26.7
6.1
53.4
Company
2018
£m
2017
£m
–
–
48.0
6.7
182.6
237.3
–
76.2
–
76.2
–
–
48.6
5.2
167.5
221.3
–
77.0
–
77.0
1.9
9.8
0.7
19.5
8.2
40.1
14.4
22.7
6.3
43.4
83.5
92.6
313.5
298.3
19.6
101.9
0.2
19.7
101.9
0.1
173.4
173.4
0.8
0.7
(355.0)
(334.1)
19.6
101.9
0.2
–
0.8
77.7
19.7
101.9
0.1
–
0.7
86.5
(59.1)
(38.3)
200.2
208.9
42.6
78.5
–
41.6
70.6
0.1
–
–
40.5
30.6
–
–
121.1
112.3
40.5
30.6
20.4
–
1.1
21.5
17.5
0.9
0.2
18.6
72.8
58.8
–
–
–
–
72.8
58.8
142.6
130.9
113.3
89.4
83.5
92.6
313.5
298.3
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent company
income statement or statement of comprehensive income. The profit for the parent company for the year was £12.3m (2017: £11.3m).
The consolidated financial statements on pages 71 to 100 were approved by the Board on 12 March 2019 and were signed on
its behalf by:
Simon Pitts
Chief Executive Officer
George Watt
Chief Financial Officer
Financial Statements
Consolidated and parent company statement of changes in equity
Year ended 31 December 2018
73
Group
Balance at 1 January 2018
Profit for the year
Other comprehensive expense
Total comprehensive expense for the year
Shares bought back on-market and cancelled
(0.1)
Acquisition of treasury shares
Share based compensation
Deferred tax charge on share based compensation
Dividends
–
–
–
–
Equity attributable to owners of the parent
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Other
reserve
£m
Accumulated
(losses)/profit
£m
Total
Equity
£m
19.7
101.9
0.1
173.4
0.7
(334.1)
(38.3)
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
0.3
–
–
1.6
(11.8)
(10.2)
(0.2)
(3.4)
–
(0.2)
(6.9)
1.6
(11.8)
(10.2)
(0.2)
(3.6)
0.3
(0.2)
(6.9)
Balance at 31 December 2018
19.6
101.9
0.2
173.4
0.8
(355.0)
(59.1)
Balance at 1 January 2017
19.8
101.9
Profit for the year
Other comprehensive income
Total comprehensive income for the year
–
–
–
Shares bought back on-market and cancelled
(0.1)
Acquisition of treasury shares
Share based compensation
Deferred tax credit on share based compensation
Issue of treasury shares to employees
Dividends
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
173.4
0.4
(348.5)
(53.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
–
11.7
10.9
22.6
(1.0)
(1.6)
–
0.1
0.5
(6.2)
11.7
10.9
22.6
(1.0)
(1.6)
0.3
0.1
0.5
(6.2)
Balance at 31 December 2017
19.7
101.9
0.1
173.4
0.7
(334.1)
(38.3)
Company
Balance at 1 January 2018
19.7
101.9
0.1
Profit for the year
Other comprehensive expense
Total comprehensive income for the year
–
–
–
Shares bought back on-market and cancelled
(0.1)
Acquisition of treasury shares
Share based compensation
Dividends
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
Balance at 31 December 2018
19.6
101.9
0.2
19.8
101.9
Balance at 1 January 2017
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Shares bought back on-market and cancelled
(0.1)
Acquisition of treasury shares
Share based compensation
Issue of treasury shares to employees
Dividends
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
0.1
–
–
–
–
Balance at 31 December 2017
19.7
101.9
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.7
–
–
–
–
(0.2)
0.3
–
0.8
0.4
–
–
–
–
–
0.3
–
–
86.5
12.3
(10.7)
1.6
(0.2)
(3.3)
–
(6.9)
208.9
12.3
(10.7)
1.6
(0.2)
(3.5)
0.3
(6.9)
77.7
200.2
78.5
11.3
5.0
16.3
(1.0)
(1.6)
–
0.5
(6.2)
200.6
11.3
5.0
16.3
(1.0)
(1.6)
0.3
0.5
(6.2)
0.7
86.5
208.9
–
–
–
–
–
–
STV Annual Report and Accounts 2018 74
Consolidated and parent company statement of cash flows
Year ended 31 December 2018
Operating activities
Cash generated by operations
Interest paid
Refinancing fees paid
Taxes paid
Pension deficit funding – recovery plan payment
Net cash generated by operating activities
Investing activities
Sale of investment
Sale of STV2 local licence companies
Capitalised web development spend
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Purchase of treasury shares
Share buyback
Issue of treasury shares to employees
Net borrowings facility utilised
Dividends paid
Net cash used in financing activities
Note
26
Group
2018
£m
23.7
(0.9)
(0.2)
(0.7)
(8.8)
13.1
0.2
0.3
(0.4)
(3.0)
(2.9)
(3.5)
(0.6)
–
1.0
(6.9)
2017
£m
11.2
(0.7)
(0.3)
(0.3)
(7.9)
Company
2018
£m
2017
£m
14.8
12.5
–
–
–
(4.2)
2.0
10.6
–
–
(0.5)
(2.9)
(3.4)
(1.4)
(0.6)
0.4
2.0
(6.2)
0.1
–
–
–
0.1
(3.5)
(0.6)
–
–
(6.9)
–
–
–
(4.1)
8.4
–
–
–
–
–
(1.4)
(0.6)
0.4
–
(6.2)
(7.8)
0.6
(4.7)
(4.1)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
26
(10.0)
(5.8)
(11.0)
0.2
6.1
6.3
(7.2)
13.3
6.1
(0.3)
(4.1)
(4.4)
Financial Statements 75
Notes to the financial statements
For the year ended 31 December 2018
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 and lottery management services.
2. Adoption of new and revised standards
New and amended standards adopted in the year
New standards, amendments and interpretations effective for the financial year beginning 1 January 2018 are as follows:
IFRS 9
IFRS 15
IFRS 2
IFRS 4
IAS 40
Financial instruments
Revenue from contracts with customers
Share based payments (amendments)
Insurance contracts (amendments)
Investment property
IFRS 2, IFRS 4 and IAS 40 are either not relevant for the Group and parent company or had no material impact on their financial
statements.
IFRS 9 ‘Financial Instruments’ sets out requirements for recognising and measuring financial assets, financial liabilities and some
contracts to buy or sell non-financial items. This standard replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’.
IFRS 9 introduces new models for classification of financial assets and accounting for credit losses. Hedge rules have been
amended to allow hedge accounting to be applied to more risks. The adoption of IFRS 9 has resulted in a change to accounting
policy, but has not had a material impact on the financial statements. The ELM debtor impairment (note 9) has been calculated
based on a whole of life weighted probability impairment review in line with the new standard.
IFRS 15 ‘Revenue from Contracts with Customers’ establishes a comprehensive framework for determining how much and when
revenue is recognised. The Group has adopted IFRS 15 on a retrospective basis recognising the cumulative effect as an adjustment
to retained earnings as at 1 January 2018 and it has not had a material impact on the financial statements.
New standards and interpretations not yet adopted
New standards, amendments and interpretations issued but not yet effective for the financial year beginning 1 January 2018 are
as follows:
IFRS 16
IAS 19
IFRIC 23 Uncertainty over income tax treatments
Leases
Share based payments (amendments)
IFRS 16 ‘Leases’ is effective 1 January 2019 and will change lease accounting for lessees under operating leases. Such
agreements will require recognition of an asset, representing the right to use the leased item and a liability, representing future
lease payments. Lease costs (such as property rent) will be recognised in the form of depreciation and interest, rather than as
an operating costs. The Group plans on adopting the retrospective approach recognising the cumulative effect as an adjustment
to retained earnings with the right to use asset equal to the lease liability at transition date. The likely impact to Operating costs
is expected to be around £0.1m (favourable) with the likely impact to Profit before tax being around £0.2m lower. Non-current
assets and gross liabilities are both expected to increase by £14m with net assets remaining unchanged. The Group has elected
not to recognise right of use assets for low-value assets. The Group will continue to expense the lease payments associated with
these leases on a straight-line basis over the lease term.
