Stvg Regulatory News (STVG)

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Press Release 0700 hours, 6 September 2022

STV Group plc Half Year Results to 30 June 2022

Diversification strategy delivers continued growth

· Strong financial performance, with revenue and profit both up on record 2021

· Diversification strategy continues to deliver, with Studios revenue +16%, VOD advertising revenue +16% and regional advertising revenue +11%

· Shape of advertising performance broadly as expected in H1, despite ongoing economic uncertainty, with Total Advertising Revenue (TAR) + 4% (+9% vs 2019)

· STV had a higher audience reach in Scotland than all subscription (SVOD) services combined in the first half

· STV remains Scotland's most popular peak time channel for the 4th year in a row

· STV Player active users +7% and VIP users +37%

· STV Studios continues to scale rapidly, with a record 25 new commissions in H1

· Board proposes interim dividend of 3.9p, +5% on 2021

Financial highlights - continued revenue and profit growth

· Total revenue of £62.1m, +3% on 2021 and +13% on 2019; excluding ELM in 2021 total revenue +4% year on year

· Operating profit of £11.9m, +22% on 2021 and +8% on 2019

· STV-controlled advertising continued to deliver strong revenue growth, with VOD advertising on the STV Player +16% (+109% on 2019) and regional advertising +11% (+15% on 2019)

· Studios revenue +16% reflects ongoing commissioning momentum

· Operating margin of 19%, broadly back to pre-Covid levels

· Adjusted EPS of 20.0p, +4%

· Net debt of £6.6m, up £6.9m since December 2021 due to expected short term funding of increased productions activity; significant headroom maintained

Good audience performance despite tough H1 2021 comparators

· STV is the most watched peak time TV channel in Scotland for the 4th year in succession, with a share of 22.2%:

o  Commercial viewing share of 29%, with peak time audience higher than the next 9 commercial channels combined

o  99% of all commercial audiences over 500k viewers in Scotland on STV in H1

o  STV News at Six Scotland's number 1 news programme since 2019

o  Average Scot spends more than 6x longer watching broadcast content each day than SVOD services such as Netflix

o  64% of Scots say they either already have or intend to cancel paid-for streaming services according to new research from Scotpulse

· STV Player grew users and ad impressions in H1, although total online streams and viewing were down 13% and 11% respectively (reflecting strong 2021 comparators including lockdown and Euros football):

o  Total digital ad impressions up 21%

o  VOD streams up 6% on rolling 12-month basis

o  Monthly active users up 7%

o  STV Player VIP users up 37%

Continued strategic momentum

· Studios:

o  25 new commissions so far in 2022 (FY 2021:15) and now 9 returning series

o  Major streaming commissions (Criminal Record for Apple TV+, Written in the Stars for discovery+) currently in production

o  A record 20 series in production in 2022, including two further premium dramas Blue Lights (BBC) and Screw season 2 (C4)

o  Further large-scale commissions secured since capital markets event, for BBC and Discovery across quiz, reality, and factual entertainment

o On track to exceed targets and contribute materially to STV's planned diversification

· Digital:

o  STV Player content proposition continues to scale to 5,500+ hours, with drama hours doubling again to over 2,000 across 150+ drama boxsets

o  10 new content deals so far in 2022, including All3Media, Banijay and EOne

o  Player-only content streams up 13% in last 12 months and contributed 37% of all VOD streams in H1 (compared to 6% in 2019); ex-Scotland streams holding at c.20% of total

o  Innovative AVOD-SVOD collaboration with Acorn TV brings more premium original drama to STV Player

o  Strengthened platform partnerships with Virgin, Amazon, and Samsung

· Scottish advertising:

o  Continues to show resilience and growth, driven by the return of larger advertising clients

o  Balance across SME and Government spend now back towards pre-Covid levels

o  In addition, STV Growth Fund attracted a further 43 new advertisers in H1

o  350+ new Scottish advertisers since launch of fund, with over 70% of 2022 advertisers rebooking from prior year

Outlook

· Strong H2 content line-up on TV and online

o  c.60 hours of new network drama, the return of I'm a Celebrity and the football World Cup

o  STV's free-to-air proposition a significant competitive advantage vs subscription services

