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ANNUAL REPORT AND
ACCOUNTS 2020
RESILIENCE AND PROGRESS
IN AN EXTRAORDINARY YEAR
While 2020 was a challenging year, the pandemic crisis
strengthened our connection with our audience. We achieved
record viewing numbers as people turned to Scotland’s public
service broadcaster for news, information and entertainment.
STV Studios production Celebrity Catchphrase was the first UK
entertainment show to get back into studio after the Covid-19
lockdown. The safety of everyone involved was the utmost priority,
but it was good to see our cameras and lights back in action.
The resilience of our people, culture, operations and business
strategy came to the fore across all divisions. We continued to
deliver for our viewers, communities and commercial partners;
to diversify; and to deliver a strong performance.
Contents
Overview
01
02
2020 financial and
operational highlights
The STV investor proposition
STV 2020 strategic progress
Strategic Report
04 Chairman’s statement
06
14 Operating review
– Broadcast
– Digital
– Studios
Finance review
26
30 Corporate responsibility
42
Section 172 statement
44 Risk management
Governance
Introduction to governance
53
54 Board of Directors
56 Corporate governance report
67 Remuneration report
85 Directors’ report
88
94
94
95
96
97
Financial Statements
Independent auditors’ report to
the members of STV Group plc
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated and parent company
balance sheets
Consolidated and parent company
statements of changes in equity
Consolidated and parent company
statements of cash flows
Notes to the financial statements
98
126 Five year summary
Additional Information
127 Shareholder information
View our Annual Report and Accounts
and other information about STV at
STVPLC.TV
STV Annual Report and Accounts 2020
Overview | Strategic Report | Governance | Financial Statements | Additional Information
01
2020 FINANCIAL AND
OPERATIONAL HIGHLIGHTS
REVENUE
(£ millions)
£107.1m
2019: £123.8m
TOTAL ADVERTISING REVENUE
(£ millions)
£90.9m
2019: £101.6m
EPS2
(pence)
37.5p
2019: 45.8p
OPERATING PROFIT1
(£ millions)
£18.2m
2019: £22.6m
NON-BROADCAST PROFIT
(%)
34%
2019: 28%
DIVIDEND PER SHARE3
(pence)
9.0p
2019: 6.3p
+14%
in STV all time audience
19
commissions won by
STV Studios, a record year
+65%
in streams on STV Player
£3.6m
funds raised by the
STV Children’s Appeal
1 Before exceptional items.
2 Before exceptional items and IAS19 finance costs (note 30); 2019 restated to reflect the bonus issue in December 2020 (note 10).
3 Dividend of 21p was disclosed in Annual Report in FY19. This comprised interim dividend of 6.3p plus proposed final dividend of 14.7p,
the latter subsequently cancelled in order to retain cash in the business in the face of the Covid-19 pandemic.
02
THE STV INVESTOR
PROPOSITION
STV Group plc has consistently delivered strong progress
against its strategic objectives originally set out in its
three year plan in 2018 and has demonstrated clear
advancement even against the backdrop of Covid-19.
Therefore, we begin 2021 in a strong position to build
on these foundations and deliver the next stage of
strategic growth for stakeholders.
Our offering is clear and strong and delivered across three business divisions:
• We are the home of news and entertainment in Scotland, holding a unique and
privileged position as Scotland’s commercial Public Service Broadcaster, trusted
and relied upon by our viewers and commercial partners alike. Our commercial
USP is our impressive reach of four out of five adults every month in Scotland.
• Our digital streamer, the STV Player, is now available on all major platforms
UK-wide, with 3,000 hours of Player-only content alongside a compelling network
schedule, creating a unique content offering. It is the fastest growing broadcaster
video on demand service in the UK.
• With the creative and organisational renewal of STV Studios now complete,
and strong momentum in commissions from a wide range of broadcasters,
the production business is now in a position to deliver a real profit contribution
to the Group.
Our people sit at the heart of our business and their health and wellbeing, working
within an inclusive and empowering environment, is of critical importance.
STV’s role as a Public Service Broadcaster and pre-eminent marketing platform,
combined with the high levels of trust in the brand, means the business holds
a unique position to raise awareness of environmental issues and challenges
and positively influence consumer behaviour. In early 2021, we confirmed our
commitments on sustainability, with a new target to be net-zero carbon by 2030.
Our creative and commercial goals, with vital objectives around diversity and
inclusion, mental health and sustainability, will make us a more successful
business for the long term.
STV business model
r t i s i ng
Ad v e
ers
View
C
o
n
t
e
n
t
Local
National
International
THE STV OFFER
A FAMILY OF STRONG
BRANDS, CONTENT
AND PRODUCTS
CLEAR, PROVEN
STRATEGIC OBJECTIVES
DELIVERING RESULTS
MAXIMISING THE
OPPORTUNITIES IN
OUR MARKET PLACE
WORKING IN
PARTNERSHIP TO
DELIVER GROWTH
KEY TARGETS TO
MEASURE SUCCESS
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 03
WE BEGIN 2021 IN A STRONG
POSITION TO DELIVER THE
NEXT STAGE OF STRATEGIC
GROWTH FOR STAKEHOLDERS
THE STV OFFER
BROADCAST
DIGITAL
STUDIOS
MAXIMISE THE
VALUE OF OUR
BROADCAST
BUSINESS
DRIVE DIGITAL
GROWTH VIA
A UNIQUE,
WIDE-REACHING
PROPOSITION
BUILD A WORLD
CLASS PRODUCTION
BUSINESS
NO.1
FASTEST
Scotland’s No.1 peak
time TV channel
UK’s fastest-growing
broadcaster VOD service
BIGGEST
Scotland’s biggest
production company
Our key diversification target has been to increase the proportion of the Group’s operating profit
from non-broadcast earnings. In 2020 we achieved our target of at least one third, hitting 34%;
our target for the next three years will be to increase that further to at least 50%.
STV Annual Report and Accounts 2020 04
CHAIRMAN’S STATEMENT
CHAIRMAN’S STATEMENT
The last 12 months have been extraordinary
and extremely challenging for everyone.
At our 2019 results, announced on
10 March 2020, STV’s key performance
metrics were at historic highs following
the successful implementation of the new
growth strategy put in place by the CEO and
his management team, with strong digital
and regional growth driving a double digit
increase in operating profit. However, at
that time there had been little effect on
the business from Covid-19. Following the
onset of the pandemic, the priority was to
ensure the safety of our people and that
STV was well positioned to continue its
successful growth strategy even in a
downside scenario.
Covid-19
The economic impact of the Government’s lockdown measures
was significant and STV responded proactively to mitigate the
commercial impacts of Covid-19 by maximising cash retention
and saving costs, which included the Management Board and
STV directors taking a voluntary 25% pay cut. Like many other
companies, our final FY19 dividend was cancelled and Directors
agreed that a complementary and balanced package of debt
(through increasing the current bank facility) and equity (from
conducting a share placing) would strengthen the balance sheet
and was the most appropriate action to take.
All parts of our business were impacted but our teams have
shown incredible resilience. The Studios business joined forces
with broadcasters to help introduce new industry wide guidance
for producing TV safely. As a trusted source throughout 2020,
STV News at Six cemented itself as the best watched news
programme in Scotland and our digital strategy to expand STV
Player continued throughout the pandemic, demonstrating
considerable growth.
Nurturing our people
Although the focus during 2020 was on costs, cash and
performance, protecting our staff has been equally important and
while many were placed on furlough, all received 100% of their
salary during that time. Our management team was conscious
of the mental health of employees and in addition to there being
significantly more communication, both within business areas/
teams and also across the whole company, employees were
encouraged to make use of STV’s Employee Assistance
Programme, which provides a 24/7 telephone counselling
service; Occupational Health; a team of Mental Health First
Aiders and other resources available through our ‘Wellbeing
from STV’ programme.
In terms of workplace planning to ensure the safety and
wellbeing of all staff and that STV was Covid-19 secure, guidance
was issued on the measures put in place to achieve physical
distancing and maintain safe working environments. The
capacity of each office was reduced and new safety measures,
including distance markers, signage and a strict cleaning routine
were introduced with employees’ temperatures being taken
before entry could be gained.
I am particularly grateful to all our staff for their resolve and
commitment through this testing time and for their determination
and hard work in helping to tackle this public health emergency
while supporting our communities and customers.
Corporate social responsibility
I am proud that STV has been there for its viewers every step
of the way during the pandemic, at the same time as taking
care of its advertisers through the STV Growth Fund and its local
communities, through the STV Appeal. STV is committed to driving
the Scottish economy by championing Scottish SMEs, providing
a platform to grow their businesses and build their brands on
television and it has an unrivalled connection with consumers,
reaching at least 80% of Scots every month. In March 2020, we
announced the doubling of our STV Growth Fund to £20 million
to make advertising even more affordable and accessible for
Scottish SMEs looking to bounce back from Covid-19.
During 2020, working closely with the Scottish Government, STV
Children’s Appeal was able to commit a total of over £3.6 million
to tackling the impacts of child poverty, making more than 860
awards and reaching every Local Authority in Scotland which was
an extraordinary outcome given the lack of mass participation
events. We were overwhelmed by the incredible generosity of STV
viewers – particularly at a time when donating may be harder to
do than normal. Their support, along with that of our community
heroes and corporate fundraisers, will make a real difference to
the one in four children living in poverty throughout the country.
2021 and beyond
Having taken proactive steps to strengthen the business
and support our people, the focus is now on accelerating our
successful strategy to grow and diversify STV. While there has
been a significant impact from Covid-19, the crisis has reinforced
the fundamentals of STV’s diversification strategy, with delivery
accelerating (i) continued record audience growth on TV and
online; (ii) clear market leadership in Scottish advertising; (iii) a
digital business going from strength to strength; and (iv) tangible
progress in Studios with a pipeline converting into significant new
commissions and talent deals. We will continue to manage cash
and costs carefully, with our variable broadcast cost base offering
ongoing protection, but we are confident in the resilience of our
business and its future prospects. Therefore we are delighted to
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 05
‘ I AM PROUD THAT STV HAS
BEEN THERE FOR ITS VIEWERS
EVERY STEP OF THE WAY
DURING THE PANDEMIC’
Baroness Margaret Ford OBE
propose a final cash dividend of 6p per share to shareholders
for approval at the AGM. In advance of this payment, and as a
reflection of our stronger than expected financial performance
in 2020, we will repay all furlough grants received from the UK
Government. Finally, I would like to thank Simon Pitts, our CEO;
Lindsay Dixon, our CFO; and our management team for their
efforts and dedication over this past difficult year. Many thanks
also to my Board colleagues for their considerable contribution
and above all, I would like to thank our loyal shareholders for
their ongoing support. A particularly warm welcome is extended
to Paul Reynolds and Aki Mandhar, who joined as non-executive
directors on 1 February this year.
I have served as Chairman for over seven years and will be
retiring at the forthcoming AGM. Paul Reynolds will take up
the role of Chairman following the AGM and I wish him every
success – I know I leave STV in capable hands and that it is well
positioned to resume its successful growth strategy with its
strong track record of delivery.
Baroness Margaret Ford OBE
Chairman
Antiques Road Trip gets back on the road
under strict new Covid-19 safety protocols.
Daily Record Pride of Scotland Awards, in
partnership with TSB is STV’s biggest ever
advertiser-funded single programme.
Scottish rock royalty Biffy Clyro perform
as part of STV Children’s Appeal show,
which, across 2020, raised £3.6 million.
STV Annual Report and Accounts 2020 06
STV 2020 STRATEGIC
PROGRESS
2020 has been exceptional in so many ways.
I have never felt prouder of our people than
this past year. In the most challenging of
circumstances, they have shown creativity,
resilience, good humour and, most
important of all, a real sense of support
for one another, whatever the last few
months has thrown at them.
It has, however, been challenging for everyone, whether on
furlough, working from home or coming into our studios as key
workers. But we have not only survived this pandemic, we have
in many ways thrived while proudly serving our viewers and
customers, and this is down to the incredible STV team, our
shareholders and all our partners.
Broadcast
Our broadcast channel has delivered a record breaking
performance this year with viewing up 14% year on year. People
have been staying at home and our broadcast schedule has
provided them with a compelling mix of entertainment, top
quality drama and informative Scottish news and current affairs.
But the strong audiences haven’t just been down to the lockdown
effect. We have been winning share versus our competitors and
stretching our lead as the most watched peak time TV station in
Scotland. We also achieved our highest all time share in 12 years,
and are now neck-and-neck with BBC One across the whole day,
quite an achievement given the BBC’s far greater funding.
Our news team have worked tirelessly and with endless creativity
to bring viewers the story of Coronavirus in Scotland in a way
that they can relate to and trust, day in day out. With more than
half a million tuning in each evening, STV News at Six has this
year cemented its position as the most watched news show in
Scotland, as well as winning another RTS Scotland award for Best
News Programme.
The mission of STV’s Commercial team is to help drive the
Scottish economy and never has there been a more important
year for us to step up to help Scottish SMEs. We are very proud
of our partnerships with hundreds of businesses right across the
country and, shortly after the pandemic hit, we doubled the
STV Growth Fund to £20 million to help local businesses recover
from the bleak lockdown period. We also created STV’s Local
Lifeline which allocated £1 million of free airtime to businesses
and charities that were helping the most vulnerable in our
communities and deserved to have their brands put up in lights.
Studios
Making TV shows is all about creativity but our Studios team
have had to take this to new heights in 2020 to keep our shows
in production. We were very proud that Celebrity Catchphrase was
the first major entertainment show in the whole of the UK to get
back into the studio in July under strict new Covid-19 safety
protocols, and Antiques Road Trip was back on the road by the
end of the summer. Their innovation and meticulous attention
to detail to keep shows safely in production has been reassuring
and impressive in equal measure, and in many cases I think our
viewers would be hard pressed to tell the difference on screen
between a show made pre and post Covid-19, which is quite a feat.
After the safety of our people, our next biggest priority in STV
Studios has been to maintain the creative momentum we had
been building pre pandemic and I’m delighted we were able
to do that with a record 19 new commissions (16 series and three
single programmes), the largest number ever in a single year.
This includes a major new prison drama series for Channel 4,
Screw, a four part series on the Royal family for Channel 5 –
commissioned, produced and delivered during lockdown, no less
– and an ambitious new series for Sky Arts, Landmark, Primal
Media’s first commission as part of the STV Studios family.
Digital
We heard a lot of talk about the success of Netflix and Disney+
during lockdown, but our streaming service, STV Player, is now the
fastest growing broadcaster VOD service in the UK, with online
viewing up 68% year on year. 2020 was the year STV Player broke
out of Scotland for the first time in a meaningful way, increasing
our addressable audience twelvefold to around 51 million adults
by launching on all major platforms including Virgin Media,
Freeview and most recently Sky. We’ve worked hard to improve our
content offer outside Scotland, building a library of 3,000 hours of
Player-only content with a particular focus on high quality drama
boxsets from around the world. We therefore entered 2021 with
confidence and excitement as we seek to further accelerate our
digital growth and build a brand new audience.
A force for good
STV’s position as a Public Service Broadcaster (PSB) with a strong
marketing ‘shop window’ allows us to use the power of television
to do good things and effect change. And never has that been
more important than in 2020.
As we all know, the impact of this pandemic has not been felt
evenly across Scotland or the UK, with the vulnerable in society
particularly challenged. In close partnership with the Hunter
Foundation and the Scottish Government, the STV Children’s
Appeal has raised £3.6 million to support hundreds of charities
across Scotland to help those who need it most.
The impact this pandemic is having on the nation’s mental health
is undeniable and will be felt long after the immediate medical
threat of the virus recedes. The health and wellbeing of our
people is paramount and we have worked particularly hard to
ensure STV colleagues feel supported, but there is plenty more
that needs to be done. To that end we have agreed a long term
partnership with Scotland’s mental health charity SAMH to pool
our resources in a number of areas including wellbeing and
resilience training for our STV colleagues, and raising awareness
for both our viewers and business partners. On screen we’ve been
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 07
‘ IN MANY WAYS WE HAVE NOT ONLY
SURVIVED THIS PANDEMIC, WE HAVE
THRIVED WHILE PROUDLY SERVING
OUR VIEWERS AND CUSTOMERS’
Simon Pitts
profit and net debt position for 2020 finished comfortably ahead
of market expectations, providing a strong foundation for a return
to growth in 2021, pandemic permitting. These foundations are
supported by the refinancing of bank facilities in March 2021,
providing flexibility to invest for future growth.
I’m more convinced than ever that we have the right long term
growth strategy for the business, and our focus is firmly on
accelerating that diversification strategy over the next three
years to the end of 2023, with a view to:
• Doubling digital viewing, users and revenues;
• Quadrupling production revenues; and
• Delivering at least 50% of operating profit from outside
traditional broadcasting.
Overall, we have strong foundations to build on over the years to
come as we transition from a linear broadcast business towards
becoming a digital-first, IP-focused entertainment company.
I would like to thank our Chairman, Baroness Margaret Ford, who
has served on our board for almost eight years and steps down
as planned at this year’s AGM. Margaret has been an outstanding
Chair and we will all miss her expert stewardship, guidance and
unstinting support, particularly through these unprecedented
times. I am also very grateful to the rest of the Board for their
wise counsel and tireless support this past year. And I’m
delighted that Paul Reynolds will succeed Margaret in April,
having joined the board alongside new Non-Executive Director
Aki Mandhar on 1 February this year.
Finally I’d like to say another huge thank you to our STV team
who all stepped up so magnificently in 2020. Making the progress
we have in this most challenging of years fills me with confidence
and excitement for the years to come, whatever the future holds.
Simon Pitts
Chief Executive Officer
delighted to build on our partnership with ITV on the Britain
Get Talking campaign, with Ant & Dec fronting a major push to
encourage families and friends to talk as well as raise money
for mental health support lines.
In the summer, against the backdrop of the death of George Floyd
and the Black Lives Matter movement reverberating around the
world, we set out a renewed public commitment to using our
privileged position as an employer, producer and public service
broadcaster to address the longstanding and systemic issue of
racism and improve the representation of Black, Asian and
Minority Ethnic people both on and off screen. As a company we
are making progress on diversity across the board, through the
STV Open Access Charter, with our Diversity & Inclusion Steering
Committee, and with our network of peer groups all empowered
to make impactful and lasting changes to the way we run our
business. However, we can and must do more and our action plan
– containing specific on and off screen targets over the next three
years – is intended to be a catalyst for long term, positive change
to the benefit of our people, our audiences and our partners.
STV’s role as a PSB and pre-eminent marketing platform, combined
with the high levels of trust in the brand, means the business holds
a unique position to raise awareness of environmental issues and
challenges and positively influence consumer behaviour. In early
2021, we confirmed our commitments on sustainability, with a
new target to be net zero carbon by 2030.
The Covid-19 pandemic has thrown the importance of Public
Service Broadcasting firmly into the spotlight, with this year’s
record audience levels demonstrating a very strong case for the
continuation of PSB. But there is a need to change the regulatory
landscape in order to safeguard the benefits of the UK’s
broadcast regime for the future. Our regulator Ofcom, together
with the UK Government, has begun a review of PSB and as part
of that we will continue to argue that free-to-air, high quality,
impartial local news must be protected; that decisive action
must be taken to ensure PSB content is prominently displayed
and easy for viewers to find on all platforms; and that a level
regulatory playing field is required with online competitors,
particularly in advertising regulation.
As a business, I am confident we have taken all the necessary
steps to mitigate against the impact of Covid-19. We strengthened
our balance sheet to enable the ongoing investment in our
successful growth strategy by completing a share placing in
the summer and raising net proceeds of £15.5 million from our
supportive shareholder base, as well as increasing our bank
facilities from £60 million to £80 million. We also swiftly
implemented cost and cash savings, and accessed the furlough
scheme where necessary, topping colleagues up to 100% of salary.
Looking ahead
Overall, we ended the year in a far better position than we
could have hoped. Our continued digital growth, tight cost
management and the strong recovery of STV-controlled local
and digital advertising post lockdown meant that our operating
STV Annual Report and Accounts 2020 08
STV Annual Report and Accounts 2020
Overview | Strategic Report | Governance | Financial Statements | Additional Information
DAILY RECORD PRIDE
OF SCOTLAND AWARDS,
IN PARTNERSHIP WITH TSB
Exclusive performance from Tom Walker and the Red Hot Chilli Pipers as part of STV’s
Hogmanay show, Daily Record Pride of Scotland Awards, in partnership with TSB.
STV Annual Report and Accounts 2020
09
ANTIQUES ROAD TRIP
STV Studios secured a bumper commission for four series of
Antiques Road Trip and two series of Celebrity Antiques Road Trip
for the BBC and production got back on the road with strict
Covid-19 safety measures in place.
DES
Biggest new drama launch in 18 years on STV.
I’M A CELEBRITY…
GET ME OUT OF HERE!
First episode of the series was most watched single transmission
on STV in 2020 with more than 1.2 million viewers.
10
STV Annual Report and Accounts 2020
Overview | Strategic Report | Governance | Financial Statements | Additional Information
LANDMARK
Primal Media’s first commission as part of STV Studios
– a groundbreaking seven-part series for Sky Arts to
create the next great British landmark.
IN CONVERSATION WITH
BERNARD PONSONBY
New series exclusively produced for STV Player.
STV Annual Report and Accounts 2020
11
STV NEWS AT SIX
Most watched news programme in Scotland achieving the
highest average audience and viewing share in its history.
12
STV Annual Report and Accounts 2020
Overview | Strategic Report | Governance | Financial Statements | Additional Information
LORRAINE KELLY
STV CHILDREN’S APPEAL
The programme and the channel takeover
reached over 1.3 million Scots.
BRITAIN’S GOT TALENT
Dance group Diversity’s performance on Britain’s Got Talent
in response to Black Lives Matter movement.
STV Annual Report and Accounts 2020
13
SEAN BATTY
Weatherman Sean set up a Mini Met team of children and
young people who provided weather observations across
the country with 800 members joining during lockdown.
GRACEPOINT
Acquired box set dramas on STV Player
helped boost viewing by 65% in 2020.
14
OPERATING REVIEW –
BROADCAST
Bobby Hain
Managing Director
+14%
A record viewing performance on STV,
with all time audience up 14% year on year
19.2%
highest all time share in 12 years
4 out of 5
adults watch STV every month
The Chase
Daytime audience has soared with
The Chase up 21% in 2020 – the highest
audience ever for the show.
Audiences for our broadcast channel have soared in 2020.
With people staying at home and seeking trusted facts,
information and entertainment in equal measure, we
anticipated an increase in viewing – but the record breaking
performance for linear viewing has surpassed our expectations
and the fact we have been consistently winning share from
our competitors shows this isn’t just the lockdown effect.
With an extremely strong content offering, STV has retained its
position as the most watched peak time TV channel in Scotland
– 10% higher than the nearest competitor. Our all time audience
saw year on year growth in every month of 2020 except January,
with the biggest month in terms of all time audience growth
being April (+27%), at the height of the first lockdown.
We’ve maintained much of that momentum during the year and,
across all time, STV has the biggest year on year share gain of
any channel in Scotland, up 0.9 share points or +5% year on year.
Indeed, we’ve achieved our highest all time share in 12 years
(19.2%, compared with 19.7% in 2008). We finished the year
with a record viewing performance on our broadcast channel,
up 14% year on year (which compares very favourably to the
ITV network, which was +5% year on year).
Much needed entertainment
Entertainment juggernaut I’m A Celebrity… Get Me Out Of Here!
is always a winter winner and this year, despite swapping sunny
New South Wales for rainy South Wales, was no different. The
first episode was the most watched single transmission on STV
this year, with more than 1.2 million viewers – the highest
opening transmission in the show’s 20 year history.
Drama provided much needed escapism for viewers in 2020.
Network production, Des, based on real life murderer Dennis
Nilsen played by David Tennant, was the biggest new drama
launch in 18 years on STV and remains the most watched
drama of the year across all channels in Scotland (863k average
audience). The remake of classic detective drama, Van der Valk,
was released at the height of lockdown and is one of the top ten
shows of the year.
All time average audience YoY (%)
27
27
23
23
22
22
19
19
20
20
10
10
16
16
17
17
10
10
7
7
5
5
-5
-5
Jan
Jan
Feb Mar Apr May
Feb Mar Apr May
Jun
Jun
Jul
Jul
Aug Sept Oct Nov Dec
Aug Sept Oct Nov Dec
Source: BARB Jan-Dec 2019, Jan-Dec 2020, individuals
YoY change in share (share points)
Scotland
Scotland
0.9
0.9
UK
UK
-1.2 -0.2
-1.2 -0.2
0.2
0.2
0.1
0.1
0.3
0.3
-0.2 -0.2
-0.2 -0.2
0.3
0.3
0.2
0.2
BBC 1 BBC 2 STV
BBC 1 BBC 2 STV
C4
C4
Ch5
Ch5
BBC 1 BBC 2 ITV
BBC 1 BBC 2 ITV
C4
C4
Ch5
Ch5
Source: BARB Jan-Dec 2019, Jan-Dec 2020, individuals
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 15
With more people at home during the day, our daytime audience
has soared – upwards of 55% in April, June and July. All of our
major daytime shows increased their audience year on year:
Lorraine was up 27% and This Morning up 44%, with quiz shows
Tipping Point and The Chase up 25% and 21% respectively –
all of these shows had their biggest yearly audiences ever.
This significant growth in daytime viewing, +26% year on year,
has seen us attracting new audiences to daytime viewing with
ABC1s +19% and 35-55s up 50%.
Resilience of local advertising
Like all media businesses our advertising revenues have been
seriously impacted by the pandemic. At the height of the
uncertainty in April, May and June, we saw unprecedented
declines, with the quarter finishing down nearly 40%, worse than
anything seen in the 60+ year history of commercial television.
But with restrictions easing across the summer, TV advertising
showed its resilience and came back strongly, illustrating the
important part it will play in the economic recovery post
Covid-19. Local advertising in Scotland proved particularly
resilient, boosted by our Growth Fund which makes advertising
on TV more cost effective and accessible, with several new
advertisers choosing to book with us for the first time, along
with the Scottish Government also making TV first choice for
their vital public information campaigns around Covid-19. >>
SPOTLIGHT:
THE STV GROWTH FUND
AND LOCAL LIFELINE
The STV Growth Fund is an investment fund introduced
in 2018 to make advertising more accessible and
affordable for SMEs. It’s less than three years old but
has already delivered more than 550 deals, with over
200 clients new to television advertising.
When lockdown hit, we launched Local Lifeline – £1 million
worth of free airtime from the Growth Fund for charities
and businesses who were working tirelessly to sustain their
organisations whilst helping the most vulnerable in our
communities. In total, 105 local heroes were celebrated on
air. From football clubs delivering prescriptions and walking
dogs, an engineering company donating face masks and
a zoo bringing its experience online for kids to enjoy – the
campaign truly marked the community spirit across Scotland.
The STV Growth Fund was doubled to £20 million when
the pandemic hit and the commercial team has never
been more committed to supporting the Scottish business
community and boosting the economy as the country
seeks to recover from Covid-19. Commended by the
Scottish Government and the advertising industry alike,
our ambition to continue to grow the Fund into 2021
and make it even more accessible to SMEs is a priority.
STV Annual Report and Accounts 2020 16
Overall, total advertising revenue finished 10% down across
2020, a very creditable performance given the circumstances,
with national advertising down 14%. We were pleased that
STV-controlled advertising in particular (local advertising and
sponsorship plus digital advertising and sponsorship) actually
finished slightly ahead of last year, which is a real testament
to the creativity and commitment of STV’s commercial team.
A must-watch television schedule
Our USP remains the same: the consistent delivery of mass
audiences to a high quality, must-watch television schedule
containing a unique combination of flagship network titles and
bespoke Scottish content – every day of the week. We reach four
out of five adults every month (3.2 million), making us the most
effective medium for advertisers to market to their audiences.
97% of the programmes on commercial TV attracting audiences
greater than half a million viewers in Scotland in 2020 were on
STV, and we still offer the highest reach of any channel in Scotland
for ‘Main Shoppers’ and the hard-to-reach 16-34 audience. The
fact that TV viewing is 14% higher in Scotland compared with the
rest of the UK, and our peak time audience (345k) is higher than
the top 10 commercial channels combined, helps too.
Tribute to Donald John MacDonald
We very sadly lost a valued member of our STV News team this
year with the passing of Donald John MacDonald. Donald was
Editor of STV North, where he worked for 36 years with a passion
for journalism and dedication to serving our audiences in the
north of Scotland. He is greatly missed by all of our colleagues.
We will be marking his significant contribution to STV and
journalism in 2021.
All major news programmes (thousands)
85 | Good Morning Britain
113 | BBC Breakfast
91 | ITV Lunchtime News
298 | BBC News at One
28 | 5 News at 5
392 | BBC News at Six
514 | STV News at Six
466 | Reporting Scotland
404 | ITV Evening News
62 | Channel 4 News
18 | The Nine (BBC Scotland)
146 | ITV News at Ten
146 | BBC News at Ten
9 | Sky News Channel*
16 | BBC News Channel*
* Average audience across a day (09.30-24.00) Source: BARB Jan-Dec 2020, individuals, Mon-Fri
SPOTLIGHT: STV NEWS AND
OUR PUBLIC SERVICE ROLE
Public Service Broadcasting has come into its own during
this pandemic, and high quality regional news is at its
heart. In a climate of uncertainty, against an upsurge
in misinformation and so-called fake news, people have
sought news they trust and is relevant to them.
2020 has been an exceptional year for the STV News team,
who have demonstrated incredible resilience, commitment
and talent in providing a much-valued service.
STV News at Six, which was already the most-watched
news programme in Scotland, has seen its audience rise
and – more importantly – retain that loyal viewership
across the year. In 2020, the programme achieved the
highest average audience (514k) and viewing share (34.8%)
in its history, and is now tracking 10% higher than the
competition (previously +3%). The 2020 audience is a
significant improvement on 2019 – average audience +32%
from 390k and viewing share up 16% (or +5 share points).
In 2019, five editions of STV News at Six attracted over half a
million viewers; in 2020 this figure was 152, more than half
our output. Our enhanced website, which we re-launched in
January 2020, has seen almost 200 million views this year.
The health and safety of our news teams and contributors
is paramount and as such, we moved temporarily to a
combined pan-Scotland programme during lockdown and
across the summer. Throughout this period, journalists
and presenters from both our licence areas contributed
to every programme ensuring a familiar and reliable
service representing the whole of Scotland.
Despite the restrictions, the team covered meticulously all
the breaking news of 2020. In addition to full and regular
updates on Covid-19, our teams presented live on location
from the Glasgow City Centre stabbing and shooting incident
and the train derailment outside Stonehaven.
Out of necessity, our current affairs programme, Scotland
Tonight, was reduced to one episode per week during the
height of the pandemic. This programme was broadcast
in peak time to make it accessible for viewers, delivering a
strong average audience in excess of 200k. A special edition
featuring the First Minister early on in the pandemic delivered
an outstanding average audience of 435k. Scotland Tonight’s
top 22 performing episodes in terms of average audience
across its nine year history were broadcast in 2020.
Our programming must reflect the diversity of our audience,
with fair and diverse representation of minority groups
on air and within the news room. We have set stretching
targets in these areas. We’ve committed to a minimum of
8% Black, Asian and Minority Ethnic (BAME) representation
among contributors in news by the end of 2021 (doubling
where we were) and maintaining a minimum of 12% of
BAME contributors in Scotland Tonight. STV works closely with
Women in Journalism, seeking at least 50% representation
of women on air; and the Pass the Mic initiative, aimed at
increasing visibility of expert women of colour on air.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 17
Kelly-Ann Woodland, reporting on
Covid-19 impact on Skye tourism.
Sports presenter, Raman Bhardwaj
reports from Celtic Park during a
football season like no other.
Scotland Tonight provided trusted
insight and analysis during the
height of the pandemic in a weekly
peak time programme.
STV Annual Report and Accounts 2020 18
OPERATING REVIEW –
DIGITAL
Richard Williams
Managing Director
+68%
online viewing in 2020
3,000
hours Player-only content
+50%
active monthly users
Take the High Road
1,517 episodes of the classic Scottish
soap are being introduced to a new
generation on STV Player so far
attracting over 2 million streams.
2020 has been a year of accelerated growth for STV Player.
We have been able to offer something for everyone, which
has been particularly important given the amount of time our
viewers have been spending at home. But our digital viewing
gains certainly haven’t just been a lockdown phenomenon.
Our successful UK-wide roll-out, the launch of thousands
of hours of Player-only content on our platform and the
introduction of technical improvements to enhance the user
experience, have all combined to propel STV Player to become
the fastest-growing broadcaster VOD service in the UK.
The growth figures are exceptional. Online viewing is up 68%
for 2020 year on year – VOD viewing +57%, with live simulcast
viewing +97%.
The network schedule continues to drive visitors in their millions,
with shows such as I’m A Celebrity… Get Me Out of Here!, drama
series Des and White House Farm, and soaps Emmerdale and
Coronation Street, all delivering record-breaking audiences. But
notably, our carefully-selected acquired Player-only content –
which crucially remains free to watch – is making a real impact,
with the digital viewing numbers vindicating our strategy. One
in three streams in 2020 was to our Player-only titles. Across
the year, active monthly users are up 50% year on year – which
means more people, watching more content, more often.
Despite very tough trading conditions for advertising, VOD
advertising revenue on STV Player continued its strong growth
in 2020, up 11% in H2, up 12% for the full year, and finishing
2020 with four consecutive months of growth.
Content strategy
Our high-quality mix of premium UK and international drama
box sets, live sports and music channels, addictive reality TV
formats, gripping factual series and a broad range of entertainment
and lifestyle shows, are all inviting viewers in and encouraging
them to stay.
Our top quality drama box sets are leading the way. Eight out
of the top 15 best-watched shows were STV Player-only content.
The Bridge was our top drama in 2020 beating all Network drama
titles with two million streams in total.
New live channels complemented the mix. Our offering for sports
fans was increased, with a host of shows covering a vast range
of sports analysis and documentaries appearing alongside live
channels, FreeSports and EDGEsport.
We’re also proud to host a vault of home-grown Scottish classics
on STV Player, such as gritty crime dramas Taggart and Rebus,
travelogue Weir’s Way and more recent regional titles Scotland
Revealed and Sean’s Scotland, all of which are hugely popular.
The decision to re-publish classic Scottish soap, Take the High
Road, from its beginning during lockdown was a strong one
– more than two million people have escaped to the fictional
town of Glendarroch on STV Player in 2020 and with over 1,500
episodes in total, we expect them to stay with us well into 2021.
We were also proud to bring exclusive Scottish acquisitions to
STV Player, including travelogue North Coast 500 and underdog
football documentary, Brave Calling.
Our Player-only content now totals 3,000 hours, with around
1,200 of these newly acquired in 2020, and is regularly refreshed
to continue to pique fans’ interest. Total streams for these titles
are hugely encouraging and for the first time ever, Player-only
content has started appearing in our top 10 most-watched shows
alongside linear network programming.
We have secured strong relationships and key content deals with
a number of distribution partners such as DCD Rights, Banijay,
Fred Media, Broken Arrow and all3media International, and we
will continue to enhance these partnerships going forward. >>
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 19
SPOTLIGHT: STV PLAYER – MORE
CONTENT AND NEW PARTNERS
Key to our expansive content offering is strong
distributor partnerships. In 2020, we have:
• Signed 19 new content deals
• Worked with 12 new distribution partners
• Acquired around 1,200 hours of
STV Player-only content
• Added two live channels
• Offered 28 drama box sets, 21 new in 2020
The Bridge
US drama which has attracted
two million streams.
Striking Out
Irish legal drama box set
starring Neil Morrissey.
Janet King
Award-winning Australian drama
starring Marta Dusseldorp.
STV Player top ten programmes 2020
(Player-only titles highlighted)
Programme
Coronation Street
Emmerdale
Take the High Road/High Road
The Bridge
Des
White House Farm
I’m A Celebrity… Get Me Out of Here!
Striking Out
Liar
Janet King
Streams
9.2m
6.2m
2.1m
2.0m
1.4m
1.3m
1.3m
1.1m
1.1m
1.0m
STV Annual Report and Accounts 2020 20
SPOTLIGHT: STV PLAYER AND
THE UK-WIDE STRATEGY
Increasing our addressable audience is a critical part
of our expansion strategy. We’ve made great strides
in this area in 2020, with STV Player now available
on all major platforms across the UK.
STV’s streaming service grew faster than any other broadcaster
VOD platform in 2020 – up 65% – thanks in large part to the
growing popularity of our Player-only content which makes
up around one third of all digital viewing as at January 2021.
Our strategy of constantly refreshing the service with new Player-
only titles from around the world will continue throughout
2021, with a range of exciting content deals in the pipeline.
The Player’s audience increased considerably after being
added to Sky Q across the UK in December, following
UK-wide launches on Freeview Play and Virgin Media earlier
in the year. This led to the Player kicking off 2021 with
a record-breaking performance. The platform delivered
12.5 million streams in January, an increase of 115%
on the same month in 2020. Online viewing was also up
99% year-on-year, with a total of 6 million hours spent
consuming content on STV Player throughout the month.
The number of monthly active users on the service grew
by 20% in January alone.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information UK-WIDE DISTRIBUTION
OFFERS ANOTHER BIG
GROWTH OPPORTUNITY
FOR STV PLAYER
Marketing campaign kicked
off in early 2021 as STV Player
becomes universally available
across all major UK platforms.
21
UK-wide strategy
Our ambitious content strategy has gone hand in hand with the
extension of STV Player outside of Scotland for the first time. Rolling
out STV Player to a UK-wide audience has been a strategic priority,
and one that has considerably expanded our addressable audience.
In summer 2020, we extended our partnership with Virgin Media
to enable their customers across the UK to watch STV Player via
their set top boxes.
In August, Freeview Play became the fourth connected TV
platform on which STV Player was automatically installed UK-wide
following YouView, Freesat and Virgin. With their 13 million devices
in homes across the UK, this was a significant development.
We concluded the year with the important news that STV Player is
now available for Sky+, Sky Q and Now TV customers across the
UK, extending our reach to millions of extra homes. With key STV
Player content appearing in the On Demand section of customers’
Sky Q home pages, we’re confident of considerable viewing
growth through 2021.
Going forward
With STV Player’s presence now secured on all major platforms
UK-wide, planning has begun to tell our story to our new
audiences. 2020 saw clever, creative marketing on the STV
broadcast channel and Out Of Home to Scottish audiences. 2021
will see us significantly ramp up our STV Player promotion at a
UK-wide level, with an ambitious marketing and PR campaign
to drive awareness and consumption.
