Stvg Regulatory News (STVG)

27 Jun 2007 07:02

SMG PLC27 June 2007 27 June 2007 100-Day Business Review The Board of SMG has completed its 100-day business review and will focus onthree components to deliver shareholder value in its turnaround plan: the saleof non-core assets; restructuring the TV business; and growing revenues. Key Highlights • Clear turnaround plan focusing on growing revenues through Broadcast, Content and Ventures with 12 KPI's for 2008 and 2010 • The IPO of Virgin Radio is on track for autumn • Primesight and Pearl & Dean remain non-core • Inherited financial projections for 2007 have been revised • Approximately £1.5 million of annualised cost savings already achieved with a target of £2.5 million by the end of 2007 • Senior management reduced from seven to three to ensure clear lines of accountability • Early wins through the renegotiation of Minotaur deal; the refocus of the PRTS campaign; and the planned introduction of an additional advert break in regional evening news Rob Woodward, Chief Executive of SMG, commented: "We have had a very thorough look at the business and taken some short termremedial actions and reconfigured SMG to deliver sustainable growth. I have setout 12 challenging but achievable Key Performance Indicators in Broadcast,Content and Ventures. Over the next six months we will focus on the disposal of the non-core assets.This will result in a content focused business that I am confident will berevived and transformed to become Scotland's most influential, relevant,innovative and trusted media brand." There will be a presentation for analysts at the offices of ABN Amro, 250Bishopsgate, London EC2 today at 9am. Further enquiries: SMG plcRob Woodward, Chief Executive Tel: 020 7882 1199George Watt, Chief Financial OfficerDebbie Johnston, Head of Communications Brunswick Group LLPJames Hogan / Simon Sporborg / Ash Spiegelberg Tel: 020 7404 5959 Introduction Overview The 100-day business review process has been completed and the Board will focuson three components to deliver shareholder value: the sale of non-core assets;restructuring the TV business; and growing revenues. The disposal of the non-core assets is expected to be completed by the end of2007 resulting in a content focused business that will be revived andtransformed to become Scotland's most influential, relevant, innovative andtrusted media brand. The Board aims to build a TV business focused on being thebroadcaster of choice in the community of Scotland leveraging our relationshipwith our viewers; relationship with our advertisers; access to ITV content; andability to create content in house. Financial projections for 2007 The detailed analysis has confirmed the new management team's initialimpressions that the previous growth initiatives and in particular the New Mediastrategy were not delivering. Specifically the contribution from E-Commerce willbe £3.0 million lower than expected; ITV sponsorship and interactive revenueweakness will result in a decrease of £1.6 million to profit before tax; andProduction Commissions have been impacted by £0.9 million due to some newcommissions not materialising as anticipated. The shortfall will be largely offset by an additional £1.0 million of costsavings and a positive IFRS 5 impact on profit before tax of £3.5 million due tonon depreciation of assets held for sale. Virgin Radio, Primesight and Pearl & Dean are performing in line with Boardexpectations and the Board is confident of achieving our revised performancetargets in 2007. Sale of non-core assets As SMG has previously outlined an immediate objective is to reduce debt throughthe sale of non-core assets. This will be achieved through the IPO of VirginRadio whilst Primesight and Pearl & Dean remain non-core. IPO of Virgin Radio The IPO of Virgin Radio is on track for the autumn. Virgin Radio is one of theUK's three national radio licences and is the only national station with a rockand pop format. It broadcasts in analogue format on AM and digitally on DAB,satellite television, digital terrestrial television and online in addition toholding a London FM licence. Its valued brand and multi-platform stance puts thebusiness in a unique position to capitalise on digital listening where italready out-competes the market average by a considerable margin (18% versus12%). Virgin Radio has 2.5 million listeners across the UK, principally in the20-44 year old age bracket - a particularly attractive demographic group toadvertisers. It has consistently outperformed the UK radio market (+9% year on year revenuegrowth to June versus a declining market) and displays particular strengths insponsorship and promotions, which represent 25% of revenue. Virgin Radio's IPO will create a strong and focused radio business, with a greatbrand, that will provide an attractive, pure-play investment opportunity with astrong platform for future growth. A strong Board is currently being formed andannouncements will be made shortly. Primesight and Pearl & Dean. The Board confirms that Primesight and Pearl & Dean remain non-core assets ofthe Group. A more ambitious growth plan has been prepared for Primesight whichwill capitalise on the fast growth experienced in the Outdoor sector. We canalso confirm there has been additional buyer interest in this business. Restructuring the TV Business Reorganisation of the Management team At the end of May, SMG announced the leadership team at SMG Television to createa strong foundation for the future focus on one business comprisingBroadcasting, Content and Ventures. The key management positions in the TVBusiness are Bobby Hain, Managing Director of Broadcast; David Archer, ManagingDirector of stv Ventures; and Elizabeth Partyka, Acting Managing Director ofContent. They will be supported by George Watt, Chief Financial Officer, Suzanne Burns,HR Director and Anmar Kawash, Director of Strategy and Planning. This new management structure, of which six directly report into Rob Woodward,ensures clear lines of accountability, as well as promoting an emphasis oncollaboration and teamwork. The culture within the entire TV business is beingtransformed into a single company with a single brand, an