· Shape of advertising performance across the year so far broadly as expected, although TV advertising not immune from ongoing macro uncertainty:

o  9-month TAR expected to be slightly down year on year

o  9-month regional and VOD advertising both expected to be up

o  Stronger commercial and viewing performance expected in Q4, driven by World Cup

· Studios building momentum and profitability with previous guidance confirmed

· On track to hit or exceed 3-year growth targets by the end of 2023 to

o  Double digital viewing, users, and revenue (to £20m)

o  Quadruple Studios revenue (to £40m)

o  Achieve at least 50% of operating profit from outside traditional broadcasting

Dividend

· The Board proposes an interim dividend of 3.9p per share, +5% on 2021, after considering all relevant factors including the ongoing macroeconomic and geopolitical uncertainty.

· The Board remains committed to a balanced approach to capital allocation across investing for growth, fulfilling our pension obligations, and paying a sustainable, progressive dividend to shareholders.

Simon Pitts, Chief Executive Officer, said:

"STV has had a strong first half of the year, with revenue and profit up on our record performance in 2021.

Our strategy of creating a more diversified business through a relentless focus on production growth, digital streaming and local advertising continues to deliver, with STV Studios revenue up 16%, VOD advertising on STV Player up 16% and regional advertising up 11%.

STV Studios is accelerating rapidly, winning a record 25 new commissions so far this year from a range of networks and global streamers as we aim to become the UK's no.1 nations and regions producer. We're currently in production on over 20 new series, including our major new drama for Apple, Criminal Record, which will debut next year in over 100 countries, and two further premium dramas Blue Lights for BBC1 and Screw series 2 for C4.

Our audience position is strong on TV and online, with STV's daily, weekly, and monthly reach in H1 higher than all subscription streaming services combined. STV remains the most popular peak time TV channel in Scotland for the 4th year in a row, boosted by dramas like Trigger Point and Our House, and active users on STV Player were up 7% in H1 despite tough comparators in the first half of last year with a lockdown and the Euros football.

Our free streaming service STV Player is well positioned to meet the needs of a more cost-conscious audience, with content hours increasing to over 5500, including a further doubling of premium drama hours to 2000+ across more than 150 free boxsets.

The advertising market is clearly not going to be immune from the ongoing economic uncertainty, with total advertising up 4% in H1 and forecast to be slightly down for the 9 months to September, but we are expecting a stronger Q4, boosted by the first ever winter football World Cup.

With a robust financial position, the Board has proposed an interim dividend of 3.9p per share, up 5% on 2021.

There will be a presentation for analysts today, 6 September 2022, at 12.30 pm, via Zoom. Should you wish to attend the presentation, please contact Angela Wilson, angela.wilson@stv.tv or telephone: 0141 300 3000.

Enquiries:

STV Group plc: Kirstin Stevenson, Head of Communications Tel: 07803 970 106

Camarco: Geoffrey Pelham-Lane, Partner Tel: 07733 124 226

Ben Woodford, Partner Tel: 07790 653 341

Financial and operating review

Group overview

Total revenue increased by 3% to £62.1m (2021: £60.3m), reflecting growth across each of Broadcast, Digital and Studios. Total advertising revenues of £53.2m were up 4% on the same period in the prior year, which was one of the strongest trading performances on record. The other key contributor to Group revenues is the Studios division, which generated a 16% increase year on year in the first half. 

Operating profit of £11.9m was up 22% on the first half of 2021. There were no exceptional items in the current period; the prior year amount of £1.7m was the repayment of furlough grants received in 2020. On an adjusted basis, operating profit was 4% up year on year.

Total finance costs were £1.3m (2021: £1.2m). These comprised interest on the Group's borrowings of £0.4m (2021: £0.7m) with the balance being non-cash costs in relation to the Group's defined benefit pension schemes of £0.6m (2021: £0.4m) and interest on lease liabilities of £0.3m (2021: £0.1m).

The Group generated adjusted profit before tax (before exceptional items and IAS19 interest) of £11.2m (2021: £10.6m), an increase of 6% on the prior year, with adjusted earnings per share increasing by 4% to 20.0p (2021: 19.2p).