We’ll continue to forge and develop the partnerships we have
cultivated with international distributors of premium content to
increase our free Player-only hours and deliver must-see TV for
existing and new viewers – with the overriding aim of attracting
them to STV Player, and once they’re with us, keep them
watching more for longer.
2020 has been an extraordinary year of digital growth for STV.
Going forward, we’ll continue to grow with more premium
international content, continued improvements and
enhancements to STV Player and an ambitious promotional
plan to capture the imagination of our UK-wide audience.
STV Annual Report and Accounts 2020 22
OPERATING REVIEW –
STUDIOS
David Mortimer
Managing Director
19
new commissions (16 series
and 3 single programmes)
57.5 hours
of programming delivered in 2020
9
awards won including
an International Emmy
The Victim
Sold in over 130 territories.
I am incredibly proud of the extraordinary resilience and
creativity that the STV Studios team has demonstrated in 2020.
The pandemic has impacted all of our productions in one way or
another, but our people have worked tirelessly with a positivity
and determination that has made this year our most successful
yet in terms of commissions, with 19 in total (16 series and
3 single programmes).
2019 was a year of organisational and creative change, which
meant that we started 2020 with a strong, talented team in
place and a healthy development slate. A bumper commission
for four new series of our popular long running show, Antiques
Road Trip, for BBC One and two series of Celebrity Antiques Road
Trip for BBC Two, got us off to a flying start.
When lockdown hit in March, all of our productions were
suspended. We became key drivers of policy proposals to
Government alongside our peers to enable a safe return to
production, aiming to help our freelance community, the TV
industry and the wider creative economy. Development slates
were quickly revamped to serve new broadcaster requirements
and productions were redesigned so that we could stay safe.
Our production managers became experts on the strictest
Covid-19 Health and Safety protocols to ensure the wellbeing of
all crew and contributors, with all eyes on Celebrity Catchphrase
as the first major UK entertainment show to get back in the
studio in the summer, with Antiques Road Trip following swiftly
behind, by successfully resuming production in July.
This was no easy task, but one that was embraced by the STV
Studios team and that they delivered on brilliantly – keeping TV
shows in production and on air, winning a record number of new
commissions and ensuring an incredibly strong pipeline, including
shows for a wider range of buyers than ever before, which
promises to make 2021 our most successful year yet.
Innovation, resilience and recognition
Under the direction of Craig Hunter, the Factual team has thrived.
Newly green-lit shows include The Yorkshire Auction House with
antiques expert Angus Ashworth for Discovery-owned channel,
Really; plus a Scottish version of the series for STV, entitled Clear
Out Cash In. A second series of Inside Central Station aired on
BBC Scotland, with a third commissioned and in production
by year end.
The team pitched and produced a four-part factual documentary
series for Channel 5 remotely during lockdown, The Tabloids and
The Royals – an innovative approach to a fresh exploration of the
Royal Family and their compelling and often troubled relationship
with the British press.
Then followed the commission of four part series Our Family Farm
Rescue for Channel 5, helping farmers diversify their businesses;
and hard-hitting investigative documentary Is Covid Racist? for
Channel 4, presented by Dr Ronx and airing in the winter.
Under our Creative Director of Drama, Sarah Brown, 2020 saw our
Drama team win a hugely significant new commission – six-part
prison drama, Screw, for Channel 4. Written by Rob Williams,
the creator of our 2019 BBC One hit, The Victim, production
takes place in Scotland from Q1 2021. Critically, this series has
returnable potential and represents a considerable boost to our
divisional revenues.
The team has enjoyed ongoing critical acclaim and success for
our 2019 TV film, Elizabeth is Missing for BBC One. Our adaptation
of Emma Healey’s novel has gone on to win nine major awards
this year alone, including Best TV Movie at the C21 Drama Awards
and Banff Media Rockie Awards; an RTS Award for writer Andrea
Gibb; and a plethora of plaudits for Glenda Jackson’s exceptional
performance, including an International Emmy and a BAFTA. >>
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 23
IN 2020 INTERNATIONAL
TAPE SALES HIT RECORD
HIGHS, ACCOUNTING
FOR OVER 40% OF OUR
TOTAL REVENUE
Elizabeth is Missing
Sold in 90 territories.
Antiques Road Trip and
Celebrity Antiques Road Trip
remain perennial favourites
worldwide.
SPOTLIGHT: INTERNATIONAL
GROWTH FROM OVERSEAS SALES
We continue to drive our international strategy via overseas
sales and our relationship with WME in the US.
Covid-19 has inevitably created many delayed and cancelled
productions throughout 2020. With broadcasters looking to
fill their schedules with acquisitions, and SVOD platforms
continuing to expand their territorial footprints, international
tape sales hit record highs.
Studios beat its 2019 record for secondary sales by delivering
sales revenue contributing more than 40% of the division’s
total for the year. Margins remain high as we increasingly
service key sales in-house, and as a result of our IP ownership.
Sales highlights include worldwide package deals with SVOD
giant Acorn TV, new buyer Britbox UK and catalogue deals
with ITV, UKTV and Discovery. Our drama catalogue and
Antiques Road Trip/Celebrity Antiques Road Trip remain
perennial favourites worldwide.
Elsewhere, NBCU secured exceptional sales of the multi-award
winning, critically acclaimed film Elizabeth is Missing with key
buyers including PBS Masterpiece USA, HBO Latin America &
Asia and Telecine Programaceo Brazil, recouping all investment
finance and bringing the film into profit within 6 months.
To date Elizabeth Is Missing has now sold to 90 territories and
our other 2019 drama hit, The Victim, to over 130 territories.
Our distribution neutral status remains a critical advantage
as we can create a bespoke finance and sales plan for each
new commission.
STV Annual Report and Accounts 2020 24
SPOTLIGHT: THE STV
STUDIOS REBRAND AND
OUR CREATIVE LABELS
We rebranded to STV Studios this summer, reflecting
the growing portfolio of businesses which are now part
of the STV Studios family and the diverse multi-genre
output of the company. Crucially, the rebrand was a
clear statement of intent about STV’s future growth.
We now have four independent production labels sitting
alongside STV Studios’ three in-house divisions. In addition
to our exclusive deal with Tod Productions, run by respected
drama producer Elaine Collins, and the majority stake we
hold in entertainment specialists Primal Media, we have
added two further labels to our stable:
• We acquired a stake in high end drama producer
Two Cities in January 2020, the company behind
critically acclaimed Patrick Melrose starring Benedict
Cumberbatch, commissioned by Sky Atlantic and
Showtime. The company is led by Michael Jackson,
formerly BBC1 Controller and Channel 4 CEO, and award
winning producer Stephen Wright (Line of Duty, The Fall),
and has an impressive pipeline of drama projects and
scripts at an advanced stage.
• Factual entertainment producer, Barefaced TV, joined
us in autumn 2020 and is focused on formats targeting
younger audiences. Founded by Rosie Bray and Lucy
Golding, the team behind Snog Marry Avoid, Barefaced
TV has already built a reputation for original and
surprising content, with their most recent production
being Naked Beach for Channel 4.
Entertainment dynamos Primal Media won their first
commission as part of the STV family in 2020 – Landmark
for Sky Arts, a groundbreaking seven-part series that is
sure to grab attention and headlines.
With exceptional development slates featuring a number
of well advanced projects, we’re expecting big things from
our partners in 2021.
The film made its debut in the USA in January 2021, where
it launched the 50th anniversary season of MASTERPIECE on
PBS and has received rave reviews across international media,
including the Hollywood Reporter and Variety.
‘ GETTING TO SEE JACKSON
IN THIS SINGULAR TWIST
ON A TRAGIC ROLE MAKES
FOR A DEEPLY AFFECTING
EXPERIENCE – AND EVEN IF
YOU FORGET THE SPECIFICS,
THE CRUSHING SADNESS OF
IT WILL LINGER ON’
Variety, January 2020
Under the creative direction of Gary Chippington, our Entertainment
team has continued to deliver Saturday night ratings winner,
Celebrity Catchphrase, for ITV across the year. Not content with
being the first entertainment show successfully and safely back
into production post lockdown, the team was commissioned by
ITV to produce a compilation series for the winter and won its
biggest celebrity series commission yet – 13 episodes for delivery
in 2021. Celebrity Catchphrase remained a ratings winner for ITV in
2020, with the shows reaching 18.6 million people across the UK.
2020 commissions
2020 was an exceptional year for commissions despite the global
pandemic, with the team winning 16 series and three single
productions. A mix of brand new titles and valuable returning
series, we’re incredibly proud of these achievements.
The commissions represent an exciting mix across genres for a
wide range of broadcasters, from our new high end drama for
Channel 4, alongside more episodes of ratings winner, Celebrity
Catchphrase for ITV; to two new factual entertainment productions
for Channel 5, and Primal’s first commission as part of the STV
Studios family with the groundbreaking Landmark for Sky Arts.
Looking ahead
Early 2021 saw STV Studios win a series commission via Channel 4’s
Contestable Pot, a ring-fenced amount to find the next innovative,
channel-defining format. Murder Island is a six-part immersive
competition format that blends factual entertainment and crime
drama, and sees the team forging exciting new ground.
With multiple commissions under our belt and major
productions underway, 2021 looks to be a promising year
for the Studios business.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 25
STV Studios commissions in 2020
Screw
6 hours (6 x 60’ for Channel 4)
Inside Central Station
6 hours (6 x 60’ for BBC Scotland)
Celebrity Catchphrase
10 hours (10 x 60’ for ITV)
Antiques Road Trip/Celebrity Antiques Road Trip
115 hours/140 episodes (100 x 45’ + 40 x 60’ respectively for BBC)
Clear Out Cash In
4 hours (8 x 30’ for STV)
The Yorkshire Auction House
10 hours (10 x 60’ for Really)
The Tabloids and The Royals
4 hours (4 x 60’ for Channel 5)
Landmark
7 hours (7 x 60’ for Sky Arts)
Is Covid Racist?
1 hour (1 x 60’ for Channel 4)
Our Family Farm Rescue
4 hours (4 x 60’ for Channel 5)
Daily Record Pride of Scotland Awards,
in partnership with TSB
1.5 hours (1 x 90’ for STV)
Catchphrase: Catchiest Moments
3 hours (3 x 60’ for ITV)
Wonders of Scotland
2 hours (4 x 30’ for ITV)
STV Children’s Appeal
1 hour (1 x 60’ for STV)
Images from top:
Is Covid Racist?
Celebrity Catchphrase
The Tabloids and The Royals
The Yorkshire Auction House
Inside Central Station
STV Annual Report and Accounts 2020 26
FINANCE REVIEW
For the year ended 31 December 2020
The Group entered 2020 on a significant,
positive growth trajectory having delivered
its strongest year ever in 2019.
Good strategic progress has continued
throughout 2020, however the financial
position and performance of the Group
has been shaped by a combination of
the impact of Covid-19 on our markets,
our response to the pandemic and the
resilience we’ve shown as a business.
Results summary
Adjusted results (pre exceptional
items and IAS19)*
2020
2019
Trading summary
Total advertising revenue at £91 million for the full year was
down 10% on 2019, a marked improvement on the H1 position
of -20%, with Q4 broadly flat year on year. Within this full year
result, regional and digital advertising continued to out-perform
national advertising (down 14%) with regional down only 5%,
and VOD advertising on STV Player growing 12% year on year.
Despite a hiatus in programme production activity in Q2, the
Studios business continued to build momentum with a number
of commissioning successes although its ability to deliver
programmes during the year was significantly reduced, with
revenues of £9 million supported by high margin library sales
into the secondary market. Total revenues for the Group were
£107 million (2019: £124 million).
In order to mitigate the impact of the reduction in revenue on
the profitability of the Group, we took a number of actions that
reduced planned spend in the year by £7 million, resulting in an
adjusted operating profit ahead of consensus expectations at
£18.2 million.
The Broadcast division returned a resilient performance in the
face of the most difficult advertising market in its 63 year history,
delivering an operating profit of £15.5 million (2019: £19.9 million),
driven by the relative strength of regional advertising and the
benefit of the protective arrangements in place with ITV, the
latter delivering a saving of almost £5 million year on year.
The Digital division grew revenues year on year, albeit not at
the levels we would have expected to see in a Covid-free world.
Despite this slower revenue growth, we continued to invest in the
strategy in line with our original plan, in the interests of building
the division for the medium term, and this resulted in a decrease
in operating profit to £6.5 million (from £7.3 million in 2019),
albeit margins remained at a very healthy 48%.
Advertising revenue (£m)
Total revenue (£m)
Operating profit (£m)
Operating margin
Profit before tax (£m)
Earnings per share (p)**
Statutory results
Total revenue (£m)
Operating profit (£m)
Profit before tax (£m)
Profit after tax (£m)
Effective tax rate
Earnings per share (p)**
90.9
107.1
18.2
101.6
123.8
22.6
17.0%
18.2%
In Studios, the impact of the significant reduction in revenues
was mitigated at a profit level with the division making a small
loss in the year of £0.3 million, compared to a loss of £0.1 million
in 2019. Unallocated corporate expenses reduced by over 20%
to £3.5 million (2019: £4.5 million).
Adjusted profit before tax of £16.6 million (2019: £21.0 million) was
after charging net finance costs of £1.5 million (2019: £1.6 million).
Interest payable on the Group’s borrowings was £1.2 million during
the year (2019: £1.3 million) with the balance of finance costs
being non-cash items in relation to the Group’s operating leases.
These adjusted results are before finance costs in relation to the
Group’s defined benefit pension schemes.
16.6
37.5
107.1
17.7
6.7
7.7
(14.9%)
18.2
21.0
45.8
123.8
22.6
19.0
15.9
16.6%
41.7
* Refer to note 30.
** 2019 restated to reflect bonus issue in December 2020 (note 10).
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 27
‘ OUR 2020 FINANCIAL PERFORMANCE HAS
BEEN SHAPED BY A COMBINATION OF THE
IMPACT OF COVID-19 ON OUR MARKETS,
OUR RESPONSE TO THE PANDEMIC AND THE
RESILIENCE WE’VE SHOWN AS A BUSINESS’
Lindsay Dixon
Response to Covid-19
Over the early part of Q2 2020, we identified and executed on a
suite of measures designed to save costs, maximise cash retention
and strengthen the balance sheet for the medium-term.
As noted above, we identified actions to reduce planned spend
by £7 million, through reductions in all areas of discretionary
spend, outdoor marketing, the regional programming budget
and people-related costs. The savings in relation to people were
delivered through non-payment of bonuses for 2020, a 25%
voluntary salary reduction by the Management Board and plc
directors, non-fulfilment of vacancies and grants received from
the UK Government’s Coronavirus Job Retention Scheme (‘CJRS’).
We principally accessed the CJRS during Q2 2020, at which point
we were under the tightest of lockdown restrictions, resulting
in total advertising revenue down 38% year on year and no
programme production activity possible. As restrictions eased
over the summer months, programme production re-started,
commercial activity began to pick up, and we significantly
reduced our access to the scheme, with no claims made from
mid-September to the end of the year. Throughout the period,
we topped-up all our people who were on furlough to 100% of
salary and safeguarded the jobs of all our team. The total benefit
received through accessing the scheme was £1.6 million.
Cash retention measures enabled us to retain £11 million within
the business principally through cancelling the final dividend
in respect of 2019, pausing non-essential capital expenditure
projects, and deferring VAT payments from Q2 2020 to Q1 2021.
In addition, we agreed with the trustees to postpone the
payment of contributions into our defined benefit pension
schemes from Q2 2020 to December 2020, providing further
flexibility during the key second quarter.
Reconciliation of net debt
1 January 2020
EBITDA
Working capital incl. leases
Capital expenditure
Interest and tax
Defined benefit pension schemes
Placing proceeds
Investment in Two Cities
31 December 2020
£m
(37.5)
23.8
(3.3)
(2.1)
(2.3)
(10.5)
15.5
(1.1)
(17.5)
We also took action to increase our bank facilities with existing
lenders and raise capital through a placing of new ordinary
shares, to provide the necessary headroom to enable us to trade
through a severe downside scenario as well as continue to invest
in the business for future growth.
We increased the size of our bank facility from £60 million to
£80 million and secured certain covenant relaxations, and the
placing of new ordinary shares with existing and new investors
raised net proceeds of £15.5 million for the Group. The combination
of all the measures taken to protect the business has meant that
we have not needed to access the additional loan facility or avail
ourselves of the covenant relaxations.
Cash flow and net debt
At the balance sheet date, the Group had net debt of £17.5 million,
significantly lower than the opening position of £37.5 million,
as a result of positive operating cash flow, receipt of the placing
proceeds, and the other cash retention measures discussed
previously. Operating cash conversion was 108% for the year
(2019: 93%).
On 8 January 2020, the Group acquired a 25% stake in drama
producer Two Cities for a cash consideration of £1.1 million.
The Group has a path to sole ownership over a period of time,
assuming profitability targets are achieved.
The Group’s covenants are in relation to leverage (net debt : EBITDA)
and interest cover. At the end of the year, the Group’s leverage
was 0.7 times (2019: 1.29 times) and interest cover was 27.7 times
(2019: 24.9 times), both metrics well within the covenant limits
of 3 times (maximum) and 4 times (minimum) respectively. The
leverage metric was below the Group’s self-imposed target range
of 1 to 1.5 times as a result of the measures taken.
Our improved financial position, seen in both the low year end net
debt and leverage, was a strong basis from which to refinance our
bank facilities (due to mature in June 2022) and this was completed
in early March 2021. We now have in place a £60 million revolving
credit facility, with a £20 million accordion, for a minimum of three
years, with two one-year extension options. These facilities will
provide the headroom and flexibility required to drive forward
with the next stage of our growth strategy.
Non-statutory measures
This Annual Report includes both statutory and non-statutory
(or adjusted) performance measures, the latter intended to better
reflect the underlying performance of the business and provide
a more meaningful comparison of performance from one period
to the next. The combination of these statutory and adjusted
measures is useful to investors as it provides them with a basis
for measuring our operational performance. The non-statutory
measures should not be considered in isolation from, or as a
substitute for, financial information in compliance with GAAP, and
the non-statutory measures used in this Annual Report may not
be directly comparable with similarly named amounts reported
by other companies.
STV Annual Report and Accounts 2020 28
FINANCE REVIEW
For the year ended 31 December 2020
In calculating adjusted operating profit, profit before tax and EPS,
the Group excludes exceptional items and amounts in relation
to IAS19, as well as the tax charge or credit on those amounts.
Exceptional items are items of income or expense which, because
of the nature, size and/or infrequency of the events giving rise
to them, are considered to be one-off and do not necessarily
directly relate to the underlying trading of the Group. These items
are excluded to reflect performance in a consistent manner and
in line with how the business is managed on a day-to-day basis.
They are also shown separately on the face of the primary
financial statements.
IAS19 related items, principally the net interest expense included
in the income statement, are excluded from non-statutory
measures as they are non-cash items that relate to historical
defined benefit pension schemes.
Exceptional items and the STV ELM
The Group announced in March 2020 that it had started a
process to divest of the STV ELM, its external lottery management
company, having undertaken an operational review of that
business and concluded it was not core to the future growth
prospects of the Group. The divestment process has continued
throughout the year, albeit at a slower pace than originally
intended as a result of the broader macroeconomic environment
brought about by the Coronavirus pandemic. At the end of the
year, the disposal process was ongoing and post year end we
have reached agreement in principle for the sale of the business,
the deal being subject to approval by the UK Gambling Commission
as at the date of this report.
A total exceptional charge of £8.7 million has been charged
against profits in 2020, with a related tax credit of £1.6 million,
relating to the disposal of the STV ELM. The most significant
component of this charge is an exceptional finance cost of
£8.8 million, which has been recognised to reflect an increase
to full provision for the debtor due from the Scottish Children’s
Lottery (SCL) at the year end. This represents a marginal increase
of £0.1 million on the provision made in the Group’s interim
results, as a result of a number of actions taken to reduce the
cost base of the ELM in the second half which, in turn, enabled
the SCL to repay a greater proportion of its operating costs.
Disposal costs associated with the sale transaction have been
accrued as operating exceptional items (£0.5 million) and we
have also recognised VAT recoverable on sales invoices written
off totalling £0.6 million. This claim was well progressed at the
balance sheet date, and has been completed with the cash
received subsequent to the year end.
Notwithstanding the corporate transaction underway, the STV ELM
continued to provide lottery management services to the Scottish
Children’s Lottery (‘SCL’) throughout the year on a breakeven basis.
Ticket sales during the year were impacted by the pandemic,
although mainly those sold through the network of retail outlets,
with £5.1 million of sales achieved compared to £5.9 million in 2019.
Over 2020, just over £1 million was donated to children’s charities
at what has been a particularly challenging time for many.
Tax
A total tax credit of £1.0 million has been recognised in the year
(2019: charge of £3.1 million). This comprises a tax charge on profits
before exceptional items of £0.6 million (2019: £3.2 million) and
a tax credit on exceptionals of £1.6 million (2019: £0.1 million).
The total tax credit of £1.0 million on profit before tax of £6.7 million
represents a negative effective tax rate (ETR) of -14.9%. The ETR
in 2019 was 16.6%.
The tax charge on profits before exceptional items at an ETR
of 4.0% is lower than the standard rate of tax principally as a
result of the change to the rate at which deferred tax has been
recognised at the end of the year. This follows the decision by the
UK Government to hold the rate of corporation tax at 19% rather
than reduce it to the rate of 17% as previously indicated. As the
Group has deferred tax assets (in relation to pension scheme
deficits and losses), the increase to the rate results in a tax credit
of £1.4 million in the consolidated income statement. In addition,
there are current and deferred tax adjustments in respect of prior
years where the estimates made for the purposes of group
reporting were more prudent than the final position submitted
in the tax computations.
The impact of Covid-19 on trading results combined with the tax
credit on exceptional items resulted in the Group making a total
payment of only £0.4 million in corporation tax in 2020 (2019:
net inflow of £0.1 million).
Dividends
Following cancellation of the final dividend in respect of 2019
in May 2020, and payment of an interim dividend for FY20 by
way of a bonus issue of shares in December 2020, the Board is
recommending a return to cash dividend for the final dividend in
respect of 2020. The Board is confident in the long-term prospects
for the Group and in its ability to continue to deliver on the growth
strategy, although remains cautious given the uncertainty that
remains in key markets, and more broadly. With an improved
financial position and good growth prospects, the Board has also
recommended a return to cash dividend payments and a final
dividend of 6p per share, giving a full year dividend of 9p per
share for 2020.
Earnings per share (‘EPS’)
The EPS metric for 2020 has been impacted by the issue of
new shares during the year, with the calculation being diluted
by comparison to previously reported numbers.
This dilution is principally due to the placing of new ordinary
shares completed in July 2020, with a smaller impact from the
bonus issue of shares in December 2020, made in lieu of a cash
dividend. The 2019 reported EPS metrics have been restated, in
accordance with IAS 33 ‘Earnings per share’, to reflect the bonus
issue, which has been assumed to have taken place at the start
of the comparator period.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 29
Adjusted EPS (before exceptional items and IAS 19 finance costs)
was 37.5p (2019 restated: 45.8p), reflecting the lower profits of
the Group in 2020 but benefitting from the significantly lower
effective tax rate. On a statutory basis, EPS was 18.2p (2019
restated: 41.7p), reflecting the exceptional charge taken during
the year in relation to the STV ELM.
Pensions
The Group has two defined benefit pension schemes, both of
which are closed to new entrants and only one of which has a
small number of active employees. The IAS19 accounting deficit
across both of these schemes was £70.3 million at the end of
the year (2019: £64.0 million), a reduction in the position seen at
30 June 2020 when the deficit was £76.9 million. The increase in
the deficit year on year is a result of the lower discount rate, driven
by the significant fall in corporate bond yields as a result of the
Covid-19 economic backdrop. This impact of the lower discount
rate more than outweighed the benefits from contributions paid
and the return on scheme assets, the latter being higher than
expected due to the hedging strategies of the schemes which saw
the value of liability-driven investments increase over the year.
The next triennial valuation is due as at 31 December 2020 and
we are in the early stages of that process.
Lindsay Dixon
Chief Financial Officer
STV Annual Report and Accounts 2020 30
CORPORATE RESPONSIBILITY –
PEOPLE
Our people strategy aims to provide an environment that
attracts the best creative talent, enables creativity to flourish,
ensures equality of opportunity, and is fun and supportive.
During 2020, we reprioritised our plans to ensure we provided the
support colleagues required to respond to remote working and
new ways of interacting and communicating to fulfil their roles
during a period of exceptional change and uncertainty. Greater
emphasis was placed on wellbeing and resilience and
communication and engagement.
Wellbeing and resilience
Our wellbeing programme has ensured all colleagues feel
supported and safe at work, whether working remotely or in
the workplace. Encouraging colleagues to talk about feelings of
isolation and concerns arising from Covid-19 has been the focus
of internal communications campaigns, prompted by managers
and supported by occupational health and our network of mental
health first aiders.
We extended the service provided by our employee assistance
programme, delivered by BUPA, to include confidential one to one
counselling. This additional confidential service is also available
to our freelance colleagues.
Supporting our freelance colleagues who have been most
severely impacted by the effect of Covid-19 on the production
sector, and whose contribution is so vital to the success of STV
Studios, is a key aim of Wellbeing from STV. We have trained
additional mental health first aiders to provide dedicated support
during production. Additionally access to our occupational health
service is now provided to freelancers for a period of one month
after their contract with STV has concluded. This will ensure
support is available during the often challenging transition
period when employment concludes.
STV Studios is delighted to partner with the Film & TV Charity to
pilot their newly designed toolkit, Mentally Healthy Productions,
aimed at ensuring productions are mentally – as well as
physically – safe and healthy to improve the working
environment of freelancers across the industry.
In October we announced the formation of a three-year
strategic partnership with SAMH. Drawing on SAMH’s expertise
and guidance whilst using STV’s reach and connection with
communities across Scotland, both organisations aim to
increase and improve awareness of mental health and wellbeing.
The partnership will include support for colleagues, production
teams and participants in our programming. In early 2021, SAMH
will deliver a comprehensive training programme, Wellbeing
& Resilience, to provide all managers with support and tools
to improve their mental wellbeing and the wellbeing of their
teams, colleagues, families and friends.
We were delighted to be invited to participate in ITV’s Mental
Health Advisory Group. The Group provides ITV, STV and ITN with
external guidance and support on all aspects of their approach
to mental health and wellbeing. Chaired by Ruth Davidson MSP,
membership of the group includes representatives from Mind,
YoungMinds and SAMH.
Despite the limitations imposed by lockdown restrictions, a range of
options to promote physical wellbeing have been provided including
online exercise sessions and a programme of yoga classes.
We retained Gold Award status from the Scottish Government’s
‘Healthy Working Lives’ standard, providing a benchmark to
measure the effectiveness and impact of Wellbeing from STV.
We started 2021 by setting wellbeing priorities and challenging
all colleagues to support a collective effort to make further
changes to live a healthier work life, increase flexibility and
improve work-life balance to build a more successful and
sustainable business in the long term.
These priorities include reducing email communication out of
conventional working hours, with emails after 7pm by exception
only; ensuring meeting-free time each day between 12.30pm
and 2pm; encouraging everyone to take ‘Me Time’ introduced in
October to focus on taking time for non-work activities including
exercise or relaxation during each working day; further training for
managers in wellbeing and resilience to ensure they are able to
provide effective mental health support for their teams. Additional
investment in a planned IT system upgrade to accelerate the
roll-out of this was also confirmed to aid remote working.
Communication and engagement
Keeping connected with colleagues to maintain motivation and
address feelings of isolation was one of the highest priorities of the
management board in responding to the impact of Covid-19 on
the business. In addition to our existing range of communication
channels, additional measures to increase connectedness and
social interaction and create opportunities for collaboration
were introduced.
Daily email updates and weekly all-colleague video conference
briefings were hosted by the CEO, informal engagement sessions
with a representative from each area of the business were
introduced to provide facilitate cross-business communications
and provide a substitute for the loss of spontaneous meetings
that occur in a workplace setting. Additional meetings with the
senior management group were held and each responsible for
ensuring an effective cascade of information to their team.
Wellbeing from STV provides
resources and activities to promote
general wellbeing, including mental
health awareness to staff.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 31
Additionally, a programme of social events, held over video
platforms, was quickly put in place to provide fun and relief
from our adjusted work environments.
In addition to proactively sharing information, we recognise the
importance of providing colleagues with the opportunity to express
their views and opinions and deliver feedback. We conducted two
employee opinion surveys during 2020. Have Your Say enables
the formal measurement of engagement and the survey is open
to all staff and freelancers. Engagement levels increased year
on year with over 70% of colleagues participating in the survey
and providing feedback on wellbeing, working environment,
communication, reward and development opportunities.
The survey results confirmed a strong sense of pride in working
for STV (82% of respondents). Results also confirmed high
awareness of the company’s objectives and a high level of
understanding of the contribution made to these at an individual
level. Results and follow up actions were communicated through
a campaign called: Words into action. The survey results were
also presented to the company’s designated ‘employee director’,
senior independent non-executive director, Simon Miller, to
provide an additional opportunity for the Board to have an
understanding of the company’s approach to engagement
and, more generally, activities relating to our people.
The survey feedback on working environment will also be used
in planning future working arrangements, including flexible
working, once Covid-related workplace restrictions are removed.
The positive partnership working the company has established
with its recognised trade unions was maintained throughout the
year with additional meetings held with full-time officials and
local representatives.
Learning and development
A number of our planned learning and career development
activities had to be postponed due to the impact of Covid-19
on working arrangements and the ability of training partners
to deliver their planned programmes.
The Pathway programme, targeted at colleagues in their early
stage career who have been identified as having the potential
to undertake a more senior role, has continued in STV News and
the Digital division. A total of 35 colleagues across both divisions
have completed the programme in 2020.
The launch of a career acceleration programme, Getting On, was
postponed and will commence in Q2 of 2021. The programme has
been designed to support achievement of our gender balance
targets and to improve representation of colleagues with a
disability or from a BAME background in senior roles.
The need to increase leadership capability in our key growth areas of
digital and production was identified through the annual succession
and development planning review and this will be addressed in
2021 through the introduction of a future leader programme.
We maintained our commitment to widen access into our industry
through apprenticeship programmes, offering a directly entry
route to the business from secondary education.
Future talent
Although unable to provide in-work experience opportunities for
supported learning during 2020, we maintained our commitment
to build strong talent pipelines to support our future growth
ambitions through the extension of our bursary scheme delivered
in partnership with the Royal Television Society.
Currently, twenty bursaries are being provided to students
from Scottish universities and colleges. The scheme is designed
to improve social mobility and is open to students from lower
income backgrounds studying journalism, television production
and technology-related courses. In addition to bursary funding
for each year of their degree course, students receive a
comprehensive programme of work placements and mentoring
opportunities at STV and, through RTS Scotland, are given access
to a wider programme of activities including networking
opportunities and industry insight sessions.
Reward and benefits
We continue to benchmark our reward and benefits through our
participation in Towers Watson UK-wide media sector remuneration
survey. This provides our company-wide grading structure which
ensures transparency in the determination of remuneration and
ensure reward and benefits are market competitive, supporting
recruitment and retention. Full details of executive remuneration is
included in the Directors’ Remuneration Report on pages 67 to 84.
Employee involvement in the company’s performance is
encouraged through the annual Save As You Earn scheme which
also promotes employee share ownership and encourages saving.
Currently 33% of colleagues are participating in a scheme. As
confirmed in the Directors’ Remuneration Report, an all-employee
share plan will be granted in Q1 of 2021 to support a collective
focus on achievement of key financial targets as the business
embarks on a period of post-Covid-19 recovery.
Diversity and inclusion
We are committed to creating an environment where all our
people can thrive, develop and succeed and are treated with
dignity, respect and fairness. All employees have participated
in unconscious bias training and all managers are coached in
inclusive leadership through workshops held throughout the year.
STV has a team of trained
mental health first aiders to
support colleagues across
the business.
STV Annual Report and Accounts 2020 32
CORPORATE RESPONSIBILITY –
PEOPLE
Each division has a diversity and inclusion action plan which
identifies activities to contribute towards building an inclusive
culture and achieving our diversity related targets specifically
in relation to gender balance; ethnicity of our people; increasing
the proportion of colleagues with a registered disability and
increasing social mobility. Our performance against these
targets is assessed annually by Ofcom.
A dedicated diversity and inclusion advisor, Femi Otitoju, has
been appointed, reporting to the Chief Executive, to support the
implementation of all areas of the company’s inclusion strategy.
A number of registered disabled persons are employed, all of
whom have equivalent access to training and career development
opportunities as their able-bodied colleagues. No employee
became disabled in 2020 during the course of their employment.
Through the year, our peer group for accessibility, Access All
Areas, and colleagues across the organisation have worked
together to address practical issues identified as barriers to
progress and effect lasting change for disabled people in all
parts of our business, both on and off screen.
We are open and transparent about the challenges faced in
eliminating the gender pay gap and recognise this requires
meaningful and sustained change. Key to this will be increasing
the proportion of women in senior roles, and we aim to achieve
gender balance in the top 25% of roles by earnings by 2023.
Across the other 75% of roles within STV, the gender pay gap
is significantly lower at 7.7%.
We have also committed to the TV Coalition for Change to
improve working practices for the freelance community. Along
with our fellow Public Service Broadcasters, PACT, Bectu and
other industry bodies, we are exploring and addressing issues
such as employment and recruitment practices, workplace
culture, race and diversity, training and talent progression,
mental health and wellbeing.
We have begun making changes to our recruitment and career
development programmes, and we appointed Femi Otitoju as
Diversity and Inclusion Advisor in 2021. In this newly created
role, Femi will work across the business to help shape, accelerate
and support the delivery of STV’s wide-reaching inclusion
strategy by providing training, guidance and new insight to STV’s
people, its Diversity & Inclusion Committee and network of peer
groups. Femi will also work closely with production teams to
increase representation both on screen and behind the camera
and will help address any areas of under-representation.
Black History Month programming celebrated
the contribution of black people to television,
comedy, history and our wider culture.
SPOTLIGHT: DIVERSITY
AND INCLUSION
As Scotland’s commercial public service broadcaster,
we have a responsibility to use our platform not only
to entertain but to educate, spark conversation and
reflect the diversity of our audience both on screen and
within our organisation – and we take this responsibility
very seriously.
We are committed to building an inclusive culture and have a
strategy in place to ensure we deliver equality of opportunity
for all.
Our activities across Diversity and Inclusion are focused
on our Open Access Charter which has been in place since
2018, and captures the commitments we have identified to
improve diversity and inclusion for three main groups – our
people, our audiences and our partners. We have a Diversity
and Inclusion Steering Committee and a network of peer
groups who meet regularly and are charged with sparking
debate, facilitating conversation and effecting positive
change for the groups they represent.
In 2020, STV confirmed a renewed commitment to using
our privileged position as an employer, PSB and producer
to address the longstanding and systemic issue of racism
and improve the representation of Black, Asian and Minority
Ethnic people both on and off screen. Our plan will see us
double the number of Black, Asian and Minority Ethnic
colleagues at STV by 2023, improve on screen representation
in the programmes STV makes for itself and others, and
ring-fence £1 million from the STV Growth Fund for
advertising campaigns that champion diversity in Scotland.
Our action plan is intended to be a catalyst for sustainable,
long-term, positive change and we will measure our
progress against it.
In summer 2020, we launched an on-air campaign offering a
platform for Black voices to share their experiences of racism
and their vision for the changes they believe should happen.
Our News and Current Affairs colleagues have committed to:
doubling the proportion of Black, Asian and Minority Ethnic
people within the team to 8% in Scotland and 33% in London
by 2023; and doubling the percentage of Black, Asian and
Minority Ethnic people appearing on STV news programmes
to at least 8% by the end of 2021. In autumn, this team also
announced a partnership with gender equality organisation,
Pass the Mic, aimed at increasing the number of expert
women of colour appearing across the media. In depth
training sessions and mentoring are well underway.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 33
Diversity and inclusion: Gender pay report
This gender pay report is calculated as at 5 April 2020 in line with
legislative requirements. Compulsory reporting of gender pay
data was suspended by the Government’s Equalities Office due
to Covid-19, however, we did submit our report as below.
Understanding our profile
There has been a 26% reduction year on year in the mean gender
pay gap, from 21% in 2019 to 15.6% in 2020. We have also seen a
32% reduction in our mean gender pay gap over 3 years since 2018.
The mean gender pay gap arises as a result of a higher proportion
of men than women in senior roles. To address this, the Company
has set a target to achieve gender balance across the top 25%
of roles (defined by earnings) by 2023.
To support attainment of this target, a range of measures have
been implemented to continue to support women to progress
through the organisation into senior roles. In April 2020, 45% of
the top 25% of roles (defined by earnings) were held by women,
an increase of 5% year on year. This increase in the number of
women in senior roles has resulted in a 43% reduction in the
mean gender pay gap in the upper pay quartile from 21% in
2019 to 11.9% in 2020.
Outwith the top 25% of roles (defined by earnings), the mean
gender pay gap reduces significantly to 7.7%.
The increase in the median pay gap is driven by an increase in the
proportion of women in the lower and lower middle pay quartiles
(an increase of 6.5% year on year).
Bonus pay
There has been a 29.4% reduction year on year in the mean
bonus gender pay gap and a 21% increase in the proportion
of females receiving a bonus.
Our gender pay profile
Proportion of men and women awarded bonus
15.6% 21.0%
2019 mean
2020 mean
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 2020, expressed as a percentage of male earnings.1
14.6% 11.9%
2020 median 2019 median
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.
16.2% 20.1%
men
women
Bonus gender pay gap
44.6% 46.4%
mean
median
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.
Quartile pay bands
Mean gender pay gap and proportion of women and men in each pay quartile.
Lower
Lower middle
Upper middle
Upper
2.5%
2.3%
4.3%
11.9%
2.3% excl.
management
board
42% Men
58% Women
44% Men
56% Women
55% Men
45% Women
55% Men
45% Women
The mean gender pay gap is 7.7% across 75% of all roles
Figures are based on all permanent and fixed term STV employees.
1
The Management Board and PLC Board volunteered to take a reduction to their base salaries/fees as part of a programme of measures implemented
to conserve costs in response to the impact of Covid-19. These reductions were in place at the reporting date of 5 April 2020 and have the effect of
reducing the mean gender pay gap by 1.6% to the reported figure of 15.6%.
STV Annual Report and Accounts 2020 34
CORPORATE RESPONSIBILITY –
PEOPLE
Open Access Charter
To support our target of achieving gender balance across the top 25% of roles (defined by earnings) by 2023,
a range of measures have been implemented to encourage more women to remain with the Company and
to support them in progressing through the organisation to the most senior roles.