IAS 19 (amendments) and IFRIC 23 are either not relevant for the Group and parent company or had no material impact on their
financial statements.
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 and parent company financial statements have been prepared in accordance with IFRS and IFRS Interpretations
Committee (IFRS IC) interpretations, as adopted by the European Union and the Companies Act 2006 applicable to companies
reporting under IFRS. The consolidated and parent company financial statements have been prepared on a going concern basis
and under the historical cost convention.
The preparation of the Group and parent company 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 5.
STV Annual Report and Accounts 2018
76
Notes to the financial statements
Continued
Going concern
The Group continues to review forecasts to determine the impact of both the short term and long term liquidity position and
expects to meet its covenants over the next twelve months. The Group therefore considers it appropriate to adopt the going
concern basis in preparing its consolidated financial statements.
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 are entities over which the Company has control. The Company controls an entity when
the Company has existing rights that give it the current ability to direct the activities that affect the Company’s returns and
exposure or rights to variable returns from the entity. Subsidiaries are included in the consolidated financial statements of the
Company from the date control of the subsidiary commences until the date that control ceases. Intra-group balances and any
unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the
consolidated financial statements.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Group’s Chief Executive.
Foreign currency translation
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.
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.
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%
Impairment of assets
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.
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.
Financial Statements
77
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.
i) Programme production work in progress
Programming made for third parties is valued at cost less appropriate provisions and is charged to the income statement
against related income.
ii) Deferred programme production
Deferred production costs represent original costs of production which are deferred and recognised against future revenue
streams expected to be generated in the secondary sales markets together with advertising generated on the STV Player
platforms. This is to ensure that revenue and costs are matched as closely as possible. The amount to be deferred varies
by programme based on future secondary sales potential. The estimation of future sales and this is referred to in the critical
accounting estimates section (note 5).
iii) Recorded programmes
Recorded programmes are programmes which the Group purchases for transmission on its broadcast and catch up channels.
They are valued at direct cost including labour and overheads less appropriate provisions and are written off after the first
transmission or sale.
The carrying value of inventory is assessed each year at the balance sheet date.
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. Financial assets are at amortised cost with the exception of investments which are
at fair value through other comprehensive income (FVOCI) and derivative financial instruments which are at fair value through
profit and loss (FVPL). Financial liabilities are at amortised cost.
i) Trade receivables
Trade receivables do not carry any interest and are stated at amortised cost as reduced by appropriate allowances for estimated
irrecoverable amounts. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and contract assets.
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. The ELM debtor, included in non-current assets, is reviewed at each reporting
period. Management perform a whole of life weighted impairment review where there is a significant increase in credit risk.
If there is a change in the timeline for recovery, the fair value of the debtor is determined by applying the effective interest rate
and the resulting discounting provision is recognised in the income statement.
ii) Investments
Until 31 December 2017, the Group classified its investments as ‘available-for-sale’. The initial recognition was measured at fair
value, including transaction costs directly attributable to the acquisition of the financial asset. From 1 January 2018, the Group
classifies its investments as fair value through other comprehensive income (FVOCI). There is no subsequent reclassification of
fair value gains and losses to profit and loss following the derecognition of the investment.
Under IAS 39, gains or losses arising from changes in fair value are recognised in other comprehensive income, until the security
is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in other
comprehensive income is included in the income statement for the period. Equity investments that do not have a quoted
market price in an active market and whose fair value cannot be reliably measured by other means are held at cost.
iii) Classification of financial liabilities and equity
Financial liabilities and equity instruments are classified according to the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
iv) 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 method. Finance costs, including
premiums payable on settlement or redemption 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.
v) Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
vi) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
STV Annual Report and Accounts 2018
78
Notes to the financial statements
Continued
vii) Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its exposure to fluctuations in interest.
The Group does not qualify for hedge accounting under IFRS9 therefore any gains or losses arising from the movement in fair
value are taken to the income statement.
The fair value of the interest rate swap contracts are calculated on a discounted cash flow basis using market forward rates.
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 liabilities 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.
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.
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:
i) 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.
ii) 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.
iii) 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.
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.
Financial Statements
79
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.
Provisions
Onerous contracts
Provisions for onerous contracts are recognised when the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
Revenue recognition
Under IFRS 15, the performance obligations promised in contracts with customers are identified and revenue recognition
is based on an assessment of when control of the good or service promised in the contract is transferred to the customer.
Revenue is recognised when the performance obligation in the contract is satisfied which is either at a ‘point in time’ or
‘over time’ depending on when or as control of the good or service is transferred to the customer.
Under IAS 18 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.
The adoption of IFRS 15 has not had a material impact on the financial statements.
Key classes of revenue are recognised on the following bases:
i) Advertising and sponsorship revenues
Revenues are stated net of advertising agency commissions.
Television advertising revenue and online advertising revenue are recognised at the point of transmission of the advertisement.
Revenue from sponsorship of the Group’s programmes is recognised on a straight-line basis over the period of the transmission
schedule for each sponsorship campaign.
ii) Programme production revenues
Revenue from third party commissions is recognised on delivery of the finished programme to the commissioning broadcaster as at
the point that the performance obligation is delivered and control ownership passes to that broadcaster for the period of their licence.
Revenues from the sale of the above programmes to overseas broadcasters or the UK secondary market (usually digital channels)
is recognised on the licence commencement date with the broadcaster. An element of the original cost of production is deferred
and recognised against the future revenue stream expected to be generated in the secondary and overseas sales markets. The
amount to be deferred varies by programme based on future overseas and secondary sales potential and involves significant
estimate (see critical accounting estimates note 5).
iii) Lottery service revenues
Revenue is recognised for ongoing lottery costs rebilled to the SCL at a point when the lottery draw to which the service relates
has taken place.
Dividend income
Dividend income is recognised when the right to receive payment is established.
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.
Dividend distribution
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.
Exceptional items
Exceptional items are items that are unusual because of their size, nature or incidence and which the Directors consider should
be disclosed separately to enable a full understanding of the Group’s results.
STV Annual Report and Accounts 2018
80
Notes to the financial statements
Continued
4. Financial risk management
Capital 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 22, 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. This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated
balance sheet plus net debt. The gearing ratios at 31 December 2018 and 2017 were as follows:
Total borrowings (note 22)
Cash and cash equivalents (note 20)
Net debt
Total equity
Total capital
2018
£m
42.6
(6.3)
36.3
(59.1)
(22.8)
2017
£m
41.6
(6.1)
35.5
(53.0)
(17.5)
(159%)
(203%)
The movement in total equity is largely due a pension remeasurement increase of £11.9m (2017: decrease of £12.7m).
Covenants
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) (see note 26) 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.
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 with a principal value
of £15.0m (2017: £15.0m) were entered into on 9 July 2016 and matured on 9 July 2018. The swaps were renewed on similar
terms for a further 2 years until 9 July 2020. Fair value is based on the market price of these instruments at the balance sheet
date. In accordance with IFRS 13, 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.
i) 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 which is also the Group’s intra-UK net currency flow. 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 2018 the Group had no forward foreign currency contracts in place (2017: £nil).
ii) 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 except for the £6.6m (2017: £8.2m) debtor due from the SCL. 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
Financial Statements
81
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.
iii) 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 22)
and cash and cash equivalents (note 20)) 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.
iv) 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 hedge between 30% and 50% of its core borrowings.
A monthly sensitivity analysis is carried out, and on the level of borrowings of the Group at 31 December 2018, a movement
of 0.25% in interest rates would change the level of interest paid in the year by +/- £0.1m (2017: £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 2016 and matured on 9 July 2018. The swaps were renewed
on similar terms for a further 2 years until 9 July 2020.
5. 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.
Group
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 and
mortality rate. Any changes in these assumptions will impact the carrying amount of pension obligations. In the event of the
pension liability becoming a surplus, the Company legally has an unconditional right to that surplus and this has been agreed
with the scheme trustees.