The statutory result for the year was a profit before tax of £10.6m (2021: £8.5m). The effective tax rate (ETR) on the profit before tax is 20.2%, slightly higher than the standard rate in the UK of 19% and mainly driven by the difference between the rate at which current and deferred tax has been recognised.

The Group's key leverage covenant (ratio of net debt to EBITDA) at the end of the period was 0.2 times, (December 2021: nil), with significant headroom against the covenant maximum of 3 times. In February 2022, the Group exercised its first option to extend its revolving credit facility by one year to March 2025.

Across the Group's two defined benefit pension schemes, the accounting deficit before tax decreased to £42.3m at the half year (31 December 2021: £79.4m). This was largely driven by an increase in the discount rate due to a rise in corporate bond yields.

Broadcast

STV's broadcast channel continues to have unrivalled reach in Scotland (3 in 4 adults every month), and has a higher daily, weekly, and monthly reach than all subscription (SVOD) services combined.

STV is the most watched commercial channel in Scotland and is the only PSB in Scotland to outperform its Network equivalent, by 8% in all time share in H1. It has the biggest share of all commercial channels across Scotland - more than three times larger than the next biggest competitor, Channel 4 - and delivered 99% of commercial programmes with audiences over 500k in the first half of 2022.

This success is down to our content and for the fourth consecutive year, STV was the most popular peak time channel in Scotland. High quality programmes including The Masked Singer, Ant & Dec's Saturday Night Takeaway; soap favourites, Coronation Street and Emmerdale; and top dramas The Bay and Our House, were in the top 10, commanding significant audiences.

We continue to work closely with Scotland's business community and recognise the key role our advertising platform plays in the growth of businesses across Scotland. Over the first half of the year, our STV-controlled regional advertising grew by 11% year on year, driven by the return of larger clients across a range of sectors. The STV Growth Fund continues to attract more new advertisers to TV, adding 43 in the first half of the year. The re-booking rate is also high with over 70% of 2022 Growth Fund members returning from the prior year. The STV Green Fund and the STV Inclusion Fund welcome environmentally conscious and socially inclusive businesses to work with us, and both are important parts of our Social Impact strategy.

Overall, total advertising revenue (TAR) comprising national, regional, and digital advertising was up 4% on the first half of 2021, despite ongoing economic uncertainty.

Our regional productions remain hugely popular and relevant for our audiences. Flagship news programme, STV News at Six, has been Scotland's most watched news programme since 2019, reaching 2.1m viewers per month. Ofcom's latest Nations and Regions report revealed that nearly one third of people in Scotland use STV News for news about their own nation, higher than any of our rivals. Our local programming remains popular, with recent antiques series, Clear Out, Cash In achieving a higher average audience in Scotland than Love Island; and we continue to hold politicians to account and interrogate the pressing issues in our current affairs programme, Scotland Tonight, which airs four times a week.

We continue to use our platforms to make a positive social impact. Through STV News we are educating and informing audiences about the need for climate action and promoting positive mental wellbeing by supporting the Britain Get Talking campaign, tailoring the messaging for our audiences using familiar local faces.

Overall, the financial performance of the division was strong in H1 2021 with revenues of £46.0m up 2% on the prior half year period, driven by regional advertising, and operating profit of £10.7m also up 2% year on year. Operating margins have been maintained at the highs of last year, at 23% for H1.

Digital

Registrations to STV Player continue to grow, increasing by 13% year on year, and within that our monthly active user base also grew by 7%, with STV Player VIP users growing by 37%. VOD viewing increased year on year in 4 out of the 6 months of H1, even with the tough comparators of lockdown and the Euros. STV Player viewers spend an average of just over an hour a day with the service, and research shows we have the most loyal viewers of all the commercial PSB streaming services.

We continue our strategy of adding high-quality, wide-ranging Player-only content to complement our Network offering. Ten new content deals were secured in H1, adding 96 new titles totalling an additional 825 hours; deals were completed with Sony Pictures, Banijay and All3Media which have boosted our total hours to over 5,500. We expect to add approximately 500 hours of new STV Player-only content in H2, offering constantly refreshed programming for our users.