Talent acceleration
Diverse talent pipeline
Work life balance
Culture
• Regular succession planning
is undertaken to assess
and strengthen our talent
pipeline for senior roles
• We continue to enhance our
leadership capability through
divisional leadership and
management development
programmes
• Development programmes
including Pathway News and
Pathway Digital are focused
on developing potential
and providing skills and
experience to support an
individual’s future career
path in the business
• All career development
programmes strive to
achieve 50:50 gender
profile in each cohort
• The STV Career Enhancement
Programme will provide
placement opportunities with
STV Growth Fund businesses
to support development of
commercial skills
• The introduction of a new online
application form, available in
accessible formats, enables all
candidate profiles to be
anonymised
• Contacts ‘hack’ events held at a
divisional level to expand talent
networks and pipelines
• Through our Open Access Training
Programme we partner with
Equate Scotland to provide two
STEM (Science, Technology,
Engineering & Maths) placements
in our Digital business to
encourage women to consider
a career in a STEM related role
• In partnership with Women In
Journalism we are developing
female contributor talent for
our News & Current Affairs
programming by offering media
and studio familiarisation training
and networking opportunities
• Partnership with Rise Up, an
industry-led schools outreach
programme designed to educate
children about engineering and
technology opportunities in
broadcasting
• The STV/RTS Bursary Scheme
has entered its second year and
is supporting 20 students studying
Journalism, TV Production and
Technology with financial and
career development support
• Our Returners programme
supports primary carers in
achieving a smooth return
to work from maternity,
shared parental or
adoption leave
• Returners includes
meetings with key
stakeholders, the offer
of a mentor and access
to a peer support network
• Partnerships with Take
Two and Share My Telly Job
to promote job sharing
opportunities across
production based roles
• Support for colleagues
in balancing their career
with parental or carer
responsibilities through
promotion of family
friendly policies
• All managers receive
training to support
them in delivering our
commitments within our
family friendly policies
• An extensive Diversity
& Inclusion awareness
programme provides
regular updates on
progress and reinforces the
role and responsibilities of
all colleagues in ensuring
an inclusive culture
• Inclusive hiring training
will be rolled out to all
managers across the
business
• Equality and diversity
has been incorporated
into our induction for new
joiners and has become
an established criterion of
all recruitment selection
processes
• Our Balance peer group
provides a forum for open
conversation around
culture and development
opportunities for women
and its mission is to
support our target to
achieve gender balance
in the top 25% of roles
by 2023
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 35
Total vehicle accidents
Number attributable to
driver error
Percentage attributable
to driver error
2020
2019
2018
2017
2016
9
6
13
8
14
10
16
10
14
7
66% 62% 71% 62% 50%
Health and Safety performance in 2020
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 used
to implement improvements, if and when required in working
practices and procedures.
The Facilities Manager is the designated senior manager
responsible for health and safety matters.
Seven day reportable
accidents
Total of all accidents
2020
2019
2018
2017
2016
–
1
–
6
–
7
–
2
–
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 to every extent possible 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. During 2019, staff with
responsibility for procurement undertook training designed
to raise awareness of 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 is carried out on a rolling basis and we have a full
complement of 27 first aiders located throughout STV sites. There
are defibrillators on site at Pacific Quay in Glasgow and Craigshaw
in Aberdeen 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. Driving standards and rules are communicated
to staff through STV’s Drivers Manual and this helps maintain
the Company’s low accident rates.
No training was carried out during 2020 due to the Covid-19
pandemic.
STV Annual Report and Accounts 2020
36
CORPORATE RESPONSIBILITY –
ENVIRONMENT
During 2020 extensive work was undertaken to understand
and assess the carbon impact of the business. Energy use,
including business travel, and waste are the most significant
contributors to the environmental impact of the business with
these principally arising from the company’s property estate
and programme making activities.
This analysis helped inform a new sustainability strategy – STV
Zero – launched in early 2021, which sets down our commitment
to reduce STV’s environmental impact and improve the
environmental sustainability of all aspects of our business
activities in response to the climate crisis.
OUR HEADLINE
COMMITMENT IS TO
BE A NET-ZERO CARBON
BUSINESS BY 2030.
Five key areas to reduce our carbon impact
Our headline commitment is to be a net-zero carbon business
by 2030.
This will be achieved through changes to current business
processes, the adoption of new ways of working and behavioural
change. Our programme of activities and related targets to
reduce the carbon impact of the business covers five key areas:
energy consumption; waste reduction; programme making;
promoting sustainability using STV’s reach; and achieving
a sustainable supply chain.
Our short term target is to become carbon neutral by 2021.
This will be achieved through offsetting all emissions from
business operations, energy use and business travel through the
purchase of certified carbon offsetting credits in sustainability
projects in Scotland.
We will also use our unique position as a public sector
broadcaster and Scotland’s pre-eminent marketing platform
to inform and raise awareness of environmental issues and
challenges and positively influence consumer behaviour through
our relationships with our audience and our advertisers and
commercial partners.
Target setting and delivering on our commitments
The sustainability strategy will be reviewed quarterly by the
Management Board. Each member of the Management Board
will have a personal objective to support achievement of the
company’s sustainability targets.
To create engagement and support a collective drive to improve
environmental sustainability, the STV Sustainability Group, which
brings together colleagues from across each area of the business,
was formed in 2020. This group will champion sustainability;
working in partnership with the business to develop and
implement sustainability initiatives and activities and monitor
progress. The group meets monthly creating a forum within the
business for ideas, discussion and development of actions.
Energy consumption
Targets:
• Achieve 100% of electrical energy used from renewable
sources by the end of 2022
• Reduce business travel by 50% by the end of 2025
Our properties and business travel are the principal
contributors to the Company’s energy usage with over
1,042 tonnes of CO2 emitted from our properties in 2020.
In 2020, c.10% of electrical energy used is generated from
renewable sources.
Further work will be undertaken in 2021 to assess our
energy consumption using the Science-Based Target
Initiatives criteria as the basis for our future measurement
and reporting and disclosure.
To achieve our headline target we will:
• Secure all electricity from renewable sources upon expiry
of current electricity supply contracts during 2022
• Implement a comprehensive programme of measures to
reduce energy consumption from 2021. This will include
a behaviour change programme, investment in ‘smart
building’ infrastructure, including LED lighting installation,
and temperature control measures
• Introduce a new business travel policy in early 2021
• Convert the company’s car fleet to be hybrid/electric
by end 2021
Waste reduction
Target:
STV will become a zero waste business by 2030
We will achieve our headline target through a programme
of ‘avoid’, ‘reuse’ and ‘recycle’ which will include:
• Remove all single use plastics by corporate catering
suppliers in early 2021
• Remove waste paper bins at each desk across our offices
to encourage recycling and a general reduction in litter
in early 2021
• Install ‘smart’ photocopiers to drive reduction in paper
usage and improve monitoring of waste
• Launch an internal communication campaign to increase
understanding of opportunities to ‘avoid’, ‘reuse’ or ‘recycle’
and to enable each area of the business to begin to develop
action plans to achieve waste reduction
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 37
Programme making
Promoting sustainability
Target:
Achieve net zero carbon emissions on all programming,
including commercial production, produced by STV and
STV Studios by 2030
Target:
We will use STV’s reach to inform and raise awareness
of environmental sustainability with our viewers and
to support our advertisers to embrace sustainability
An industry wide initiative, led by BAFTA, has established
a recognised benchmark and standard for the production
sector to measure emissions arising from its activities.
Project albert is successfully supporting the film and TV
industry to make positive contributions to the environment
by actively seeking to eliminate waste and carbon emissions.
From 2021, all programmes produced by STV Studios will
be registered with albert which enables a calculation to be
made to assess the carbon impact of a production. Where
required by the commissioner, productions will attain albert
certification. This further commitment requires the
production to use carbon offsetting to become net zero.
Programmes made by STV’s broadcast business, including
the output of STV News, will also become albert certified
by 2022.
STV’s in-house commercial production business, STV
Creative, delivered over 450 advertising and promotional
campaigns in 2020. STV Creative has committed to become
an active supporter of Ad Net Zero, the UK’s response to
achieving environmental sustainability, which shares STV’s
headline target to become net-zero carbon by 2030.
To achieve our headline target:
• STV Studios will register all productions on albert and,
where required, attain albert certification for all productions
by 2021
• STV will commit to albert certification for all of its
programming, including news and current affairs, by 2022
• STV Creative will support sustainability within the
advertising industry by becoming an active supporter
of Ad Net Zero
As a trusted public service broadcaster, we have a strong
platform to encourage behavioural change by raising
awareness, stimulating discussion of environmental issues
and promoting sustainable lifestyles and behaviours.
We will achieve this through our programming and
self-promotional airtime.
We will also work with our advertisers and commercial
partners to support them in making their organisations,
products and services more environmentally sustainable.
To achieve our headline target we will:
• Ensure environmental sustainability is represented
in the editorial content of our programming
• Use promotional airtime to celebrate STV’s commitment
to environmental sustainability and encourage positive
behaviour change from our viewers and advertisers
• Support our advertisers and commercial partners in
becoming environmentally sustainable businesses
through the launch of the STV Green Fund in early 2021
Achieving a sustainable supply chain
Target:
Our supply chain will be 100% sustainable by 2030
Currently, suppliers providing c.80% by value of our
procured goods and services have confirmed sustainability
commitments consistent with our overall objectives.
During 2021 we will develop criteria addressing sustainability
and ethical requirements that all suppliers will be expected
to meet by 2030. As we develop these criteria, we will
undertake a review of our supplier base and our
procurement and sourcing processes to ensure these are
efficient, streamlined and aligned with our sustainability
and ethical values, including the Modern Slavery Act and
diversity and inclusion principles.
The review of our supplier base will therefore be focused
on the remaining suppliers, estimated to represent c.20% of
the value of goods and services purchased by the company.
To achieve our target we will:
• Develop environmental sustainability criteria for all suppliers
• Undertake a review of sourcing and procurement
processes to ensure sustainability and ethical criteria can
be incorporated into the supply chain in the long term
• Perform a supplier data base cleanse to remove dormant
suppliers, and focus our activities on those suppliers who
are actively engaged with the business at present
STV Annual Report and Accounts 2020 38
CORPORATE RESPONSIBILITY –
ENVIRONMENT
Streamlined Energy and Carbon Reporting
Under the requirements of Streamlined Energy and Carbon Reporting (SECR), STV Group plc is required to report
energy and emissions data annually arising as a result of activities for which we have operational control.
2020 energy and carbon emissions
Scopes and categories
Scope 1
Scope 2
Total Scope 1 and 2
(SECR minimum)
2020
2019
2018
2017
2016
Energy data*
(kWh)
2,057,373.09
3,135,556.33
Greenhouse
gas emissions*
(tonnes of CO2e)
Greenhouse
gas emissions*
(tonnes of CO2e)
Greenhouse
gas emissions*
(tonnes of CO2e)
Greenhouse
gas emissions*
(tonnes of CO2e)
Greenhouse gas
emissions*
(tonnes of CO2e)
396.31
731.02
454.85
437.27
433.89
1,050.31
1,251.94
2,055.77
501.46
2,039.95
5,192,929.42
1,127.34
1,505.16
1,689.21
2,489.66
2,541.41
12.16
n/a
n/a
13.41
n/a
n/a
21.28
n/a
n/a
21.10
n/a
n/a
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.
Total Scope 1 and 2 Intensity Ratio
Scope 3
209,399.40
158.98
Total Scope 1, 2 and 3
5,402,328.83
1,286.32
Intensity ratio** (all scopes)
tonnes of CO2e per £m revenue
12.02
A range of energy efficiency measures have been successfully
implemented during 2020 in support of the Group’s
commitment to sustainability. These measures include:
Installation of LED lighting in all offices (except for Pacific
Quay); replacement of fleet vehicles to transfer to hybrid fuel
(41% of overall fleet); IT investment programme to replace
desktops with laptops and introduce ‘smart printers’ to reduce
both paper and energy.
A sustained programme of energy reduction measures will
continue during 2021 to include: transfer to all electricity
usage from renewable sources; costing of installation of LED
lighting at Pacific Quay, Glasgow; implementation of a new
travel policy to support reduction in business travel by 50%
by 2025; completion of IT upgrade which will ensure use
of more energy efficient equipment; and the conversion
of the remaining vehicles to low emissions vehicles.
Scope 1: Emissions from stationary and mobile combustion
together with operation of facilities. This includes the
consumption of fuel in company owned vehicles (satellite
trucks) and leased fleet vehicles.
Scope 2: Emissions from purchased grid electricity.
Scope 3: Emissions from business travel including all vehicles
(including employee owned and hired), train, air and hotel stays.
*
The methodologies used in calculating energy data and greenhouse
gas (GHG) emissions include the GHG Protocol Corporate Standard, the
2019 HM Government Environmental Reporting Guidelines and the
2020 UK Government’s Conversion Factors for Company Reporting.
** The selected intensity measurement is tonnes of CO2e per total £m
sales revenue. The intensity ratio was calculated by dividing total
GHG emissions (tonnes) by total sales revenue for the financial year
1 January 2020 to 31 December 2020.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information CORPORATE RESPONSIBILITY –
COMMUNITY
STV Children’s Appeal
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. The money
raised is distributed to provide practical help like food and warm
clothes, create opportunities for training and employability, and
enable social and emotional support for those who need it most.
STV and the Hunter Foundation meet all overheads, meaning
every penny of donations received goes directly to helping those
in need. In 2013, The Wood Foundation pledged its support for
projects in the North East of Scotland.
Since the Appeal was launched, the Scottish Government has
match funded the first £1 million raised by the Appeal, and this
continued in 2020.
STV Children’s Appeal in 2020
As Scotland faced massive challenges in the wake of the
coronavirus, STV Children’s Appeal recognised the vital role we
could play. When the STV Children’s Appeal was set up the trustees
ensured the charity had the flexibility to respond to any situation
to help those most in need. In mid-March when the pandemic was
beginning to be felt but before lockdown, we distributed £400,000
in immediate funding from donations made to the Appeal, to food
charity FareShare to help vulnerable families meet their most basic
of needs by providing food supplies. The STV Children’s Appeal
also contacted all previously funded projects to offer support and
help, to make them aware of additional funding streams and to
provide a flexible approach to how they might use their funding
from us if their needs had changed to meet the needs of their
communities in the face of Covid-19.
As part of a coalition of independent funders, STV Children’s
Appeal assisted in the distribution of the Scottish Government
Community Wellbeing Fund, meaning 283 community groups
and voluntary organisations whom we had previously funded
received £2,000 grants to allow a rapid response to the social
impacts of the pandemic.
As the pandemic worsened and lockdown commenced, an
Emergency Coronavirus Campaign was launched in partnership
with National Emergencies Trust (NET), an organisation that
collaborates with charities and other bodies to raise and distribute
money and support victims at times of domestic disasters. Fronted
by TV presenter Lorraine Kelly, this encouraged supporters and
STV audiences to donate what they could to help children and
families struggling because of the effects of Covid-19.
A grand total of £3.6 million has been raised by the STV Children’s
Appeal throughout 2020, bringing the total amount raised by the
Appeal since its formation in 2011 to over £25 million.
Connecting with communities
With many of our usual fundraising events cancelled, new virtual
forms of Covid-secure fundraising such as virtual games were
introduced, and our supporters were encouraged to take part in
a virtual 2.6 Challenge where individuals up and down the country
took part in a whole range of challenges.
Creative approaches and new ways of fundraising, organising
challenges and events in a virtual or socially distant way, ensured
individuals, schools, businesses and community groups were still
able to get involved with the charity and make a difference within
their communities.
39
Corporate supporters of the Appeal have included supermarket
chain Lidl. Its customers and staff helped to raise £73,000 this
year – bringing the total amount Lidl has raised for the Appeal
to over £500,000.
To ensure the Appeal continued to reach new supporters,
a series of virtual concerts called Songs for Scotland hosted by
STV presenter Polly Bartlett, were also recorded and streamed
on Facebook including exclusive sets from Annie Lennox, Tom
Walker, KT Tunstall and Amy Macdonald.
The STV Children’s Appeal is a fundraising partner for Kiltwalk and
although all events became virtual in 2020, an incredible amount
was raised that was further boosted thanks to a generous 100%
top up from the Hunter Foundation. These funds have provided
vital support to charities in each of the four cities the events
would have taken place.
Employee engagement
STV employees continued to be great ambassadors for the Appeal
in 2020 even while working remotely. Recognising that no one
would be hit harder by the coronavirus than our most vulnerable
communities STV staff continued their unwavering support for
the charity by taking part in various virtual fundraising events
across the year such as Kiltwalk, 2.6 Challenge and hosting a
Big Scottish Breakfast.
AS SCOTLAND FACED
MASSIVE CHALLENGES IN THE
WAKE OF THE CORONAVIRUS,
STV CHILDREN’S APPEAL
RECOGNISED THE VITAL
ROLE WE COULD PLAY.
Lorraine Kelly hosts the STV Children’s Appeal
annual telefundraiser which this year saw stars
including Andy Murray and KT Tunstall encouraging
Scots to donate funds for vulnerable children and
young people across Scotland.
STV Annual Report and Accounts 2020 40
“Frank, get the door!” First Minister
Nicola Sturgeon makes a memorable
appearance in this year’s Appeal show,
starring in a specially-recorded sketch
alongside comedian Janey Godley.
Inverness schoolboy Shaun Maclean, 8,
features in Appeal programming after he
ran 200 laps of his garden to raise £966.
Tom Walker headlined Songs for Scotland:
Summer Festival – a star-studded online
music festival to help fundraise.
An Emergency Coronavirus Campaign
was launched in partnership with
National Emergencies Trust (NET), to
encourage donations to support children
and families struggling because of the
effects of Covid-19.
Place2Be
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information CORPORATE RESPONSIBILITY –
COMMUNITY
The STV Children’s Appeal is a fundraising partner
for Kiltwalk, and although all events became virtual
in 2020, an incredible amount was raised.
STV Children’s Appeal funding supported a mental
health awareness training programme for youth
workers in partnership with the charity Place2Be.
41
Programming
STV uses its platform as Scotland’s commercial public service
broadcaster to shine a light on the issues faced by so many
people across Scotland.
A busy year of fundraising culminated in a telefundraiser broadcast
on STV in October. The programme, hosted by Lorraine Kelly, saw
stars including Andy Murray and KT Tunstall encouraging Scots
to donate funds for vulnerable children and young people across
Scotland. Viewers saw the impact their generous donations on
the lives of children and young people across Scotland.
A series of poignant films explored the devastating impact of
Covid-19 on mental health, food and fuel poverty, and Scotland’s
widening digital divide, whilst also highlighting how the STV
Children’s Appeal has supported those hit hardest by the
pandemic throughout 2020. The programme had the biggest
average audience of all live Appeal shows in the last five years,
and Appeal messaging across both the show and the channel
takeover reached over 1.3 million Scots.
Scottish Children’s Lottery
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, with
monies raised distributed to children and young people’s charities
and projects across Scotland.
In 2020, The Scottish Children’s Lottery distributed just over
£1 million in funding. Proceeds raised by the Lottery provided
grants to local projects across Scotland and also enabled Lottery
trustees to make over £400,000 in emergency funding available
to charities such as Barnardos, Children 1st, One Parent Families
Scotland , Home Start and FareShare offering them greater
flexibility to respond to the urgent needs of vulnerable families
and children dealing with the impact of Covid-19.
Since launch the Lottery has distributed almost £6 million in
funding for children and young people’s charities working in all
32 of Scotland’s local authorities to support four key areas of early
years’ intervention, education and health, employment skills and
employability, and community development and citizenship.
Place2Be
Baroness Margaret Ford OBE
Chairman
Annie Lennox performed an
exclusive live set from her living
room as part of the Appeal’s Songs
for Scotland online music series.
STV Annual Report and Accounts 2020 42
SECTION 172 STATEMENT
The Board and its individual Directors consider that, in the
decisions taken during 2020, they have acted in the way most
likely to promote the success of STV for the benefit of its
members as a whole, having regard to the stakeholders
and matters set out in S.172 of the Companies Act 2006.
Section 172 of the Companies Act 2006 requires the Directors
to act in a way that they consider would most likely promote the
success of the Company for the benefit of its members as a whole
and the matters they are required to take into account are set
out on page 57. In addition to these matters, Directors are also
cognisant of other factors which they consider relevant to the
decisions being made and these include the interests and views
of STV’s employees and viewers, and the relationship with Ofcom.
This success must be for the benefit not only of STV’s shareholders
but also for all of its other stakeholders and this has never been
more relevant than during the on-going Covid-19 pandemic.
The following table provides some insight into how the Board
discharges its duties under S.172, in particular with its stakeholder
groups. The Directors believe this demonstrates how seriously
the Board takes these responsibilities.
Investors
Why important to us?
• Our shareholders provide funds which aid the growth
of our business and are vital to our future success.
Key priorities of the stakeholder group
• Strong financial performance.
• Good governance practices.
• Transparency and openness.
• Trust and a good relationship with management.
Engagement with stakeholder group
• Meetings between Executive Directors and major shareholders
are held immediately following publication of the interim and
final results. During the current Covid-19 environment, these
were conducted via video conference.
• There is a dedicated Investor section of the corporate website
where RNS announcements, reports and publications and
general shareholder information can be found.
Colleagues
Why important to us?
• Our colleagues are vital to STV and nurturing them is essential
to the success of the business.
Key priorities of the stakeholder group
• Development and training of our colleagues.
• Safety and wellbeing of our people, including their mental health.
• Good employment conditions, culture and opportunities.
• Transparency and openness.
Engagement with stakeholder group
• There is a designated employee director who is STV’s Senior
Independent Director.
• Significant employee communication particularly during
2020 including the ‘Monday Minute’, an all company informal
discussion led by the CEO that covered what’s happening
within STV and its financial and operational performance;
regular ‘check-ins’ with line managers; and several company/
departmental social events, all undertaken in compliance
with social distancing measures in force at the time.
• Annual employee surveys.
• Share ownership is promoted through the Save As You Earn
scheme.
• Provision of many resources to promote general wellbeing,
including mental health, available through the ‘Wellbeing
from STV’ programme of activities.
• Broad range of benefits provided including discounted gym
membership and cinema tickets and a car salary exchange
scheme where employees can lease a car through salary sacrifice.
Impact on Board decisions
• Topped up furlough payments so all employees received 100%
of salary, and additional holidays for those not furloughed.
• In response to the most recent employee survey, a number
of measures have been introduced to support employees
during the pandemic, including a curfew on emails after 7pm,
meeting-free periods from 12.30 until 2pm, home workstation
assessments, access to wellbeing and resilience training and
confidential meetings with healthcare professionals on request.
• Establishment of a 24/7 telephone counselling service and
additional Mental Health First Aiders trained.
• A comprehensive consultation exercise is carried out with
• Continually enhanced range of benefits.
major shareholders on any significant changes to
remuneration practices.
• Meetings are held between the Executive Directors and current
and potential significant shareholders.
• The Annual General Meeting, which all Directors attend, offers
the opportunity for shareholders to directly engage with the
Board. While the 2020 AGM was held as a closed meeting due
to lockdown measures in place at that time, investors were
able to submit questions in advance, via our corporate website.
Impact on Board decisions
• All comments made by major shareholders are carefully
considered by the full Board.
• Shareholder input has helped to shape the proposed
remuneration policy.
• The views of major shareholders on the key actions to take
during the pandemic were considered, specifically in relation
to the Placing and interim dividend for 2020 and also on the
appointment of the new Chair and Non-Executive Director.
Suppliers
Why important to us?
• Having good relationships with our suppliers provides comfort
over the continuity of our supply chain and is therefore
important to our long-term success.
Key priorities of the stakeholder group
• Timely payment practices.
• Open and transparent negotiations.
• Compliance with laws, regulations and industry regulators.
Engagement with stakeholder group
• STV’s largest supplier is ITV: a significant proportion of the
broadcast schedule is produced or procured by ITV and made
available to STV through long term agreements, and ITV is also
the Group’s sales agent for national airtime and sponsorship.
The relationship with ITV is managed closely, with weekly
revenue reporting and discussions between ITV and STV
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 43
Commercial Directors, regular updates on programme and
schedule developments and meetings with the ITV Council
held at least quarterly, attended by the Director of Change,
Director of Policy & Regulatory Affairs, Head of CRR Compliance
& Third Party Sales, Commercial and Online, Director of Viewer
Marketing and the Content, Media and Entertainment Director
from ITV together with the CEO, MD of Broadcast, Head of
Consumer Insights, Director of Programme Strategy &
Marketing and the Head of Legal from STV.
• The Digital division has sought content suppliers with titles
which reflect the audience of STV Player and built solid
relationships with the distributors and producers which
has resulted in them all coming back for further deals.
Impact on Board decisions
• The Board is regularly updated on the working relationship
with ITV in order that this operates smoothly and that any
issues can be discussed and resolved efficiently.
Customers
Why important to us?
• Our viewers, subscribers, advertisers and commissioners
are all key to STV’s continued success.
• STV must deliver quality content on air, online and on
demand to ensure viewers and subscribers continue to want
to watch STV and in turn, strong viewing figures and a strong
commercial proposition encourages advertisers to the channel
which is vital for STV’s growth as a business.
Key priorities of the stakeholder group
• Broadcasting and producing programmes that appeal
to a wide variety of viewers.
• A trusted and impartial news service.
• Providing awareness of key social and topical issues.
Engagement with stakeholder group
• The Viewer Enquiries team deals with viewer queries
and escalates any issues.
• Customer surveys are carried out through Scotpulse.
• Provision of a rich variety of content.
Impact on Board decisions
• Strategic decision to acquire more programmes and box sets,
with significantly more Player-only content.
• The Board receives regular compliance reports as well as
viewing figures and channel performances.
• Investment in new creative labels within Studios, to widen
appeal and enable the Group to place more creative bets
with a broader range of commissioners.
Community and environment
Why important to us?
• As Scotland’s public service broadcaster, a strong sense
of social purpose is fundamental in all we do.
• STV is committed to continuous improvement of its
environmental performance and to becoming a net-zero
carbon business by 2030.
Key priorities of the stakeholder group
• Support for local causes and community projects.
• Supporting local business and local high streets.
• Reduce waste and protect the environment in all activities.
Engagement with stakeholder group
• Online campaigns targeting mental health, exercise,
healthy eating and public health.
• £1 million campaign to celebrate local business and
charity heroes.
• Range of new STV Growth Fund partnerships to boost
the local economy.
• On screen Black Voices campaign in response to Black
Lives Matter movement.
• The STV Children’s Appeal team has distributed over
£2.7 million to help children and young people living in
poverty who have been hit hardest by the pandemic.
Impact on Board decisions
• Doubling of STV Growth Fund to £20 million to make
advertising more affordable and accessible for Scottish
SMEs and support their recovery from Covid-19.
• Commitment to ring fence £1 million for diverse advertising
campaigns.
• New target to double BAME colleagues by 2023 plus on screen
representation targets.
• Establishment of the STV Sustainability Group and the
resultant sustainability strategy with the over arching
target to achieve net zero carbon emissions by 2030.
Government and regulators
Why important to us?
• Active engagement with government bodies and regulators
is important to allow us the opportunity to input on matters
relating to our industry and to ensure we are able to put in place
appropriate measures to comply with laws and regulations.
Key priorities of the stakeholder group
• Compliance with laws and regulations.
• Ethical operations and practices.
• Strong governance credentials.
• Provide good quality employment opportunities.
Engagement with stakeholder group
• Participation in a range of consultations affecting our industry
and practices.
• Attendance at meetings and forums to engage with policy
makers relevant to our operations, e.g. Department of Digital,
Culture, Media & Sport (DCMS).
• Discussions with Ofcom regarding renewal of our licences and
our PSB obligations.
• Engaging with the London Stock Exchange regarding the listing
of shares.
• Government lobbying in relation to matters impacting public
service broadcasting.
Impact on Board decisions
• Involvement with other UK broadcasters and PACT to
design industry wide guidelines for producing television
safely during Covid-19.
• Decision on which government initiatives available to
the company during the pandemic should be applied for.
• The Board is regularly updated on discussions with regulators
and government bodies.
STV Annual Report and Accounts 2020 44
RISK MANAGEMENT
Risk management and internal control
Introduction
Risk is inherent in the Company’s business and activities and the
ability to effectively identify and manage risk is a vital element
of business success. Risk management takes place across many
different processes and operations throughout the Company and
the Board considers this to be a fundamental business discipline,
designed to balance risk and reward and to protect the Group
against the potential impact of uncertainties that could threaten
the achievement of its business objectives.
The comprehensive and consistent management of risk is a
fundamental part of the culture in STV and while all employees
are responsible for risk management, the Directors have overall
responsibility for monitoring and reviewing the effectiveness of
the risk management activities from a strategic, financial and
operational perspective. They must satisfy themselves that the
Company’s risk management policies and procedures are
consistent with its strategy and risk appetite.
Risk agenda
The Board reviewed the effectiveness of the systems of risk
management and internal control and the principal risks
affecting the Group in line with its Risk Appetite Statement.
These activities meet the Board’s responsibilities in connection
with Risk Management and Internal Control as set out in the UK
Corporate Governance Code.
The aim of the Risk Appetite Statement is to highlight the risks that
we should be willing to take, as well as those which we would not.
The statement includes a series of risk assertions that are aligned
to our strategy, together with the risk parameters within which
we expect our people to work. Compliance with the Risk Appetite
Statement is monitored through the Group’s functional and front
line controls including oversight and reporting mechanisms.
The Risk Appetite Statement was recently updated to include
‘Corporate Sustainability’ and the Board will continue to review
and update this document on an annual basis.
The Report from the Audit & Risk Committee includes further
detail on the work undertaken during the year to review the
internal control and risk management systems of the Group.
Risk management process
The outbreak of Covid-19 has made risk management more
challenging, requiring first an understanding of the short and
longer term impacts on STV’s business before then assessing how
best to deal with each of these pandemic-triggered problems.
The Board’s focus on risk has been much wider than that relating
purely to shareholder value, with Directors considering their role
in mitigating the impact of risks to a broad set of stakeholders,
including employees, customers, viewers, shareholders and wider
society. More information on how STV has supported its local
community can be found in the Chief Executive Officer’s report
on pages 6 and 7 and in the Corporate Social Responsibility report
on pages 39 to 41.
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.
The risk management process is designed to identify, assess,
respond to, report on and monitor the risks that threaten the
Company’s ability to achieve its business strategy and objectives,
within its agreed risk appetite. It is an important factor in the
Company’s financial soundness, performance, reputation and
future success which is why the review of risk and risk management
has been embedded throughout the Company.
While the Board has overall responsibility for risk management,
each divisional managing director has day-to-day ownership
of the risks relevant to their respective areas of responsibility.
In conjunction with their team, they ensure that identified
mitigating actions and controls are being operated effectively,
and they also continually assess the risk landscape to determine
changes in likelihood or significance of identified risks, and the
emergence of any new risks.
Following the first lockdown in March 2020, the Board took
the decision to hold weekly audio-video calls in order to discuss
fully the risk implications of Covid-19 to the business, and be
available to make decisions real time, in what was a fast-moving
environment. At these meetings the Board was provided with
information on Government measures taken or likely to be taken
as well as verbal updates from both the Chief Executive Officer
and the Chief Financial Officer. These updates included insight
on the Company’s liquidity position, latest trading and financial
data, viewing figures and a range of people matters covering
mental health, general wellbeing, communications and similar
items, together with the measures taken by the Executives to
support employees during that time. The Board was also advised
of the new protocols in place across all office premises for those
who were unable to work from home, including appropriate
safety measures such as a one way system, increased sanitation,
mandatory mask wearing and appropriately distanced desks for
the small number of colleagues who were required to be in the
office to ensure operational continuity.
The economic impact of the Government’s lockdown measures
has been significant, and STV responded proactively to mitigate
the commercial impact of Covid-19 by maximising cash retention
and saving costs. Key decisions taken by the Board during that
time, following receipt of advice from advisers, included
execution of a complementary and balanced package of debt
and equity that strengthened the balance sheet and provided
greater medium term flexibility. Accordingly, the bank facility
was increased from £60 million to £80 million, coterminous with
the existing facility maturing in June 2022, and £15.5 million
(net of expenses) was raised through the placing of 7,050,665
new ordinary shares. In March 2021, the bank facilities were
fully refinanced with an RCF of £60 million and accordion of
£20 million in place for a minimum term of three years.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 45
Risk management cycle
Identify
the risk
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Monitor, assure
and report
Quantify the
gross risk
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Determine
whether further
risk management
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Identify
existing mitigations
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Quantify the
net risk
Risk register
A risk register formalises the consideration of risk and
opportunities in a way that enables wider consideration and
discussion within management and at a board level, and is the
culmination of a bottom-up assessment of risk by operational
management and a top-down assessment by the Board. It helps
to ensure that all significant risks have been suitably identified
and assessed and are being actively managed.
Although a risk register tends to focus on negative risks it can also
address the opportunities that face the business and assist both
management and the Board in ensuring that their risk policies
are appropriate. Not all risks are controllable or foreseeable, for
example natural disasters. Our response to such risks is having
controls which lessen the impact to our business should they
occur, including up to date business continuity and disaster
recovery plans.
For each risk identified, we quantify the gross risk by considering
the potential impact and likelihood of occurrence. Then,
incorporating the impact of the existing mitigating actions and
controls, the net risk is quantified. If the net risk is not acceptable
and is not in line with our Risk Appetite, further mitigating actions
and controls are identified as necessary. All risks are assigned
to an appropriate risk owner and the Board is provided with risk
updates as part of the normal process by which the Audit & Risk
Committee provides reporting on its activities.
STV’s risk register was refreshed in 2019 and the structure now in
place mirrors the divisional structure of the Group with each division
and the central functions (taken together) having their own
individual risk register, owned by the divisional managing director
(or the Chief Financial Officer in the case of the central functions).
During 2020, given the pandemic and the rapid pace of change,
the Board elected to take a greater role in risk oversight and the
corporate issues that affected risk rather than delegating these
to the Audit & Risk Committee. Risk issues were discussed at the
weekly audio-video Board meetings with proposals considered
and solutions implemented.
Going forward, these registers will be reviewed and the
consideration of risk and risk management plans will be
executed through the divisional board governance structure.
The Audit & Risk Committee will review these registers twice
each year with updates provided to the Board thereafter.
The Group risk register comprises those risks from the divisional
risk registers that the Board considers to be the most significant
and/or likely and the Board will review this twice each year, with
a focus on internal control and to ensure that all risks have been
captured and areas of emerging risk considered.
A separate cyber risk register is also in place. It is owned by the
Group’s Cyber Risk Committee, reviewed regularly and represents
a further input into the Group risk register that is reviewed by the
Audit & Risk Committee and the Board.
Internal controls
The system of internal control is designed to manage rather
than eliminate risk and can only provide reasonable and not
absolute assurance against material misstatement or loss.
By further developing and operating an annual and ongoing risk
management process to identify, report and manage significant
risks, the Board seeks to provide a reasonable assurance against
material misstatement or loss.
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 divisional boards
• 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.
Regular review is vital to ensure that the risk culture continues to
be embedded throughout the Group and that the risk framework
is operating effectively. It also provides the Board and the Audit
& Risk Committee with an overall view of the Group’s risk profile,
identifying any major exposures and mitigating actions.
STV Annual Report and Accounts 2020 46
RISK MANAGEMENT
Risk management and internal control
continued
Roles and responsibilities
The key roles and responsibilities for risk management comprise
three layers. Each role within the Company is well-defined with
clear responsibilities and a transparent reporting structure.
The first line of defence is our divisional management who are
responsible for managing their business to ensure divisional
strategic objectives are achieved and there is compliance with
Group policies and standards throughout their division. Issues
are escalated to the Management Board as required.
Our second line of defence is the Management Board with
overall responsibility for managing the Group to ensure it meets
its strategic objectives. It is responsible for managing the risks
that may have the potential to impact the delivery of the Group’s
strategic objectives, monitoring business performance, taking
strategic decisions in accordance with the authority delegated
to it by the Board, and escalating issues to the Board as required.
The third line of defence comprises internal audit, the Audit & Risk
Committee and then the Board. The Audit & Risk Committee has
delegated authority from the Board to review the effectiveness of
the Group’s risk and internal control frameworks. It performs an
annual assessment of the effectiveness of the risk management
and internal control frameworks, reviews reports from the internal
and external auditors and reports to the Board on the outcome
of the work performed.
The Board has overall responsibility for the Group’s risk
management and internal control frameworks, and strategic
decisions within the Group. It undertakes an annual review and
ongoing monitoring of the effectiveness of the risk management
and internal control frameworks, as well as an annual review of
the Risk Appetite Statement. All Directors receive the minutes
of Audit & Risk Committee meetings and at the Board meeting
following each Audit & Risk Committee meeting, the Committee
Chairman provides a comprehensive and detailed verbal update
on discussions that have taken place.
Risk appetite
STV’s risk appetite can best be demonstrated through the following table:
Risk category
Reputation
Compliance and regulatory
Returns and profitability
Technology
Opportunities
TV market
Operational
Pensions
People and culture
Corporate sustainability
Unacceptable to take risks
Higher willingness to take risks
1
2
3
4
5
6
7
8
9
10
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Reputation
STV places great importance on upholding its high reputation
and therefore has a low appetite for risk in conducting any
activities that put 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 other stakeholders.
Compliance and regulatory
It is critical that STV conducts itself in a compliant manner
at all times, particularly in relation to its broadcasting licences
and it has no appetite for any breaches of statute or regulation.
Returns and profitability
STV aims to deliver strong growth through the strategic options
it identifies, ensuring that these are for appropriate returns, with
a focus on market median margins (as a minimum target), clear
return on investment and good working capital management
together with cash generation. While opportunities may be taken
that result in some dilution to the operating margin in the short
term, these would be expected to generate margin enhancing
results within the plan period.
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,
and mergers and acquisitions are periodically considered, as
is technology innovation, if they are aligned with our strategic
direction. These inevitably involve an element of risk. STV has
a strong appetite for the development of such opportunities
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 47
provided always that the potential benefits and risks are fully
understood and that appropriate mitigation measures are in place.
TV market
Various aspects of the TV market are, to an extent, beyond the
control of STV, such as national airtime advertising revenue
and the increasing number of SVoD services now available to
consumers, 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.
Pensions
There are funding deficits in STV’s two defined benefit pension
schemes and while the investment strategy is determined to
reduce the impact of material market movements, various
measures are being taken to reduce the deficit. STV has a low
risk appetite in respect of its pension obligations.
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. STV is committed to building a diverse and inclusive
culture and through its Open Access Charter, has a strategy
in place to ensure it represents the communities it serves.