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 29.
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 which are a judgemental area. A detailed forecast of future secondary
sales is prepared by management based on historic experience and expected future trends. £4.9m (including £4.6m exceptional
write offs) was expensed through the income statement in the year (2017: £1.4m). Additional information is disclosed in note 18.
STV Annual Report and Accounts 2018
82
Notes to the financial statements
Continued
Lottery recoverability
An amount of £6.6m (2017: £8.2m) is included within non-current assets as receivable from the Scottish Children’s Lottery. It is due
to ELM (the lottery management company) and is expected to be recovered from 2019 onwards. In line with IFRS 9, as a result of
recent trends in ticket sales and updated future forecasts, which show a significantly slower repayment profile and a resulting
increased credit risk for the debtor than previously anticipated, management has performed a whole of life probability weighted
impairment review. The outcome has been to increase the provision by £4.2m to £5.0m.
Company
Carrying value of parent company investments
The Company’s policy is to carry out annual reviews of its investments. Based on operating results for the subsidiary undertakings
and future forecast cash flows, the Directors consider that the investments’ recoverable amount is greater than its carrying value
and consequently no impairment is considered necessary. Additional information is disclosed in note 17.
6. 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 Broadcast, Digital, Productions and ELM (external lottery management).
The performance of the segments is assessed based on a measure of adjusted operating profit.
Since the last annual financial statements, there has been a change in the basis of segmentation. The previous Consumer
segment has been further broken down into Broadcast and Digital and as such the 2017 figures have been restated.
Segment revenues
Broadcast
Digital
Productions
ELM
External revenue
2018
£m
94.5
9.6
16.3
5.5
2017
£m
92.0
8.2
10.2
6.6
125.9
117.0
The Group adopted IFRS 15 during the year. Revenue for 2018 would have been the same under IAS 18. Group revenue is
recognised at a point in time except for £9.2m which is recognised over time.
Revenue in 2018 includes £0.5m of revenues from sources outside the UK (2017: £0.8m).
Segment result
Broadcast
Digital
Productions
ELM
Operating profit (pre-exceptionals)
Exceptional provision attributable to ELM
Exceptional reorganisation cost attributable to Group
Exceptional loss on sale of STV2 attributable to Group
Exceptional GMP equalisation charge attributable to Group
Operating profit
Financing
Impairment losses – exceptional ELM provision
Profit before tax
Tax charge
Profit attributable to owners of the parent
Operating profit in 2018 includes £0.3m arising outside the UK (2017: £0.5m).
2018
£m
15.3
4.7
0.1
–
20.1
–
(8.7)
(0.8)
(1.6)
9.0
(2.9)
(4.2)
1.9
(0.3)
1.6
2017
£m
15.3
3.7
–
–
19.0
(1.6)
–
–
–
17.4
(3.5)
–
13.9
(2.2)
11.7
Financial Statements
83
Assets
Liabilities
2018
£m
31.5
1.3
23.6
6.7
63.1
2017
£m
32.4
1.1
29.4
8.2
71.1
2018
£m
13.5
0.3
4.4
0.4
2017
£m
9.5
0.1
5.1
0.5
18.6
15.2
20.4
21.5
124.0
115.7
83.5
92.6
142.6
130.9
Broadcast
Digital
Productions
2018
£m
3.1
2.0
2017
£m
3.3
1.8
2018
£m
0.3
0.4
2017
£m
0.1
0.4
2018
£m
2017
£m
–
–
–
–
ELM
2018
£m
–
–
2017
£m
–
–
Segment assets and liabilities
Broadcast
Digital
Productions
ELM
Total of all segments
Unallocated corporate
Consolidated
Other segment information
Capital additions
Depreciation and amortisation
Segment assets consist primarily of 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 2017 and 2018 were held in the UK and therefore operate in a single geographical segment.
7. Operating expenses by nature
Programming costs
Staff costs
Other external charges
Depreciation and amortisation
Operating lease charges
Other operating charges
Exceptional items
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
Included in the audit fees payable is £5,000 (2017: £5,000) paid in respect of the parent company.
2018
£m
57.1
30.6
13.7
2.4
1.8
0.2
105.8
11.1
116.9
2017
£m
47.9
28.6
16.8
2.2
2.3
0.2
98.0
1.6
99.6
2018
£000
2017
£000
115
24
27
166
110
25
26
161
STV Annual Report and Accounts 2018
84
Notes to the financial statements
Continued
Fees in respect of STV Group plc pension schemes
Audit
8. Staff
Group
The average monthly number of employees (including executive directors) was:
Broadcast, Digital, Productions and ELM
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
2018
£000
25
2017
£000
25
2018
Number
2017
Number
457
26
483
480
23
503
2018
£m
23.5
2.1
5.0
30.6
2017
£m
20.4
2.2
6.0
28.6
Details of Directors’ remuneration is provided in the Remuneration Report on pages 54 to 61.
Company
The Company had no employees during the current or preceding year.
No director received remuneration from the Company during the year (2017: £nil). The emoluments of the Directors are paid
by another Group company which makes no recharge to the parent company.
9. Exceptional items
Reorganisation cost
A provision of £8.7m has been recognised during the year in relation to restructuring within the business. The restructure was
mainly as a result of the closure of STV2. The £8.7m includes a £6.0m non-cash writedown of stock (£5.0m) and assets (£1.0m).
Included within the stock writedown of £5.0m is £4.6m impairment of deferred production stock due to the reorganisation.
Loss on disposal of STV2
The disposal of the STV2 companies to That’s Media Limited on 30 June resulted in a loss on sale of £0.8m. The loss on disposal
includes a non-cash writedown of stock and assets of £0.4m. See note 11 for more information.
GMP charge
A past service cost of £1.6m has been included in the measurement of the pension scheme liabilities for Guaranteed Minimum
Pension (‘GMP’) equalisation. This is to equalise the benefits between men and women following a High Court ruling around
equalisation of GMP.
ELM debtor
An additional £4.2m provision has been recorded during the year in relation to the ELM debtor.
In line with IFRS 9, as a result of recent trends in ticket sales and updated future forecasts, which show a significantly slower
repayment profile and a resulting increased credit risk for the debtor than previously anticipated, management has performed
a whole of life probability weighted impairment review. The outcome has been to increase the provision by £4.2m to £5.0m.
In 2017, the £1.6m non-cash charge incurred in the year included the IAS 39 discounting provision of £0.8m (above) and also
a £0.8m write off of post-launch non-billable costs.
The tax effect on exceptional items during the year was a credit of £2.6m (2017: £0.1m credit).
Financial Statements
10. Finance costs
Bank borrowings
IAS 19 pension finance charge
Impairment losses – exceptional ELM provision (note 9)
85
2017
£m
1.0
2.5
3.5
–
3.5
2018
£m
1.1
1.8
2.9
4.2
7.1
11. Disposal of subsidiary
On 30 June 2018, the Group sold the STV2 local licence companies to That’s Media Limited for a gross cash consideration of £0.3m
(£0.2m net of disposal costs) resulting in a £0.8m loss on disposal.
The loss on disposal has been calculated as follows:
Exceptional items written off:
Stock
Pre-launch costs
Redundancy costs
Cost of contract cancellations
Fixed assets
Disposal expenses
Total consideration
Loss on sale of STV2
12. Tax charge
Corporation tax:
Current year
Adjustments in respect of prior years
Deferred tax (see note 23)
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 19% (2017: 19.25%)
Tax effects of:
Other expenses not deductible for tax purposes
Utilisation of losses not recognised
Impact of changes in tax rates
Changes in estimates related to prior years
Tax charge for the year
30 June
2018
£m
(0.3)
(0.3)
(0.2)
(0.1)
(0.1)
(1.0)
(0.1)
(1.1)
0.3
(0.8)
2018
£m
2017
£m
–
(0.4)
(0.4)
0.7
0.3
2018
£m
1.9
0.4
0.1
0.2
(0.2)
(0.2)
0.3
1.2
–
1.2
1.0
2.2
2017
£m
13.9
2.7
0.1
(0.2)
(0.2)
(0.2)
2.2
STV Annual Report and Accounts 2018
86
Notes to the financial statements
Continued
13. 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.