The top 20 programmes in H1 on STV Player included 8 STV Player acquisitions, including new box sets City Homicide and The Commons as well as STV archive favourite, Taggart. STV Player-only content generated more than 15m VOD streams in H1, accounting for 37% of total VOD streams. Our STV Player Presents initiative sees us leverage our broadcast channel to premiere the first episode of new Player-only content, from which we drive viewers to the STV Player to watch the rest of the series. 

In H1, we signed a unique new partnership with Acorn TV, which enables us to showcase premium Acorn TV original dramas to viewers across the UK on STV Player for free. The first AVOD-SVOD endeavour of its kind in the UK, the collaboration adds more high-end drama to STV Player, whilst simultaneously introducing STV viewers to the SVOD, as key Acorn titles will form part of our STV Player Presents initiative.

We also agreed a new multi-year deal with Virgin Media to extend our strategic partnership. In Scotland, Virgin Media's fully regionalised HD version of the STV broadcast channel will continue as part of the agreement. Across the rest of the UK, Virgin Media set-top boxes (STBs), including the new Stream device, will continue to carry all our drama box sets.

In addition to appealing new content, we have made several enhancements to the user experience, including personalised recommendations and an improved homepage; and mandatory registrations mean we know more about our users and can serve them targeted advertising.

Commercial VOD delivery grew across the first half of the year, with total ad impressions up 21% year on year, driving a 16% increase in VOD revenues. Total revenue for the division was £9.2m in the first half, up 8% on the prior year. Operating profit also grew year on year, up 1% to £4.0m (2021: £3.9m), with a slight first-half weighting for some costs reducing the flow through of incremental revenue to profit.

STV Player has also begun to win recognition across the industry, winning Best Programme Acquisition for gripping drama, The Commons, at the Broadcast Digital Awards; and was shortlisted at the Edinburgh TV Festival for Best Streaming Service.

Studios

STV Studios continues to win new business across drama, factual and entertainment, with a record 25 commissions in 2022 to date for the main UK broadcasters and two global streamers. 

Our continuing commissioning success means that we are now in a very busy period of programme production activity meaning that we are set to exceed our target to quadruple revenues to at least £40m by 2023 (from the baseline of £8.7m in 2020).

Our team is delivering high volume returning series, which are significant contributors to our business growth and are also important for the growth of the creative industry and talent base in Scotland. Highlights in H1 2022 include:

· A second series of our prison drama, Screw, was confirmed after the first series was Channel 4's most successful drama launch since It's A Sin.

· A bumper order from Really for a further five new series - 58 episodes in total - based on our popular format The Yorkshire Auction House. The show is incredibly successful for Really, comprising 9 of the top 10 transmissions in H1 for the channel.

· The recommission of quiz show Bridge of Lies with Ross Kemp, for BBC One, including a primetime celebrity version and 25 x 45" episodes for daytime.

· In addition to securing returning series, a significant commission of 80 x 1-hour episodes of a new returnable format, The Great Auction Showdown, for Channel 5 was announced and will be delivered later this year.

Our strategy of acquiring stakes in partner production companies is starting to pay off. In H1, we added a 9th label to the group, Mighty Productions - the minds behind Tipping Point and Impossible - with the opportunity to increase our position to a majority interest over time. All our labels share our growth ambitions and have shown good progress in 2022 to date, with several projects in advanced development and some key commissions and productions underway:

· In June we announced drama, Criminal Record, for Apple TV+ which is a co-production with our exclusive production partner, Tod Productions.

· New dating show format for global streamer, discovery+, Written in the Stars, was won by our entertainment label Barefaced TV.

· A third series of award-winning, Jerk, was confirmed for Primal Media with a further major commission yet to be announced.

· Hello Mary won a four-part series, One Night Stand, for E4. 

· High end drama producer, Two Cities, will deliver their Belfast-based cop drama, Blue Lights, to BBC One later this year.

Catalogue tape sales across our full range of programmes and format relicensing remained strong in H1 with our distributor-neutral position enabling us to work with multiple parties to match the most appropriate sales agent to our content.