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 no appetite for
any deviation from its standards in these areas.
Corporate sustainability
STV is striving to become a sustainable business, creating
long-term value by taking into consideration how it operates
in the ecological, social and economic environment. It has
integrated sustainability into its strategy and at the start of
2021 launched its Sustainability Policy. Using its current carbon
footprint as a backdrop, a series of targets have been established
in order to become a net zero carbon business by 2030. STV has
a low appetite for risk in this area.
Principal risks and uncertainties
As in any business, there are risks and uncertainties that could
have an impact on the Group’s operating results, financial
condition and prospects. The Group’s risk management and
assurance framework is designed to make this less likely by
clearly identifying and seeking to mitigate key risks.
The Covid-19 pandemic had a significant impact on the
macro-economic environment in which the Group operated
throughout much of 2020, which continues to evolve with its full
effect not yet known. It has also affected the way in which the
business operates, with a wholesale pivot for the workforce to
home-working, as well as different means of communication
being sought to continue engagement with key stakeholders,
and new measures put in place to protect and look after our
employees. There remains an amount of uncertainty associated
with Covid-19, which may still have the potential to impact a
number of our principal risks. It remains unclear as to how quickly
economic activity will resume to pre-pandemic levels. However,
the resilience shown across the operating divisions, particularly
since Summer 2020 when restrictions began to lift, combined
with the benefits from the suite of measures taken during Q2
2020 to maximise cash retention and save costs, are a good
barometer for the Group’s ability to continue its growth strategy
and respond positively to the challenges it faces. The Board and
management continue to closely monitor the position.
The Directors confirm they have carried out a robust assessment
of the principal risks facing the Company and the risks identified
have been fully evaluated and taken into account in preparing
the budgets and forecasts which support going concern, the
viability statement and impairment assessments. The principal
risks and uncertainties set out below are those believed to have
the greatest potential to impact our ability to achieve the Group’s
strategic objectives, or which have the greatest potential impact
on the Group’s solvency or liquidity.
STV Annual Report and Accounts 2020 48
RISK MANAGEMENT
Principal risks and uncertainties continued
Operational risks
Risk area: Regulatory environment
Potential impact
Mitigation
STV’s linear broadcast business is operated under
licences that 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. 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.
As licensee, 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 this
happens. There is a dedicated compliance function and a compliance mentality
has been embedded within all relevant areas of the business. There is frequent
contact with the regulator to ensure awareness and understanding of any
updates or changes to the codes/rules and that appropriate changes to internal
processes are implemented as required. There is also regular staff training.
Risk area: Market volatility and advertising spend
Potential impact
Mitigation
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.
STV’s national advertising is sold by ITV and the contract requires ITV, as agent,
to maximise revenue through ‘best endeavours’. ITV send a weekly performance
report to STV and regular meetings are held between the senior commercial
management from both companies to understand current forecasts, trends,
and other related matters. STV’s London-based marketing team is responsible
for monitoring the digital advertising market and selling Video on Demand
advertising for STV Player to customers from across the UK. STV aims to create
greater value for advertisers through focusing on targeted opportunities and new
ways to engage with consumers. STV’s regional Scottish advertising is sold by a
further, dedicated team who pursue a range of initiatives designed to ensure the
effectiveness of our sell, driven by the STV Growth Fund through which we provide
matched-funding and other support to make TV advertising affordable and enable
businesses to grow their brand awareness. The strength of the relationships that
the commercial teams have with their clients is crucial in selling advertising
services, and in maintaining those sales levels during periods of uncertainty.
Impact from Covid-19 and Group response
While Covid-19 boosted viewing figures for public service broadcasters, with the STV News audience up 32% year on year and the STV
daytime audience up 27%, the crisis also reinforced STV’s strong sense of social purpose as Scotland’s public service broadcaster with
campaigns for health & wellbeing; driving the local economy and diversity & inclusion. Despite the many challenges faced during
2020, STV maintained its PSB credentials in accordance with Ofcom’s codes and regulations and adhered to its licence terms.
STV adjusted programme output particularly during the summer lockdown, broadcasting a single news programme across Scotland
instead of the regular pattern contributions from both licence areas and transmitted fewer non-news programmes than usual,
returning to normal when lockdown eased. These decisions were taken on health and safety grounds to protect staff and contributors
and reflected the fact that the news was dominated by Covid-19, a story common to all of Scotland. Although output was reduced, STV
remained within the terms of its licences which include a force majeure condition for exceptional circumstances. Ofcom advised all
broadcasters that it considered this clause to be in effect and the regulator was kept updated on progress through regular dialogue.
Impact from Covid-19 and Group response
Although the Covid-19-driven lockdown in Q2 2020 resulted in many advertisers temporarily ceasing or reducing spend, when
those restrictions began to be lifted, there was a broad based return to television advertising across all sectors, demonstrating the
business’s resilience. There were also a number of advertisers who increased spending during lockdown, principally across financial
services, food retail and home improvements, and TV has been the medium of choice for both the UK and Scottish governments
as they have needed to share public health messages with a mass audience. In order to manage the increased risk to advertising
revenues associated with Covid-19, the frequency of meetings with ITV was increased to ensure information available was as
current as possible at all times, and the STV Growth Fund was doubled to £20 million to support local businesses and enable them
to continue to promote their brand and product/service, and boost the local economy. Lastly, the variable cost arrangement with ITV
offers profit protection in times of declining national advertising revenue. Over the course of the year national advertising revenues
declined by 14% and so there was an equivalent reduction in the cost STV pays for the Channel 3 national programming budget,
saving the business c.£5 million during the year.
Risk area: Post Brexit uncertainty
Potential impact
Mitigation
Impact from Covid-19 and Group response
The continuing macroeconomic uncertainty
associated with the Brexit process and impact
that the new trade deal will have on all areas of
UK businesses is considered to be a risk to STV,
to the extent it affects the UK advertising market,
upon which STV is dependent.
Where this uncertainty results in a decline in national advertising revenues, the
Group receives a partial offset to this impact through its arrangements with ITV
in the Network Affiliate Agreement.
The positive benefit of these arrangements with ITV where the broadcast business is partly shielded from adverse national advertising
performance was demonstrated well during 2020, albeit the primary cause of the market downturn was the Coronavirus pandemic
rather than the crystallisation of any risk associated with Brexit.
Risk area: Reliance on ITV
Potential impact
Mitigation
The majority of STV’s Channel 3 programming
content is provided by the ITV Network. Therefore,
its ability to attract and retain audiences is
dependent on the quality, variety and diversity
of programming available, which, in turn, impacts
the ability of STV to attract regional advertisers. In
addition, the performance of ITV as STV’s national
advertising sales agent is a significant factor that
affects the financial performance of the Group.
This relationship is managed closely, with regular updates on programme and
schedule developments being provided through STV’s Head of Consumer Insights
with STV’s Commercial Director having responsibility for the sales relationship
with ITV. Contracts are in place for all network functions performed by ITV
with agreed consultation processes for any changes to arrangements. Regular
dialogue includes formal quarterly ITV Council meetings with minutes provided
to Ofcom. With regard to ITV acting as the Group’s national sales agent, there are
regular meetings between the Commercial Directors of both businesses to discuss
latest forecasts, booking trends and similar factors. In addition, there is profit
protection for STV by virtue of the contractual arrangement in place with ITV,
whereby STV’s costs are pegged to national advertising revenues with costs
only increasing in the event that national advertising revenues also increase.
Impact from Covid-19 and Group response
All broadcasters found 2020 to be a difficult year with productions having to be halted and postponed due to lockdown measures.
However, following the introduction of Covid-19 safety protocols, both the UK and Scottish governments confirmed that television
production could recommence, and this remains the case in the current lockdown. Restrictions on movement meant more people
were watching television and STV set new viewing records on screen and online, with television viewing up 14% and STV Player
viewing up 65% in 2020. With regard to the effect on advertising sales, please refer to comments made under the ‘market volatility
and advertising spend’ risk above.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
49
Impact from Covid-19 and Group response
While Covid-19 boosted viewing figures for public service broadcasters, with the STV News audience up 32% year on year and the STV
daytime audience up 27%, the crisis also reinforced STV’s strong sense of social purpose as Scotland’s public service broadcaster with
campaigns for health & wellbeing; driving the local economy and diversity & inclusion. Despite the many challenges faced during
2020, STV maintained its PSB credentials in accordance with Ofcom’s codes and regulations and adhered to its licence terms.
STV adjusted programme output particularly during the summer lockdown, broadcasting a single news programme across Scotland
instead of the regular pattern contributions from both licence areas and transmitted fewer non-news programmes than usual,
returning to normal when lockdown eased. These decisions were taken on health and safety grounds to protect staff and contributors
and reflected the fact that the news was dominated by Covid-19, a story common to all of Scotland. Although output was reduced, STV
remained within the terms of its licences which include a force majeure condition for exceptional circumstances. Ofcom advised all
broadcasters that it considered this clause to be in effect and the regulator was kept updated on progress through regular dialogue.
Impact from Covid-19 and Group response
Although the Covid-19-driven lockdown in Q2 2020 resulted in many advertisers temporarily ceasing or reducing spend, when
those restrictions began to be lifted, there was a broad based return to television advertising across all sectors, demonstrating the
business’s resilience. There were also a number of advertisers who increased spending during lockdown, principally across financial
services, food retail and home improvements, and TV has been the medium of choice for both the UK and Scottish governments
as they have needed to share public health messages with a mass audience. In order to manage the increased risk to advertising
revenues associated with Covid-19, the frequency of meetings with ITV was increased to ensure information available was as
current as possible at all times, and the STV Growth Fund was doubled to £20 million to support local businesses and enable them
to continue to promote their brand and product/service, and boost the local economy. Lastly, the variable cost arrangement with ITV
offers profit protection in times of declining national advertising revenue. Over the course of the year national advertising revenues
declined by 14% and so there was an equivalent reduction in the cost STV pays for the Channel 3 national programming budget,
saving the business c.£5 million during the year.
The continuing macroeconomic uncertainty
Where this uncertainty results in a decline in national advertising revenues, the
associated with the Brexit process and impact
Group receives a partial offset to this impact through its arrangements with ITV
that the new trade deal will have on all areas of
in the Network Affiliate Agreement.
The positive benefit of these arrangements with ITV where the broadcast business is partly shielded from adverse national advertising
performance was demonstrated well during 2020, albeit the primary cause of the market downturn was the Coronavirus pandemic
rather than the crystallisation of any risk associated with Brexit.
Impact from Covid-19 and Group response
Impact from Covid-19 and Group response
All broadcasters found 2020 to be a difficult year with productions having to be halted and postponed due to lockdown measures.
However, following the introduction of Covid-19 safety protocols, both the UK and Scottish governments confirmed that television
production could recommence, and this remains the case in the current lockdown. Restrictions on movement meant more people
were watching television and STV set new viewing records on screen and online, with television viewing up 14% and STV Player
viewing up 65% in 2020. With regard to the effect on advertising sales, please refer to comments made under the ‘market volatility
and advertising spend’ risk above.
Principal risks and uncertainties continued
Operational risks
Risk area: Regulatory environment
Potential impact
Mitigation
STV’s linear broadcast business is operated under
As licensee, it is STV’s responsibility to ensure that the terms of these licences
licences that are regulated by Ofcom, and the key
are adhered to and measures have been put in place internally to ensure this
Channel 3 licences have a term that runs to the
happens. There is a dedicated compliance function and a compliance mentality
end of 2024. These Channel 3 licences contain
has been embedded within all relevant areas of the business. There is frequent
conditions around contribution to public service
contact with the regulator to ensure awareness and understanding of any
broadcasting, programme production and
updates or changes to the codes/rules and that appropriate changes to internal
compliance with Ofcom’s codes. In the event
processes are implemented as required. There is also regular staff training.
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.
Risk area: Market volatility and advertising spend
Potential impact
Mitigation
STV’s sales, expenses and operating results could
STV’s national advertising is sold by ITV and the contract requires ITV, as agent,
vary from period to period as a result of a variety of
to maximise revenue through ‘best endeavours’. ITV send a weekly performance
factors, some of which are outside STV’s control.
report to STV and regular meetings are held between the senior commercial
These factors include general economic conditions;
management from both companies to understand current forecasts, trends,
conditions specific to general advertising markets
and other related matters. STV’s London-based marketing team is responsible
including the commercial television market; trends
for monitoring the digital advertising market and selling Video on Demand
in sales, capital expenditure and other costs, and
advertising for STV Player to customers from across the UK. STV aims to create
the introduction of new services and products by
greater value for advertisers through focusing on targeted opportunities and new
STV or its competitors. In response to an ever-
ways to engage with consumers. STV’s regional Scottish advertising is sold by a
changing operating and competitive environment,
further, dedicated team who pursue a range of initiatives designed to ensure the
STV may elect from time to time to make certain
effectiveness of our sell, driven by the STV Growth Fund through which we provide
pricing, service or marketing decisions that could
matched-funding and other support to make TV advertising affordable and enable
have a material adverse effect on sales, results
businesses to grow their brand awareness. The strength of the relationships that
of operations and financial conditions.
the commercial teams have with their clients is crucial in selling advertising
services, and in maintaining those sales levels during periods of uncertainty.
Risk area: Post Brexit uncertainty
Potential impact
Mitigation
UK businesses is considered to be a risk to STV,
to the extent it affects the UK advertising market,
upon which STV is dependent.
Risk area: Reliance on ITV
Potential impact
Mitigation
The majority of STV’s Channel 3 programming
This relationship is managed closely, with regular updates on programme and
content is provided by the ITV Network. Therefore,
schedule developments being provided through STV’s Head of Consumer Insights
its ability to attract and retain audiences is
with STV’s Commercial Director having responsibility for the sales relationship
dependent on the quality, variety and diversity
with ITV. Contracts are in place for all network functions performed by ITV
of programming available, which, in turn, impacts
with agreed consultation processes for any changes to arrangements. Regular
the ability of STV to attract regional advertisers. In
dialogue includes formal quarterly ITV Council meetings with minutes provided
addition, the performance of ITV as STV’s national
to Ofcom. With regard to ITV acting as the Group’s national sales agent, there are
advertising sales agent is a significant factor that
regular meetings between the Commercial Directors of both businesses to discuss
affects the financial performance of the Group.
latest forecasts, booking trends and similar factors. In addition, there is profit
protection for STV by virtue of the contractual arrangement in place with ITV,
whereby STV’s costs are pegged to national advertising revenues with costs
only increasing in the event that national advertising revenues also increase.
STV Annual Report and Accounts 2020
50
RISK MANAGEMENT
Principal risks and uncertainties continued
Operational risks continued
Risk area: Cyber
Potential impact
Mitigation
Impact from Covid-19 and Group response
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.
There are cyber risk policies in place covering information security, data
retention and data incident reporting. The IT infrastructure is protected by
firewalls and software restricting use to authorised persons only. Regular
internal and external network penetration tests are performed by a third-party
specialist to ensure the level of protection is maintained. The Group has a Cyber
Risk Committee which meets regularly to discuss the internal controls framework
in place, any incidents that have arisen and further enhancements to the control
environment that could be implemented.
Financial risks
Risk area: Defined benefit pension scheme shortfalls
Potential impact
Mitigation
The STV defined benefit pension schemes’
investment strategy is aimed at reducing 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 and the ability
to invest in key growth areas.
This position is kept under regular review by the Board. The trustees appointed
River & Mercantile Solutions as investment manager for the schemes’ assets
and this is intended to increase returns and meet the schemes’ long-term
funding objectives.
Risk area: Group funding
Potential impact
Mitigation
The overall financial position of STV may be
constrained by the Group’s leverage and other
debt arrangements in particular in relation to
its ability to invest in strategic growth areas.
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. There are 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.
With the majority of staff working from home and accessing systems remotely, management was alert to the increased risk of fraud,
especially cyber fraud. Payment processes and banking approvals for payments are conducted through an online portal with agreed
workflows and approval levels and this continued during the pandemic with a small number of processes being tightened. There
were no known phishing attacks and the Finance Manager for Group and Corporate Development attended training courses on this
subject after which the information and advice provided was shared with the broader team in order that they were all alert to the
common forms of cybercrime and how to detect them.
A cyber simulation exercise was carried out in Q1 2020, designed to test the Group’s business continuity plans in the event of a virus
spreading to both IT and Broadcasting networks, resulting in key systems offline and/or unavailable. The Business Continuity team
was tasked with implementing the Business Continuity/Disaster Recovery plans to provide intermediate solutions to isolate the
simulated virus, keep STV on air, maintain live streaming and return to a stable situation as quickly as possible. The rehearsal was
successful with all observations recorded and actions assigned where appropriate.
Within Broadcast, the earlier introduction of new technology in news – cameras, laptops and 4G connectivity – had already made
it easier for people to work from home. Remote workflows were created and tested and processes adapted to enable secure remote
working within promos, creative and post production. Transmission largely remained on the premises with a remote workflow created
enabling people to operate remotely.
Impact from Covid-19 and Group response
There has been constructive engagement by the Chief Financial Officer with the trustees during 2020, with the agreement to postpone
certain contributions payable during Q2 2020 until the end of the year as part of the Group’s initial response to Covid-19. In addition,
the risk weighting of the investment portfolio has been rebalanced to increase the proportion allocated to return-seeking asset
classes, in order to benefit from the anticipated rebound in markets once the uncertainty surrounding Covid-19 settles. The overall
financial position of the defined benefit schemes has benefitted from the hedging strategies put in place by the investment manager
although there has been an adverse impact on the overall deficit as a result of a fall in corporate bond yields. The 2020 triennial
valuation process has recently commenced, and is required to be completed by the end of March 2022.
Impact from Covid-19 and Group response
Maximising cash retention and reducing costs were key objectives in the Group’s response to Covid-19. In order to enable the
business to continue to invest in its growth areas, and trade through a potential, severe downside scenario, a number of actions were
taken to secure liquidity and manage leverage. The Group’s bank facilities, with a maturity date of June 2022, were increased from
£60 million to £80 million and relaxations to the leverage covenant were secured during the period of anticipated higher leverage.
In addition, an equity placing was completed on 7 July 2020, when c.7 million new ordinary shares were admitted to trading, realising
net proceeds of £15.5 million. Other cash retention measures were taken, and cost savings of c.£7 million identified. The combination
of resilience in the broadcast business, digital revenue growth, strong cash collection and management actions has resulted in a
significantly reduced net debt position at the end of 2020, and leverage below 1 times. Subsequent to the year end, the Group
refinanced its bank facilities (see page 27 for more details).
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
Principal risks and uncertainties continued
Operational risks continued
Risk area: Cyber
Potential impact
Cyber risk commonly refers to any risk of
financial loss, disruption or damage to a
There are cyber risk policies in place covering information security, data
retention and data incident reporting. The IT infrastructure is protected by
company’s reputation resulting from the failure
firewalls and software restricting use to authorised persons only. Regular
of its information technology systems. STV is
internal and external network penetration tests are performed by a third-party
dependent on technology for the smooth running
specialist to ensure the level of protection is maintained. The Group has a Cyber
of its business and a cyber-security incident could
Risk Committee which meets regularly to discuss the internal controls framework
lead to a loss of commercially sensitive data, a
in place, any incidents that have arisen and further enhancements to the control
loss of data integrity within our systems or loss
environment that could be implemented.
of financial assets through fraud.
The STV defined benefit pension schemes’
This position is kept under regular review by the Board. The trustees appointed
investment strategy is aimed at reducing any
River & Mercantile Solutions as investment manager for the schemes’ assets
market movement impacts. However, it is possible
and this is intended to increase returns and meet the schemes’ long-term
that the Group may be required to increase its
funding objectives.
Financial risks
Risk area: Defined benefit pension scheme shortfalls
Potential impact
Mitigation
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 and the ability
to invest in key growth areas.
Risk area: Group funding
Potential impact
Mitigation
The overall financial position of STV may be
STV uses derivative financial instruments to hedge certain risk exposures. Risk
constrained by the Group’s leverage and other
management is carried out under policies approved by the Board with financial
debt arrangements in particular in relation to
risks being identified, evaluated and hedged in close co-operation with the
its ability to invest in strategic growth areas.
operating divisions. There are 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.
51
Mitigation
Impact from Covid-19 and Group response
With the majority of staff working from home and accessing systems remotely, management was alert to the increased risk of fraud,
especially cyber fraud. Payment processes and banking approvals for payments are conducted through an online portal with agreed
workflows and approval levels and this continued during the pandemic with a small number of processes being tightened. There
were no known phishing attacks and the Finance Manager for Group and Corporate Development attended training courses on this
subject after which the information and advice provided was shared with the broader team in order that they were all alert to the
common forms of cybercrime and how to detect them.
A cyber simulation exercise was carried out in Q1 2020, designed to test the Group’s business continuity plans in the event of a virus
spreading to both IT and Broadcasting networks, resulting in key systems offline and/or unavailable. The Business Continuity team
was tasked with implementing the Business Continuity/Disaster Recovery plans to provide intermediate solutions to isolate the
simulated virus, keep STV on air, maintain live streaming and return to a stable situation as quickly as possible. The rehearsal was
successful with all observations recorded and actions assigned where appropriate.
Within Broadcast, the earlier introduction of new technology in news – cameras, laptops and 4G connectivity – had already made
it easier for people to work from home. Remote workflows were created and tested and processes adapted to enable secure remote
working within promos, creative and post production. Transmission largely remained on the premises with a remote workflow created
enabling people to operate remotely.
Impact from Covid-19 and Group response
There has been constructive engagement by the Chief Financial Officer with the trustees during 2020, with the agreement to postpone
certain contributions payable during Q2 2020 until the end of the year as part of the Group’s initial response to Covid-19. In addition,
the risk weighting of the investment portfolio has been rebalanced to increase the proportion allocated to return-seeking asset
classes, in order to benefit from the anticipated rebound in markets once the uncertainty surrounding Covid-19 settles. The overall
financial position of the defined benefit schemes has benefitted from the hedging strategies put in place by the investment manager
although there has been an adverse impact on the overall deficit as a result of a fall in corporate bond yields. The 2020 triennial
valuation process has recently commenced, and is required to be completed by the end of March 2022.
Impact from Covid-19 and Group response
Maximising cash retention and reducing costs were key objectives in the Group’s response to Covid-19. In order to enable the
business to continue to invest in its growth areas, and trade through a potential, severe downside scenario, a number of actions were
taken to secure liquidity and manage leverage. The Group’s bank facilities, with a maturity date of June 2022, were increased from
£60 million to £80 million and relaxations to the leverage covenant were secured during the period of anticipated higher leverage.
In addition, an equity placing was completed on 7 July 2020, when c.7 million new ordinary shares were admitted to trading, realising
net proceeds of £15.5 million. Other cash retention measures were taken, and cost savings of c.£7 million identified. The combination
of resilience in the broadcast business, digital revenue growth, strong cash collection and management actions has resulted in a
significantly reduced net debt position at the end of 2020, and leverage below 1 times. Subsequent to the year end, the Group
refinanced its bank facilities (see page 27 for more details).
The reputational and financial risk of the lottery operation has been removed as a principal risk. During 2020 the Board took the
decision to divest itself of the STV ELM in order to focus fully on progressing its successful growth strategy. As noted in the Finance
Review on page 28, an agreement in principle has been reached, and is subject to Gambling Commission approval.
Baroness Margaret Ford OBE
Chairman
STV Annual Report and Accounts 2020
The Board does not consider any of these factors to individually
threaten the viability of the business and therefore the viability
assessment focused on a range of potential scenarios in which
there was a compounding effect from all factors crystallising
simultaneously. These scenarios included a severe but plausible
downside scenario, and more extreme scenarios in which the
Group would breach borrowing and/or covenant levels. The Group
reflected on its experiences in Q2 2020 in particular when
considering severe but plausible outcomes, given advertising
revenue declines during that time were the most significant
seen by the business in its history.
The severe downside scenario modelled assumed that the
significantly reduced advertising revenues seen in Q2 2020 recurred
in H1 2021 with the return to more normal levels of trading
taking much longer than experienced in H2 2020. Furthermore,
a production hiatus was modelled over the first half of the year,
with the resultant impact of delays to programme deliveries over
the immediately following 12-18 months. Even in these extreme
circumstances, the Group would remain within its banking facility
(both those in place at the year end and those agreed with lenders
in March 2021) and comply with all financial covenants.
In evaluating these models, the Directors took into account a
number of the available mitigating actions that the business
would reasonably take to manage the impact, specifically in
relation to cost reduction, management of working capital,
capital investment and returns to shareholders.
Having conducted the above exercise and taken into account
the business model, strategic aims, risk appetite, and principal
risks and uncertainties along with the Group’s current financial
position, the Directors are satisfied that the Group will be able to
continue in operation and meet its liabilities as they fall due over
the three year period under review.
52
RISK MANAGEMENT
Long term viability statement
In accordance with the UK Corporate Governance Code 2016,
the Directors are required to perform an assessment of the
Group’s viability over a period longer than the twelve months
required for the going concern statement.
This year’s viability assessment covers a three-year period,
a duration that has not changed since the requirement for this
viability reporting was introduced. The Directors consider that
three years continues to be the most appropriate time frame for
assessing the Group’s longer-term viability, after consideration
of the following factors:
• Visibility over the broadcast advertising business is relatively
short term; advertising remains cyclical and closely linked to
UK economic growth;
• The programme development lifecycle for programmes tends
to be more medium term, however over time there is less
visibility due to changes in viewer demand;
• The speed of innovation in the digital landscape continues
to drive changing viewer and consumer habits, with limited
visibility beyond the short-term;
• One of the Group’s key funding obligations is payment of
contributions to its defined benefit pension schemes, which
are dependent on independent valuations undertaken every
three years; and
• Capital expenditure requirements do not require consideration
over a period beyond three years.
This year’s assessment covers the period from 1 January 2021
to 31 December 2023.
The viability assessment evaluates the potential financial impact
of the principal risks and uncertainties that are faced by the
Group, to assess its ability to withstand them. The analysis takes
as its starting point the Group’s 2021-2023 Strategic Plan which
was prepared over November and December 2020. These plans
are the result of detailed consideration of all areas of the business
including the business model, opportunities, potential risks and
uncertainties faced over that timeframe and include profit and
loss and cash flow forecasts.
In assessing the viability of the business, the Board considered a
number of factors that may have a material impact on long-term
viability, principally falling under the risk of ‘Market volatility and
advertising spend’. Specific consideration was also given this year
to the identification of any medium or long term impacts on the
business of the Covid-19 pandemic, and any changes that were
required to the Group’s strategy or risk management activities
in support of its longer term viability. The main points of
consideration were:
a) The performance of the national and regional advertising
markets is significantly adverse to forecast;
b) The projected growth in digital advertising is significantly
adverse to forecast, including the impact from the inability
to grow the STV Player outside Scotland; and
c) The projected growth in programme commissions and therefore
revenue in STV Studios is significantly adverse to forecasts,
and is insufficient to leverage fully the fixed cost base.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information INTRODUCTION TO
GOVERNANCE
Corporate governance at STV
STV is committed to business integrity, high ethical values and
professionalism in all of its activities. The Board of Directors’ remit
is to provide direction to help shape STV’s strategy and ensure
that it is being executed effectively within a structure that is well
controlled, mitigates risk and is compliant with corporate and
social responsibility. Good governance comes from an effective
Board which provides strong leadership and engages well with
both management and stakeholders and your Board supports
the highest standards in all aspects of governance. We are
accountable to our stakeholders not only for ensuring that
governance processes are in place, but that these are effective
as we believe this underpins good business performance.
As Directors, we are also mindful of our statutory duty to act in
the way each of us considers, in good faith, would be most likely
to promote the success of STV for the benefit of its members as a
whole, as set out in S.172 of the Companies Act 2006 and further
details of how we have achieved this can be found on pages 42
and 43.
STV’s corporate governance
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Under the Code, the Board is required to undertake a formal and
rigorous annual evaluation of its own performance and that of
its Committees and individual Directors. In December 2020 the
Board conducted an internally facilitated evaluation and details
of the process and its outcome are covered in the Corporate
Governance report. Following this, I am satisfied that the Board
and its Committees are carrying out their duties efficiently and
particularly following the appointments of Paul and Aki on
1 February this year, that there is an appropriate balance of
skills, experience, knowledge and independence on the Board.
53
Stakeholder engagement
While the lockdown measures implemented by the Westminster
and Scottish Governments have meant much reduced in-person
engagement with our stakeholders, these relationships are vital
in ensuring we can work together to successfully deliver our
strategic plan and further details of how we do this can be found
in the S.172 Statement on pages 42 and 43.
One recent example of the Board’s engagement with stakeholders
has been the triennial review of the remuneration policy this year,
for which we consulted with our largest shareholders. Full details
of the revised Directors’ Remuneration Policy, which will be
submitted to shareholders for consideration at the company’s
AGM in April, can be found on pages 69 to 76 in the Directors’
Remuneration Report.
Although the Board welcomes engagement and dialogue with its
shareholders, in view of the current restrictions, it has concluded
that shareholders will not be permitted to attend the AGM in
person and accordingly the meeting will take place virtually
as a closed meeting. The Board thanks shareholders for their
understanding in these exceptional times and looks forward to
returning to an open AGM format in future years. We are always
happy to receive shareholders comments and answer any
questions and the email address to which these should be sent
is set out in the Notice of Meeting accompanying the Annual
Report and Accounts 2020.
Sustainability
Sustainability plays an important role in STV’s vision and that of its
Board. The Company is committed to reducing its environmental
impact and improving the sustainability of all aspects of its
business activities. Its Environmental Sustainability Policy,
further details of which can be found on pages 36 to 38, will
help STV deliver greater value to all its stakeholders in a way
that is economically, environmentally and socially responsible.
This policy sets out STV’s initial response to the climate crisis,
and includes a developing programme of activities and initiatives
to enable STV to be a more environmentally sustainable business
and to achieve an ambition to become net-zero carbon by 2030.
Compliance with the UK Corporate Governance Code
The Board considers that, in respect of the financial year ended
31 December 2020, the Company has complied fully with the UK
Corporate Governance Code 2018 (the Code) and this section,
together with the Directors’ Remuneration Report, set out on
pages 77 to 84, 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
STV Annual Report and Accounts 2020
54
BOARD OF DIRECTORS
At 14 March 2021
From top left:
Baroness Margaret Ford OBE
Simon Pitts
Lindsay Dixon
Simon Miller
Anne Marie Cannon
Ian Steele
David Bergg
Paul Reynolds
Aki Mandhar
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 55
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 a non-executive
director of Deloitte UK Oversight Board and a member of the
North and South European Board. Margaret 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. She was appointed to the House of Lords in 2006
and sits as a Crossbench Peer. Margaret is Chairman of the STV
Children’s Appeal and, 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, He 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 ITN for
eight years and prior to ITV, worked in the European Parliament.
He is Vice Chair of the Royal Television Society and a trustee of
the STV Children’s Appeal and literary charity Oscar’s Book Prize.
Lindsay Dixon Chief Financial Officer
Appointed: May 2019
Lindsay is a Chartered Accountant with extensive commercial
experience gained across a range of sectors covering the FTSE
100, 250 and large private companies. Previously, Lindsay held
the role of Group Financial Controller at William Grant & Sons
Limited and prior to that was Group Financial Controller of The
Weir Group plc. In addition to her core financial responsibilities
she has wide ranging M&A, investor relations and international
experience. After qualifying at Deloitte, she held senior finance
roles with Johnston Press plc.
Simon Miller Senior Independent Director
Appointed: December 2016
Committees: Audit & Risk, Remuneration, Nomination
Simon is an experienced director and chair with exposure
to a wide range of financial, commercial and manufacturing
businesses, holding both executive and non-executive roles.
He is currently chairman of Blackrock North American Income
Trust plc and chairman of Hampden & Co. He was formerly
chairman of Brewin Dolphin Holdings PLC and a non-executive
director of Scottish Friendly Assurance Limited. Simon read Law
at Cambridge and is a Barrister at Law.
Anne Marie Cannon Non-Executive Director
Appointed: November 2014
Committees: Remuneration (Chair); Audit & Risk
Anne Marie has over 35 years’ experience in the energy industry
and investment banking and is an experienced director, holding
executive and non-executive roles. She is currently Deputy Chair
at Aker BP ASA, Senior Independent Director at Premier Oil plc and
a non-executive director at Aker Energy AS. In addition, she is a
Senior Advisor in the Strategic Advisory business at PJT Partners.
Anne Marie was previously a Senior Advisor at Morgan Stanley and
has also held financial and commercial roles at Shell UK, Schroder
Wagg and Thomson North Sea, as well as executive director
positions on the boards of Hardy Oil and Gas and British Borneo.
Ian Steele Non-Executive Director
Appointed: November 2015
Committees: Audit & Risk (Chair); Remuneration; Nomination
Ian qualified as a Chartered Accountant 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 retired as Senior Partner for Deloitte in
Scotland and Northern Ireland in 2015 and prior to retiring, 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. He is on the Advisory
Board of Visible Capital and is Chairman of Iomart Group plc.
David Bergg Non-Executive Director
Appointed: May 2018
Committees: Remuneration; Audit & Risk
David has worked in the broadcasting industry for over 30 years
– at ITV, the BBC, Sky, TV-am and Channel Five. He started his
career in a number of ITV regional audience research teams
(including Grampian Television), 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 and
retains extensive contacts at senior levels in the broadcasting
and programme production sectors in the UK and USA.
Paul Reynolds Non-Executive Director and Chair Elect
Appointed: February 2021
Paul has over 30 years international public-company experience
as a Chair, non-executive Director and senior executive, including
tenures as Chief Executive of BT Wholesale and Executive Director
of BT Group plc and Chief Executive of Telecom New Zealand Ltd.
He is currently a non-executive Director of TalkTalk Telecom Group
plc, and was previously Chair of its subsidiary, FibreNation Limited.
Paul is also active in financial services, as a non-executive director
at Computershare Ltd in Melbourne and Chair of data-analytics
fintech, 9Spokes Ltd. He has held previous roles as a non-executive
Director at Eircom Ireland Limited, XConnect Global Networks Ltd
and Japan-based telecommunications company, eAccess Ltd.
Aki Mandhar Non-Executive Director
Appointed: February 2021
Committees: Audit & Risk
Aki has built a successful executive career across the advertising,
marketing and digital media sectors and is currently UK General
Manager of subscription-based sports news website, The Athletic.
Prior to joining The Athletic in early 2020, she was Chief Operating
Officer of Telegraph Media Group, responsible for delivery of the
strategy to transform the business from a traditional publisher
model into a successful, sustainable subscription-based business.
Aki was UK Managing Director of Omnicom Group Agency, OMD
from 2015 until 2017 and prior to this held executive roles within
MediaCom over a period of nine years. Aki’s early career was
established with employment website Monster.com from 1999
until 2006 where she rose to become General Manager.
STV Annual Report and Accounts 2020 56
CORPORATE GOVERNANCE REPORT
Governance structure
External auditors
Elected at the AGM. Review the
financial statements to ensure they provide
a true and fair view of past financial
performance and current financial position.
<>
Audit & Risk Committee
Monitors the integrity of the financial
statements and reviews internal financial
controls, risk management and
compliance.
<>
Internal Audit
Provides independent assurance
that risk management, governance
and internal control processes are
operating effectively.
>
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>
>
Shareholders in general meetings
The Company’s highest decision-making body.
Exercise their authority via these meetings.
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The Board
Elected by shareholders, the Board, led by the Chairman,
is responsible for managing the Group, which includes
addressing the risks it is subject to, agreeing strategy, setting
the budget and overseeing performance while discharging
various governance and legal responsibilities.
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Executive Directors
Manage the Company’s operations within the
framework of rules established by the Board.
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Management Board
Drives the implementation of the Company’s strategic priorities
while addressing critical business issues and opportunities.
Nomination Committee
Ensures the Board has the appropriate
balance of skills, knowledge, experience,
independence and diversity.
Remuneration Committee
Agrees the remuneration framework
for the Executive Directors.
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Principles statement
STV Group plc is fully committed to the highest standards of corporate governance, believes 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 ended 31 December 2020, the Company was subject to the provisions of the UK Corporate Governance Code 2018 (the
‘Code’), available at https://www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance-code, and the
Board’s view is that it has complied with all relevant provisions of the 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 the risk management measures and internal controls in place are appropriate and
operating effectively. 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, unless otherwise stated,
was as follows:
Chairman
Baroness Margaret Ford OBE
Chief Executive Officer
Simon Pitts
Chief Financial Officer
Lindsay Dixon
Non-Executive Directors
Simon Miller (Senior Independent Director)
Christian Woolfenden (resigned 9 March 2020)
Anne Marie Cannon
Ian Steele
David Bergg
Paul Reynolds (appointed 1 February 2021)
Aki Mandhar (appointed 1 February 2021)
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 57
Board of Directors*
11%
22%
67% Non-Executive Directors
Chairman
Executive Directors
* Current composition of the Board
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 contributing factor towards 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 from across a
variety of sectors means they can constructively challenge management in relation 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 the Non-Executive Directors.
Board responsibilities
The roles of Chairman and Chief Executive are separate with a clear division of responsibility that 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 the constructive challenge to management that 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 the leadership of the Board, setting the highest standards of governance, ensuring its effectiveness
(including the timely dissemination to Directors of clear and accurate 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 that 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, capital allocation (covering dividends, significant capital projects, and acquisitions and disposals), and key
accounting policies. 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 implemented effectively 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, as well as updates on strategic progress across all business areas.
S.172 of the Companies Act 2006 states that 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; and
• need to act fairly as between members of the Company.
Pages 42 and 43 of the Strategic Report set out how Directors have implemented S.172 during the year, taking into account the
above factors.
The Senior Independent Director is available to shareholders should they request a meeting or have concerns that 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
STV Annual Report and Accounts 2020 58
CORPORATE GOVERNANCE REPORT
Chairman’s performance in the annual performance review. The Senior Independent Director is STV’s Employee Director and his role
is to engage with employees and the wider workforce to enhance the ‘employee voice’ in the boardroom.
The Board is accountable to shareholders for the efficient and effective management of the Company’s operations and for the adherence
to corporate governance standards in accordance with the strategy. Furthermore, the Board is held to account in the maximisation of
shareholder value over the long term, within a framework of sound business ethics, and while taking into account all stakeholder groups.
Each Director is able to devote the time necessary to discharge their respective responsibilities effectively.
Number of meetings held in 2020:
Attendance:
Baroness Margaret Ford OBE
Simon Pitts
Lindsay Dixon
Simon Miller
Anne Marie Cannon
Ian Steele
David Bergg
Christian Woolfenden (resigned 9 March 2020)
* Attended at the invitation of the respective Chairman.