Adjusted EPS is presented in order to show the business performance of the Group in a consistent manner and reflect how the
business is managed and measured on a day-to-day basis. Adjusted EPS reflects the impact of operating and non-operating
exceptional items on Basic EPS and also IAS 19 net financing cost adjustment; and the tax adjustments relating to these items.
Each of these adjustments is explained in detail in the section below.
The calculation of Basic EPS and Adjusted EPS, together with the diluted impact on each, is set out below:
Basic earnings per share
Profit for the year attributable to equity shareholders
Weighted average number of ordinary shares in issue – million
Basic earnings per ordinary share
Diluted earnings per share
Profit for the year attributable to equity shareholders
Weighted average number of ordinary shares in issue – million
Dilution due to share options
Total weighted average number of ordinary shares in issue – million
Diluted earnings per ordinary share
Adjusted earnings per share
Profit for the year attributable to equity shareholders
Exceptional items (net of tax)
Exceptional impairment losses (net of tax)
Profit for the year before exceptional items
Adjustment for IAS 19 financing cost (net of tax)
Adjusted profit
Weighted average number of ordinary shares in issue – million
Adjusted earnings per ordinary share
Diluted adjusted earnings per share
Adjusted profit
Weighted average number of ordinary shares in issue – million
Dilution due to share options
Total weighted average number of ordinary shares in issue – million
Diluted adjusted earnings per ordinary share
2018
£m
1.6
38.4
4.2p
2018
£m
1.6
38.4
0.8
39.2
4.1p
2018
£m
1.6
9.2
3.5
14.3
1.5
15.8
38.4
2017
£m
11.7
38.9
30.1p
2017
£m
11.7
38.9
0.6
39.5
29.6p
2017
£m
11.7
1.6
–
13.3
2.1
15.4
38.9
41.1p
39.6p
2018
£m
2017
£m
15.8
38.4
0.8
39.2
15.4
38.9
0.6
39.5
40.3p
39.0p
Ref
(a)
(b)
(c)
Financial Statements
87
Details of the adjustments to earnings are as follows:
(a) Exceptional items (net of tax) £9.2m (2017: £1.6m)
Exceptional items of £11.1m (2017: £1.6m), net of related tax credit of £1.9m (2017: £nil). See note 9 for more details.
(b) Exceptional impairment losses (net of tax) £3.5m (2017: £nil)
Exceptional impairment losses of £4.2m (2017: £nil), net of related tax credit of £0.8m (2017: £nil). See note 9 for more details.
(c) Adjustment for IAS 19 financing cost (net of tax) £1.5m (2017: £2.1m)
An adjustment for the IAS 19 financing cost of £1.8m (2017: £2.5m), net of a related tax credit of £0.3m (2017: £0.4m).
14. Dividends
Equity dividends on ordinary shares
Declared and paid during the year:
Final for 2017: 12.0p (2016: 11.0p) per share
Interim for 2018: 6.0p (2017: 5.0p) per share
Dividends paid
2018
£m
2017
£m
4.6
2.3
6.9
4.3
1.9
6.2
A final dividend of 14.0p per share (2017: 12.0p per share) has been proposed and is subject to approval by the Board of Directors.
It is payable on 31 May 2019 to shareholders who are on the register at 12 April 2019. The ex-dividend date is 11 April 2019.
This final dividend, amounting to £5.3m has not been recognised as a liability in these financial statements.
15. Intangible assets
Cost
At 1 January 2017
Additions
At 1 January 2018
Additions
Disposals
At 31 December 2018
Accumulated amortisation and impairment
At 1 January 2017
Amortisation
At 1 January 2018
Amortisation
Disposals
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
Web
development
and branding
£m
3.2
0.5
3.7
0.4
(0.7)
3.4
0.5
0.6
1.1
0.7
(0.3)
1.5
1.9
2.6
STV Annual Report and Accounts 2018
88
Notes to the financial statements
Continued
16. Property, plant and equipment
Cost
At 1 January 2017
Additions
Transfers
Disposals
At 1 January 2018
Additions
Transfers
Disposals
At 31 December 2018
Accumulated depreciation and impairment
At 1 January 2017
Charge for year
Disposals
At 1 January 2018
Charge for year
Disposals
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
17. Investments
Group
Listed
Other
Plant,
technical
equipment
and other
£m
Assets
under
construction
£m
Leasehold
buildings
£m
0.1
0.3
–
–
0.4
–
–
–
0.4
0.1
–
–
0.1
–
–
0.1
0.3
0.3
22.3
–
1.9
(0.1)
24.1
–
1.8
(0.2)
25.7
15.2
1.6
(0.1)
16.7
1.7
(0.1)
18.3
7.4
7.4
0.2
2.6
(1.9)
–
0.9
3.0
(1.8)
–
2.1
–
–
–
–
–
–
–
2.1
0.9
Total
£m
22.6
2.9
–
(0.1)
25.4
3.0
–
(0.2)
28.2
15.3
1.6
(0.1)
16.8
1.7
(0.1)
18.4
9.8
8.6
2018
£m
2017
£m
0.1
0.6
0.7
0.8
0.6
1.4
The Group holds investments in a number of different entities. These investments are categorised as equity investments and
are measured at fair value through the Statement of Other Comprehensive Income.
The movement of £0.7m during the year relates to Mirriad plc, one of STV Group’s investments. 324,203 shares were sold in the
year for £0.2m and the value of the remaining investment was written down by £0.5m to market value.
Company
Share in Group undertakings
Other investments
Listed
Other
2018
£m
2017
£m
47.3
47.3
0.2
0.5
48.0
0.8
0.5
48.6
Financial Statements
89
Impairment testing
Investments in subsidiaries is monitored by management to ensure that it has not suffered any impairment. In order to assess
whether the investment in subsidiaries was subject to impairment, a valuation assessment was performed using a DCF model.
The cash flow projections for the model were based on a 3 year plan approved by the Board in October 2018 which supported
moderate growth in the Group through the period from 2019 to 2021 and a terminal value thereafter based on 3% growth. The
resulting valuation provided significant headroom against the carrying value.
Further sensitivities were modelled to provide management with sufficient comfort that no impairment would be required,
namely a +/- 1% change in discount rate and also an operating profit fall in 2019 of 10% and then flat growth. Both scenarios
still left the Group with significant headroom. The discount rate applied was 7.85% (2017: 7.95%).
Based on the above the Directors consider that the investments’ recoverable amount is greater than its carrying value and
consequently no impairment is considered necessary.
Subsidiary undertakings
A full list of subsidiary undertakings as at 31 December 2018 is as follows:
Undertaking
Principal activity
Registered address
STV News Services Limited *
STV Television Limited
STV Central Limited
STV North Limited
STV Productions Limited
STV Drama Productions Limited
Investment holding undertaking
Investment holding undertaking
Television broadcasting
Television broadcasting
Programme production
Programme production
Ginger Television Productions Limited
Programme production
SKA Ginger Productions Limited (50%)
Programme production
Altissimo Music Limited
stv.tv Limited
Solutions.tv Limited
Grampian Television Limited
STV Services Limited *
Scottish News Network Limited
STV SIP Trustees Limited
Music rights
Dormant
Dormant
Dormant
Group services undertaking
Dormant
Dormant
Rise & Shine (Television) Limited *
Investment holding undertaking
STV Publishing Limited
STV Out of Home Limited
Peopleschampion Limited
Scottish Media Group (Jersey) Limited
The Ginger Media Group Limited
Dormant
Dormant
Dormant
Dormant
Dormant
STV Appeal *
Holding undertaking for charity
STV Appeal Trading Company Limited
Trading undertaking for charity
STV Elm Limited *
* directly held
Group services undertaking
The registered address for all companies (except where noted) is Pacific Quay, Glasgow, G51 1PQ.