Studio revenues were £6.9m (2021: £6.0m) with an operating loss of £1.0m (2021: loss of £0.9m). In line with historic norms, the phasing of programme deliveries is weighted towards H2; the division has already secured revenues of £20m - £25m this year and is expected to contribute of at least £1m in profit for the second year in a row. 

Principal risks and uncertainties

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

· Regulatory environment

· Market volatility and advertising spend

· Reliance on ITV for quality network programming and effective national sales

· Changing viewing habits

· Cyber attack or breach incident

· Defined benefit pension scheme shortfalls

· Recruitment and retention of people

Further details of the Group's policies on principal risks and uncertainties are contained within the Group's 2021 Annual Report, a copy of which is available at www.stvplc.tv.

Unaudited condensed interim income statement

Six months ended 30 June 2022

A reconciliation of the statutory results to the adjusted results is included at note 23. The above unaudited condensed interim income statement should be read in conjunction with the accompanying unaudited notes.

Unaudited condensed interim statement of comprehensive income

Six months ended 30 June 2022

The above unaudited condensed interim statement of comprehensive income should be read in conjunction with the accompanying unaudited notes.

Unaudited condensed interim balance sheet

As at 30 June 2022

The above unaudited condensed interim balance sheet should be read in conjunction with the accompanying unaudited notes.

Six months ended 30 June 2022

The above unaudited condensed interim statement of changes in equity should be read in conjunction with the accompanying unaudited notes.

Unaudited condensed interim statement of cash flows

Six months ended 30 June 2022

Unaudited notes to the condensed interim financial statements

Six months ended 30 June 2022

1. General information

STV Group plc (the "Company") is a public limited company incorporated and domiciled in Scotland and listed on the London Stock Exchange. The address of the registered office is Pacific Quay, Glasgow, G51 1PQ.

The principal activities of the Company and its subsidiaries (together "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. 

These condensed interim financial statements were approved for issue on 6 September 2022 and have been reviewed, not audited. They do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2021 were approved by the Board of Directors on 9 March 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2. Basis of preparation

These unaudited condensed interim financial statements for the six months ended 30 June 2022 have been prepared based on the policies set out in the 2021 annual financial statements and in accordance with UK adopted IAS 34 and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. These should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2021 which were prepared in accordance with IFRS as adopted by the UK Endorsement Board.

The year to 31 December 2022 annual financial statements will be prepared in accordance with IFRS as adopted by the UK Endorsement Board.

Going concern

At 30 June 2022, the Group was in a net debt position of £6.6m (31 December 2021: net cash of £0.3m). The Group is in a net current asset position and generates cash from operations that enables the Group to meet its operating liabilities as they fall due.

The Group has in place a £60m revolving credit facility, with £20m accordion, maturing in March 2025 and with the option to extend by one-year in February 2023. The covenants in place relate to leverage (namely net debt to EBITDA), which must be less than 3 times, and interest cover, which must be greater than 4 times. At 30 June 2022, the Group's leverage was 0.2 times and interest cover was 61.6 times, both well within covenant limits. £38m of the facility plus the £20m accordion remained available at the balance sheet date (31 December 2021: £45m).

As part of the going concern review, the Group considers forecasts of the advertising market, from which the Group generates the majority of its cash inflows, as well as its prospects in the programme production 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 financial covenants.

The Directors performed a full review of principal risks and uncertainties during 2021 as part of its process to review and approve the three-year plan covering the period to 31 December 2024. A severe but plausible downside scenario was identified that reflected crystallisation of a number of risks, including a downturn in advertising markets and a hiatus in programme production activity.

The Directors have assessed current trading relative to the budget for the year and reconfirmed that the downside scenario previously identified remains appropriate. Under this downside scenario, the Group generated sufficient cash to enable it to continue in operation, pay its obligations as they fall due and remain within its covenant levels.

Following completion of these activities, 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.

3. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2021. There were no changes to accounting standards in the period that had any material impact on the financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

4. Judgements and estimates

Judgements

In the course of preparing the condensed interim financial statements, no judgements have been made in applying the Group's accounting policies that have had a significant effect on the amounts recognised in the condensed interim financial statements, other than those involving estimation below.