Board
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
21
21
21
21
19
21
21
21
1
3
3*
3*
3*
1*
3
3
2
1
3
2*
2*
–
–
3
3
3
–
2
2
–
–
2
–
2
–
–
The Board meets regularly, usually at least eight times a year, with additional meetings taking place as and when required. Following the
outbreak of Covid-19, which represented a unique challenge for Directors, the frequency of meetings was increased during April, May and
June 2020 with weekly online audio-video meetings held in addition to the scheduled meetings. These meetings included discussions on
remuneration related matters. From March 2020, all Board and Committee meetings were held online via audio-video conferencing.
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.
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 policy, internal control policies and corporate governance arrangements.
The Board’s strategy day is a significant event within the annual calendar and provides the Board with the opportunity to come
together and discuss in detail STV’s strategy and implementation plans. Usually taking place in Q4, the 2020 annual strategy day was
postponed until February 2021, when it took place online and by which time both Paul Reynolds and Aki Mandhar, the two newest
non-executives, had joined the Board and were able to participate.
The agenda for the strategy discussion focused on the Group’s three year plan, including the setting of new targets against which
performance would be measured, and the capital investment required in order to deliver the plan.
Board focus
During Q2 2020 in particular, discussions on the business’s response to Covid-19 constituted the majority of each board meeting,
with the weekly discussions held during that time having a particular focus on risk management and value protection.
These weekly calls were vital to ensure that the impact of the pandemic on STV’s business was understood and that all possible
actions were being taken to mitigate its impact. The list of operating issues was considerable and the priority was to ensure that
STV was well positioned to continue its successful growth strategy even in a severe downside scenario.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 59
All of these weekly meetings were formally minuted, and at them the Board was provided with information on Government measures
taken or likely to be taken as well as verbal updates from both the Chief Executive Officer and the Chief Financial Officer on the
Company’s liquidity position, latest trading and financial data, viewing figures, and a range of people matters covering mental health,
general wellbeing, communications and similar items, as well as the measures taken by the Executives to support employees during that
time. The Board was also advised of the new protocols in place across all office premises for those who were unable to work from home,
including appropriate safety measures such as a one way system, increased sanitation, mandatory mask wearing and appropriately
distanced desks for the small number of colleagues who were required to be in the office to ensure operational continuity.
Key decisions taken by the Board during that time, following receipt of advice from its advisers, included execution of a complementary
and balanced package of debt and equity that would strengthen the balance sheet and provide medium term flexibility. Accordingly,
the bank facility was increased from £60 million to £80 million, coterminous with the existing facility maturing in June 2022, and
£15.5 million (net of expenses) was raised through the placing of 7,050,665 new ordinary shares.
In addition to these specific Covid-19-response measures, the Board executed its responsibilities across the full suite of core activities
with the main focus across those areas being:
Operational and financial performance, including monitoring
• operational and financial updates for each business area at each Board meeting
• monthly finance reports, including details of performance against budget and latest forecast and the Company’s financial position
• approval of the Annual Report & Accounts
• approval and declaration of a bonus issue in replacement of an interim cash dividend in respect of 2020
• approval of the 2021 Budget
• approval of the Viability Statement
• monitoring of share trading and liquidity
Strategy
• discussion on growth plans for each business areas
• discussion on Covid-19 measures across the business
• approval of share placing
• approval of extension to existing bank facility, and covenant relaxations
• consideration of acquisition opportunities
• approval of the Company’s strategy
• discussion on various regulatory issues
• discussion around the divestment of the lottery
• approval of the Group’s Sustainability Strategy and long-term targets
Governance and risk
• consideration of the appropriateness of the financial statements being prepared on a going concern basis
• approval of the 2021 AGM Resolutions
• approval of revised terms of reference for Nomination Committee
• discussion on the Board’s annual performance evaluation
• approval of the Group’s risk appetite and discussion on risk management processes
• update on shareholder meetings with the Remuneration Committee chairman following shareholders votes against the
Remuneration Report resolution at the previous AGM
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
• review of placing materials
Corporate Social Responsibility
• involvement in the STV Children’s Appeal 2020
STV Annual Report and Accounts 2020 60
CORPORATE GOVERNANCE REPORT
Board committees
The Board is supported by the Audit & Risk, 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 & Risk 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
• reviews and notes annually the
remuneration trends across the Company
• reviews workforce remuneration and
related policies, including alignment
with the Company’s culture
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 61
Audit & Risk Committee Report
Page 77
Remuneration Committee Report
Page 61
Nomination Committee Report
Remuneration Committee
The members of the Committee during the year were:
Anne Marie Cannon (Chairman)
Ian Steele
David Bergg
Simon Miller (appointed 4 March 2021)
The activities of the Remuneration Committee are described within the Directors’ Remuneration Report which can be found on pages
67 to 84. The written terms of reference of the Remuneration Committee set out various considerations that must be made when
determining the Company’s remuneration policy, such as ensuring:
• Executives are provided with appropriate incentives to encourage enhanced performance 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 reward 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.
The Committee also reviews workforce remuneration and policies and ensures that these are aligned with the Company’s culture.
Copies of the Committee’s terms of reference are available on request and on the Company’s website www.stvplc.tv.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
61
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.
These were revised during 2020 to better reflect the increased governance responsibilities of this committee.
The Committee met twice during the year and at its February 2020 meeting agreed that, while the Board had an appropriate balance of
skills and experience, it was likely that one of the non-executive directors would be retiring within the next few months and accordingly
the appointment of an additional non-executive director should be considered. In terms of the skills, experience and knowledge, a good
all-rounder with clear experience in corporate governance would be sought and Russell Reynolds, which has no other connection with
STV, was appointed to lead the search for suitable candidates. Following the decision of Baroness Margaret Ford OBE not to put herself
forward for re-election as non-executive Chairman at the Annual General Meeting in April 2021, Russell Reynolds was also asked to
lead the search for a new chairman.
Role specifications were discussed and prepared. The Committee is conscious that diversity of social, professional, international and
ethnic backgrounds as well as of cognitive and personal strengths is as important as gender diversity and the role specifications
reflected the Committee’s desire for broader diversity on the STV Board taking all these into account.
Diversity: STV is committed to building an inclusive culture and has a strategy in place to ensure it represents the communities it
serves, both on and off screen and to create an inclusive culture that ensures equality of opportunity for all. Activities in this area are
focused on the Open Access Charter which captures the commitments that have been identified to improve diversity and inclusion for
employees, audiences and partners. STV has also confirmed a renewed commitment to using its privileged position as an employer,
public service broadcaster and producer to address the longstanding and systemic issue of racism and improve the representation
of Black, Asian and Minority Ethnic people both on and off screen.
Succession planning: a comprehensive report was prepared by STV’s HR and Communications Director in late 2019, assessing
organisational resilience and succession strength to senior roles and other key operational roles and identifying successors. The report
also assessed the development needs of Directors and other senior executives and reviewed progress towards achievement of the
2023 target to achieve gender balance across senior roles.
The report included input from divisional managing directors and considered readiness to progress on different time horizons. The results
were set out in the 2019 Nomination Committee Report and are still relevant. The HR & Communications Director will attend one of the four
Nomination Committees scheduled for 2021 to discuss talent management and succession planning for the Board and Management Board.
Board
Management Board
Staff
44.4% Women
55.6% Men
33.3% Women
66.7% Men
51% Women
49% Men
Report from the Audit & Risk Committee
The members of the Committee, all of whom were independent, during the year were:
Ian Steele (Chairman)
Anne Marie Cannon
David Bergg
Christian Woolfenden (resigned 9 March 2020)
Simon Miller (appointed 4 March 2021)
Aki Mandhar (appointed 4 March 2021)
The Audit & Risk Committee is chaired by Ian Steele who has recent and relevant financial experience. The Committee members have,
through their other business activities, significant experience in financial and risk management matters. They have been selected with
the aim of providing the wide range of financial and commercial expertise necessary to fulfil the Committee’s responsibilities.
At the invitation of the Committee, meetings are attended by the Chairman, Chief Executive Officer, Chief Financial Officer and the
Finance Manager for Group and Corporate Development. Representatives from both the external and internal auditors also attend
each meeting and the Committee meets separately with each of senior management and the external and internal auditors at least
STV Annual Report and Accounts 2020 62
CORPORATE GOVERNANCE REPORT
once during the year. These separate meetings with the internal and external auditors provide the Committee with the opportunity
for any issues to be raised by, or with, the auditors.
The Committee met three times during the year and once since the year end and the Chairman of the Committee provides a full verbal
report on the Committee’s activities at each subsequent Board meeting. The Board receives a copy of the minutes of each meeting,
and the papers considered by the Committee are available to any Director who is not a member, should they wish to receive them.
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, with employees directed to co-operate with any request made by the Committee. No such requests were
made in 2020. The Audit & Risk Committee has written terms of reference and these are available on request and on the Company’s
website www.stvplc.tv.
The Committee’s effectiveness is reviewed annually as part of the Board evaluation process.
The work of the Audit & Risk Committee focuses on the four areas of (i) financial reporting; (ii) internal control and risk management;
(iii) internal audit; and (iv) external audit.
(i) Financial reporting
The Committee’s principal responsibility in this area is the review and challenge of the actions and judgements of management in
relation to the interim and annual financial statements before submission to the Board. The Committee has a particular focus on:
• critical accounting policies and practices (including any changes);
• decisions requiring significant judgements, areas of significant estimate, or where there has been discussion with the external auditor;
• the existence of any errors, adjusted or unadjusted, arising from the audit;
• the clarity and compliance of disclosures with accounting standards and relevant reporting requirements;
• assessment of the going concern basis of preparation and review of the process and financial modelling underpinning the Viability
Statement; and
• the processes surrounding compilation of the Annual Report and Accounts from the perspective of presenting a fair, balanced and
understandable assessment of the Group’s position and prospects.
Formal reports were received from the Chief Financial Officer and the external auditor summarising the main discussion points for
both the interim report at the August 2020 meeting and the Annual Report in the February 2021 meeting. The significant financial
reporting matters discussed during the current year, in addition to recurring agenda items, were as follows:
Accounting for defined benefit pension schemes: The valuation of pension liabilities can be materially affected by the assumptions
used and the Committee challenged management on the key assumptions underpinning the valuation, specifically the discount rate,
RPI and mortality. The Committee also considered the treatment and disclosure of the insurance policies held for some individual
members of the Scottish & Grampian scheme, and challenged management on the work that had been done to reflect the related
assets and liabilities in the year end accounting valuation. Assurance was taken from the fact that external advice had been provided
to the Company, including from its actuary. The Committee received PwC’s report on the work they carried out in respect of pension
liabilities and their conclusions (which are set out in their report on page 89). On this basis, the Audit & Risk Committee was satisfied
with the assumptions and related pension disclosures.
Accounting for the debtor due by the STV ELM from the Scottish Children’s Lottery (SCL): At the half year, the Group fully provided for the
debtor due from the SCL in light of the ongoing process to divest of the STV ELM. Over the second half of the year, the debtor balance
increased by a further £0.1 million, which has also been provided for with the total exceptional charge for expected credit losses of
£8.8 million during the year. Also related to the disposal of the ELM business, operating exceptional costs of £0.5 million have been
recognised during the year representing costs associated with the transaction, as has a VAT recoverable of £0.6 million, reflecting
amounts due to be recovered from HMRC following the write-off of sales invoices in the ELM. Management presented to the Committee
on the status of negotiations with prospective buyers both as at the year-end and the extent of developments subsequent to the balance
sheet date, as well as the status of the VAT reclaim process over the same period. On the basis of those representations, the Committee
was satisfied that full provision for the debtor was appropriate, as was recognition of both the accruals for costs to complete the
transaction and the VAT debtor. It was confirmed by management that the amounts due from HMRC had been received post year end.
Deferred programme production stock: Deferred programme production stock forms part of inventory and is stated in the financial
statements at the lower of cost and net realisable value. The assessment of net realisable value is based on projections of future
secondary sales which is an area of judgement by management. The Audit & Risk Committee received reports from management
on the basis of assumptions underpinning the projections as at the end of the year, and a reconciliation of the deferred programme
production stock balance from the previous to the current balance sheet date. The Committee challenged management on the basis
of the assumptions and whether the approach was consistent year on year.
The Committee also received reporting from PwC on the work they had carried out in this area, and discussed their decision not to
classify this item as a significant risk for the purposes of the 2020 audit. The reasons included:
• The balance was significantly reduced from prior years so the possibility of a material misstatement is also reduced;
• The methodology for calculating the related amortisation was well understood and has not changed in many years;
• Most of the balance was in four key productions and in all cases these continue to sell well in the UK and abroad; and
• The balance has been subject to several years of audit as a significant risk and not led to any significant adjustments being proposed.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 63
On the basis of the discussions held, the Committee was satisfied that the balance was recoverable and no provision was required.
Furthermore, members agreed that it was appropriate for the Committee to continue to focus on this area given the judgement
involved by management in the underlying assumptions.
(ii) Internal control and risk management
Overall responsibility for the Group’s risk management and internal control frameworks rests with the Board. The Committee’s role
with regard to risk management has been delegated by the Board and is to review the effectiveness of the Group’s risk and internal
control frameworks. This work is supported by reporting from the internal auditor on the results of the programme of internal audits
completed, the overall assessment of the internal control environment and any reporting, either verbal or written, from senior
management covering any investigations into known or suspected fraudulent activities.
During 2020, the Committee received formal reporting, as well as verbal updates, from the Chief Financial Officer on key aspects
of the risk control framework. These updates were principally to provide assurance to the Committee that the operational changes
adopted as a result of Covid-19 and the shift to home-working had not had an adverse impact on the quality of the internal control
environment. The topics discussed included payment processes and approval routes, credit control, payroll, and finance resource.
The Audit & Risk Committee also receives reporting on the process conducted to ensure that the Group financial statements are
prepared having taken into account the internal control procedures and risk management strategies of the Group. The purpose
of these processes 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 and are free from material misstatement.
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 are investigated and reported to the Audit & Risk Committee. No concerns were raised during 2020.
(iii) Internal audit
Deloitte LLP (Deloitte) is the Company’s internal auditor. The primary focus of its internal audit programme is to provide assurance
over key revenue streams and operating costs. 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 undertakes its work via a programme of audits that is agreed in advance with the Audit & Risk Committee, and
which seeks to provide assurance over key financial processes on a rotational basis as well as give assurance over other areas, at the
request of the Committee. A full report on each internal audit carried out is shared with the Audit & Risk Committee with discussion
in the meetings focused on high priority findings, recurring items and management responses to address these areas. These reports
and discussions give the Committee a broad coverage of the activities of Internal Audit and a good sense of the control environment.
They also allow the Committee to ensure the function is effective.
A comprehensive 2020 internal audit plan was approved at the Audit & Risk Committee meeting in February 2020 but this was
temporarily paused during the mid-part of the year as the transition to home-working was facilitated and the Company’s response
to the crystallisation of a number of risks arising from the Coronavirus pandemic was determined and executed.
As part of that response, management focused on the potentially heightened risk of fraud and specifically cyber fraud, given that the
majority of staff were working from home and accessing systems remotely. The Committee received reporting from management that
provided assurance that payment processes were continuing as normal as they were facilitated through a banking online portal via
agreed workflows and that the location of the approver was not relevant. The same was also true for payroll processes and controls.
Deloitte attended two out of the three meetings of the Committee in 2020 and at the February meeting reported on the Payroll
financial controls review that had been completed with five Priority 3 recommendations made. The detailed findings were discussed
and it was noted that management had addressed several of these already. The Committee was pleased that a relatively clean report
had been given for this important area and all recommendations had been implemented.
Internal audit recommenced in Q4 2020 with completion of a review of key financial controls within the Studios division. Deloitte
reported the results of this review to the Audit & Risk Committee at its February 2021 meeting, including an overview of the work
performed, and the Committee took comfort from the extent of procedures undertaken.
The Committee has decided to undertake a tender for Internal Audit services in Q2 2021, as part of a programme of good governance.
It is expected that the successful candidate will be in place from the start of Q3 and will undertake a programme of reviews over H2
in order to provide the Committee with the independent assurance they rely on in relation to internal control design and operation.
(iv) External audit
The Audit & Risk Committee and the Board place great emphasis on the objectivity of the Company’s auditor PwC LLP in their
reporting. PwC was appointed auditor on 20 June 2013 following a tender process. STV will be required to tender and rotate the
external audit in advance of FY23 and the Chief Financial Officer has commenced planning for the process to ensure a timely and
efficient handover to the new provider.
STV Annual Report and Accounts 2020 64
CORPORATE GOVERNANCE REPORT
The audit partner and senior manager attend all Audit & Risk 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
independence and objectivity is not compromised.
Auditor effectiveness
With regard to the requirement for the Audit & Risk Committee to assess the effectiveness of the external audit process, feedback
is sought from the members of the Audit & Risk Committee, the Chief Financial Officer as well as STV’s finance team and the wider
management team as required. 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 & Risk Committee
and relayed to the auditors and to management. Following completion of this assessment for the 2020 year end, the Audit & Risk
Committee concluded that the external audit process operated effectively and efficiently.
Independence policy and non-audit services
The Audit & Risk Committee is responsible for approving, in advance, any non-audit work undertaken by the external auditor. In order
to preserve the auditor’s objectivity and independence, the Company has a policy regulating the provision of non-audit services by
the auditor. The Chief Financial Officer must obtain the approval of either the Chairman of the Audit & Risk Committee or another
Committee member if the preference is to use the auditor and must provide an explanation as to why the auditor is the most suitable
supplier of services. A case by case decision is therefore necessary and the auditor cannot be engaged for non-audit work without
reference to the Audit & Risk Committee. It is felt that this process ensures shareholders receive value for money and the Audit & Risk
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 for the purpose of
compliance with the Group’s bank facility agreement, the fees for which were less than 2% of the audit fee, and the Audit & Risk
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.
The auditor is required each year to confirm in writing to the Committee that it has complied with the independence rules of its 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 a 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 audit rules. This includes consideration of the safeguards which are in place to mitigate the risks to independence.
Committee activities
The principal activities undertaken by the Board Committees during 2020 included:
Month
Committee
Activity
February
Audit & Risk
• 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
• Internal Audit update
• Agreement to tender external audit and
appoint a new provider by end FY22
February
Nomination
• Succession planning
• Agreed to hold four rather than two meetings
• Agreed revised Terms of Reference
• Agreed all Non-Executive Directors be put
in 2021
• Committee Performance Evaluation
forward for re-election at the AGM
February
Remuneration
• Update on shareholder meetings following
votes against Remuneration Report at the AGM
• Approval of Remuneration Report
• Committee Performance Evaluation
• Consideration of vesting targets for LTIP
August
Audit & Risk
• Review of Half Year Results
• Review of Auditor report on Half Year Results
Review of internal controls/risk management
August
Remuneration
• Planning for Remuneration Policy
October
Nomination
• Update on succession planning
November
Audit & Risk
• Consideration of CFO report on Financial
• Review of external audit plan for 2020
Controls and Risk Management
December
Remuneration
• Consideration of 2021 Remuneration Policy
• Approval of grant of 2020 LTIP
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 65
Performance evaluation
The effective functioning of the Board is key to the success of the Company and STV recognises that performance evaluation is
extremely valuable in contributing to the effectiveness of the Board, both as a collective unit and for each individual Board member.
The evaluation has been designed to encourage Directors to optimise their contribution to the success of STV and add value beyond
their statutory requirements by building on existing strengths, agreeing on the challenges ahead and preparing for the future. It 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. The 2020 evaluation process was an internal exercise led by the Chairman and in
accordance with the Code, an externally facilitated evaluation will be carried out every three years with the next one proposed for 2022.
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 comments and suggestions
made together with the rating allocated to each question by Directors. The Senior Independent Director engaged with each Director
individually to evaluate the Chairman’s performance. The Chairman reported the results of the evaluations at the Board meeting held
on 12 January 2021.
The review concluded that the performance of the Board, its Committees, the Chairman and each of the Directors continued to be
effective and with the appointment of Paul Reynolds and Aki Mandhar, the mix of skills and experience on the Board was felt to be
excellent. All Directors demonstrated commitment to their roles and the boardroom culture was deemed effective and conducive
to creating a positive environment for participation and challenge by the Non-Executive Directors. All Non-Executive Directors were
agreed to be independent.
Measured against the principal duties expected of it, and building upon the progress of previous years, the Board continues to operate
effectively and to meet in full its obligations to support management, to monitor performance in the widest sense and to maintain
its strategic oversight. Accordingly, the process concluded that the Board provides the effective leadership and control required for a
listed company. The Board was agreed to be independent, with a strong Chairman, while completely aligned as regards strategy and
goals. It was unanimously agreed that STV had responded to and navigated the Covid-19 crisis well and that the proactive steps taken
to strengthen the balance sheet and support its colleagues and partners, meant that it was positioned well to continue to progress
with its successful growth strategy.
In terms of specific points made, while it was agreed that there were succession plans in place, it was important to continue the
focus and planning, particularly in relation to achieving ethnic and gender diversity. Accordingly, it was agreed that the Nomination
Committee would meet four times each year going forward, rather than the previous twice yearly meetings, to allow more discussion
to take place. STV’s HR and Communications Director would also be asked to prepare and present a comprehensive paper to the Board
covering succession for the wider senior leadership team and high potential individuals with suggestions as to how best to achieve
gender balance and ethnic diversity and over what timescale.
The other point arising from the performance evaluation was with regard to risk and while Deloitte provided assurance on internal
controls, there was always more scope for analysis and formal discussion on risks. Accordingly, it was agreed that in addition to the
Audit & Risk Committee Chairman’s detailed reports to the Board, risk would be formally added as a standalone agenda item at two
Board meetings.
Training and development
All Directors are given a comprehensive introduction to the Company’s business. Development and training of Directors is an
ongoing process. Throughout their period in office the Directors are regularly updated on the Company’s business, the competitive
environment 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 maintained. Directors are also provided with, and
encouraged to take up, opportunities to meet major shareholders. 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.
Re-election
All Directors are subject to election by shareholders at the first Annual General Meeting following their appointment, and annual
re-election at each subsequent AGM. Copies of the Non-Executive Directors’ terms and conditions of appointment are available for
inspection at the Company’s registered office.
The Nomination Committee confirmed to the Board that the contributions made by the Directors offering themselves for re-election
at the AGM in April 2021 continue to be effective and that the Company should support their re-election.
The biographies and experience of all Board members can be found on pages 54 and 55, enabling shareholders to make an informed
decision regarding Directors’ elections and re-elections. Following the formal evaluation, the Chairman confirms that each director
continues to contribute effectively and is important to the Company’s long-term sustainable success.
STV Annual Report and Accounts 2020 66
CORPORATE GOVERNANCE REPORT
Tenure of Non-Executive Directors and Chairman
29% More than 6 years
29% 4-6 years
13% 2-4 years
1-2 years
0%
Less than 1 year
29%
Relations with shareholders
STV believes that open and regular dialogue with investors is the basis of 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 convenient for them.
The Board recognises the importance of having continual engagement with its shareholders and fully supports the principles of the
Code that 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 and was extremely disappointed that as a result of the lockdown
measures following the outbreak of Covid-19, the 2020 AGM had to be held as a closed meeting with no shareholders, other than
Directors, in attendance. However, the health and wellbeing of shareholders, employees, advisers and of the general public is of utmost
importance to the Board and the Company was committed to minimising the unnecessary movement of people at that time. Online
proxy voting was recommended and shareholders were encouraged to put forward questions for Directors at the AGM via a dedicated
email address. Following the conclusion of the AGM, a transcript of the meeting was made available on the Company’s website.
It is extremely disappointing that similar measures remain in place at present and accordingly the Board has had to conclude that
shareholders will be unable to attend the 2021 AGM since to do so would be inconsistent with current Government guidance in relation
to Covid-19. The AGM is an important opportunity for all shareholders to express their views by asking questions of the Directors and
voting on the resolutions and the Board very much regrets that shareholders will not be able to attend this year. The Board thanks
shareholders for their understanding in these exceptional times and looks forward to returning to an open AGM format in future years
when Covid-19 restrictions are eased.
Shareholders by type
Institutionals
96%
0.3% Board of Directors
3.7% Other individuals (excl. Directors)
Institutional shareholders
STV undertakes a comprehensive programme of meetings and events for institutional investors, research analysts and the financial
press throughout the year and the Board is kept fully informed of feedback given to the Chief Executive and Chief Financial Officer over
the course of those meetings. The Board regularly receives updates on movements in 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. While various meetings have taken
place with shareholders during the year, these were conducted online due to social distancing requirements as a result of Covid-19,
but face to face meetings will re-commence as soon as it is appropriate and safe to do so. Discussions at these meetings are conveyed
to all Directors in order that each can develop an understanding of major shareholders’ views on the Company.
Other matters
The powers of the Directors (including in relation to the issue or buy back of shares) are exercisable in accordance with the Companies
Act 2006 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.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
67
REMUNERATION REPORT
Annual Statement
I am pleased to introduce the Directors’ Remuneration Report for 2020.
Overview of 2020 performance
In a year defined by the Covid-19 pandemic, our main priorities throughout were the wellbeing and safety of our colleagues, and
serving our viewers and customers. Colleagues who were placed on furlough had their salaries topped up to 100% of full pay to ensure
no financial detriment and this approach was also extended to all of our freelance colleagues impacted by the cessation of production
activity at the start of the first lockdown.
In light of the challenges posed, a number of measures were taken in the first half of the year to ensure STV remained financially
resilient and could continue to execute its long-term strategy for growth. This included the Management Board and the Non-Executive
Directors all volunteering a 25% cut in salary or fees, which was applicable for the five-month period from 1 April to 31 August 2020.
In addition, the payment of the earned 2019 annual bonus and the grant of the 2020 LTIP were delayed. It was also decided that no
payments would be made under the 2020 bonus plan and the plan was suspended.
The proactive steps taken by the Company helped to mitigate the impact of Covid-19 and a stronger than expected performance in
the latter half of the year resulted in adjusted operating profit, at £18.2 million, being comfortably ahead of expectations. This was
driven by tight cost management and strong recovery of STV controlled local and digital advertising. STV also set new viewing records
both on-screen and online. On-screen viewing was up 14% with STV the most watched peak-time station in Scotland, increasing share
against the competition. Strong digital growth continued throughout the year with the STV Player the fastest growing broadcaster
streamer service in the UK. Although impacted by the immediate cessation of all production activity in March, STV Studios was the
first producer of a major entertainment show to return to studio in July under new Covid-secure safety protocols. Across the year,
19 new commissions were secured, the largest number achieved in a single year. Despite the ongoing uncertainty and challenges
presented by the pandemic, STV managed to accelerate its long-term strategy during 2020, building strong foundations from which
to grow. Significantly, the strategic target set in 2018 – for one-third of earnings to be derived from non-broadcast activities by the
end of 2020 – was achieved.
Incentive outcomes for 2020
The Committee recognises the exceptional personal contributions of both Executive Directors during the year. Notwithstanding this,
along with a number of measures taken in response to Covid-19, it was decided that it would not be appropriate to pay a bonus for the
2020 financial year and the bonus plan was suspended.
The three-year performance period in respect of the 2018 LTIP award came to an end on 31 December 2020. The 2018 LTIP award was
subject to EPS, non-broadcast operating profit and relative TSR performance. As a result of the impact of Covid-19 on the business and
reflective of the stretching nature of the targets set at the start of the performance period, these targets were not met. The award will
therefore lapse in full.
Review of Directors’ Remuneration Policy
In line with the three-year cycle under the remuneration reporting regulations, we will be seeking shareholder approval for a new
Directors’ Remuneration Policy at our 2021 AGM. During 2020, the Committee reviewed the existing Policy and determined that overall
the current executive remuneration framework continues to support the delivery of our key strategic objectives, while aligning the
interests of Executive Directors with those of our shareholders.
Notwithstanding this, as STV embarks on the next phase of its ambitious strategic growth plan, it will be important to ensure that
Executive Directors remain appropriately incentivised. The Committee is therefore proposing to increase the maximum annual bonus
opportunity for the Chief Executive Officer from 125% to 150% of salary. This will provide an appropriate and market related incentive
to ensure that the Chief Executive Officer is effectively rewarded for delivering this next phase of our strategy and ultimately delivering
value to all stakeholders. There is no change to the maximum annual bonus opportunity for the Chief Financial Officer.
In reviewing the Policy, the Committee was mindful of the provisions of the UK Corporate Governance Code and continuing
developments in best practice. As such, the following changes are being proposed to the Policy to align with evolving shareholder
guidance and expectations:
• Alignment of incumbent executive director pension with the workforce rate. We are committing to reduce the pension of the
Chief Executive Officer to the level of the wider workforce (currently 7% of salary) at the end of 2022. The Chief Financial Officer
already receives a pension in line with the wider workforce.
• Introduction of post-employment shareholder guidelines. Executive Directors will be required to hold shares equivalent to their
full in-employment shareholding guideline for two years post-employment.
• Expanded malus and clawback provisions. Recovery provisions will be expanded to include serious reputational damage and
corporate failure for all incentive awards made from 2021.
The Policy review also provided the opportunity for a broader review of benefit allowances offered in lieu of benefits in kind including
car and medical insurance. These benefit allowances remained unchanged for over ten years. Following this review, it is proposed that
the benefit allowance for the Chief Executive Officer and Chief Financial Officer be increased to £25,000 per annum and £18,000 per
annum, respectively.
STV Annual Report and Accounts 2020 68
REMUNERATION REPORT
We remain committed to an open and ongoing dialogue with investors. Therefore, ahead of finalising proposals, I wrote to our top
ten shareholders, who represent 65% of our issued share capital. I am pleased to say that the feedback we received indicates a strong
level of support for the proposed changes. On behalf of the Committee, I would like to thank those shareholders who engaged with
us and look forward to continuing this open dialogue in the future.
Implementation of Policy for 2021
For 2021, the Committee has agreed that there will be no increase in Executive Director salaries.
The annual bonus and LTIP will operate in line with the proposed Policy, subject to approval at the AGM on 29 April 2021.
The annual bonus will continue to be based on a combination of Operating profit, Cash flow, and Personal objectives, with stretching
performance targets for each. Personal objectives will relate to key success factors in progressing and delivering the new three-year
strategic growth plan, including embedding ESG priorities into all areas of the business. Further details of key objectives are set out
on page 77.
For the 2021 LTIP award, the three performance measures (EPS, Non-Broadcast Operating Profit, and Relative TSR) will also remain
unchanged, as these continue to align with our strategic growth plan and the creation of shareholder value. The Committee has set
stretching performance targets for each metric, based around the execution of our long-term plan. For EPS, we have changed the
target range from 5% to 9% p.a. growth in last year’s award to 4% to 13% p.a. growth this year, which results in both an increase in
the stretch of the targets to reflect our growth ambitions and a broadening of the range to reflect ongoing uncertainty in the trading
environment. For non-broadcast operating profit, we have also increased the target range from last year, again reflecting our strategic
growth commitment. The Committee considers that the target ranges are appropriately stretching, in the context of the current
external climate and the Group’s strategic growth plan. Full details of the targets are set out on page 78.
Wider workforce
As noted, our main priority throughout the last year was the wellbeing and safety of our colleagues. In order to thank colleagues for
their contribution to the business during this challenging period and to provide an incentive to continue driving the success of the Group
going forward, all employees will be granted a one-off share award in 2021 with a face value on grant equal to £1,000. This award is
intended to focus and align all colleagues on achieving the Group’s operating profit target for 2021, whilst also promoting a sense of
share ownership.
In conclusion
Once again, I would like to thank shareholders for their engagement and support throughout this challenging period. Our Directors’
Remuneration Policy will be subject to a binding shareholder vote at our 2021 AGM and the Annual Report on Remuneration, including
this Annual Statement, will be subject to an advisory vote. I look forward to your support and would be happy to answer any questions
you may have on our executive remuneration arrangements.
Anne Marie Cannon
Chairman of the Remuneration Committee
16 March 2021
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
69
Summary of how our Policy will be implemented in 2021
Implementation in 2021
Pay element
Approach
Simon Pitts, CEO
Lindsay Dixon, CFO
Fixed pay
Base salary
Pension
Benefits
allowance
Fixed pay levels set at competitive
levels with role-appropriate benefits
arrangements.
£419,000 (unchanged
from 2020)
£235,000 (unchanged
from 2020)
20% of salary*
£25,000
7% of salary
£18,000
Pay linked to
performance
Annual bonus
Incentive linked to short-term targets,
including business performance and
growth, and ESG measures. Portion
of award is deferred.
Maximum opportunity –
150% of salary
Maximum opportunity –
125% of salary
Subject to operating profit, cash flow and personal targets
LTIP
Incentive linked to long-term priorities. Maximum opportunity – 100% of salary
Shareholding
requirements
To align the interests of executives
with shareholders.
150% of salary, to be maintained for two years
post-cessation of employment
Subject to EPS, non-broadcast operating profit
and relative TSR targets
* Will reduce to 7% of salary in line with wider workforce at end of 2022
How we measure performance and link to strategy
Measure
Operating profit
Cash flow
EPS
Non-broadcast operating profit
Personal objectives
Relative TSR
Bonus
LTIP
Rationale and link to strategy
✔
✔
✔
Measures profitability of our operating activity
Measures operational gearing
✔
✔
✔
Measures earnings growth driven by continued operational excellence
Aligns to strategic objective to diversify earnings
Focuses executives on the delivery of strategic goals linked to key business
priorities, including growth and ESG targets
Measures the delivery of long-term sustainable value growth for shareholders
STV Annual Report and Accounts 2020 70
REMUNERATION REPORT
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (‘the Policy’), determined by the Group’s Remuneration Committee (‘the Committee’) and presented
below, will be effective following shareholder approval at the 2021 Annual General Meeting.
During 2020, the Committee undertook a review of the Policy and determined that overall the current executive remuneration
framework continues to support the delivery of our key strategic objectives while aligning the interests of Executive Directors with
those of our shareholders. The Committee is nonetheless proposing a number of changes to ensure that management is appropriately
incentivised to deliver the next three-year phase of the Company’s strategic growth plan. A summary of the key changes are:
• Alignment of incumbent Executive Director pensions with the workforce rate;
• Increase in discretion available to the Committee such that it can override formulaic incentive outcomes if considered appropriate;
• Introduction of post-employment shareholding guidelines;
• Expanded malus and clawback provisions; and
• Realignment of quantum to market levels – increase in the maximum annual bonus opportunity from 125% to 150% of salary
for the Chief Executive Officer and increase in the maximum taxable cash allowance.
A number of other minor changes have been made to reflect and aid current operation as well as increase clarity.
In developing this Policy, the Committee followed a robust process taking into account the views of our shareholders, the provisions
of the UK Corporate Governance Code and evolving best practice. Input was sought from management, whilst ensuring that conflicts
of interest were suitably managed.
The key principles which underpin our remuneration framework continue to apply. These are:
• Closely aligning rewards with the delivery of Company strategy;
• Ensuring a significant proportion of the awards are based on long-term success criteria;
• Reflecting changes in best practice and governance;
• Simplifying and streamlining the framework for clarity and effectiveness;
• Ensuring market competitiveness.
The Committee considers that the Policy and its implementation appropriately address the following factors, as set out in the UK
Corporate Governance Code.
Clarity
Simplicity
Risk
The Committee is committed to providing open and transparent disclosures with regards to executive
remuneration arrangements. In formulating the new Policy, the Committee Chair wrote to our major
shareholders outlining the proposed changes and rationale for these.
At each year’s AGM, shareholders have the opportunity to ask any questions they may have on matters
relating to executive remuneration.
Our executive remuneration arrangements, which consist of fixed remuneration, an annual bonus and LTIP,
are simple in nature, aligned to UK market practice, and well-understood by participants.
The Committee considers that the structure of incentive arrangements does not encourage inappropriate
risk-taking. Annual bonus deferral, the LTIP holding period and in-employment and post-employment
shareholding guidelines ensure that Executive Directors are exposed to the long-term performance of the
Company and are therefore incentivised to deliver our strategic ambitions within the Company’s risk appetite.
Recovery provisions, which have been expanded from 2021, also apply for both the annual bonus and LTIP.
Predictability
For each component of pay, the Policy outlines the maximum opportunity levels for Executive Directors.
Actual incentive outcomes vary dependent on the level of performance achieved against specific measures.
The Policy also includes an illustration of the remuneration payable to Executive Directors in four different
performance scenarios (minimum, target, maximum and maximum plus share price growth).
Proportionality
Our remuneration framework does not reward poor performance. Payment of the annual bonus and LTIP
is subject to the achievement of stretching performance targets, which are determined by the Committee
annually to take account of business expectations and strategic priorities at the time.
Alignment to culture
The metrics used to measure performance under both the annual bonus and LTIP are closely aligned to the
delivery of the Company’s strategic growth plan.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 71
Policy table for Executive Directors
Objective and link to strategy
Operation
Maximum opportunity
Performance conditions
Base salary
The Committee sets
salaries as a retainer for
the Executive Directors
to recognise status and
responsibility to deliver
the strategy.
Benefits
To provide competitive
levels of employment
benefits consistent
with role.
Pension
To provide competitive
levels of retirement benefit.
There is no prescribed maximum
salary.
None
In general, any salary increase for
Executive Directors will be in line
with other employees in the Group.
The Committee retains discretion
to award larger increases where
considered appropriate to reflect
the factors described in this table.
Salaries with effect from 1 January
2021 are set out on page 77.
None
The maximum cash allowance
paid to Executive Directors in lieu
of benefits in kind is £25,000 per
annum for the Chief Executive
Officer and £18,000 per annum
for the Chief Financial Officer.
Participation in all employee share
plans is subject to HMRC plan rules
and limits.
When determining the salary of the
Executive Directors, the Committee
takes into consideration a number
of factors including:
• the scale and complexity of the
Company and the scope and
responsibilities of the role
• the skills, experience and
performance of the individual
• the Committee’s assessment of the
competitive environment including
consideration of similar positions
in organisations of broadly similar
size and complexity, in particular
companies within the media sector
• pay and conditions throughout
the Company.
Salaries are normally reviewed
annually, with any changes effective
from 1 January in the financial year.
Executives are entitled to receive
a taxable cash allowance in lieu of
benefits in kind, including car and
private medical insurance. This cash
allowance is excluded from the
calculation of any other benefit
provided by the Company.
Other reasonable benefits may be
granted to Executive Directors at
the discretion of the Remuneration
Committee.
The Executive Directors are eligible
to participate in the Company’s all
employee share plans, as offered
from time to time, on the same
terms as all employees.
None
The Group operates a defined benefit
(DB) scheme (closed to new members),
a defined contribution (DC) scheme
and a Group personal pension plan.
Executive Directors have the option
to receive a taxable cash allowance
in lieu of pension benefits.