(1) 2nd Floor, Bewlay House, 2 Swallow Place, London, W1B 2AE
(2) 13 Castle Street, St Helier, Jersey, Channel Islands, JE4 5UT
The investments are stated in the balance sheet at cost less amounts written off for impairment in value. All of the above
investments are 100% shareholdings within the Group except where stated.
(1)
(1)
(1)
(2)
(1)
STV Annual Report and Accounts 2018
90
Notes to the financial statements
Continued
18. Inventories
Deferred programme production
Programme production work in progress
Recorded programmes
Group
2018
£m
10.3
3.9
0.2
14.4
2017
£m
14.8
4.9
0.9
20.6
Deferred programme production stock represents original costs of production which are deferred and recognised against future
revenue streams expected to be generated in the secondary sales market.
Deferred programme production stock is classified as a current asset even though it will be realised into cash over several years
due to the homogeneous nature of the inventory which would result in an arbitrary split between the current and non-current
categories and to be consistent with practice elsewhere in the industry. It is anticipated that £1.0m is likely to be realised within
12 months.
At 31 December 2018, the net present value (NPV) of the future sales, estimated over a maximum period of 15 years for drama
and 10 years for other genres of programming, was £14.0m (2017: £24.7m), with the net book value of £10.3m representing 46%
(2017: 54%) of the future sales gross of discounting. A discount rate of 6.0% (2017: 6.0%) was applied. Revenues in 2019 are
expected to be £2.0m.
The sensitivities regarding the principal assumptions used to measure the deferred production costs are set out below:
Assumption
Discount rate
Change in assumption
Impact on NPV
Increase/decrease by 0.25%
Decrease/increase by £0.2m
Rate of price inflation (RPI)
Increase/decrease by 0.25%
Increase/decrease by £0.2m
Sales
Increase/decrease by 10.00%
Increase/decrease by £1.3m
19. Trade and other receivables
Group
Company
Current
Non-current
Current
Non-current
2018
£m
2017
£m
2018
£m
2017
£m
Trade receivables
11.9
15.4
Amounts owed by group undertakings
Prepayments
Contract assets
Other receivables
Corporation tax debtor
–
2.0
8.4
0.2
0.2
–
2.4
8.5
0.4
–
22.7
26.7
–
–
–
–
8.2
–
8.2
2018
£m
–
2017
£m
–
2018
£m
–
2017
£m
–
75.2
75.9
182.6
167.5
–
–
1.0
–
–
–
1.1
–
–
–
–
–
–
–
–
–
–
–
–
–
8.2
–
8.2
76.2
77.0
182.6
167.5
Trade receivables relate to a number of independent customers for whom there is no recent history of default.
Financial Statements
91
The ageing analysis of the trade receivables is as follows:
Less than 30 days
Past due
2018
2017
Gross
£m
Provision
£m
Gross
£m
Provision
£m
11.4
0.5
11.9
–
0.1
0.1
15.1
0.3
15.4
–
–
–
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. All trade receivables
are expected to be recovered.
Contract assets (accrued income) primarily relate to the Group’s right to consideration for work completed but not billed at the
reporting date.
Group other receivables of £8.2m (31 December 2017: £8.2m), included within non-current assets, relates mainly to debt due to
ELM (the lottery management company) from the Scottish Children’s Lottery and will be recovered from 2019 onwards. The £6.6m
(2017: £8.2m) ELM debtor is net of an expected credit loss impairment of £5.0m. In line with IFRS 9, as a result of recent trends in
ticket sales and updated future forecasts, which show a significantly slower repayment profile and a resulting increased credit risk
for the debtor than previously anticipated, management has performed a whole of life probability weighted impairment review.
The outcome has been to increase the provision by £4.2m to £5.0m.
Opening provision under IAS 39 (included in operating expenses) and IFRS 9
Increase in provision under IFRS 9
£m
0.8
4.2
5.0
Amounts owed by group undertakings are considered to have low credit risk and the loss allowance recognised during the period
was therefore limited to 12 months expected credit losses. The amounts were not material.
A loan to a subsidiary undertaking of £80.0m (2017: £80.0m) is included within the Company amounts owed by group undertakings.
All remaining amounts owed by group undertakings are unsecured, interest free and have no fixed date of repayment.
20. Cash and cash equivalents
Cash and cash equivalents
Group
2018
£m
6.3
2017
£m
6.1
STV Annual Report and Accounts 2018
92
Notes to the financial statements
Continued
21. Trade and other payables
Current
Trade payables
Accrued expenses
Contract liabilities
Amounts owed to group undertakings
Bank overdraft
Social security and other taxes
Group
2018
£m
6.1
9.8
1.9
–
–
2.6
20.4
2017
£m
4.3
7.4
2.1
–
–
3.7
17.5
Company
2018
£m
2017
£m
–
0.1
–
68.3
4.4
–
–
0.5
–
54.2
4.1
–
72.8
58.8
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Contract liabilities (deferred income) primarily relate to the consideration received from customers in advance of transferring
a good or service:
Balance at 1 January
Revenue recognised in the year
Cash received
Balance at 31 December
22. Borrowings
Bank loans
The borrowings are repayable as follows:
Expiring in 2 to 5 years
All undrawn committed borrowing facilities are repayable within 2 to 5 years (2017: 2 to 5 years).
The amount of bank loans is net of £0.4m unamortised borrowing costs (2017: £0.4m).
The effective interest rates were as follows:
Bank loans (floating)
2018
£m
2.1
(2.1)
1.9
1.9
2017
£m
1.1
(1.0)
2.0
2.1
Group
2018
£m
2017
£m
42.6
41.6
42.6
41.6
2018
%
2.2
2017
%
2.0
At 31 December 2018, the Group had revolving credit and overdraft bank facilities in place totalling £60.0m (£60.0m at 31 December
2017). At 31 December 2018, £43.0m (£42.0m at 31 December 2017) of the facility was drawn down.
The £60.0m revolving credit and overdraft facility has a maturity date of June 2022. 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 (2017: £15.0m). The notional
principal amount of the outstanding interest rate swap contracts at 31 December 2018 was £15.0m (2017: £15.0m). A fair value
on the interest rate swaps of £nil (2017: £nil) has been recognised at 31 December 2018.
Financial Statements
93
23. 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
Group
2018
£m
2017
£m
Company
2018
£m
2017
£m
(19.5)
–
(19.5)
(17.0)
(1.4)
(18.4)
(19.5)
(18.4)
(6.7)
–
(6.7)
(6.7)
(1.8)
(1.9)
–
(4.7)
(0.5)
(5.2)
(5.2)
–
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 £1.8m (2017: £1.9m) 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:
Group
At 1 January 2018
Charge/(credit) to income
Charge/(credit) to equity/OCI
At 31 December 2018
Company
At 1 January 2018
Charge to income
Credit to equity/OCI
At 31 December 2018
Tax
trading
losses
£m
Other
temporary
differences
£m
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
Total
£m
(3.9)
–
–
(3.9)
–
–
–
–
(0.9)
0.2
0.2
(0.5)
–
–
–
–
(1.6)
(0.3)
–
(12.0)
(18.4)
0.8
(2.0)
0.7
(1.8)
(1.9)
(13.2)
(19.5)
–
–
–
–
(5.2)
0.3
(1.8)
(6.7)
(5.2)
0.3
(1.8)
(6.7)
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (No.2) on 26 October 2015. These
include reductions to the main rate to reduce the rate to 19% from 1 April 2017. Finance Act 2016, which was substantively enacted
on 6 September 2016, includes legislation reducing the main rate of UK corporation tax to 17% from 1 April 2020. Deferred taxes
at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
STV Annual Report and Accounts 2018
94
Notes to the financial statements
Continued
24. 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
25. Share capital and premium
At 1 January 2018
Shares bought back on-market and cancelled
At 31 December 2018
Reorganisation
provisions
Onerous lease
provisions
Total
provisions
2018
£m
–
1.7
(0.7)
1.0
1.0
–
1.0
2017
£m
–
–
–
–
–
–
–
2018
£m
0.3
–
(0.2)
0.1
0.1
–
0.1
2017
£m
0.5
–
(0.2)
0.3
0.2
0.1
0.3
2018
£m
0.3
1.7
(0.9)
1.1
1.1
–
1.1
2017
£m
0.5
–
(0.2)
0.3
0.2
0.1
0.3
Number of
shares
(thousands)
Ordinary
shares
£m
Share
premium
£m
Total
£m
39,367
(175)
39,192
19.7
(0.1)
19.6
101.9
121.6
–
(0.1)
101.9
121.5
The total authorised number of ordinary shares is 63 million shares (2017: 63 million shares) with a par value of £0.50 per share
(2017: £0.50 per share). All issued shares are fully paid.