accountable leadershipteam and engaged staff. Cost reduction There is a clear plan to reduce costs by an annualised £2.5 million by the endof 2007. Good progress has already been made with a reduction in seniormanagement (from seven to three posts) and most current vacancies beingeliminated (15 posts), which together result in annualised savings ofapproximately £1.5 million. The business units are on track to achieve furtherannualised cost savings of £1.0 million by the end of 2007. Delivery of improved commercial management Through immediate remedial action there have been some early wins alreadydelivered. The renegotiation of Minotaur deal with Virgin Media resulting inbetter terms and a strengthened relationship; the refocus of the PRTS campaign'Watch to Win' resulting in a 50% increase in the weekly run rate; and theplanned introduction of an additional advert break in the regional evening newsresulting in increased sponsorship and advertising revenue. In addition we are working with ITV to improve the ad sales relationship onrolling out the ITV broadband product; and launching an stv broadbandproposition by Q4 2007. Growing Revenues Introduction Whilst management is making progress on the sale of non-core assets and therestructuring of the TV Business, the Board has a clear three year turnaroundplan focussed on growing revenues. The Board aims to build a TV business centred on being the broadcaster of choicein the community of Scotland leveraging our relationship with our viewers;relationship with our advertisers; access to ITV content; and ability to createcontent in house. Plus we will extend our community across other mediaplatforms. In the long term we aim to become Scotland's most influential,relevant, innovative and trusted media brand. The business mix will also changeover this period with our dependence on national advertising reducing fromapproximately 60% of total television revenues to 45%, while our content andventures businesses will increase from 28% to 40%. This is based around the three divisions of Broadcast, Content and Ventures witha clear focus on a single company, single brand with an accountable leadershipteam and engaged staff. We will report on our progress against 12 KPI's. Broadcast The Broadcasting division will focus on the core TV channel to strengthen therelationship with our audience and advertisers and act as the catalyst forbuilding out our presence on other new media platforms. This will be achieved bytaking control of the stv schedule and maximising ratings from ITV content &regional content; developing and strengthening the stv brand; consolidating alladvertising activity under one leadership; taking ownership of the ITVrelationship; and controlling news under one brand ("stv news") and migratingnews editorial online. The three Key Performance Indicators by which we will manage Broadcast are to: 1. increase regional advertising market share from 19% to 25% by 2010 (21% in 18 months) 2. grow sponsorship revenues by 50% by 2010 (30% in 18 months) 3. increase margins through better cost control and commercial management from 10% to 14% by 2010 (11.0% in 18 months) The goal is to deliver £5 million of revenue growth through improved targetingof the local advertising base and improving margins through tighter commercialmanagement of the ITV relationship and improved efficiency. Content The Content division will deliver content and be positioned at the heart of thebusiness in order to strengthen and deepen our relationship with audiences andadvertisers across TV and other platforms. This will be achieved by a greaterfocus on 360 degree cross-platform programming; building new programme brands;becoming the natural home for Scottish talent; and centralising all creativetalent into one group. The four Key Performance Indicators are to: 4. grow produced hours from 45 hours to 130 hours by 2010 (60 hours in 18 months) 5. exploit the extensive content library to achieve 60% growth by 2010 (40% in 18 months) 6. grow rights exploitation business by 40% by 2010 7. maintain margins at 10% This will ensure that we remain a significant content producer for ITV anddevelop relationships with other networks generating £10 million in revenuegrowth. Ventures The Ventures division will focus on new growth opportunities. This new businessconsolidates all new media activity across the group under one leader toconcentrate on building a powerful online presence through strong content and arobust advertising model. This will be achieved by building a younger audience;developing a local and relevant portal for Scottish audience; becoming aScottish component on international online brands; and partnering with new mediacompanies. The five Key Performance Indicators are to: 8. develop our online presence through stv.tv by delivering compelling online content to target 200,000 visitors a day by 2010 (30,000 visitors a day in 18 months) 9. increase online advertising revenue to £2 million (£0.75 million in 18 months)10. focus on regional transaction based consumer opportunities to build revenues of £2.5 million in 2010 (£1.0 million in 18 months)11. expand into the Scottish classified advertising market to capture 3% of the total market in 2010 from a zero starting point (0.5% in 18 months)12. increase margins from 5% to 30% by 2010 (10% in 18 months) We will exploit our unique regional position through the stv brand. Our goal isto dominate the Scottish new media market from a local perspective and generatetotal Ventures revenues of £20 million by 2010. Other In addition there will be potential additional benefits through the ITV Network.These include successful lobbying by ITV to amend CRR; improvement in the ITVprogramme slate; an increase in non-advertising revenue generated through theITV consumer group; and leveraging ITV's significant investment in broadband toexpedite stv's launch of online broadband proposition. SMG will provide updates on the sale of non-core assets as appropriate andreport back on progress on its 12 Key Performance Indicators in detail at eachresults presentation. This information is provided by RNS The company news service from the London Stock Exchange