Neither the Chief Executive Officer
nor the Chief Financial Officer are
members of the DB scheme.
The maximum pension
contribution or taxable cash
allowance in lieu of pension is set
in line with the wider workforce,
currently 7% of base salary.
The Chief Executive Officer receives
a pension allowance of 20% of
base salary, which will be reduced
to a level in line with the wider
workforce (currently 7% of base
salary) at the end of 2022.
STV Annual Report and Accounts 2020 72
REMUNERATION REPORT
Objective and link to
strategy
Operation
Maximum opportunity
Performance conditions
Annual bonus
Aligns reward to the
delivery of annual
financial and strategic
performance
measures.
Deferral creates long
term alignment with
shareholders.
Annual maximum
bonus opportunity is:
• 150% of salary for
the Chief Executive
Officer
• 125% of salary for
other Executive
Directors
Provides an opportunity for
additional reward (up to a
maximum specified as a %
of salary) based on annual
performance against targets set
and assessed by the Committee.
A proportion of any bonus (20%)
is deferred into Company shares
under the terms of the STV
Deferred Bonus Plan (DBP) and
will normally vest over three
years, subject to continued
employment.
Recovery and dividend
equivalent provisions apply
(see explanatory notes).
Long Term Incentive Plan
Aligns reward to the
delivery of long-term
financial performance
delivered for
shareholders.
The maximum
award in respect
of a financial year
is normally 100%
of salary.
Awards are made under the
terms of the STV Long Term
Incentive Plan.
Awards are normally in the form
of a right to acquire shares in
the Company for a zero or
nominal amount.
Awards vest over a period of at
least three years, subject to the
satisfaction of performance
conditions.
A post-vesting holding period
of two years will apply.
Recovery and dividend
equivalent provisions apply
(see explanatory notes).
Payment is determined by reference to
performance assessed over one financial year
based on a range of financial and strategic
performance measures.
For 2021, these measures are:
• operating profit
• cash flow
• personal objectives
As well as determining the measures and
targets, the Committee will also determine
the weighting of the various measures, which
will normally be weighted towards the financial
measures.
At threshold and target performance 10% and
50% of maximum, respectively, is currently
payable.
The Committee has discretion to use different
or additional measures, weightings or payout
schedules to ensure that the bonus framework
appropriately supports the business strategy
and objectives for the relevant year.
The Committee has discretion to adjust the
formulaic outcome if it considers that this is
inconsistent with overall Group performance,
taking into account any factors it considers
appropriate.
The Committee has the discretion to adjust
targets for any exceptional events that may
occur during the year.
Vesting is determined by reference to
performance assessed over a period of at
least three years, based on performance
measures which the Committee consider
to be aligned with the delivery of strategy
and long term shareholder value.
The measures for the 2021 award are:
• earnings per share (EPS)
• non-broadcast operating profit
• relative total shareholder return
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 threshold for vesting is no higher than
25% of the maximum award.
The Committee has discretion to adjust the
formulaic outcome if it considers that this is
inconsistent with overall Group performance,
taking into account any factors it considers
appropriate.
The Committee has the discretion to adjust
targets for any exceptional events that occur
during the period.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 73
Objective and link to strategy
Operation
Maximum opportunity
Performance conditions
Shareholding requirement
To strengthen long term
alignment with
shareholders.
Executive Directors are required
to hold shares equivalent to 150%
of their annual salary.
The required level of holding
is 150% of salary.
Executive Directors will, on leaving
the Board, be required to maintain
their in-employment shareholding
guideline (or their actual shareholding
if lower) for a period of two years.
Non-Executive Directors are required
to build holdings of 20,000 shares for
the Chairman and 5,000 shares for
other Non-Executive Directors.
Notes to the Policy table
Recovery provisions
Awards of variable remuneration made under the Policy for Executive Directors are subject to recovery provisions which allow
the Committee to reduce or cancel unvested DBP/LTIP awards, or seek to reclaim paid or deferred cash or DBP/LTIP awards,
in certain circumstances.
The recovery provisions for the annual bonus apply for three years from the date of payment of the bonus/grant of deferred shares,
and two years from the date of vesting under the LTIP. The circumstances which may trigger the recovery provisions are as follows:
• a material misstatement of the Company’s (or any Group members) audited financial results
• misconduct on the part of the participant
• an error in assessing a performance condition
• action by a participant or participants which resulted in a material breach and subsequent loss of the Company’s Channel 3 licence(s)
• serious reputational damage (for awards made from 2021)
• corporate failure (for awards made from 2021).
Dividend equivalents
The Committee may determine that the number of shares to which a participant’s DBP or LTIP award relates shall increase to take
account of dividends that would have been paid on vested shares on such terms as it determines, or that an equivalent amount
should be paid in cash.
Performance measures and targets
The Committee selects performance measures for the annual bonus which appropriately support the business strategy and objectives
for the relevant year. The financial metrics used (such as operating profit and cash flow) are the key metrics used by the Directors
to oversee the operation and performance of the business. Personal measures allow the Committee to reward the delivery of key
strategic objectives. The performance measures for the LTIP are aligned with the delivery of strategy and long term shareholder value.
The performance targets are determined annually by the Committee, and are set at an appropriately stretching level taking into
account relevant business forecasts at that time.
Discretion
The Committee has discretion in several areas of policy as set out in this report. The Committee may also exercise operational and
administrative discretions under relevant plan rules approved by shareholders as set out in those rules.
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any
discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy where the terms
of the payment were agreed (i) before the 2014 AGM (the date the Company’s first shareholder-approved Directors’ remuneration policy
came into effect); (ii) before the Policy set out above came into effect, provided that the terms of the payment were consistent with the
shareholder-approved Directors’ remuneration policy in force at the time they were agreed; or (iii) at a time when the relevant individual
was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual
becoming a Director of the Company. For these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration
and, in relation to an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted.
The Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or administrative purposes or to take
account of a change in legislation) without obtaining shareholder approval.
Differences in remuneration policy for all employees
All employees are entitled to base salary, pension and benefits. Bonus plan participation is dependent on the role and seniority and
responsibility of the role. Long-term incentive awards are only available to the leadership team and key senior staff by invitation.
STV Annual Report and Accounts 2020 74
REMUNERATION REPORT
Non-Executive Directors
The table below sets out the key elements of the policy for Non-Executive Directors.
Objective and link
to strategy
Operation
Maximum opportunity
To attract
Non-Executive
Directors with the
requisite skills and
experience.
The fees of the Non-Executive Directors are determined by the Board based upon
recommendations from the Chairman and Chief Executive Officer (or, in the case
of the Chairman, based on recommendations from the Senior Independent
Non-Executive Director and the Chief Executive Officer).
Fees are set at a level which
reflects skills, experience,
time commitment and
appropriate market data.
The fee for Non-Executive Directors encompasses a basic fee and may also
include supplementary fees for committee or other duties.
The Chairman receives a single fee for all duties.
Fees are normally reviewed annually with changes effective from 1 January.
Fees are paid in cash.
The Chairman and Non-Executive Directors do not participate in any bonus or
share incentive scheme, nor do they participate in any pension arrangements.
Fees are set within the
limits set by the Articles
of Association.
Fees with effect from
1 January 2021 are set
out on page 78.
Illustrations of application of remuneration policy
The graphs below seek to demonstrate how pay varies with performance for the Executive Directors based on the Policy for
Executive Directors.
Chief Executive Officer
Chief Financial Officer
£2,000k
£1,500k
£1,000k
£500k
£0k
£1,575k
26%
£1,785k
12%
23%
40%
35%
£947k
11%
33%
£528k
100%
56%
34%
30%
Minimum
Target
Maximum Maximum plus
share price
growth
£1,000k
£800k
£600k
£400k
£200k
£0k
£798k
£916k
12%
26%
23%
40%
35%
£475k
11%
33%
£269k
100%
56%
34%
30%
Minimum
Target
Maximum Maximum plus
share price
growth
Fixed pay
Bonus
LTIP
Share price growth
Assumptions used in determining the level of pay-out under given scenarios are as follows:
• Minimum – reflects fixed pay only (base salary as at 1 January 2021, benefits allowance, and cash in lieu of pension contributions).
• Target – reflects fixed pay, target bonus (50% of maximum) and LTIP awards vesting at threshold performance (25% of maximum).
• Maximum – reflects maximum bonus (150% of salary for the Chief Executive Officer and 125% of salary for the Chief Financial
Officer) and LTIP awards vesting in full (100% of salary).
• Maximum plus share price growth – reflects maximum bonus and LTIP awards vesting in full plus share price growth of 50% on
those LTIP awards.
Recruitment remuneration policy
The Committee’s approach to recruitment remuneration is to pay no more than it considers necessary to secure appropriate
candidates to the role.
The principle is that the pay of any new recruit would be assessed following the same principles as for the Executive Directors. The
structure of the remuneration package would therefore normally include the components, and be subject to relevant maxima, as set
out in the Policy Table for Executive Directors. Salaries would typically be set at an appropriately competitive level to reflect skills and
experience. They may be set at a level to allow future salary progression to reflect performance in role. The Executive Director would
be eligible to participate in the annual bonus and LTIP for the year subject to a maximum level in line with the Policy Table above.
Where an individual forfeits remuneration with a previous employer as a result of appointment to the Company, the Committee
may make compensatory payments or awards to facilitate recruitment. In determining the structure of these commitments, the
Committee will normally seek to replicate, as far as practicable, the timing and performance requirements of remuneration foregone.
Such payments or awards could include cash (where cash-based remuneration is forfeited) as well as share awards. There is no limit
on the value of such compensatory awards, but the Committee’s intention is that the value awarded would be no more generous than
a broadly equivalent economic value of the forfeited remuneration.
In instances where the new Executive Director relocates from one work location to another, the Company may provide compensation to
reflect the cost of relocation. The level of relocation package will be assessed on a case by case basis but will take into consideration any
cost of living differences, housing allowance and schooling in accordance with the Company’s normal relocation package for employees.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
75
Where an existing employee is promoted to the Board, the Policy would apply from the date of promotion but there would be
no retrospective application of the Policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly,
existing elements of the remuneration package of the employee would be honoured and form part of the ongoing remuneration
for the person concerned.
Service contracts
When setting notice periods, the Committee has regard to market practice and corporate governance best practice. Notice periods
will not be greater than 12 months.
Director
Executive
S Pitts
L Dixon
Director
Non-Executive
Date of contract/
letter of appointment
Unexpired term
Notice period by
Company/Director
3 January 2018
Rolling contract
12 months/6 months
4 December 2018
Rolling contract
12 months/6 months
Date of contract/
letter of appointment
Date(s) of (re)
appointment
Unexpired as
at March 2021
Baroness Ford
1 June 2013
28 May 2020
2 years 2 months
S Miller
2 December 2016
28 May 2020
2 years 2 months
A M Cannon
1 November 2014
28 May 2020
2 years 2 months
I Steele
D Bergg
1 November 2015
28 May 2020
2 years 2 months
1 May 2018
28 May 2020
2 years 2 months
Policy on payment for loss of office
When determining any loss of office payment the Committee will always seek to minimise cost to the Company whilst seeking
to reflect the circumstances in place at the time.
In the event of termination by the Company, there will be no compensation for loss of office due to misconduct or normal resignation.
In other circumstances Executive Directors may be entitled to receive compensation for loss of office which will be paid monthly for
a maximum of twelve months. Such payments will be equivalent to the monthly salary, pension supplements, and benefits that the
Executive would have received if still in employment with the Company. Executive Directors will be expected to mitigate their loss
within a 12-month period of their departure from the Company.
The treatment of incentive awards would be determined by the relevant plan rules. If the individual is a ‘good leaver’, the treatment of
awards will be as set out in the table below (which also describes the Committee’s areas of discretion). The ‘good leaver’ circumstances
are death, ill-health, injury, disability, the sale of the business or entity that employs the participant out of the Group, or for any other
reason at the Committee’s discretion. If the individual is not a good leaver, unvested awards will lapse in full. It is the Committee’s policy
to only apply its discretion to determine an individual is a ‘good leaver’ where the circumstances at the time are, in its opinion,
sufficiently exceptional, and to provide a full explanation to shareholders where discretion is exercised.
Treatment of awards for a ‘good leaver’
Annual bonus
The Committee has discretion to make a payment under the annual bonus in respect of the year of cessation.
This would reflect performance in the year and be pro-rated to reflect the period worked in that year.
DBP
LTIP
Unvested DBP awards will usually continue, unless the Committee determines that the award should vest
as soon as reasonably practicable following the date of cessation.
An award will normally vest in full but the Committee retains discretion to determine the extent to which
it vests, taking account of the period of time that has elapsed since the award was granted until the date
on which the participant ceases to hold office or employment with the Group.
Unvested LTIP awards will usually continue, unless the Committee determines that the award should be
released as soon as reasonably practicable following the date of cessation. The Committee will decide the
extent to which an unvested award vests in these circumstances, taking into account the extent to which any
performance condition is satisfied and, unless the Committee in its discretion determines otherwise, the period
of time that has elapsed since the award was granted until the date of cessation.
STV Annual Report and Accounts 2020 76
REMUNERATION REPORT
The Committee reserves the right to make any other payments in connection with a Director’s cessation of office or employment
where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an
obligation) or by way of settlement of any claim arising in connection with the cessation of a Director’s office or employment. Any
such payments may include but are not limited to paying any fees for outplacement assistance and/or the Director’s legal and/or
professional advice fees in connection with his cessation of office or employment.
Treatment of awards on a change of control
DBP
LTIP
An award will normally vest in full but the Committee retains discretion to determine the extent to which
it vests, taking account of the period of time that has elapsed since the award was granted until the date
on which the participant ceases to hold office or employment with the Group.
Awards will vest, taking into account the extent that any performance condition has been satisfied, and,
unless the Committee determines otherwise, the period of time which has elapsed between the grant date
and the relevant event. Alternatively, the Committee may permit participants to exchange awards for
equivalent awards which relate to shares in a different company.
Consideration of employment conditions elsewhere in the Company
In making annual pay decisions the Committee gives consideration to pay and employment conditions in the rest of the Company.
The Committee is provided with data on the remuneration structure for the Executive leadership team, and uses this information
to work with the HR team to ensure consistency of approach throughout the Company.
To appraise itself of conditions elsewhere in the Company, the Committee invites the HR & Communications Director to present on
the proposals for salary increases for the employee population generally, and on any other changes to remuneration policy within
the Company.
The Committee actively considers the relationship between general changes to employees pay and conditions and any proposed
changes in the remuneration packages for Executive Directors to ensure it can be sufficiently robust in its determinations in light
of the position of the Company as a whole.
Although the Committee takes into account the pay and conditions of other employees, the Company did not consult with employees
when developing the Policy. There are however a number of different mechanisms in place to gather feedback from employees,
including on remuneration. Relevant feedback is presented to the Board to help to inform decision-making.
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. In developing this Policy, the Committee Chair wrote to our major shareholders outlining proposals
and the rationale for these. Feedback received was taken on board when finalising our arrangements.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 77
Annual Report on Remuneration
This section of the report sets out how the proposed Policy will be implemented in 2021, assuming shareholder support at the 2021
AGM. It also sets out how the current Policy, which was approved at the 2018 AGM, has been implemented during 2020. Some sections
of this report, where indicated, have been audited.
The Committee believes that the Policy operated as intended in the year.
Statement of implementation for 2021
Executive Directors
Salaries
Salaries for Executive Directors will remain unchanged for 2021. Salaries for 2021 are therefore as follows:
Executive Director
S Pitts
L Dixon
2021 salary
£000
419
235
Benefits and pension
In line with the proposed Policy, the Executive Directors are entitled to receive a taxable cash allowance in lieu of benefits-in-kind. For 2021,
the value of this taxable allowance will be £25,000 and £18,000 for the Chief Executive Officer and Chief Financial Officer, respectively.
Pension contributions will operate in line with the proposed Policy. For 2021, contribution levels will be 20% of salary and 7% of salary
for the Chief Executive Officer and Chief Financial Officer, respectively. In line with the proposed Policy, the pension contribution for the
Chief Executive Officer will be reduced to 7% of salary at the end of 2022, in line with the wider workforce.
Annual bonus
The annual bonus will operate in line with the proposed Policy. The maximum bonus opportunity is 150% of salary for the Chief
Executive Officer and 125% of salary for the Chief Financial Officer.
For 2021, 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
* Operating profit pre-exceptional items
** Cash generated by operations
Weighting
(% of max)
50%
25%
25%
Personal objectives will relate to key success factors in progressing and delivering the new three-year strategic growth plan, including:
• Developing and launching the new three-year strategic plan to deliver continued profitable growth and diversification of the Group’s
earnings to represent 50% of earnings by 2023
• Embedding ESG priorities into all areas of the business through implementation of the STV’s Sustainability Strategy and delivery
of continued progress against Diversity & Inclusion targets
• Strengthening the reputation of STV Studios to build a world class production business
• Accelerating the successful digital growth strategy, including the consumer and commercial launch of STV Player UK-wide
• Management of relationships with key stakeholders to secure a viable future for STV as a public service broadcaster
• Successful balancing of optimisation of capital allocation with a sustainable return of value to shareholders
• Delivery of the triennial deficit funding valuation for both defined benefit schemes
The Committee believes that the annual bonus performance targets are commercially sensitive, and that it would be detrimental
to the interests of the Company and its shareholders to disclose them fully at this time. It is the Committee’s intention to disclose
the targets, and performance against them, in the next Annual Report on Remuneration if the Committee is satisfied that the targets
are no longer sensitive.
In line with the Policy, 20% of any bonus received will be deferred into shares for a period of three years.
STV Annual Report and Accounts 2020 78
REMUNERATION REPORT
Long-term Incentive Plan
In 2021, the Executive Directors will receive awards under the LTIP at the level of 100% of salary. Awards will vest after three years
and will be subject to a two-year holding period post-vesting. The performance targets for the award are as follows:
Performance measure
Calibration of targets
EPS
Annualised growth in adjusted EPS from FY20 to FY23
Non-broadcast
operating profit
Relative TSR
Operating profit for non-broadcast activities in FY23
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
(100% of maximum)
50%
30%
20%
4%
£9.5m
13%
£16.5m
Median
Upper quartile
There is no vesting for performance below threshold, and straight-line vesting between threshold and maximum.
Performance targets have been set in the context of the Group’s three-year strategic growth plan which is designed to accelerate
the successful diversification strategy. The plan covers the period 2021 to 2023 which is aligned with the performance period of the
2021 LTIP. The plan is based upon ambitious new growth targets for delivery by the end of 2023:
• double viewing, users and advertising revenue (to £20 million) in the Digital business;
• to quadruple STV Studios revenue (to £40 million);
• to achieve at least 50% of operating profit from outside traditional broadcasting.
As described in the Chair’s letter, the three performance measures (EPS, Non-Broadcast Operating Profit, and Relative TSR) remain
unchanged, as these continue to align with our strategic growth plan and the creation of shareholder value. The Committee has set
stretching performance targets for each metric, based around the execution of our long-term plan. For EPS, we have changed the
target range from 5% to 9% p.a. growth in last year’s award to 4% to 13% p.a. growth this year, which results in both an increase in
the stretch of the targets to reflect our growth ambitions and a broadening of the range to reflect ongoing uncertainty in the trading
environment. For non-broadcast operating profit, we have also increased the target range from last year, again reflecting our strategic
growth commitment. The Committee considers that the target ranges are appropriately stretching, in the context of the current
external climate and the Group’s strategic growth plan.
Non-Executive Directors
Following the announcement of Baroness Margaret Ford’s intention to step down from the Board in April 2021, the appointment of
Paul Reynolds as Chair Elect was announced in January 2021. Paul Reynolds will be appointed as Chair at the 2021 AGM on 29 April
2021. The appointment of Aki Mandhar as Non-Executive Director was also confirmed in January 2021.
The fee payable to the Chairman, which has not increased since 2017, was reviewed during the search process. To reflect market rates,
it is confirmed that the annual fee payable to Paul Reynolds will be £150,000 per annum, representing an increase to the Chairman
fee. All other fees payable to Non-Executive Directors remain unchanged compared to the prior year.
The fees payable in 2021 are set out below.
Non-Executive Director
Chairman fee
Basic Non-Executive Director fee
Additional fees: Senior Independent Director
Additional fees: Chairing the Audit or Remuneration Committee
£000
150
40
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 2019 and 2020 financial years.
Executive
Director
S Pitts
L Dixon
2020
2019
2020
2019
Salary
£000
Taxable
benefits
£000
Pension
£000
376
411
211
143
16
16
16
10
75
82
12
5
Total
fixed
£000
467
509
239
158
Annual
bonus
£000
Long-term
incentives
£000
Other
(buy-out)
£000
Total
variable
£000
–
447
–
146
–
–
–
–
–
94
–
–
–
541
–
146
Total
£000
467
1,050
239
304
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 79
Notes to the single figure table
Lindsay Dixon was appointed to the Board on 21 May 2019. The amounts shown above reflect her respective period in office during
the 2019 financial year.
Salary – Salaries for 2020 were £419,000 and £235,000 for Simon Pitts and Lindsay Dixon, respectively. However, in light of the
Covid-19 pandemic, the Executive Directors volunteered a 25% cut in salary, which was applicable for a five-month period from
1 April to 31 August 2020. This is reflected in the table above.
Taxable Benefits – Includes a taxable cash allowance in lieu of benefits-in-kind, including car and private medical insurance.
Pension – Simon Pitts receives a taxable cash allowance in lieu of pension and life assurance. For 2020, this was set at 20% of salary.
Lindsay Dixon joined the Company’s defined contribution scheme on 1 August 2019. The scheme has an employer contribution of 7%
of salary up to the pension cap (£160,800).
Annual Bonus – This includes the value of bonus earned in respect of the relevant financial year.
Long-term Incentives – The 2018 LTIP award granted to Simon Pitts is due to vest in 2021 based on performance over the three-year
period to 31 December 2020. Performance targets were not met and therefore this award will lapse in full.
Other – The value shown in this column for Simon Pitts in 2019 relates to the vesting of an award under the 2017 LTIP, which was granted
as a component of his buy-out package paid to compensate for forfeited remuneration from his previous employer. The award vested
at 18% of the maximum. The value has been restated this year to reflect the share price on the actual date of vest of 246 pence.
None of this amount related to share price appreciation over the performance period given the share price at grant was 310 pence.
Annual bonus (audited)
The maximum annual bonus opportunity for 2020 was 125% of salary. The bonus was based predominantly on financial performance
(50% Operating Profit and 25% Cash Flow), with the remaining (25%) based on personal targets linked to strategic delivery. The
performance targets for the 2020 bonus were set by the Committee at the start of the year, prior to the impact of the Covid-19
pandemic, and by reference to the annual budget, which itself is set in the context of the Board’s long-term strategic plan.
As noted in the Chair’s Annual Statement, the performance of the Group was significantly impacted by Covid-19. The Committee
recognises the exceptional personal contributions of both Executive Directors during the year, in particular the actions taken to
mitigate the impact of the pandemic on the business and protect the Group’s long-term financial interests. Notwithstanding this,
it was decided that it would not be appropriate to pay a bonus for the 2020 financial year and the bonus plan was suspended.
Long-term Incentive Plan (audited)
The table below sets out the performance achieved for the 2018 LTIP award, which was subject to performance over the three-year
period from 1 January 2018 to 31 December 2020.
Performance condition
EPS
Non-broadcast operating profit
Relative TSR
Weighting
Threshold vesting
(25% of maximum)
Maximum vesting
(100% of maximum)
Actual
outcome
(6.8)%
£6.2m
7%
£7m
12%
£11m
Median
Upper quartile
Below median
Overall vesting
Percentage
vesting
0%
0%
0%
0%
50%
30%
20%
100%
Simon Pitts holds an LTIP award which is due to vest based on the outcome of the performance conditions above. As the targets set
for each of the performance measures were not met, the award will lapse in full.
Scheme interests awarded in the 2020 financial year (audited)
The table below shows awards made to the Executive Directors during 2020 under the LTIP. In light of Covid-19, the grant of awards
was delayed.
Executive
Director
S Pitts
L Dixon
Award type
Date of grant
Basis of award
Number of
shares awarded*
Face value
of award
Threshold vesting
Performance period
LTIP
LTIP
16/12/20
100% of salary
16/12/20
100% of salary
147,095
82,584
£419k
25% of maximum
1/1/20-31/12/22
£235k
25% of maximum
1/1/20-31/12/22
* Calculated using the closing share price of 285 pence on the date prior to the date of award.
STV Annual Report and Accounts 2020 80
REMUNERATION REPORT
These awards will vest after three years, subject to the performance targets set out in the table below. An additional two-year holding
period will apply to any shares vesting.
Performance measure
Calibration of targets
EPS
Non-broadcast operating profit
Relative TSR
Annualised growth in adjusted EPS
from FY19 to FY22
Operating profit for non-broadcast
activities in FY22
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
(100% of maximum)
50%
30%
20%
5%
9%
£8.5m
£12.5m
Median
Upper quartile
There is no vesting for performance below threshold, and straight-line vesting between threshold and maximum.
The performance measures denote a balanced set of metrics which reflect profitable growth (EPS), the strategic objective to diversify
earnings’ streams (non-broadcast operating profit) and the delivery of shareholder value (relative TSR).
Performance targets were set by the Committee to be stretching yet feasible in the context of the Group’s long-term business strategy.
The target range for EPS has been set taking account of the decline in the national television advertising market, the Group’s principal
revenue source. The target range for non-broadcast operating profit was increased compared to the 2019 LTIP reflecting the Group’s
objective to achieve a more balanced and diversified profit base thereby ensuring long-term stability and prosperity.
Payments for loss of office (audited)
No payments of loss of office were made during the year.
Payments to past Directors (audited)
No payments were made to past Directors during the year.
External appointments
Neither of the Executive Directors held any external appointments during the year.
Non-Executive Directors (audited)
The table below sets out the single total figure of remuneration for each Non-Executive Director. In light of the Covid-19 pandemic, all
Non-Executive Directors volunteered a 25% cut in fees, which was applicable for a five-month period from 1 April to 31 August 2020.
This is reflected in the figures below.
Non-Executive Directors do not participate in any of the Company’s incentive arrangements nor do they receive any benefits.
Non-Executive Director
Financial year
Basic fees
£
Additional fees
£
Total fees
£
Baroness Ford
C Woolfenden*
S Miller
A M Cannon
I Steele
D Bergg
* Stepped down on 9 March 2020.
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
117,350
128,400
7,600
39,300
35,900
39,300
35,900
39,300
35,900
39,300
35,900
39,300
–
–
–
–
12,000
13,100
4,560
5,100
4,650
5,100
–
–
117,350
128,400
7,600
39,300
47,900
52,400
40,550
44,400
40,550
44,400
35,900
39,300
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 81
Statement of Directors’ shareholding and share interests (audited)
Under the Policy, Executive Directors are required to build up a shareholding equal to 150% of salary. From 2021, Executive Directors will
also, on leaving the Board, be required to maintain this in-employment shareholding guideline (or their actual shareholding if lower)
for a period of two years.
The shareholding requirement for Non-Executive Directors is set at the level of 20,000 shares for the Chairman and 5,000 shares for
other Non-Executive Directors. All Non-Executive Directors have attained these levels.
Director
Executive
S Pitts
L Dixon
Non-Executive
Baroness Ford
C Woolfenden***
S Miller
A M Cannon
I Steele
D Bergg
Number of
beneficially
owned
shares*
Number of
unvested
deferred
awards**
Number of
SAYE options
subject to
conditions
Number of
unvested
LTIP awards
at 31/12/20
Shareholding
requirements
Current
shareholding
(% salary/
base fee)
Requirement
met
134,687
30,372
8,785
–
–
–
384,157 150% of salary
146,151 150% of salary
108%
11%
n/a****
n/a****
31,202
9,092
7,577
11,167
9,616
12,489
n/a
n/a
n/a
n/a
n/a
n/a
20,000 shares
5,000 shares
5,000 shares
5,000 shares
5,000 shares
5,000 shares
n/a
*
**
Beneficial interests include shares held directly or indirectly by connected persons.
Simon Pitts and Lindsay Dixon also have a right to receive a certain number of shares in respect of the deferred portion of previous annual bonuses.
For Simon Pitts this relates to the deferred portion of his 2018 and 2019 annual bonus, and for Lindsay Dixon for the deferred portion of her 2019
annual bonus.
*** Data shown as at date of stepping down from the Board.
**** Given their length of tenure, Simon Pitts and Lindsay Dixon have not yet met their shareholding requirement. It is expected that their shareholding
will continue to build as they receive shares through participation in the annual bonus and LTIP. The Committee is confident that both executives
retain a strong interest in the Group, as demonstrated through their own acquisition of shares during the year.
The following table provides further detail on the share awards held by the Executive Directors.
Executive
Award
Granted
Held at
31/12/19
Granted
in year
Released
in year
Lapsed
in year
Held at
31/12/20
S Pitts
Buy-out – deferred shares
25/01/18
105,600
Buy-out – deferred shares
11/12/18
32,825
Buy-out – LTIP*
25/01/18
210,662
2018 LTIP
2019 LTIP
2020 LTIP
2019 LTIP
2020 LTIP
L Dixon
11/12/18
123,839
29/05/19
113,223
16/12/20
–
147,095
29/05/19
63,567
–
16/12/20
–
82,584
–
–
–
–
–
75,228
32,825
–
–
37,919
172,743
30,372
–
–
–
–
–
–
–
–
–
–
–
–
123,839
113,223
147,095
63,567
82,584
Vesting dates
24,196 in March 2019
75,228 in March 2020
30,372 in March 2021
50% in March 2019
50% in March 2020
March 2020
11/12/21**
29/05/22**
16/12/23**
29/05/22**
16/12/23**
* This award was subject to the performance conditions of the 2017 STV LTIP award and vested during the year at 18% of maximum.
** Subject to an additional two-year holding period following vesting.
Dilution
The following table sets out the current level of dilution against the limits in the bonus and long-term incentive plan and sets out the
commitments to issue shares made during the financial year reported:
Maximum
Current dilution
Additional dilution during the year in question
10% dilution in ten years
5% dilution in ten years
6.08
0.29
(0.11)
(0.55)
STV Annual Report and Accounts 2020 82
REMUNERATION REPORT
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 is used as a performance measure under the LTIP,
and the FTSE All Share Media index provides a comparison of performance against companies in the media sector.
The chart illustrates the performance of a hypothetical investment of £100 in ordinary shares of STV Group plc over the ten-year
period 1 January 2011 to 31 December 2020, compared to a similar investment in the FTSE Small Cap or FTSE All Share Media indices.
TSR data is based on Returns Index data, calculated on a daily share price growth plus re-invested dividends (as measured at the
ex-dividend rates).
£500
£450
£400
£350
£300
£250
£200
£150
£100
£50
£0
STV
FTSE Small Cap
FTSE All Share Media
Dec
2010
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Dec
2020
Single figure of total remuneration
The information in the table below shows the total remuneration for the Chief Executive Officer over the same period.
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Chief Executive Officer
Single figure of total remuneration
(£000)
Bonus pay-out
(as % maximum opportunity)
Long-term incentive vesting
(as % maximum opportunity)
S Pitts
S Pitts
S Pitts
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
R Woodward
467
1,050
1,712*
697
807
2,269
661
601
696
958
–
87
72
32
29
49
46
54
31
15
–
18
–
14
–
100
–
–
100
–
* Simon Pitts’ single figure for 2018 includes an amount of £857,000 in respect of his buy-out package paid to compensate for forfeited remuneration
from his previous employer. His single figure excluding this amount would have been £855,000.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 83
Percentage change in remuneration
The table below shows the percentage change between 2019 and 2020 in the salary/fees, benefits and annual bonus of all Directors’
of the Company during the year compared to all employees.
In light of the Covid-19 pandemic, all Executive and Non-Executive Directors volunteered a 25% cut in fees, which was applicable for a
five-month period from 1 April to 31 August 2020. Additionally, it was decided that the 2020 annual bonus plan would be suspended.
These are reflected in the figures below.
Salary/fees
Taxable benefits
Annual bonus
All employees
Executive Directors
S Pitts
L Dixon**
Non-Executive Directors
Baroness Ford
C Woolfenden***
S Miller
A M Cannon
I Steele
D Bergg
2%
(8.6)%
(8.6)%
(8.6)%
n/a
(8.6)%
(8.6)%
(8.6)%
(8.6)%
n/a*
(447)%
(146)%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
*
**
These benefits are not available to all employees.
As Lindsay Dixon was appointed in May 2019, salary received in 2019 was pro-rated to reflect service in the year therefore year on year comparison
is not valid.
*** Stepped down on 9 March 2020.
Chief Executive Officer pay ratio
The table below discloses the ratio of the Chief Executive Officer’s pay for 2020, using the single total figure of remuneration
(as disclosed on page 78), to the comparable earnings of employees at the 25th, 50th and 75th percentiles.
Year
2020
2019
Method
Option B
Option B
25th percentile
(P25) pay ratio
Median (P50)
pay ratio
75th percentile
(P75) pay ratio
20:1
41:1
14:1
30:1
11:1
22:1
The ratios were calculated using Option B in the disclosure regulations, with the employees at the 25th, 50th and 75th percentiles
determined based on the Group’s gender pay data. Total remuneration for 2020 for these employees was then calculated using a
valuation methodology consistent with that used for the Chief Executive Officer in the single figure table on page 78. Whilst the gender
pay gap legislation and CEO pay ratio legislation employ different calculations, the Committee considers that the three identified
employees are reasonably representative of the respective percentiles. The calculation is undertaken on a full time equivalent basis.
The salary and total remuneration received during 2020 by employees at the 25th, 50th and 75th percentiles and used in the above
analysis is as follows:
25th percentile (P25)
Median (P50)
75th percentile (P75)
2020 salary £
2020 total remuneration £
22,934
23,356
30,467
32,600
39,780
40,786
A significant proportion of the Chief Executive Officer’s total remuneration is delivered in variable remuneration, the value of which is
linked to stretching performance targets and, in the case of LTIP awards, share price performance. As a result, the pay ratio is likely to
be driven largely by the outcome of these awards and may therefore fluctuate significantly on a year-to-year basis. In comparison to
last year, the pay ratio has decreased. This is a direct result of no annual bonus or LTIP vesting for the Chief Executive Officer in respect
of performance in 2020. In contrast, the Chief Executive Officer’s total remuneration for 2019 included both the payment of an annual
bonus and the vesting of an award relating to the buy-out package made on his appointment to compensate for forfeited
remuneration from his previous employer.
The Committee considers the median pay ratio to be consistent with the pay, reward and progression policies for STV’s employees.
STV Annual Report and Accounts 2020 84
REMUNERATION REPORT
Workforce pay
The Committee has oversight of remuneration and related policies across the organisation and gives these due consideration when
determining pay for Executive Directors. Throughout the Company, pay is positioned to be fair and market competitive in the context
of the relevant talent market, fairly reflecting market data and other relevant benchmarks for the role. The Committee considers pay
ratios as one of many reference points when considering remuneration.
As highlighted in the Chair’s Annual Statement, to recognise and reward employees for their hard work and services over the last year
and to provide an incentive to continue driving the success of the Group going forward, all employees will be granted a one-off share
award in 2021 with a face value on grant of £1,000. This award will vest after one-year, subject to the Group meeting its operating
profit target for the year.
The Company continues to evolve its approach to employee engagement on executive remuneration. There are however a number
of different mechanisms in place at STV to gather feedback from employees. Relevant feedback is presented to the Board to help
to inform decision-making.
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2020 and 2019 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
2020
£20.6m
£1.3m
2019
% change
£22.2m
£7.7m
(7.1)%
(82.9)%
Consideration by the Directors of matters relating to Directors’ remuneration
Members of the Committee
During the year, the Committee comprised of the following Non-Executive Directors: Anne Marie Cannon (Chair); Ian Steele; and David
Bergg. The Committee met three times during the year.
The Committee is responsible for recommending to the Board the remuneration policy for Executive Directors. The Committee also has
oversight of remuneration and related policies for the wider workforce as this pertains to determining the remuneration of the Executive
Directors. The Committee has formal terms of reference which describe its full remit and can be downloaded from the Company’s
website, www.stvplc.tv.
Advisors to the Committee
The Committee seeks independent advice to assist in its consideration of executive remuneration. This includes updating the
Committee on compensation trends and governance matters, and advising the Committee in connection 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 founding member of the Remuneration Consultants’
Group and has signed up to their Code of Conduct on executive remuneration consulting. The total fees paid to Deloitte LLP for the
provision of independent advice to the Committee in 2020 were £21,500, charged on a time and materials basis. During 2020, Deloitte
LLP was also the Company’s internal auditor. The Committee reviewed the nature of the other services provided and was satisfied that
no conflict of interest existed in the provision of these services. Baroness Ford, Chair of the STV Board, was appointed as a member of the
Board of Deloitte LLP in August 2020. Baroness Ford has no connection to the engagement team providing advice to the Remuneration
Committee. The Committee is satisfied that the advice received by Deloitte LLP in its role as Remuneration Committee advisors is
objective and independent.
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 attended Committee meetings by invitation.
Statement of voting at general meeting
The table below shows the voting outcomes on the most recent Remuneration Report (2020 AGM) and Remuneration Policy (2018 AGM).
2019 Remuneration Report (2020 AGM)
Remuneration Policy (2018 AGM)
23,216,273
23,755,066
83.89
80.15
4,458,010
5,884,715
16.11
19.85
27,674,283
2,006,473
29,639,781
1,411
Votes for
%
Votes against
% Total votes cast
Votes withheld*
* 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
16 March 2021
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 85
DIRECTORS’ REPORT
The Directors present their report for the year ended 31 December 2020. The Directors’ report comprises pages 85 to 87
and the sections of the annual report incorporated by reference, as set out below:
Directors during 2020 financial year – See page 56
Risk management – See pages 44 to 47
Streamlined Energy and Carbon Reporting (SECR) – See page 38
Corporate governance report – See pages 56 to 66
Employee diversity and inclusion – See page 31 to 33
Employee involvement and engagement – See pages 30 and 31
Principal risks and uncertainties – See pages 47 to 51
Disability reporting – See page 32
Post balance sheet events – See page 125
This Annual Report has been prepared for, and only for, the members of the Company, as a body, and for no other persons. The Company,
its Directors, employees, agents and advisers, do not accept or assume responsibility to any other person to whom this document is
shown or into whose hands it may come, and any such responsibility or liability is expressly disclaimed.
Management Report
The Directors’ Report, together with the Strategic Report, set out on pages 4 to 52, form part of the Management Report for the
purposes of DTR 4.1.5R.
Company number
STV Group plc is registered in Scotland under company number SC203873.