The Group commenced a share buyback programme in 2017 which ceased in April during the year. During 2018 175,000 shares
were purchased and cancelled (2017: 181,000 shares).
26. Notes to the parent and consolidated statement of cash flows
Operating profit/(loss)
Adjustments for:
Depreciation (note 16)
Amortisation (note 15)
Share based payment
Reorganisation exceptional
Sale of STV 2 exceptional
GMP exceptional
ELM exceptional
EBITDA
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables (excluding ELM)
Increase/(decrease) in trade and other payables (excluding ELM)
Increase in ELM trade and other receivables
Decrease in ELM trade and other payables
Increase in intra group balances
Exceptional reorganisation cash costs
Cash generated by operations
Group
2018
£m
9.0
1.7
0.7
0.3
8.7
0.8
1.6
–
22.8
0.7
2.2
3.1
(2.6)
(0.1)
–
26.1
(2.4)
23.7
2017
£m
Company
2018
£m
2017
£m
17.4
(1.7)
(0.8)
1.6
0.6
0.3
–
–
–
1.6
21.5
(1.1)
(3.9)
(1.4)
(3.9)
–
–
11.2
–
–
–
–
–
0.3
0.3
–
–
1.1
–
(0.3)
–
0.1
0.2
–
–
14.8
14.8
–
–
–
–
–
(0.5)
–
(0.1)
–
–
–
13.1
12.5
–
11.2
14.8
12.5
Financial Statements
Reconciliation of movement in net debt
Share buy-back
Long-term borrowings
Total liabilities from financing activities
Deduct: Share buy-back
Cash and cash equivalents
Net debt
95
At 1 January
2018
£m
Cash flows
£m
Non-cash
changes
£m
(0.4)
(41.6)
(42.0)
0.4
6.1
(35.5)
0.6
(1.0)
(0.4)
(0.6)
0.2
(0.8)
(0.2)
–
(0.2)
0.2
–
–
At 31
December
2018
£m
–
(42.6)
(42.6)
–
6.3
(36.3)
The share buy-back liability included within Trade and other payables on the balance sheet in 2017 and relating to a contract
to purchase our own shares as part of the share buy-back scheme was reversed in 2018.
The long-term borrowings non-cash changes relate to the amortisation of borrowing costs.
27. 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
2018
£m
1.7
8.0
4.1
13.8
2017
£m
2.1
8.0
6.1
16.2
28. Transactions with related parties
Key management compensation
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 to 57 for details
2018
£m
2.4
2017
£m
1.4
Other related party transactions
During the year £3,700 (2017: £3,700) of fee income was received from the Group’s investment companies and a balance of
£1,110 owed at 31 December 2018 (31 December 2017: £2,220).
During the year airtime advertising transactions occurred between the Group and a company of which Christian Woolfenden
is the Managing Director. The transactions amounted to £32,758 during the year (2017: £32,683) with an outstanding receivable
of £nil at 31 December 2018 (31 December 2017: £25,610).
There have been no other transactions with key management personnel as defined under IAS 24.
STV Annual Report and Accounts 2018
96
Notes to the financial statements
Continued
29. 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 £1.5m (2017: £1.5m).
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. Both are closed schemes and accounted for under the projected unit method.
Defined benefit pension deficit
Group
The net pension deficit at 31 December 2018 was £78.5m (2017: £70.6m).
Company
The net pension deficit was £40.5m (2017: £30.6m).
The net assets and liabilities of the schemes are recognised in the consolidated balance sheet and shown within non-current
liabilities. The totals recognised in the current and previous years are:
Total defined benefit scheme obligations
Total defined benefit scheme assets
Net pension deficit
Group
2018
£m
2017
£m
Company
2018
£m
2017
£m
(421.9)
(440.0)
(180.3)
(182.2)
343.4
(78.5)
369.4
(70.6)
139.8
(40.5)
151.6
(30.6)
A related offsetting deferred tax asset for the Group of £13.2m (2017: £12.0m) and the Company of £6.7m (2017: £5.2m) is included
under non-current assets. Therefore the pension scheme deficit net of the related deferred tax asset for the Group amounts to
£65.3m at 31 December 2018 (£58.6m at 31 December 2017) and the Company amounts to £33.8m (2017: £25.4m).
Total defined benefit scheme obligations
The movement in the present value of the defined benefit obligation is analysed below:
Defined benefit obligation at 1 January
Past service cost – GMP equalisation
Interest cost
Remeasurement (gains)/losses
Benefits paid from plan
Defined benefit obligation at 31 December
Group
2018
£m
2017
£m
Company
2018
£m
2017
£m
440.0
448.2
182.2
186.6
1.6
11.0
(10.6)
(20.1)
421.9
–
12.2
0.4
(20.8)
440.0
1.1
4.5
1.9
(9.4)
–
5.1
(0.2)
(9.3)
180.3
182.2
Assumptions used to estimate the scheme obligations
The 1 January 2015 valuation has been updated to 31 December 2017 by a qualified independent actuary and reflect recent
market movements in corporate bond yields and inflation. The major assumptions used by the actuary were:
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Rate of price inflation (RPI)
Group
Company
2018
2017
2018
2017
nil%
3.30%
2.75%
3.30%
nil%
3.21%
2.55%
3.20%
nil%
3.30%
2.75%
3.30%
nil%
3.21%
2.55%
3.20%
Assumptions regarding future mortality experience are set based on advice, published statistics and experience in each scheme and
are reflected in the table below (average life expectations of a pensioner retiring at age 65). As part of the 1 January 2015 valuation
process, a detailed research project on the health of approximately 40% of the two schemes’ pensioners was undertaken. The
outcomes of this study have been reflected in the mortality assumptions used at both 31 December 2017 and 2018.
Financial Statements
97
Group
2018
Years
Company
2017
Years
2018
Years
2017
Years
19.4
21.6
21.4
23.1
18.8
20.8
20.6
22.3
19.1
21.3
20.8
23.3
18.5
20.6
20.1
22.5
Retiring at balance sheet date:
Male
Female
Retiring in 25 years:
Male
Female
The sensitivities regarding the principal assumptions used to measure the defined benefit obligation are set out below:
Assumption
Group
Discount rate
Change in assumption
Impact on scheme liabilities
Increase/decrease by 0.25%
Increase/decrease by 3%
Rate of price inflation (RPI)
Increase/decrease by 0.25%
Increase/decrease by 1%
Rate of mortality
Decrease by 1 year
Decrease by 5%
Company
Discount rate
Increase/decrease by 0.25%
Increase/decrease by 3%
Rate of price inflation (RPI)
Increase/decrease by 0.25%
Increase/decrease by 1%
Rate of mortality
Decrease by 1 year
Decrease by 4%
The analysis above 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.