Dividends
A final cash dividend of 6.0p per share has been declared for 2020 which, subject to approval at the AGM in April, will be paid on
28 May 2021, to shareholders on the register at 16 April 2021. The interim dividend for 2020 was paid by way of a bonus issue of
shares and equated to 3.0p per share. The proposed total dividend for 2020 is therefore 9.0p per share.
Share capital and substantial shareholders
On 16 March 2021 there were 46,722,499 ordinary shares of 50p each in issue, each with one vote attached. There were no shares 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 81.
As at 16 March 2021, the following information had been received, in accordance with DTR5, from holders of notifiable interests in
STV’s issued share capital:
Shareholders
Slater Investments
Aberforth Partners
Columbia Threadneedle Investments
AXA Framlington Investment Managers
M&G Investments
Chelverton Asset Management
Schroder Investment Management
Shares held
5,792,073
4,867,536
3,562,390
3,239,311
2,715,310
2,576,451
2,087,121
Canaccord Genuity Wealth Management (Inst)
2,000,000
Tellworth Investments
1,407,115
%
12.40
10.42
7.62
6.93
5.81
5.51
4.47
4.28
3.01
Annual General Meeting (AGM)
Details of the 2021 AGM, together with the resolutions being put to shareholders, can be found in the separate Notice of AGM document.
Directors
The Directors of the Company and their profiles are detailed on pages 54 and 55. All of these Directors served throughout the year
under review. Paul Reynolds and Aki Mandhar were appointed as non-executive directors on 1 February 2021.
In accordance with the Code, at the 2021 AGM each Director will stand for election or re-election.
Directors’ indemnities
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 from
the assets of the Company against any liability he or she incurs in defending any proceedings brought against them in connection
with the execution of their powers, duties and responsibilities as Directors (provided that judgement is not given against them).
STV Annual Report and Accounts 2020
86
DIRECTORS’ REPORT
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
ended 31 December 2020.
Donations
The Group made no political donations or any contributions to a non-EU political party during the year (2019: £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. These include 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 receive cash dividends on those shares it holds that 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 licence holder, to notify Ofcom on a change of control. Ofcom would
thereafter require to determine that any proposed new licence 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.
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.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
prepared the group financial statements in accordance with international accounting standards in conformity with the requirements
of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as
it applies in the European Union, and parent company financial statements in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006.
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 affairs of the group and parent company and of the profit or loss of the group for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
have been followed for the group financial statements and international accounting standards in conformity with the requirements
of the Companies Act 2006 have been followed for the parent company financial statements, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent
company will continue in business.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 87
The Directors are also responsible for safeguarding the assets of the group and parent company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and parent
company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company and
enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the parent company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the group’s and parent company’s position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed on pages 54 and 55 confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit
of the Group;
• the parent company financial statements, which have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position
and profit of the parent company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and
parent company, together with a description of the principal risks and uncertainties they face.
In the case of each Director in office at the date the Directors’ Report is approved:
• as far as the Director is aware, there is no relevant audit information of which the Group’s and Company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Group’s and Company’s auditors are aware of that information.
By order of the Board
Baroness Margaret Ford OBE
Chairman
16 March 2021
STV Annual Report and Accounts 2020 88
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’):
• give a true and fair view of the state of the Group’s and of the Parent company’s affairs as at 31 December 2020 and of the Group’s
profit and the Group’s and Parent company’s cash flows for the year then ended;
• have been properly prepared in accordance with international accounting standards in conformity with the requirements of the
Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
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 2020; the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated and Parent company Statements of Changes in Equity, and Consolidated and
Parent company Statements of Cash Flows 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 and Risk Committee.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union
As explained in note 3 to the Group financial statements, the Group, in addition to applying international accounting standards in
conformity with the requirements of the Companies Act 2006, has also applied international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been properly prepared in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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.
Other than those disclosed in the Corporate Governance report and the Notes to the Financial Statements, we have provided no
non-audit services to the Group in the period under audit.
Our audit approach
Overview
Audit scope
• Taken together, the entities where we performed our audit work accounted for 100% of Group revenue and 99% of Group profit
before tax.
Key audit matters
• Retirement benefit obligations (Group and Parent).
• Deferred programme production stock (DPS) – carrying value (Group).
• The impact of Covid-19 (Group and Parent).
Materiality
• Overall Group materiality: £860,000 based on 5% of average profit before tax and exceptional items over the last three years.
• Overall Parent company materiality: £3,940,000 based on 1% of total assets.
• Performance materiality: £645,000 (Group) and £2,955,000 (Parent company).
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.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 89
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to the Listing Rules, UK tax legislation and compliance with industry regulation (OFCOM), and we considered
the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. 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 management bias in accounting estimates and posting inappropriate
journal entries to manipulate revenue or profit. Audit procedures performed by the engagement team included:
• Discussions with management, reading reports from internal audit and consideration of any 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;
• Reviewing Board minutes;
• Challenging assumptions and judgements made by management in areas involving significant accounting estimates; and
• Identifying and testing journal entries, in particular any journal entries posted by senior management and/or with unusual
account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, 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.
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.
The impact of Covid-19 is a new key audit matter this year. Recoverability of ELM Other receivable, which was a key audit matter last
year, is no longer included because of the amounts due being fully provided for as at 31 December 2020, with the result that there
is no residual risk relating to the carrying value. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Retirement benefit obligations (Group and Parent)
(Refer to page 103 (Significant accounting policies) and note 26
(Retirement benefit schemes))
The Group has a net pension deficit at 31 December 2020 of
£70.3m (2019: £64.0m) and the Parent company a deficit of £36.2m
(2019: £32.1m). The gross defined benefit scheme obligation
of the Group and Parent company is £507.5m (2019: £445.9m)
and £202.4m (2019: £186.7m) respectively. These balances are
significant in the context of the Group and Parent company balance
sheets and are dependent on key judgemental assumptions,
including the discount rate, inflation rate and mortality rates
adopted by the Directors in the actuarial valuations. Given the
judgements involved and that small movements in these
assumptions can have a significant impact on the overall
obligation, this was an area of significant risk in our audit.
We engaged our actuarial experts to consider the reasonableness
of the key assumptions used in the actuarial valuation, being the
discount rate, inflation rate and mortality rates, assessing if they
were within our observable/expected range. Together with our
experts, we discussed the methodology and assumptions used
in calculating the obligation with the Group’s actuary.
All actuarial assumptions fell within our observable/expected
range based on the nature of the schemes and scheme
experience, albeit, mortality rates continue to be at the lower,
more optimistic end of the range. We considered the methods
by which the assumptions were derived and how the assumptions
sit within our observable/expected ranges year-on-year. This
allowed us to challenge if there was any indication of management
bias in the setting of assumptions. We did not identify any issues
in this respect.
As a result of our audit work, we were able to conclude that the
net pension deficit and gross defined benefit scheme obligation
taken as a whole are not materially misstated and the associated
disclosures contain all the relevant information required and are
fairly stated.
STV Annual Report and Accounts 2020 90
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF STV GROUP PLC
Key audit matter
How our audit addressed the key audit matter
Deferred programme production stock (DPS) – carrying value
(Group)
(Refer to page 102 (Significant accounting policies) and note 17
(Inventories))
DPS of £10.3m (2019: £10.3m) relates to 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.
We no longer consider this to be a significant audit risk due to
the reduction in the balance in recent years, with the substantial
amount of the carrying value now focused on a limited range
of productions, for which ongoing sales have been in excess of
forecast. However, it remains an area of audit focus because
the support for the carrying value and the charge to the income
statement are based on judgements made by management
in respect of related future revenues.
The impact of Covid-19 (Group and Parent)
Covid-19 was declared a pandemic by the World Health
Organisation on 11 March 2020 and the on-going response
is having an unprecedented impact on the wider economy.
It is therefore necessary to consider the impact on the Group.
The key impacts on the Group have been: a reduction in national
and regional advertising; a temporary pause in production activity;
and a significant reduction in retail based lottery sales.
We have determined the impact of Covid-19 to be a key audit
matter.
We have reviewed the calculations performed by management
and verified that these are mathematically accurate and the
method of calculation is appropriate and consistent with prior
years. We analysed management’s 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. Consistent with prior years 91% of the
carrying value is represented by four main productions so these
were the focus of our audit work. We obtained 2020 sales contracts
for a sample of productions to verify the existence of forecast sales.
We performed sensitivities on the key assumptions for future
sales, in relation to discount rates and the time period over which
sales could be achieved, to satisfy ourselves that no material
impairment of DPS was required.
There were no issues arising from the audit work performed.
In assessing the impact of Covid-19 on the Group, we have
undertaken the following audit procedures:
We considered the impact of the pandemic on trading performance
as part of our going concern assessment. Our conclusions in
relation to going concern are set out later in this report.
We considered whether the pandemic and the related impact
on the economy and trading conditions indicated impairment
of any assets such that an impairment assessment would be
required. We did not identify any such requirement.
We reviewed the accuracy of the claims made under the
Coronavirus Job Retention Scheme for any indication of
non-compliance with associated regulations.
We reviewed the disclosures throughout the Annual Report
to consider whether they appropriately reflected the impact
of the pandemic on the trading performance and risks related
to the Group.
We have not identified any matters to report which we believe
would materially affect the conclusions reached or the
disclosures within the financial statements.
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
considered 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.
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:
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 91
Financial statements – Group
Financial statements – Parent company
Overall materiality
£860,000
How we determined it
5% of average profit before tax and exceptional items over the
last three years
£3,940,000
1% of total assets
Rationale for
benchmark applied
We have applied this benchmark because we consider the
measure of profit before tax and exceptionals is the measure
most commonly used by the shareholders to measure the
performance of the Group. Taking a three year average is
appropriate this year due to the adverse impact of the
external operating environment, which included factors
outside of the control of the Group, on financial performance.
As a result, a three year average gives a materiality which
is more appropriate for the size of the Group.
We considered the most appropriate
benchmark for the Parent company to
be total assets as it is a holding company.
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 £40,000-£780,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% of overall materiality, amounting to £645,000 for the Group financial statements
and £2,955,000 for the Parent company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £43,000
(Group audit) and £197,000 (Parent company audit) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Parent company’s ability to continue to adopt the going concern
basis of accounting included:
• Checking management’s base case and downside models for mathematical accuracy;
• Validating the appropriateness of key assumptions inherent in the cash flow models and agreeing the opening cash/net debt position;
• Confirming that downside scenarios were sufficiently severe but plausible in the context of the STV business and plans; and
• Considering compliance with the terms and covenants applicable to the lending facilities in both the base case and downside cases.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and the Parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the
Parent company’s ability to continue as a going concern.
In relation to the Parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
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.
STV Annual Report and Accounts 2020 92
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF STV GROUP PLC
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 and Directors’ report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
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 2020 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
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.
Directors’ Remuneration
In our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Parent company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information
are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement, included within the Corporate Governance Report is materially consistent with the financial statements
and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report and Accounts that describe those principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis
of accounting in preparing them, and their identification of any material uncertainties to the Group’s and Parent company’s ability
to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the Group’s and Parent company’s prospects, the period this assessment
covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the Parent company will be able to continue
in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent
with the financial statements and our knowledge and understanding of the Group and Parent company and their environment
obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides
the information necessary for the members to assess the Group’s and Parent company’s position, performance, business model
and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when 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.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information 93
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities, 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.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
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.
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 obtained 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 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 and Risk 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 17 years, covering the years ended 31 December 2004 to 31 December 2020.
Michael Timar (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Glasgow
16 March 2021
STV Annual Report and Accounts 2020 94
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2020
Revenue
Net operating expenses
Other income
Operating profit
Finance costs
– borrowings
– defined benefit pension schemes
– lease interest
Provision for impairment losses – ELM debtor
Share of loss of an associate
Profit before tax
Tax credit/(charge)
Profit for the year
Attributable to:
Equity holders of the company
Non-controlling interests
Earnings per share (restated)*
Basic
Diluted
2020
2019
Before
exceptional
items
£m
Exceptional
items
(note 8)
£m
Results
for year
£m
Before
exceptional
items
£m
Exceptional
items
(note 8)
£m
Results
for year
£m
107.1
(88.9)
–
18.2
(1.2)
(1.2)
(0.3)
–
(0.1)
(2.8)
15.4
(0.6)
14.8
14.7
0.1
14.8
35.2p
33.8p
–
107.1
123.8
–
123.8
(0.5)
–
(0.5)
–
–
–
(8.2)
–
(8.2)
(8.7)
1.6
(7.1)
(7.1)
–
(7.1)
(89.4)
–
17.7
(1.2)
(1.2)
(0.3)
(8.2)
(0.1)
(11.0)
6.7
1.0
7.7
7.6
0.1
7.7
(101.2)
–
22.6
(1.3)
(2.0)
(0.3)
–
–
(3.6)
19.0
(3.2)
15.8
15.9
(0.1)
15.8
18.2p
17.5p
41.4p
40.1p
(2.0)
2.0
–
–
–
–
–
–
–
–
0.1
0.1
0.1
–
0.1
(103.2)
2.0
22.6
(1.3)
(2.0)
(0.3)
–
–
(3.6)
19.0
(3.1)
15.9
16.0
(0.1)
15.9
41.7p
40.3p
Note
5
6
21
9
10
*
The number of shares reported in 2019 for the purposes of earnings per share has been updated to reflect the bonus issue in December 2020;
those shares issued are assumed to have been in issue since the start of the comparator period.
The above consolidated income statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2020
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes
Deferred tax credit/(charge)
Revaluation gain on listed investment to market value
Other comprehensive (expense)/income – net of tax
Total comprehensive income for the year
Attributable to:
Owners of the parent
Non-controlling interests
Note
26
22
2020
£m
7.7
(15.3)
3.2
5.9
(6.2)
1.5
1.4
0.1
1.5
2019
£m
15.9
6.2
(0.9)
–
5.3
21.2
21.3
(0.1)
21.2
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
At 31 December 2020
95
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments
Deferred tax asset
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Ordinary shares
Share premium
Capital redemption reserve
Merger reserve
Other reserve
Accumulated (losses)/profit
Shareholders’ equity
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Lease liabilities
Retirement benefit obligations
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Total liabilities
Total equity and liabilities
12
13
14
16
22
18
17
18
24
24
20
21
26
19
21
Group
2020
£m
Note
2019
£m
2.6
10.7
12.2
0.9
16.1
9.5
52.0
13.2
21.6
6.2
41.0
93.0
2.3
9.9
10.4
6.7
19.9
0.9
50.1
15.4
25.6
5.2
46.2
96.3
23.3
115.1
0.2
173.4
1.0
19.6
102.0
0.2
173.4
0.9
(342.8)
(343.2)
(29.8)
(0.1)
(29.9)
22.7
9.1
70.3
102.1
22.4
1.7
–
24.1
(47.1)
(0.2)
(47.3)
43.7
10.6
64.0
118.3
19.9
1.8
0.3
22.0
Company
2020
£m
2019
£m
–
–
–
52.9
6.9
217.0
276.8
–
117.2
–
117.2
–
–
–
48.2
5.5
199.5
253.2
–
84.7
–
84.7
394.0
337.9
23.3
115.1
0.2
–
1.0
102.9
242.5
–
19.6
102.0
0.2
–
0.9
88.0
210.7
–
242.5
210.7
–
–
36.2
36.2
–
–
32.1
32.1
115.3
95.1
–
–
–
–
115.3
95.1
126.2
140.3
151.5
127.2
96.3
93.0
394.0
337.9
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 £16.2m (2019: £16.1m).
The consolidated financial statements on pages 94 to 126 were approved by the Board on 16 March 2021 and were signed on its
behalf by:
Simon Pitts
Chief Executive Officer
Lindsay Dixon
Chief Financial Officer
STV Annual Report and Accounts 2020 96
CONSOLIDATED AND PARENT COMPANY STATEMENTS
OF CHANGES IN EQUITY
Year ended 31 December 2020
Group
At 1 January 2020
Profit for the year
Other comprehensive expense
Total comprehensive income for the year
Issue of ordinary shares
Share based compensation
Shares acquired by EBT
Dividends paid in shares
At 31 December 2020
At 1 January 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Acquisition of subsidiary
Share based compensation
Shares acquired by EBT
Tax charge on share based compensation
Dividends paid
Unclaimed dividends received
At 31 December 2019
Company
At 1 January 2020
Profit for the year
Other comprehensive expense
Total comprehensive income for the year
Issue of ordinary shares
Share based compensation
Shares acquired by EBT
Dividends paid in shares
At 31 December 2020
At 1 January 2019
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Share based compensation
Shares acquired by EBT
Dividends paid
Unclaimed dividends received
At 31 December 2019
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Other
reserve
£m
Accumulated
(losses)/profit
£m
Attributable
to owners of
the parent
£m
Non-
controlling
interest
£m
Total
equity
£m
19.6
102.0
0.2
173.4
0.9
(343.2)
–
–
–
–
–
–
3.5
12.0
–
–
–
–
0.2
1.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
(0.1)
–
7.6
(6.2)
1.4
–
–
0.3
(1.3)
(47.1)
7.6
(6.2)
1.4
15.5
0.2
0.2
–
(0.2)
(47.3)
0.1
–
0.1
–
–
–
–
7.7
(6.2)
1.5
15.5
0.2
0.2
–
23.3
115.1
0.2
173.4
1.0
(342.8)
(29.8)
(0.1)
(29.9)
19.6
101.9
0.2
173.4
0.8
(355.1)
(59.2)
– (59.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
(0.2)
–
–
–
16.0
5.3
21.3
–
–
(2.0)
0.2
(7.7)
0.1
16.0
5.3
21.3
–
0.3
(2.1)
0.2
(7.7)
0.1
(0.1)
15.9
–
5.3
(0.1)
21.2
(0.1)
(0.1)
–
–
–
–
–
0.3
(2.1)
0.2
(7.7)
0.1
19.6
102.0
0.2
173.4
0.9
(343.2)
(47.1)
(0.2)
(47.3)
19.6
102.0
0.2
–
–
–
–
–
–
3.5
12.0
–
–
–
–
0.2
1.1
23.3
115.1
19.6
101.9
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
0.2
0.2
–
–
–
–
–
–
–
19.6
102.0
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9
–
–
–
–
0.2
(0.1)
–
1.0
0.8
–
–
–
0.3
(0.2)
–
–
88.0
16.2
(0.3)
15.9
–
–
0.3
(1.3)
210.7
16.2
(0.3)
15.9
15.5
0.2
0.2
–
102.9
242.5
77.7
16.1
3.8
19.9
–
(2.0)
(7.7)
0.1
200.2
16.1
3.8
19.9
0.3
(2.1)
(7.7)
0.1
0.9
88.0
210.7
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information CONSOLIDATED AND PARENT COMPANY STATEMENTS
OF CASH FLOWS
Year ended 31 December 2020
97
Note
25
Operating activities
Cash generated by/(used in) operations
Interest paid
Refinancing fees paid
Net taxes (paid)/received
Exceptional reorganisation cash costs
Pension deficit funding – recovery plan payment
Contingent cash payment to pension schemes
Net cash generated by/(used in) operating activities
Investing activities
Proceeds from sale of investment
Purchase of investment in associate
Cash acquired on purchase of subsidiary
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash (used in)/generated by investing activities
Financing activities
Shares acquired by EBT
Payment of obligations under leases
Issue of ordinary shares
Borrowings drawn
Borrowings repaid
Dividends paid
Net cash (used in)/generated by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
(8.6)
12.8
13.3
(12.9)
22.4
(1.6)
(0.3)
(0.4)
–
(9.1)
(1.4)
9.6
–
(1.1)
–
(0.7)
(1.4)
(3.2)
–
(1.9)
15.5
19.0
(40.0)
–
25.6
(1.1)
–
0.1
(1.0)
(9.0)
(1.3)
1.3
–
0.4
(1.6)
(2.9)
(2.8)
(2.1)
(1.9)
–
20.0
(19.0)
(7.6)
–
–
–
–
(3.7)
(0.6)
–
(1.1)
–
–
–
–
–
15.5
–
–
–
(7.4)
(10.6)
15.5
(1.0)
(0.1)
6.2
5.2
6.3
6.2
1.5
(4.9)
(3.4)
–
–
–
–
(4.3)
(0.6)
7.9
1.3
–
–
–
–
(2.1)
–
–
–
–
(7.6)
(9.7)
(0.5)
(4.4)
(4.9)
(1.1)
1.3
STV Annual Report and Accounts 2020 98
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
1. General information
The consolidated financial statements of STV Group plc (the ‘Company’) and its subsidiaries (together the ‘Group’) for the year
ended 31 December 2020 were approved and authorised for issue in accordance with a resolution of the Directors on 16 March
2021. The comparative information is presented for the year ended 31 December 2019.
STV Group plc is a public limited company incorporated in Scotland and is listed on the London Stock Exchange.
The principal activities of the Group are the production and broadcasting of television programmes, provision of internet services
and the sale of advertising airtime and space in these media. Outside the core business, the Group also operates an external
lottery management company, although post year end an agreement in principle has been reached to dispose of that business,
subject to Gambling Commission approval (note 31).
2. Adoption of new and revised standards
In the current year, the Group has adopted the following new amendments with no material impact:
• Amendment to IFRS 16 Leases Covid-19 – Related Rent Concessions – effective date 1 June 2020
• Amendments to IFRS 3 Business Combinations – effective date 1 January 2020
• Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform – effective date 1 January 2020
Standards and amendments to standards that have been issued but are not effective for 2020 and have not been early adopted are:
• IFRS 17 Insurance Contracts – effective date 1 January 2021
• Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9 – effective date 1 January 2021
• Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform – Phase 2 – effective date 1 January 2021
The above standards and amendments issued but not yet effective will be adopted in accordance with their effective dates
and have not been adopted in these 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
These financial statements are presented in Sterling. All values are rounded to the nearest 0.1 million pounds (£m) except
where otherwise indicated.
The financial statements are prepared in accordance with both international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies to the European Union.
Going concern
At 31 December 2020, the Group was in a financial net debt position with a positive gross cash balance. The Group is in a net
current asset position and generates cash from operations that enables the Group to meet its liabilities as they fall due, and
other obligations.
As part of the going concern review, the Group considers forecasts of the total advertising market to determine the impact
on liquidity. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance,
show that the Group will be able to operate within the level of its current available funding and covenant levels.
During 2020, and in response to Covid-19, the Group took a number of measures to create additional headroom to enable it to
trade through a severe downside scenario, should one materialise. These measures included the increase of bank facilities from
£60m to £80m and the relaxation of certain covenants, as well as raising net proceeds of £15.5m through an issue of new share
capital. From the time when the increased facilities were put in place to the start of March 2021 when the Group refinanced its
banking arrangements, the Group did not need to avail itself of the incremental £20m in facility or the covenant relaxations.
In early March, the Group refinanced its existing facilities, due to mature in June 2022, and now has in place a £60m revolving
credit facility, with a £20m accordion, for a minimum period of three years with two one-year extension options. The covenant
package in place reflects those under the previous arrangement, without the relaxations, and requires the Group’s leverage to
be less than three times and interest cover to be more than four times. The financial modelling undertaken in support of the
Group’s application of the going concern basis of preparation remains valid under the new facilities, with the Group being able
to continue to trade within the new facility limits and covenant levels.
As set out in the Group’s strategy in 2018, the Group continues to focus on diversification of operations to drive a greater
proportion of the Group’s results from non-broadcast earnings.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operation for at least 12 months from the date of this report. Accordingly, the Group continues to adopt the going concern basis
in preparing its consolidated financial statements.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
99
The preparation of the consolidated and Company financial statements, in conformity with IFRS, requires management to
make judgements that affect the application of accounting policies and estimates that impact the reported amounts of assets,
liabilities, income and expense.
Management bases these judgements on a combination of past experience, professional expert advice and other evidence that
is relevant to each individual circumstance. Actual results may differ from these judgements and the resulting estimates which
are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised.
Areas requiring significant judgement in the current year and on a recurring basis are presented to the Audit & Risk Committee,
as summarised on page 62 and with details included in note 4.
Basis of consolidation
The Group financial statements incorporate the financial statements of STV Group plc and all its subsidiaries up to 31 December
each year, using consistent accounting policies.
Subsidiaries are entities over which the Company has control. Control is achieved when the Company has the power over the
subsidiary, is exposed, or has rights to, variable returns from its involvement with the subsidiary, and has the ability to use its
power to affect its returns. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Subsidiary undertakings acquired during the year are recorded using
the acquisition method of accounting and their results are included from the date of acquisition.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on
consolidation.
Non-controlling interests represent the portion of profit or loss and net assets/(liabilities) in subsidiaries that are not held by the
Group and are presented within equity in the consolidated balance sheet, separately from the Company shareholders’ equity.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred,
liabilities incurred and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs
are recognised in the income statement as incurred.
At the acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fair value.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the
acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed. If the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised
immediately in the income statement as a bargain purchase gain (or loss if the liabilities assumed exceed the identifiable assets).
Goodwill in respect of an acquired business is recognised as an intangible asset. Goodwill is carried at cost less any recognised
impairment losses and is tested at least annually or where there are indicators of impairment.
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.
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 that point the performance obligations are delivered and control 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 note 4).
iii) Lottery service revenues
Revenue is recognised for ongoing lottery costs recharged to the Scottish Children’s Lottery at the point when the lottery draw
to which the service relates has taken place.
STV Annual Report and Accounts 2020
100
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
3. Significant accounting policies continued
Dividend income
Dividend income is recognised when the right to receive payment is established.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. When the grant relates to an expense item, it is deducted from the related expense. When the grant relates
to an asset, it is deducted from the asset’s carrying value.
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 the amount of tax payable or recoverable in respect of the taxable profit or loss for the year, 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
substantively enacted at the balance sheet date and are expected to apply when the related deferred 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 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 tax 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.
Exceptional items
In order to provide the users of the consolidated financial statements with a more relevant presentation of the Group’s
underlying performance, on a like-for-like basis, profit for each year has been analysed between:
(i) profit before exceptional items; and
(ii) the effect of 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.
Exceptional items may include, but are not restricted to: profits or losses arising on disposal or closure of a business; the cost
of significant business restructuring; significant impairments of intangible or tangible assets; significant gains or losses on sale
of investments, intangible or tangible assets; adjustments to the fair value of acquisition-related items; other items deemed
exceptional due to their significance, size or nature; and the related exceptional taxation.
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. Currency translation differences are recognised in the consolidated income statement.
Intangible assets
Intangible assets, other than goodwill, 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 intangible assets, less residual value, on a straight line basis
from the date they are brought into use:
Web development and branding
between 10% and 25%
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
101
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 the assets, less estimated residual values, in equal annual instalments as follows:
Leasehold improvements
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, from the date of addition or to the date of disposal.
Any impairment in value is charged to the income statement.
Leases
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term
leases (defined as leases with a term of 12 months or less) and leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight-line basis over the term of the lease.
Lease liability
The lease liability is initially measured as the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease.
Lease payments included in the measurement of the lease liability comprise:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payments that are based on an index or rate, initially measured using the index or rate as at the
commencement date
• amounts expected to be payable by the Group under residual value guarantees
• the exercise price of purchase options, if the Group is reasonably certain to exercise those options; and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which
is generally the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost element is charged to the income statement
over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets
Right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before
the commencement date, less any lease incentives received and any initial direct costs. They are subsequently measured at
cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter of the lease term and the useful life of the underlying asset. If the lease
transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts
at the commencement date of the lease.
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.
STV Annual Report and Accounts 2020
102
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
3. Significant accounting policies continued
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
Programme production work in progress for programmes being made for third parties is recorded at cost less any provision
for impairment. When the programme production has been completed, and at the point of delivery to the commissioner,
the inventory value is charged to the income statement to match the cost of production with the revenue recognised.
ii) Deferred programme production
Deferred programme production stock represents original costs of production that are deferred and recognised against future
revenue streams expected to be generated in the secondary sales markets, or from advertising revenue generated on the STV
Player. 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 estimate of future sales and deferred programme production stock is referred
to in the critical accounting estimates section (note 4).
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 charged to the income
statement after the first transmission or sale.
Provisions
Reorganisation costs
Provisions for reorganisation costs are recognised when the Group has a legal obligation as a result of a past event, it is probable
that an outflow of resources will be required to settle the obligation and the amount can be estimated reliably.
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 recorded at amortised cost with the exception of investments
which are recognised at fair value through other comprehensive income (FVOCI) and derivative financial instruments which
are recognised at fair value through profit and loss (FVPL). Financial liabilities are measured 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 trade.
The debtor due from the Scottish Children’s Lottery, included in non-current assets, is reviewed at each reporting period.
Management perform a whole of life probability weighted impairment review when 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
Investments are classified 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.
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 unless the Group is deemed to hold significant influence. Investments, whereby the Group is deemed
to hold significant influence, are initially recognised at cost and adjusted thereafter for the post-acquisition change in the net assets
of the investment. A share of the profit or loss, based on equity holding, is recognised in the income statement for the period.
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. Finance costs, including premiums payable on settlement or redemption
and direct issue costs, are accounted for using an effective interest rate method 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.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
103
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.
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 IFRS 9 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 every six months on a discounted cash flow basis using market
forward rates.
Pensions
For defined benefit pension schemes, the annual service cost is calculated using the projected unit credit method and is recognised
over the future service lives of participating employees, in accordance with the advice of qualified actuaries. Current service cost and
administration expenses are recognised in operating costs and net interest on the net pension liability is recognised in finance costs.
The finance cost recognised in the consolidated income statement reflects the net interest on the net pension liability. This
represents the change in the net pension liability resulting from the passage of time, and is determined by applying the discount
rate to the opening net liability, taking into account employer contributions paid in to the scheme, and hence reducing the net
liability during the year.
Past service costs resulting from enhanced benefits are recognised immediately in the consolidated income statement. Actuarial
gains and losses, which represent the difference between interest on scheme assets, experience on the defined benefit obligation
and the effect of changes in actuarial assumptions, are recognised in full in the consolidated statement of comprehensive
income in the year in which they occur.
The retirement benefit obligation recognised in the consolidated balance sheet comprises the net total for each scheme of
the present value of the benefit obligation, using a discount rate based on yields at the balance sheet date on appropriate
high-quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and are
denominated in sterling, minus the fair value of the scheme assets at the balance sheet date.
Payments to defined contribution schemes are charged to the income statement as an expense as they fall due.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. A fair value for the equity-settled share awards
is measured at the date of grant. The Group measures the fair value of each award using an appropriate option pricing model.
The fair value of each award is recognised as an expense over the vesting period on a straight-line basis, after allowing for an
estimate of the share awards that will eventually vest. The level of vesting is reviewed at each reporting period and the charge
is adjusted, where appropriate, to reflect actual and estimated levels of vesting.
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.
4. Critical accounting estimates and judgements
In the application of the Group’s accounting policies, which are described in note 3, management is required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. These 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 obligations
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.
The Group determines the appropriate discount rate at the end of each year. This is the 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.
STV Annual Report and Accounts 2020
104
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
4. Critical accounting estimates and judgements continued
With regard to mortality, the base tables used are updated every three years (to coincide with triennial valuations) or more
frequently when there is evidence of a change in experience. The CMI tables relating to future improvements in mortality are
updated when new information is available, usually annually.
Other key assumptions for pension obligations are based in part on current market conditions. Additional information, along
with details of sensitivities, is disclosed in note 26.
Inventory
Deferred programme production stock forms part of inventory and is stated in the financial statements at the lower of cost or
net realisable value. Programme costs are expensed in line with expected future revenues which is an area involving significant
management judgement and estimate. A detailed forecast of future secondary sales is prepared by management based on
historic experience and expected future trends. £1.1m was expensed through the income statement in the year (2019: £1.7m).
Additional information is disclosed in note 17.
Lottery recoverability
The STV ELM Limited provides external lottery management services to the Scottish Children’s Lottery (SCL) and recharges its
costs at nil mark-up to the SCL. The level of ticket sales by the SCL has not been sufficient to enable repayment of the debtor due
to the STV ELM and, in line with IFRS 9, management have performed a whole of life probability weighted impairment review to
determine the provision required.
In March 2020, the Group announced its intention to divest of the STV ELM having undertaken a full review of its operations and
concluded that it was not core to the future growth prospects of the Group. At the end of June 2020, based on the status of the
divestment process at that time, full provision was made for the debtor due from the SCL and this position has been maintained
at the balance sheet date with a total provision of £13.6m being recognised in the balance sheet and the debtor carrying value
reduced to nil. Further details are presented in note 18.
Company
Carrying value of parent company investments
The company’s policy is to carry out annual reviews of the carrying value of 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 16.
5. Business segments
Information reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment
performance is by product. The Group’s operating segments, which remain the same as the prior year, are Broadcast, Digital,
Studios (previously called Production), and the STV ELM.
The Group’s reportable segments continue to be Broadcast, Digital and Studios, with the STV ELM included within ‘Other’.
Sales
Inter-segment sales
Segment revenue
Segment result
Operating profit
Broadcast
Digital
Studios
Other
Total
2020
£m
94.8
(13.6)
81.2
2019
£m
105.7
(13.4)
92.3
2020
£m
13.7
–
13.7
2019
£m
13.0
–
13.0
2020
£m
9.1
(0.4)
8.7
2019
£m
14.6
(0.9)
13.7
2020
£m
3.5
–
3.5
2019
£m
4.8
–
4.8
2020
£m
2019
£m
121.1
138.1
(14.0)
107.1
(14.3)
123.8
15.5
19.9
6.5
7.3
(0.3)
(0.1)
–
–
21.7
27.1
Unallocated corporate expenses
Adjusted operating profit
Exceptional items
Finance costs
Share of loss in associate
Profit before tax
Tax credit/(charge)
Profit for the year
(3.5)
(4.5)
18.2
22.6
(8.7)
(2.7)
(0.1)
6.7
1.0
7.7
–
(3.6)
–
19.0
(3.1)
15.9
Revenue includes £1.0m from sources outside the UK (2019: £1.0m). Operating profit includes £0.6m arising outside the UK
(2019: £0.6m).
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
105
Segment assets
and liabilities
Assets
Liabilities
Segment total
Broadcast
Digital
Studios
Other
Total
2020
£m
2019
£m
33.0
33.6
(18.6)
(13.3)
14.4
20.3
2020
£m
2.8
(0.5)
2.3
2019
£m
2.9
(0.7)
2.2
2020
£m
21.7
(4.8)
2019
£m
19.2
(3.6)
16.9
15.6
2020
£m
0.4
–
0.4
2019
£m
8.2
–
2020
£m
57.9
(23.9)
8.2
34.0
2019
£m
63.9
(17.6)
46.3
Unallocated corporate assets
Unallocated corporate liabilities
Consolidated
38.4
29.1
(102.3)
(122.7)
(29.9)
(47.3)
Segment assets consist primarily of property, plant and equipment, certain leased assets, inventories, trade and other
receivables and cash and bank deposits.
Segment liabilities comprise operating liabilities including trade and other payables and provisions and certain lease liabilities.
They exclude Group borrowings, retirement benefit obligations, tax liabilities and other non-current liabilities, including the
remaining lease liabilities.
All the net assets in 2019 and 2020 were held in the UK and therefore operate in a single geographical segment.
Broadcast
Digital
Studios
Other
Total
Other segment
information
2020
£m
2019
£m
2020
£m
Capital additions
1.0
1.9
0.6
2019
£m
2.3
Depreciation and
amortisation additions
2.4
1.8
0.1
0.6
2020
£m
2019
£m
2020
£m
2019
£m
2020
£m
2019
£m
–
–
–
–
0.7
0.6
2.3
4.8
2.6
2.4
5.1
4.8
6. Net operating expenses
Programming and production costs
Staff costs (note 7)
Other operational costs
Depreciation and amortisation
Exceptional items (note 8)
2020
£m
36.9
22.8
24.1
5.1
88.9
0.5
89.4
2019
£m
52.0
25.8
18.6
4.8
101.2
2.0
103.2
STV Annual Report and Accounts 2020
106
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
6. Net operating expenses continued
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 the parent company and consolidated
financial statements
Fees payable to the Company’s auditors and their associates for other services:
– The audit of the Company’s subsidiaries pursuant to legislation
– Audit-related assurance services
Included in the audit fees payable is £5,000 (2019: £5,000) paid in respect of the parent company.
Fees in respect of STV Group plc pension schemes
Audit
7. Staff
Group
Aggregate remuneration
Wages and salaries
Social security costs
Other pension costs
Total aggregate remuneration
2020
£000
2019
£000
200
25
5
230
2020
£000
71
2020
£m
19.2
2.3
1.3
22.8
157
24
4
185
2019
£000
70
2019
£m
22.2
2.3
1.3
25.8
During the year ended 31 December 2020, the Group, through its utilisation of the Coronavirus Job Retention Scheme, received
government grants totalling £1.6m by way of contributions towards the cost of employee wages and salaries and social security cost.
The pension costs in 2019 have been restated to exclude the administration costs associated with operating the Group’s defined
benefit schemes and the net interest on the net pension deficit.
Average monthly number of employees (including executive directors)
Broadcast, Digital, Studios, ELM and Corporate:
Established
Contract
Total average number of employees
2020
Number
2019
Number
441
19
460
434
22
456
Contract staff numbers consist of employees on fixed-term contracts.
Details of directors’ remuneration is provided in the Remuneration Report on pages 77 to 84.
Company
The company had no employees during the current or preceding year.
No director received remuneration from the company during the year (2019: £nil). The emoluments of the directors are paid
by another group company which makes no recharge to the parent company.
A charge of £0.2m (2019: £0.3m) for share based compensation was included in the Company’s profit for the year.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
8. Exceptional items
Recognised in arriving at operating profit:
Costs incurred in relation to disposal of STV ELM Ltd
Gain on sale of investment
Acquisition costs
Development costs written off
Recognised in arriving at finance costs:
Provision for impairment losses – STV ELM Ltd receivable
VAT recoverable following write off of STV ELM Ltd receivable
Total exceptional items (pre-tax)
107
2020
£m
2019
£m
(0.5)
–
–
–
(0.5)
(8.8)
0.6
(8.2)
(8.7)
–
2.0
(0.1)
(1.9)
–
–
–
–
–
2020 exceptional items
All exceptional items in 2020 relate to the disposal of the STV ELM Limited. The total exceptional cost of £8.7m comprises
three elements:
(i) actual and expected costs associated with the disposal of the business of £0.5m;
(ii) VAT recoverable of £0.6m following the write-off of the receivable due from the Scottish Children’s Lottery (SCL); and
(iii) expected credit loss provision of £8.8m being full provision for the receivable due from the SCL at the balance sheet date,
under IFRS 9.
The first amount has been recognised as an operating exceptional item. The second and third amounts are included as
exceptional finance costs.
2019 exceptional items
The disposal of the deltaDNA investment to Unity Technologies Inc in September 2019 resulted in a gain on sale of £2.0m.
See note 16 for more information.
Costs of £0.1m were incurred in the acquisition of Primal Media Limited on 1 July 2019. There was no change recognised
in relation to the provisional fair values identified at the time of the acquisition, these being net liabilities of £0.1m.
A write off of development costs of £1.9m was recognised following a full review of the development costs previously capitalised.
Those costs that related to creative ideas and investments that no longer aligned to the new strategic direction of the division
were written off.
9. Tax charge
Corporation tax
Current year
Adjustments in respect of prior years
Deferred tax (note 22)
Tax (credit)/charge for the year
2020
£m
2019
£m
–
(0.4)
(0.4)
(0.6)
(1.0)
1.4
(0.8)
0.6
2.5
3.1
STV Annual Report and Accounts 2020
108
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
9. Tax charge continued
The (credit)/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% (2019: 19%)
Tax effects of:
Exceptional costs
Other expenses not deductible for tax purposes
Impact of changes in tax rates
Changes in estimates related to prior years
Tax (credit)/charge for the year
2020
£m
6.7
1.3
–
0.1
(1.4)
(1.0)
(1.0)
2019
£m
19.0
3.6
(0.1)
0.1
(0.2)
(0.3)
3.1
10. Earnings per share
The calculation of earnings per share is based on earnings after tax and the weighted average number of ordinary shares in
issue during the year, excluding ordinary shares purchased by the Company and held for use by the STV Employee Benefit Trust.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares. The Group has one type of dilutive potential ordinary shares namely share options granted
to employees.
The adjusted earnings per share figures that have also been calculated are based on earnings before adjusting items that are
significant in nature and/or quantum and are considered to be distortive. The adjusting items include the impact of operating
and non-operating exceptional items and the IAS 19 net financing cost, as well as the related tax effect. Adjusted earnings
per share has been presented to provide shareholders with an additional measure of the Group’s year-on-year performance.
The number of shares reported in 2019 for the purposes of earnings per share has been updated to reflect the bonus issue
in December 2020, with those shares issued assumed to have been in issue since the start of the comparator period.
Earnings per share
Basic earnings per share
Diluted earnings per share
Earnings per ordinary share (before exceptional items)
Diluted earnings per ordinary share (before exceptional items)
Adjusted basic earnings per share
Adjusted diluted earnings per share
The following reflects the earnings and share data used in the calculation of earnings per share:
Earnings
Profit for the year attributable to equity shareholders
Exceptional items (net of tax)
Profit for the year before exceptional items
Adjustment for IAS 19 financing cost (net of tax)
Adjusted profit
2020
pence
18.2p
17.5p
35.2p
33.8p
37.5p
36.1p
2020
£m
7.6
7.1
14.7
1.0
15.7
Restated
2019
pence
41.7p
40.3p
41.4p
40.1p
45.8p
44.4p
2019
£m
16.0
(0.1)
15.9
1.7
17.6
Ref
(a)
(b)
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share
Dilution due to share options
Weighted average number of ordinary shares for the purposes of diluted earnings per share
109
2020
million
41.7
1.7
43.4
Restated
2019
million
38.4
1.3
39.7
Details of the adjustments to earnings are as follows:
(a) Exceptional items (net of tax) £7.1m charge (2019: £0.1m credit)
Exceptional items of £8.7m (2019: £nil), net of related tax credit of £1.2m (2019: £0.1m). See note 8 for more details.
(b) Adjustment for IAS 19 financing cost (net of tax) £1.0m (2019: £1.7m)
An adjustment for the IAS 19 financing cost of £1.2m (2019: £2.0m), net of a related tax credit of £0.2m (2019: £0.3m).
The IAS 19 financing cost is adjusted as it is a non-cash item that relates to historical defined benefit pension schemes.
11. Dividends
Dividends on equity ordinary shares
Paid final dividend
Paid interim dividend
Dividends paid
2020
per share
2019
per share
2020
£m
2019
£m
–
3.0p
3.0p
14.0p
6.3p
20.3p
–
1.3
1.3
5.3
2.4
7.7
The final dividend of 14.7p per share in respect of 2019 was cancelled in May 2020 as part of the Group’s response to the Covid-19
pandemic. An interim dividend in respect of 2020 was made by way of a bonus issue of new ordinary shares in December 2020.
The Board is now proposing a final cash dividend of 6.0p per share in respect of 2020, subject to approval at the Company’s Annual
General Meeting 2021. It is payable on 28 May 2021 to shareholders who are on the register at 16 April 2021. The ex-dividend date
is 15 April 2021. This final dividend, amounting to £2.7m has not been recognised as a liability in these financial statements.
STV Annual Report and Accounts 2020
110
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
12. Intangible assets
Cost
At 1 January 2019
Additions
At 1 January 2020
Additions
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Amortisation
At 1 January 2020
Amortisation
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
13. Property, plant and equipment
Cost
At 1 January 2019
Additions
Transfers
At 1 January 2020
Additions
Transfers
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for year
At 1 January 2020
Charge for year
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
Web
development
and branding
£m
3.4
1.6
5.0
0.7
5.7
1.5
0.9
2.4
1.0
3.4
2.3
2.6
Total
£m
28.2
2.9
–
31.1
1.4
–
32.5
18.4
2.0
20.4
2.2
22.6
9.9
10.7
Plant,
technical
equipment
and other
£m
Assets
under
construction
£m
Leasehold
buildings
£m
0.4
25.7
–
–
0.4
–
–
0.4
0.1
–
0.1
–
0.1
0.3
0.3
–
4.7
30.4
–
0.4
30.8
18.3
2.0
20.3
2.2
22.5
8.3
10.1
2.1
2.9
(4.7)
0.3
1.4
(0.4)
1.3
–
–
–
–
–
1.3
0.3
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
111
Property
£m
Vehicles
£m
Total
£m
13.5
0.3
13.8
0.2
(0.1)
13.9
–
1.8
1.8
1.8
3.6
10.3
12.0
0.3
–
0.3
–
–
0.3
–
0.1
0.1
0.1
0.2
0.1
0.2
13.8
0.3
14.1
0.2
(0.1)
14.2
–
1.9
1.9
1.9
3.8
10.4
12.2
14. Right-of-use assets
The balance sheet shows the following amounts relating to leases:
Cost
At 1 January 2019 – on adoption of IFRS16
Additions
At 1 January 2020
Additions
Derecognition of assets
At 31 December 2020
Depreciation
At 1 January 2019 – on adoption of IFRS16
Charge for the year
At 1 January 2020
Charge for the year
At 31 December 2020
Net book value at 31 December 2020
Net book value at 31 December 2019
15. Acquisition of subsidiary
On 1 July 2019, the Group acquired 52% of the issued share capital of Primal Media Limited (‘Primal’), an award winning
unscripted producer, for a nominal consideration.
The final fair values of the assets and liabilities of Primal as at the date of acquisition, which have not changed from the
provisional fair values reported, were as follows:
Cash and cash equivalents
Deferred production costs
Deferred production income
Accruals
Loan liabilities
Fair value of net liabilities acquired
Less : Non-controlling interests
Net cash
Cash consideration
Cash and cash equivalents acquired
Loan liabilities
Fair value
£m
0.4
0.5
(0.6)
(0.1)
(0.3)
(0.1)
0.1
–
–
0.4
(0.3)
0.1
STV Annual Report and Accounts 2020
112
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
16. Investments
Group
Listed
Associates
Other
2020
£m
2019
£m
5.6
1.0
0.1
6.7
0.1
–
0.8
0.9
Listed investments comprise Mirriad Advertising plc and Unity Software Inc. The increase in the value of listed investments
during the year relates to the transfer of Unity Software Inc (formerly Unity Technologies Inc) from ‘Other investments’ following
its listing on the New York Stock Exchange on 22 September 2020 and its revaluation to market value at the balance sheet date.
These listed investments are measured at fair value through the Consolidated Statement of Comprehensive Income.
On 18 September 2019, the Group (along with all other shareholders) sold its investment in deltaDNA Ltd to Unity Technologies
Inc for a net consideration of £2.5m. The net consideration comprised an element payable in cash (62.5%) and the balance in
shares in Unity (37.5%). Consideration of £0.5m (£0.2m in shares and £0.3m in cash) was deferred for 2 years and at the end of
2019 was recognised in other receivables in non-current assets. At the end of 2020, the element of deferred consideration held
in shares has been revalued to current market value and the full amount, including deferred consideration in cash, is shown in
other receivables in current assets.
The movement in investments in associates during 2020 relates to the investment in a 25% stake in Two Cities Television Limited
for £1.1m in January 2020, with initial recognition at cost, and subsequent recognition of the Group’s share of losses (£0.1m) in
the investment under the equity method of accounting. No dividends have been received.
Company
Share in group undertakings
Other investments
Listed
Other
2020
£m
2019
£m
47.3
47.3
5.6
–
52.9
0.2
0.7
48.2
Impairment of investments in subsidiary undertakings
The Company tests the carrying value of the investment in subsidiary undertakings annually for 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 three year plan prepared by the Management Board in November 2020
which supported moderate growth in the Group through the period from 2021 to 2023 and a terminal value thereafter based
on 3% growth. The resulting valuation provided significant headroom against the investment 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 2021 of 10% followed by flat growth. Both scenarios
still left the Group with significant headroom. The discount rate applied was 10.62% (2019: 7.39%).
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.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
113
Subsidiary undertakings
A full list of subsidiary undertakings as at 31 December 2020 is as follows:
Undertaking
Principal activity
Registered address
STV News Services Limited*
STV Television Limited
STV Central Limited
STV North Limited
STV Studios Limited (3)
STV Drama Productions Limited
Investment holding undertaking
Investment holding undertaking
Television broadcasting
Television broadcasting
Programme production
Programme production
STV Drama Productions 2 Limited
Programme production
STV Drama Productions 3 Limited
Primal Media Limited (52%)
Programme production
Programme production
Ginger Television Productions Limited
Programme production
SKA Ginger Productions Limited (50%)
Altissimo Music Limited
stv.tv Limited
Solutions.tv Limited
Grampian Television Limited
STV Services Limited*
Dormant
Music rights
Dormant
Dormant
Dormant
Group services undertaking
Scottish News Network Limited
Dormant
Rise & Shine (Television) Limited*
Investment holding undertaking
Peopleschampion Limited
Scottish Media Group (Jersey) Limited
The Ginger Media Group Limited
Dormant
Dormant
Dormant
STV Elm Limited*
* directly held
Group services undertaking
The registered address for all companies (except where noted) is Pacific Quay, Glasgow, G51 1PQ.
(1) 9 Savoy Street, London, WC2E 7EG
(2) IFC, St Helier, Jersey, Channel Islands, JE1 1ST
(3) Formerly STV Productions Limited
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 except where stated.
17. Inventories
Deferred programme production
Programme production work in progress
Recorded programmes
(1)
(1)
(1)
(1)
(2)
(1)
Group
2020
£m
10.3
4.4
0.7
15.4
2019
£m
10.3
2.4
0.5
13.2
STV Annual Report and Accounts 2020
114
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
17. Inventories continued
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. This asset is classified as current, 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 normal industry practice. It is anticipated that
£0.9m (2019: £0.7m) is likely to be realised within 12 months.
At 31 December 2020, 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 £21.0m (2019: £15.8m), with the net book value of £10.3m (2019: £10.3m)
representing 39% (2019: 55%) of the future sales gross of discounting. A discount rate of 6.7% (2019: 5.4%) was applied.
Revenues in 2021 are expected to be £2.2m.
The sensitivities regarding the principal assumptions used to support the carrying value of the deferred programme production
stock are set out below:
Assumption
Discount rate
Change in assumption
Impact on NPV
Increase/decrease by 0.25%
Decrease/increase by £0.3m
Rate of price inflation (RPI)
Increase/decrease by 0.25%
Increase/decrease by £0.3m
Sales
Increase/decrease by 10.0%
Increase/decrease by £2.1m
18. Trade and other receivables
Group
Company
Current
Non-current
Current
Non-current
2020
£m
2019
£m
Trade receivables
Amounts owed by group undertakings
Prepayments
Contract assets
Other receivables
Income tax recoverable
2020
£m
13.7
–
6.2
3.8
1.6
0.3
2019
£m
12.7
–
3.4
5.5
–
–
25.6
21.6
–
–
–
–
0.9
–
0.9
2020
£m
–
2019
£m
–
2020
£m
–
2019
£m
–
113.7
83.7
217.0
199.0
0.1
0.1
3.0
0.3
–
–
1.0
–
–
–
–
–
–
–
0.5
–
–
–
–
–
9.5
–
9.5
117.2
84.7
217.0
199.5
Group
Trade receivables relate to a number of independent customers for whom there is no recent history of default.
The ageing analysis of the trade receivables is as follows:
Less than 30 days
Past due
2020
2019
Gross
receivable
£m
Provision
£m
Gross
receivable
£m
Provision
£m
13.3
0.7
14.0
–
(0.3)
(0.3)
12.6
0.1
12.7
–
–
–
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. With the exception
of those trade receivables that have been provided for, 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.
The reduction in non-current other receivables to £0.9m (2019: £9.5m) relates primarily to amounts provided for during
the year that were due to STV ELM Ltd (the external lottery management company) from the Scottish Children’s Lottery.
At 31 December 2020 £nil is due to STV ELM (2019: £7.7m). The receivable has been presented net of an expected credit loss
impairment of £13.5m (2019: £4.7m). In accordance with IFRS 9, management have performed a whole of life probability
weighted impairment review resulting in an additional expected credit loss impairment of £8.8m recognised in the year.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
115
Deferred consideration of £1.3m (2019: £0.5m) is also included in other receivables of the Group and the Company. The amounts
relate to the sale of the Group’s investment in deltaDNA (note 16), which are held in escrow.
Company
Amounts owed by group undertakings are considered to have low credit risk and the loss allowance recognised during the year
was therefore limited to 12 months expected credit losses. The amounts were not material.
A loan to a subsidiary undertaking of £80.0m (2019: £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.
19. Trade and other payables
Current
Trade payables
Accrued expenses
Contract liabilities
Amounts owed to group undertakings
Bank overdraft
Social security and other taxes
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
5.0
9.9
2.2
–
–
5.3
22.4
5.3
11.4
0.4
–
–
2.8
19.9
–
0.1
–
111.8
3.4
–
–
0.1
–
90.1
4.9
–
115.3
95.1
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.
20. Borrowings
Bank loans
Group
2020
£m
2019
£m
22.7
43.7
At 31 December 2020, the Group had revolving credit and overdraft facilities in place totalling £80.0m, stepping down to £70.0m
on 31 March 2022 (2019: total facility of £60.0m with no step down), of which £23.0m was drawn down (2019: £44.0m). The balance
sheet value of £22.7m (2019: £43.7m), reported as non-current and expiring within 1 to 2 years from the balance sheet date at
the end of the current period (and within 2 to 5 years from the end of the prior period), is presented net of £0.3m of unamortised
borrowing costs (2019: £0.3m).
The bank facilities in place at the balance sheet date had a maturity date of June 2022 and security is provided to the lenders
by way of a bond and floating charge. Refer to note 31 for details of the refinancing completed post year end.
The effective interest rates were as follows:
Bank loans (floating)
2020
%
1.8
2019
%
2.3
The Group hedges its exposure to fluctuations in interest rates with interest rate swaps. The notional principal outstanding is
£nil (2019: £15.0m) due to the close out of all exposures in July 2020. A fair value on the interest rate swaps of £nil (2019: £nil)
has been recognised at 31 December 2020.
STV Annual Report and Accounts 2020
116
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
21. Lease liabilities
Current
Non-current
The income statement shows the following amounts relating to leases:
Interest expense (included in finance costs)
Maturity analysis
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Carrying value at 31 December 2019
Less: Future finance charges
22. Deferred tax asset
The analysis of the current deferred tax balances is as follows:
Group
2020
£m
1.7
9.1
10.8
2019
£m
1.8
10.6
12.4
Group
2020
£m
0.3
2019
£m
0.3
Minimum payments
Present value
of payments
2020
£m
2.0
7.8
2.1
11.9
(1.1)
10.8
2019
£m
2.1
7.9
3.8
13.8
(1.4)
12.4
2020
£m
1.7
7.3
1.8
10.8
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
1.8
7.1
3.5
12.4
2019
£m
(5.5)
Deferred tax asset to be recovered after more than one year
(19.9)
(16.1)
(6.9)
A deferred tax asset has been recognised in respect of certain 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.
A deferred tax asset of £2.0m (2019: £1.8m) has not been recognised and relates to a combination of trading tax losses and
non-trade debits.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
117
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 2019
Charge to income
Charge to equity/OCI
At 1 January 2020
(Credit)/charge to income
Charge/(credit) to equity/OCI
At 31 December 2020
Company
At 1 January 2019
Charge to income
Charge to equity/OCI
At 1 January 2020
Charge to income
Credit to equity/OCI
At 31 December 2020
Tax
trading
losses
£m
Other
temporary
differences
£m
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
Total
£m
(3.9)
0.1
–
(3.8)
(1.5)
–
(5.3)
–
–
–
–
–
–
–
(0.5)
–
–
(0.5)
(0.1)
0.1
(0.5)
–
–
–
–
–
–
–
(1.9)
1.0
–
(13.2)
(19.5)
1.4
0.9
2.5
0.9
(0.9)
(10.9)
(16.1)
0.1
–
0.9
(3.3)
(0.6)
(3.2)
(0.8)
(13.3)
(19.9)
–
–
–
–
–
–
–
(6.7)
0.6
0.6
(5.5)
0.3
(1.7)
(6.9)
(6.7)
0.6
0.6
(5.5)
0.3
(1.7)
(6.9)
The Government announced in the Budget on 11 March 2020 that the main rate of corporation tax for the financial year beginning
1 April 2020 will remain at 19% rather than falling to 17% as was previously legislated. The 19% rate was substantively enacted
on 17 March 2020 when the Budget Provisional Collection of Taxes Act resolution was passed. The Finance Act 2020 included this
amendment and set the main rate at 19% for the financial year beginning 1 April 2021. Therefore, the Group has remeasured
the deferred tax balances to be carried at the 19% rate.
23. Provisions
Group
At 1 January
Provided during the year
Written off during the year
Utilised during the year
At 31 December
Reorganisation
provisions
Onerous lease
provisions
Total
provisions
2020
£m
2019
£m
2020
£m
2019
£m
2020
£m
2019
£m
–
–
–
–
–
1.0
–
–
(1.0)
–
–
–
–
–
–
0.1
–
(0.1)
–
–
–
–
–
–
–
1.1
–
(0.1)
(1.0)
–
The Company had no provisions at 31 December 2020 (2019: £nil).
STV Annual Report and Accounts 2020
118
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
24. Ordinary shares and share premium
Group and Company
At 1 January 2019
Sharesave exercise
At 1 January 2020
Issue of ordinary shares
Bonus issue of ordinary shares
At 31 December 2020
Number of
shares
(thousands)
Ordinary
shares
£m
Share
premium
£m
Total
£m
39,192
–
39,192
7,051
480
46,723
19.6
–
19.6
3.5
0.2
23.3
101.9
0.1
121.5
0.1
102.0
121.6
12.0
1.1
15.5
1.3
115.1
138.4
The total authorised number of ordinary shares is 63 million shares (2019: 63 million shares) with a par value of £0.50 per share
(2019: £0.50 per share). All issued shares are fully paid.
25. Notes to the consolidated and parent statement of cash flows
Cash generated by/(used in) operations
Operating profit/(loss)
Adjustments for:
Depreciation and amortisation (note 6)
Share based payments
STV ELM Ltd disposal costs – exceptional
Sale of investment – exceptional
Acquisition costs – exceptional
Write off development costs – exceptional
Adjusted EBITDA
Increase in inventories
Increase/(decrease) in trade and other receivables (excluding STV ELM Ltd)
Increase/(decrease) in trade and other payables (excluding STV ELM Ltd)
Net increase in STV ELM Ltd working capital
(Increase)/decrease in intra group balances
Cash generated by/(used in) operations
Non-cash investing and financing activities
Right-of-use assets of £0.2m (2019: £0.3m) were acquired during the year.
Group
Company
2020
£m
17.7
5.1
0.5
0.5
–
–
–
23.8
(2.2)
1.1
1.1
(1.4)
–
22.4
2019
£m
22.6
4.8
0.3
–
(2.0)
0.1
1.9
27.7
(0.7)
1.5
(1.1)
(1.8)
–
25.6
2020
£m
(0.7)
–
0.5
–
–
–
–
(0.2)
–
(0.1)
(0.3)
–
(8.0)
(8.6)
2019
£m
1.4
–
0.3
–
(2.0)
–
–
(0.3)
–
–
(0.2)
–
13.3
12.8
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
119
Long-term
borrowings
£m
Cash
and cash
equivalents
£m
Net debt
£m
Lease
liabilities
£m
Net debt
including
lease
liabilities
£m
(42.6)
(1.0)
(0.1)
(43.7)
21.0
–
6.3
(0.1)
–
6.2
(1.0)
–
(36.3)
(13.7)
(50.0)
(1.1)
(0.1)
(37.5)
20.0
–
1.9
(0.6)
(12.4)
1.7
(0.1)
0.8
(0.7)
(49.9)
21.7
(0.1)
(22.7)
5.2
(17.5)
(10.8)
(28.3)
Net debt reconciliation
At 1 January 2019
Cash flows (i)
Non-cash flows (ii)
At 1 January 2020
Cash flows
Non-cash flows (ii)
At 31 December 2020
(i) Cash flows includes an amount of cash acquired on acquisition of subsidiary.
(ii) Non-cash movements relate to the amortisation of borrowing costs (for long-term borrowings) and the acquisition of right-of-use assets
and increase in certain lease payments (for lease liabilities).
26. 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 charge for the year was £1.3m (2019: £1.3m).
Defined benefit schemes
The Group operates two defined benefit pension schemes, the benefits of which are related to service and final salary. The
schemes are trustee administered and the schemes’ assets are held independently from those of the Group. 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.
The net deficit of the schemes is recognised in the consolidated balance sheet, with the deficit of the Caledonian Publishing
Pension Scheme recognised in the Company balance sheet, as STV Group plc is the sponsoring employer. In both the Group
and Company balance sheets, the net deficits are presented within non-current liabilities, as follows:
Defined benefit scheme obligations
Defined benefit scheme assets
Net pension deficit
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
(507.5)
(445.9)
(202.4)
(186.7)
437.2
(70.3)
381.9
(64.0)
166.2
(36.2)
154.6
(32.1)
A related, offsetting deferred tax asset for the Group of £13.3m (2019: £10.9m) and the Company of £6.9m (2019: £5.5m)
is included within non-current assets. Therefore, the pension scheme deficit net of deferred tax for the Group was £57.0m
at 31 December 2020 (2019: £53.1m) and the Company was £29.3m (2019: £26.6m).
Assumptions used to estimate the scheme obligations
The significant actuarial assumptions used for accounting purposes reflect prevailing market conditions in the UK and are as follows:
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Rate of price inflation (RPI)
Group and Company
2020
%
nil
3.00
1.25
3.00
2019
%
nil
3.00
2.00
3.00
STV Annual Report and Accounts 2020
120
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
26. Retirement benefit schemes continued
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).
Retiring at balance sheet date:
Male
Female
Retiring in 25 years:
Male
Female
Group
2020
Years
Company
2019
Years
2020
Years
2019
Years
19.6
21.9
21.5
23.5
19.3
21.5
21.2
23.1
19.2
21.6
21.0
23.7
18.9
21.2
20.7
23.3
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 2%
Rate of mortality
Decrease by 1 year
Decrease by 4%
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%
These sensitivities have been calculated to show the movement in the defined benefit obligations in isolation, and assuming
no other changes in market conditions at the balance sheet date.
Defined benefit scheme assets
The movement in the fair value of the defined benefit scheme’s assets is analysed below:
Fair value of scheme assets at 1 January
Interest income
Inclusion of insurance policy assets
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
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
381.9
343.4
154.6
139.8
7.5
20.6
38.2
12.0
(1.7)
(21.3)
437.2
9.3
–
39.1
11.6
(1.6)
(19.9)
381.9
3.0
–
14.2
4.8
(0.7)
(9.7)
3.8
–
15.3
5.2
(0.5)
(9.0)
166.2
154.6
One of the schemes also holds insurance policies that pay an income into the scheme. At 31 December 2020 the assets were
included within the fair value of the scheme assets.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
121
At 31 December 2020, the 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
Annuity policies
Company
Investment funds
Debt instruments
Cash and cash equivalents
Derivatives
At 31 December 2020
At 31 December 2019
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
8.7
213.7
133.1
24.4
–
–
36.6
(1.3)
1.4
20.6
222.4
169.7
23.1
1.4
20.6
66.2
193.6
5.1
–
–
115.3
–
–
1.7
–
Total
£m
181.5
193.6
5.1
1.7
–
166.2
271.0
437.2
264.9
117.0
381.9
At 31 December 2020
At 31 December 2019
Quoted
£m
Unquoted
£m
3.4
53.4
9.9
–
85.4
14.1
(0.5)
0.5
Total
£m
88.8
67.5
9.4
0.5
Quoted
£m
Unquoted
£m
26.6
78.3
2.1
–
46.9
–
–
0.7
47.6
Total
£m
73.5
78.3
2.1
0.7
154.6
Defined benefit scheme obligations
The movement in the present value of the defined benefit obligation is analysed below:
66.7
99.5
166.2
107.0
Defined benefit obligation at 1 January
Experience gain
Interest cost
Remeasurement losses
Benefits paid from the schemes
Defined benefit obligation at 31 December
Group
2020
£m
Company
2019
£m
2020
£m
2019
£m
445.9
421.9
186.7
180.3
(2.2)
8.7
76.4
(21.3)
507.5
(0.8)
11.3
33.4
(19.9)
445.9
(0.8)
3.6
22.6
(9.7)
(0.3)
4.8
10.9
(9.0)
202.4
186.7
The defined benefit obligation at 31 December 2020 includes an amount of £20.5m relating to the benefits payable to the
holders of the annuity contracts.
Amounts recognised through the income statement:
Amounts recognised through the consolidated income statement are as follows:
Amount charged to net operating expenses:
Administration expenses
Amount charged to finance costs:
Net interest expense
Total charged in the consolidated income statement
2020
£m
2019
£m
(1.7)
(1.6)
(1.2)
(2.9)
(2.0)
(3.6)
STV Annual Report and Accounts 2020
122
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
26. Retirement benefit schemes continued
Amounts recognised through the statement of comprehensive income:
The amounts recognised in the consolidated statement of comprehensive income are:
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
2020
£m
2019
£m
38.2
39.1
(5.5)
(50.2)
2.2
(15.3)
3.0
(36.7)
0.8
6.2
Funding arrangements
Contribution rates to the scheme are determined by a qualified independent actuary on the basis of a triennial valuation using
the projected unit method. The most recent triennial valuation was carried out as at 31 December 2017. This valuation resulted
in a deficit of £127.0m on a pre-tax basis at 28 February 2019 compared to £130.0m on a pre-tax basis at the previous settlement
date of 30 November 2016. The next triennial valuation as at 31 December 2020 is currently underway.
Following the 2017 valuation, a 12 year recovery plan was agreed with the first annual contributions of £9.0m in line with the
existing recovery plan. Annual contributions increase at the rate of 2% per annum over the term of the plan, the first such
increase being on 1 January 2020. 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 are payable to the schemes.
The weighted average duration of the Plan’s defined benefit obligation is approximately 13 years.
Employer contributions under the recovery plan are expected to be in the region of £9.4m in 2021.
27. 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.
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. That plan matured at the end of 2015 and the remaining
outstanding shares were exercised in 2019.
Total share-based compensation costs were £0.2m (2019: £0.3m).
i) Long-term incentive plans
The Group has a long-term incentive plan for executive directors and other senior executives. Awards are normally granted 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 what they consider to be aligned with the
delivery of strategy and creation of 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 an appropriate option pricing model.
The assumptions used for the 2020 LTIP valuation are:
Risk-free interest rate
Expected dividend yield
Expected share price volatility
%
0.27
5.5
43.35
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
123
Awards granted 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
2014 LTIP
2015 LTIP
2016 LTIP
2017 LTIP
2018 LTIP
2018 LTIP – Chief Executive
2019 LTIP
2020 LTIP
ii) Employee share plans
Market price
on grant date
£
3.40
4.25
3.67
3.65
3.23
3.10
3.55
2.85
2020
Number
2019
Number
1,873
1,206
3,755
1,873
1,607
4,689
16,101
247,765
348,025
348,025
172,025
210,662
417,461
417,461
542,413
–
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 £2.72 to £3.60. At 31 December 2020 there were 591,769 (2019: 309,239)
options outstanding under the plans. The employee share plans are valued using the Black and Scholes model.
28. Financial risk management
Capital management
The Group’s objectives when managing capital are to safeguard it’s ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Company consists of debt, which includes the bank loans disclosed in note 20, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings.
The Group monitors capital on the basis of the gearing ratio. 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 2020 and 2019 were as follows:
Total borrowings (note 20)
Cash and cash equivalents
Net debt
Total equity
Total capital
2020
£m
22.7
(5.2)
17.5
(29.9)
(12.4)
2019
£m
43.7
(6.2)
37.5
(47.3)
(9.8)
(141%)
(383%)
Covenants
The Group is subject to two financial covenants in respect of its committed borrowing facilities. The terms of the Facility Agreement
contain the following covenants (i) the ratio of average net debt to adjusted earnings (pre exceptional) before interest, tax,
depreciation and amortisation (EBITDA) and (ii) the ratio of adjusted EBITDA to cash interest, both of which are tested quarterly.
In June 2020, as part of the Group’s agreement with lenders to increase the facility size from £60m to £80m, certain covenant
relaxations were also agreed, should leverage increase above a certain level in a severe downside scenario. The Group has not
accessed the additional £20m in facility, nor has it required to avail itself of any covenant relaxations. The Group complied with
all the covenants in each of the test periods to the balance sheet date.
STV Annual Report and Accounts 2020
124
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2020
28. Financial risk management continued
Derivative financial instruments
The Group’s policy is to minimise the exposure to interest rates by ensuring an appropriate balance of floating and fixed rates.
The Group’s primary funding is at floating rates through its bank facilities. The Group has previously used interest rate swaps
to vary the mix of fixed and floating rates. Interest rate swap contracts with a principal value of £15.0m (2019: £15.0m) were
held in the year. The contracts matured on 9 July 2020 and were not replaced given the interest rate environment at the time.
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. The fair value is based on the market price of these
instruments at the balance sheet date.
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 2020 the Group had no forward foreign currency contracts in place (2019: £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.
In prior years, the only significant concentration of credit risk related to monies due from the Scottish Children’s Lottery. This
amount has now been fully provided for (2019: unprovided receivable of £7.7m). The Group has policies in place to ensure that
sales are made to customers with an appropriate credit history. Independent credit ratings are sought for all potential customers
and based on the outcome of the feedback from the ratings agency, a judgement is made on the appropriate level of credit to
be given. Derivative transaction counterparties are limited to high-credit/quality financial institutions.
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 (comprising the undrawn borrowing facility (note 20)
and cash and cash equivalents) 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.
In 2020, specifically in response to the Covid-19 pandemic, the Group undertook a detailed assessment of liquidity, across a range
of potential trading scenarios, and as a result reached agreement with lenders to increase the facility size to £80m (from £60m).
This additional committed headroom was considered sufficient to enable the Group to both continue to invest in its successful
growth strategy but also trade through a severe but possible downside scenario.
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 up to 50% of its core borrowings.
Regular sensitivity analysis is carried out, and on the level of borrowings of the Group at 31 December 2020, a movement of 0.25%
in interest rates would change the level of interest paid in the year by +/- £0.1m (2019: £0.1m). 0.25% is considered a reasonably
possible change.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
125
29. 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 Directors’ Remuneration Report pages 77 to 84 for details.
2020
£m
1.0
2019
£m
1.9
Other related party transactions
During the year £nil (2019: £2,644) of fee income was received from the Group’s investment companies and a balance of £nil
owed at 31 December 2020 (2019: £nil).
During 2019 airtime advertising transactions occurred between the Group and a company of which Christian Woolfenden is
the Managing Director. Mr Woolfenden resigned as Director of the Group on 9 March 2020. The transactions amounted to £nil
(2019: £32,116) with an outstanding receivable of £nil at 31 December 2020 (2019: £nil).
There have been no other transactions with key management personnel as defined under IAS 24.
30. Reconciliation of statutory results to adjusted results
In reporting financial information, the Group presents alternative performance measures (APMs) which are not defined or
specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for
or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business.
The Group makes certain adjustments to the statutory profit measures in order to provide a more meaningful comparison
of how the business is managed and measured on a day-to-day basis.
Below sets out a reconciliation of the statutory results to the adjusted results:
Post-exceptional
Add back: exceptionals
Pre-exceptional
Add back: IAS 19
Adjusted results
2020
Profit
before tax
£m
Basic EPS
pence
Diluted EPS
pence
Profit
before tax
£m
2019
Restated
Basic EPS
pence
Restated
Diluted EPS
pence
6.7
8.7
15.4
1.2
16.6
18.2p
17.0p
35.2p
2.3p
37.5p
17.5p
16.3p
33.8p
2.3p
36.1p
19.0
–
19.0
2.0
21.0
41.7p
(0.3p)
41.4p
4.4p
45.8p
40.3p
(0.2p)
40.1p
4.3p
44.4p
The number of shares reported in 2019 for the purposes of earnings per share has been updated to reflect the bonus issue
in December 2020, with those shares issued assumed to have been in issue since the start of the comparator period.
31. Post balance sheet events
In early March 2021, the Group refinanced its bank facilities, agreeing a new £60m revolving credit facility, with £20m accordion,
for a minimum tenor of 3 years (two one-year extension options are available). The covenant package is in line with the Group’s
previous facility, namely net debt to EBITDA must be less than 3 times, and interest cover must be greater than 4 times.
Also subsequent to the year end, the Group has reached an agreement in principle for the sale of its lottery management
company, the STV ELM Limited. The agreement is subject to Gambling Commission approval and will combine a modest
consideration for the business with a multi-year advertising agreement.
STV Annual Report and Accounts 2020
126
FIVE YEAR SUMMARY
For the year ended 31 December 2020
Results
Revenue
2016
£m
2017
£m
2018
£m
2019
£m
2020
£m
120.4
117.0
125.9
123.8
107.1
Profit from operations before exceptional items
19.7
19.0
20.1
22.6
Profit on ordinary activities before taxation and exceptional items
18.5
15.5
17.2
19.0
Assets
Non-current assets
Current assets
Total assets
Equity and liabilities
Current liabilities
Non-current liabilities
Equity attributable to the owners
Non-controlling interests
Total equity and liabilities
Key statistics
Earnings per ordinary share – basic (i)
– diluted (i)
Dividends per ordinary share
38.4
55.6
94.0
18.1
128.9
(53.0)
–
39.2
53.4
92.6
18.6
112.3
(38.3)
–
40.1
43.4
83.5
21.5
121.1
(59.1)
–
94.0
92.6
83.5
32.5p
31.9p
15.0p
30.1p
29.6p
17.0p
4.2p
4.1p
20.0p
52.0
41.0
93.0
22.0
118.3
(47.1)
(0.2)
93.0
41.7p
40.3p
6.3p
18.2
15.4
50.1
46.2
96.3
24.1
102.1
(29.8)
(0.1)
96.3
18.2p
17.5p
9.0p
(i) Basic and diluted earnings per share reported in 2019 have been updated to reflect the bonus issue in December 2020; those shares issued are
assumed to have been in issue since the start of the comparator period.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information
SHAREHOLDER INFORMATION
127
Registrars
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds LS1 4DL
Tel: +44 (0)371 664 0300*
Email: enquiries@linkgroup.co.uk
Shareholder Portal: 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
Joint Corporate Brokers
Peel Hunt LLP
100 Liverpool Street
London EC2M 2RH
Panmure Gordon (UK) Limited
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
Annual Report on internet
The 2020 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 contact the Registrars
to have the accounts amalgamated.
Investor relations
For investor enquiries please contact:
Kirstin Stevenson
Head of Communications STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3886
Email: kirstin.stevenson@stv.tv
STV Annual Report and Accounts 2020 128
SHAREHOLDER INFORMATION
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.
Shareholder services
If you have any queries in relation to your shareholding, please contact Link Group, 10th Floor, Central Square, 29 Wellington Street,
Leeds, LS1 4DL; email: enquiries@linkgroup.co.uk; telephone +44 (0) 371 664 0300*.
Shareholder portal
You can register online to view your holdings using the Shareholder Portal, a service offered by Link Group at www.signalshares.com.
The Shareholder Portal is an online service enabling you to quickly and easily access and maintain your shareholding online – reducing
the need for paperwork and providing 24 hour access for your convenience. Through the Shareholder Portal you may:
• Cast your proxy vote online
• View your holding balance and get an indicative valuation
• View movements on your holding
• View the dividend payments you have received
• Update your address
• Register and change bank mandate instructions so that dividends can be paid directly to your bank account
• Elect to receive shareholder communications electronically
• Access a wide range of shareholder information including the ability to download shareholder forms
Dividend payment options
UK shareholders: STV normally pays dividends twice each year and we would like to encourage you to elect to have your dividends
paid directly into your bank account. This is a more secure method of payment and avoids delays or cheques being lost. You can
sign up for this service on the Shareholder Portal www.signalshares.com. This will allow you to receive all future dividends direct
to your chosen account.
Non-UK shareholders: If you are resident outside the UK you can have any dividends in excess of £10 paid into your bank
account directly via Link Group international payments service. Details and terms and conditions may be viewed at
https://ww2.linkassetservices.com/ips
Dividend Reinvestment Plan
STV Group plc operates a Dividend Reinvestment Plan to provide 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* or by emailing
shares@linkgroup.co.uk.
Link share dealing services
Link offer a quick and easy share dealing service to buy or sell STV Group plc shares. An online and 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 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.
STV Annual Report and Accounts 2020Overview | Strategic Report | Governance | Financial Statements | Additional Information Designed and produced by Thunderbolt Projects
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raised in 2020
£3.6m
£25m
860
raised so far
awards made in 2020 with over
2,000 awards made since 2011
100%
of Scotland’s local authorities reached
TO GET INVOLVED WITH
THE 2021 APPEAL VISIT
STV.TV/APPEAL
STV Group plc
Pacific Quay
Glasgow G51 1PQ
Tel: 0141 300 3000
www.stv.tv
Company Registration Number SC203873