Total defined benefit scheme assets
The movement in the fair value of the defined benefit scheme’s assets is analysed below:
Group
2018
£m
2017
£m
Company
2018
£m
2017
£m
Fair value of scheme assets at 1 January
369.4
359.4
151.6
147.4
Interest income
Return on plan assets excluding interest income
Contributions from the employer
Administrative expenses paid from plan assets
Benefits paid from plan
Fair value of scheme assets at 31 December
9.3
(22.5)
10.0
(2.7)
(20.1)
343.4
9.9
13.1
9.4
(1.6)
(20.8)
369.4
3.8
(9.0)
4.5
(1.7)
(9.4)
4.0
5.4
4.2
(0.1)
(9.3)
139.8
151.6
Scheme assets
At 31 December 2018 the Scheme’s assets were invested in a diversified portfolio that consisted primarily of investment funds
and debt instruments. The fair value of the Scheme’s assets are shown below:
Group
Investment funds
Debt instruments
Cash and cash equivalents
Derivatives
At 31 December 2018
At 31 December 2017
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
36.1
184.0
13.1
110.4
–
–
–
(0.2)
146.5
184.0
13.1
(0.2)
109.7
100.3
8.9
–
233.2
110.2
343.4
218.9
144.2
–
–
6.3
150.5
Total
£m
253.9
100.3
8.9
6.3
369.4
STV Annual Report and Accounts 2018
98
Notes to the financial statements
Continued
Company
Investment funds
Debt instruments
Cash and cash equivalents
Derivatives
At 31 December 2018
At 31 December 2017
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
14.8
75.1
5.0
–
94.9
45.2
–
–
(0.3)
44.9
60.0
75.1
5.0
(0.3)
139.8
44.7
41.4
3.6
–
89.7
59.5
104.2
–
–
2.4
61.9
41.4
3.6
2.4
151.6
Amounts recognised through the income statement:
Amounts recognised through the income statement are as follows:
Amount charged to net operating expenses:
Current service cost – defined benefit expenses
Past service cost – GMP equalisation
Amount charged to finance costs:
Net interest expense
Total charged in the consolidated income statement
Amounts recognised through the statement of comprehensive income:
The amounts recognised through the consolidated statement of comprehensive income are:
Remeasurement (losses)/gains:
Return on plan assets excluding interest income
Actuarial (losses)/gains on liabilities arising from change in:
– demographic assumptions
– financial assumptions
– experience adjustments
Total recognised in the consolidated statement of comprehensive income
2018
£m
2017
£m
(1.8)
(1.6)
(3.4)
(1.8)
(5.2)
(1.9)
–
(1.9)
(2.5)
(4.4)
2018
£m
2017
£m
(22.5)
13.1
(19.0)
8.1
20.1
(13.3)
11.8
(12.2)
–
12.7
Funding arrangements
Contribution rates to the scheme are determined by a qualified independent actuary on the basis of triennial valuation using
the projected unit method. The most recent triennial valuation was carried out as at 1 January 2015. This valuation resulted in
a deficit of £129.9m on a pre tax basis at 30 November 2016 compared to £83.0m on a pre tax basis at the previous settlement
date of 31 March 2014. This differential is principally due to a decrease in gilt yields during this period. The next triennial valuation
will take place as at 1 January 2018.
Following the valuation, an 11 year recovery plan was agreed with monthly payments commencing in January 2017. Annual
payments will increase at the rate of 2% per annum over the term of the plan. Additionally, in the event of outperformance
against the Group’s sensitised net cash flow, contingent payments equivalent to 20% of any outperformance above a benchmark
of available cash will be paid to the schemes. Sensitised forecast net cash flow is defined as cash flow pre-pension deficit funding
payments and returns to shareholders.
The estimated total employer contributions in 2019 are £10.2m which reflects the deficit funding payments described above.
The weighted average duration of the Plan’s defined benefit obligation is approximately 15 years.
30. Share-based compensation
The purpose of the share-based compensation plans is to align the interests of management and employees with those
of shareholders by providing incentives to improve the Company’s performance on a long-term basis, thereby increasing
shareholder value.
Financial Statements
99
The Company has the following plans currently operating:
i) Long-term incentive plans (LTIP)
ii) Employee share plans
In previous years, a Value Creation Plan (VCP) was in operation with the plan maturing at the 2015 year end.
Share-based compensation costs were £0.3m (2017: £0.3m).
i) Long-term incentive plans
The Group has a long-term incentive plan for Executive Directors and other senior executives. Awards are granted 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.
The performance measures are agreed by the Remuneration Committee based on which they consider to be aligned with the delivery
of strategy and long term shareholder value. 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 performance measures are
based on a combination of earnings growth and total shareholder return and are valued based on Monte-Carlo simulation.
The assumptions used in Monte-Carlo simulation for the 2018 LTIP valuation are:
Risk-free interest rate
Expected dividend yield
Expected share price volatility
%
0.65
5.45
29.62
Granted awards under the Company’s long term incentive plan that were outstanding at the end of the year had the following
market prices at the date of award:
Year awarded
2013 VCP
2014 LTIP
2015 LTIP
2016 LTIP
2017 LTIP
2018 LTIP
2018 LTIP – Chief Executive
ii) Employee share plans
Market price
on grant date
pence
1.00
3.40
4.25
3.67
3.65
3.23
3.10
2018
Number
2017
Number
376,735
470,205
1,875
1,607
20,040
302,473
306,395
324,265
264,647
292,888
348,025
210,662
–
–
The employee share plans are open to all employees. They provide for a grant price approximately equal to 90% of the middle
market quotion of a share on the dealing day last preceding the relevant date of invitation as derived from the London Stock
Exchange daily office list and can be purchased once a year. There are currently 3 employee share plans outstanding and the
exercise prices for options under these plans range from £3.34 to £3.60. At 31 December 2018 there were 428,886 (2017: 452,030)
options outstanding under the plans. The employee share plans are valued using the Black and Scholes model.
31. Reconciliation of statutory results to adjusted results
Statutory results are adjusted to reflect the underlying performance of the business, providing a more meaningful comparison
of how the business is managed and measured on a day-to-day basis.
Post-exceptional
Add back: exceptionals
Pre-exceptional
Add back: IAS 19
Adjusted results
2018
2017
Profit
before tax
£m
Basic EPS
pence
Diluted EPS
pence
Profit
before tax
£m
Basic EPS
pence
Diluted EPS
pence
1.9
15.3
17.2
1.8
4.2p
33.0p
4.1p
32.4p
37.2p
36.5p
3.9p
3.8p
13.9
1.6
15.5
2.5
30.1p
4.1p
29.6p
4.1p
34.2p
33.7p
5.4p
5.3p
19.0
41.1p
40.3p
18.0
39.6p
39.0p
STV Annual Report and Accounts 2018
100
Five year summary
For the year ended 31 December 2018
Results
Revenue
2014
£m
2015
£m
IFRS
2016
£m
2017
£m
2018
£m
120.4
116.5
120.4
117.0
125.9
Profit from operations before exceptional items
19.5
20.3
19.7
19.0
Profit on ordinary activities before taxation and exceptional items
17.3
18.6
18.5
15.5
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
26.9
61.2
88.1
19.7
64.9
3.5
88.1
38.7p
37.6p
8.0p
22.3
55.0
77.3
18.6
47.8
10.9
77.3
29.8p
29.0p
10.0p
38.4
55.6
94.0
18.1
128.9
(53.0)
94.0
32.5p
31.9p
15.0p
39.2
53.4
92.6
18.6
112.3
(38.3)
92.6
30.1p
29.6p
17.0p
20.1
17.2
40.1
43.4
83.5
21.5
121.1
(59.1)
83.5
4.2p
4.1p
20.0p
Financial Statements
101
Shareholder information
Registrars
Link Asset Services
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
Tel: 0871 664 0300*
Tel: (overseas) +44 371 664 0300
Fax: +44 (0) 1484 601 512
Email: enquiries@linkgroup.co.uk
Website: www.signalshares.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 LLP
120 Bothwell Street
Glasgow G2 7JL
Principal bankers
Santander UK plc
2 Triton Square
Regent’s Place
London NW1 3AN
Stockbrokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Panmure Gordon & Co
One New Change
London EC4M 9AF
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
STV Annual Report and Accounts 2018 102
Shareholder information
Annual Report on internet
The 2018 Annual Report of STV Group plc including the financial statements is available at: www.stvplc.tv
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:
Katie Martin
Communications Executive
STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3109
Email: katie.martin@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: +44 (0) 371 664 0381.**
Your shareholding
You can check your shareholding at any time by visiting our share portal at: www.signalshares.com
Link share dealing services
Link 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.linksharedeal.com (online dealing); 0371 664 0445** (telephone dealing).
*
Calls cost 12p per minute plus your phone company’s access charge. Calls outside the UK will be charged at the applicable international rate.
Lines are open between 9am-5:30pm, Monday to Friday excluding public holidays in England and Wales.
** Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate.
Lines are open between 9am-5:30pm, Monday to Friday excluding public holidays in England and Wales.
Additional Information 103
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 Tuesday
23 April 2019 at 11 am for the purpose of considering and, if thought fit, passing the resolutions below.
Resolutions 1 to 10 (inclusive) will be proposed as ordinary resolutions and Resolutions 11 to 13 (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 2018 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 in the form set out on pages 56 to 61 of the Annual Report and Accounts for
the financial year ended 31 December 2018.
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 declare a final dividend of 14.0p per ordinary share for the year ended 31 December 2018.
The Board proposes a final dividend of 14.0p per ordinary share for the year ended 31 December 2018 which, if approved,
will be paid on 31 May 2019 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 12 April 2019.
4.
To elect David Bergg as a Director of the Company, having been appointed since the last Annual General Meeting.
David Bergg is standing for election following his appointment as a Non-Executive Director on 1 May. 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 David Bergg can be found on page 43.
Resolutions 5 to 7
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.
5.
To re-elect Christian Woolfenden as a Director of the Company.
Biographical details of Christian Woolfenden can be found on page 42 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 Woolfenden’s performance continues to be effective and to demonstrate
commitment to the role.
6.
To re-elect Anne Marie Cannon as a Director of the Company.
Biographical details of Anne Marie Cannon can be found on page 42 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 Cannon’s performance continues to be effective and to demonstrate
commitment to the role.
STV Annual Report and Accounts 2018
104
Notice of Annual General Meeting
7.
To re-elect Simon Miller as a Director of the Company.
Biographical details of Simon Miller can be found on page 43 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 Miller’s performance continues to be effective and to demonstrate commitment
to the role.
8.
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.
9. To authorise the Audit Committee to fix the remuneration of the auditors of the Company.
10.
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 £6,532,022; and
(b)
up to an aggregate nominal amount of £6,532,022 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 in
both cases 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 (13,064,045 being shares
representing one third of the ordinary issued share capital of the Company as at 14 March 2019, 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 (13,064,045 being shares
representing one third of the ordinary issued share capital of the Company as at 14 March 2019, 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 2020. 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.
Special resolutions
11.
That subject to the passing of Resolution 10, 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 10 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 10 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; and
(b)
the allotment of equity securities (otherwise than pursuant to paragraph (a) above) having a nominal value not exceeding
in the aggregate £979,803,
and shall expire on the conclusion of the next Annual General Meeting 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.
Additional Information
105
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 renews a similar power granted at last year’s
annual general meeting to grant authority to the Directors to allot a limited number of ordinary shares other than to existing
shareholders in proportion to their existing shareholdings.
The power to be granted by this resolution will be limited, otherwise than in connection with a rights issue or similar pre-emptive
issue, to 1,959,606 ordinary shares, representing 5% of the ordinary issued share capital of the Company as at 14 March 2019.
It also allows the Directors to allot shares up to a nominal amount of £13,064,045 (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 £6,532,022 (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 2020. 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.
12.
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 3,919,213 Shares, the aggregate
nominal value of which is £1,959,606;
(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(6) of the Market Abuse Regulation
(No 598/2014); and
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 3,919,213 Shares, representing 10% of the ordinary share capital of the Company in issue as at 14 March 2019.
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.
The Company announced a share buyback programme on 22 September 2017 and as at 14 March 2019 the Company
has completed the buyback of 356,094 ordinary shares of 50p each, the aggregate consideration of which was £1,243,569.
Each of these shares was cancelled upon purchase. Consequently, on 14 March 2019 there were 39,192,137 ordinary shares
of 50p each in issue, each with one vote and no shares are held in treasury.
As at 14 March 2019 warrants and options to subscribe for 2,692,500 ordinary shares in the capital of the Company were
outstanding, representing 6.87% of the Company’s issued ordinary share capital as at 14 March 2019 (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 7.63% of the issued ordinary share capital of the Company (excluding treasury
shares held by the Company).
STV Annual Report and Accounts 2018
106
Notice of Annual General Meeting
13.
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.
By order of the Board
Jane E A Tames
Company Secretary
STV Group plc
Pacific Quay
Glasgow G51 1PQ
14 March 2019
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 Investors section at
www.stvplc.tv
2.
3.
4.
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.
To appoint a proxy and give proxy instructions please visit www.signalshares.com. You will require your investor code which
can be found on your share certificate or obtained from our Registrar, Link Asset Services. To request a paper proxy form
please contact Link on 0871 664 0300 or at enquiries@linkgroup.co.uk (calls cost 12p per minute plus your phone company’s
access charge. Calls from outside the UK will be charged at the applicable international rate. Lines are open between
9am-5:30pm, Monday to Friday excluding public holidays in England and Wales).
5.
To be valid the appointment of a proxy must be received online, by post or by hand (during normal business hours only) at
Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF no later than 11.00am on 21 April 2019
or 48 hours before the time of any adjournment of the meeting.
6.
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.
7.
8.
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.
To be entitled to attend, speak 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 by 6pm
on 21 April 2019 (or, in the event of any adjournment, by 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.
9.
As at 14 March 2019 (being the last business day prior to the publication of this Notice) the Company’s issued share capital
consists of 39,192,137 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 14 March 2019 are 39,192,137.
Additional Information
107
10.
11.
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.
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, Link Asset Services (ID RA10)
by 11.00am on 21 April 2019 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 Link
Asset Services on 0871 664 0300 or enquiries@linkgroup.co.uk (calls cost 12p per minute plus your phone company’s access
charge. Calls from outside the UK will be charged at the applicable international rate. Lines are open between 9am-5:30pm,
Monday to Friday excluding public holidays in England and Wales). 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.
15.
In order to revoke a proxy instruction you will need to send a signed hard copy notice clearly stating your intention to revoke
your proxy appointment to Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF. 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.
The revocation notice must be received by Link Asset Services no later than 8am on 23 April 2019 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.
Any member attending the meeting has a right to ask the Company questions and the Company must answer any question
asked which relates to the business being dealt with at the meeting unless:
(i)
answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of
confidential information;
(ii)
the answer has already been given on a website in the form of an answer to a question; or
(iii)
it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
STV Annual Report and Accounts 2018
108
Notice of Annual General Meeting
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 it:
(i)
would, if passed, be ineffective (whether by reason of any inconsistency with any enactment or the Company’s
constitution or otherwise);
(ii)
is defamatory of any person; or
(iii)
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.
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 it:
(i)
is defamatory of any person or
(ii)
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 six 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.
22.
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.
Except as provided above, members who have general queries about the Annual General Meeting should call our shareholder
helpline on 0871 664 0300 (calls cost 12p per minute plus your phone company’s access charge. Calls outside the UK will be
charged at the applicable international rate. Lines are open between 9am-5:30pm, Monday to Friday excluding public
holidays in England and Wales).
You may not use any electronic address provided either:
• in this notice of Annual General Meeting or
• in 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
Printer to place
FSC logo
In producing this report we have chosen production
methods which aim to minimise the impact on our
environment. The paper chosen – Cocoon 60 Silk
contains 60% recycled fibre and is certified in accordance
with the FSC (Forest Stewardship Council). Both the
paper mill and printer involved in this production are
environmentally accredited with ISO 14001.
Designed and produced by Thunderbolt Projects
STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3000
www.stv.tv
Company Registration Number SC203873
The Victim – STV Productions four-part
contemporary thriller for BBC One. Starring
leading Scottish actors Kelly Macdonald,
John Hannah and rising star James Harkness.
Shining a light on the causes
and impact of child poverty
£19m
raised so far
1,102
79,000
100%
projects
supported
children and young
people helped
of Scotland’s local
authorities reached
To get involved with the 2019 Appeal visit www.stv.tv/appeal
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
8
S
T
V
G
r
o
u
p
p
l
c