Estimates

The preparation of the Group's condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting 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 described below. The Group based its assumptions and estimates on parameters available when the condensed interim financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

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. The key assumption is estimating the likely future revenues for which associated programme costs are expensed in line with. A detailed forecast of future secondary sales is prepared by management based on historic experience and expected future trends. £0.5m was expensed through the income statement in the period (2021: £0.5m).

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 key assumptions. The assumptions used in determining the projected benefit obligation 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 period. 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.

Regarding 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. Refer to note 21 for further disclosure.

5. Financial risk management and financial instruments

The Group's activities expose it to a variety of financial risks, to varying degrees: currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2021. 

There have been no changes in any risk management policies since the year end.

6. Seasonality of operations

In line with the UK advertising market, the autumn season provides the Group with its highest level of revenues, as trading picks up from the quieter summer months. The Studios business delivers the majority of its programmes to broadcasters in the second half of the year which results in higher work in progress inventory at the interim period end compared to the year end position (see note 16). In the current year, guidance is for the Studios division to generate revenues between £20m and £25m, of which £6.9m has been recognised in the six months ended 30 June 2022.

7. 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 reportable segments, which remain the same as the prior year, are Broadcast, Digital and Studios. The trade of STV ELM, which was disposed of in August 2021, is included within 'Other' in the prior year comparative.

There has been no significant change in total assets from the amount disclosed in the last annual financial statements.

8. Exceptional items

2022

The Group did not incur any material exceptional costs or generate exceptional income in the interim

period.

2021

In May 2021, the Group repaid the full amount of furlough grants received in 2020 under the Government's Coronavirus Job Retention Scheme (£1.7m) before resuming payment of cash dividends to shareholders. The Group presented the cost of repayment as exceptional so as not to distort the underlying trading results of the business.

9. Tax charge

The tax on the results for the six month period is charged at the rate that represents the best estimate of the average annual effective tax rate (ETR) expected for the full year, applied to the pre-tax result for the six month period.

The ETR on the results has been charged at 20.2% (30 June 2021: 17.7% before exceptional items), which is higher than the standard rate of 19.0%, primarily because of the increased rate at which deferred tax is recognised.

On 3 March 2021, the UK Government announced a change in the UK corporation tax rate from 19% to 25% with effect from 1 April 2023. The 25% rate was substantively enacted on 10 June 2021. The deferred tax assets at 30 June 2022 have been measured using the rates that apply in the periods when the underlying timing differences, on which deferred tax is recognised, are expected to unwind.

The ETR on exceptional items in the prior period was 19%. This related wholly to the repayment of furlough monies received which were treated as taxable in the prior year.

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 period, excluding ordinary shares purchased by the Group 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 share namely share options granted to employees.

The adjusted earnings per share figures have also been calculated based on earnings before adjusting items that are significant in nature and/or quantum and therefore 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 tax adjustments relating to these items. Adjusted earnings per share have been presented to provide shareholders with an additional measure of the Group's year-on-year performance.

The following reflects the earnings and share data used in the calculation of earnings per share:

11. Dividends

A dividend of £3.3m relating to the year ended 31 December 2021 was paid from the parent company's accumulated realised profits in May 2022. (31 December 2021: final dividend of £2.7m paid in May 2021).

An interim dividend of 3.9p per share has been proposed and is subject to approval by the Board of Directors. It is payable on 3 November 2022 to shareholders who are on the register at 23 September 2022. This interim dividend, amounting to £1.8m has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the year ending 31 December 2022. 

12. Intangible assets

During the six months ended 30 June 2022, the Group incurred expenditure of £0.3m on web development (£0.4m in the year to 31 December 2021; £0.2m in the six months ended 30 June 2021). The net disposals amounted to £nil in the current period and for the year ended 31 December 2021.

13. Property, plant and equipment and right-of-use assets

During the six months ended 30 June 2022, the Group incurred expenditure of £1.9m on property, plant and equipment (£2.5m in the year ended 31 December 2021; £1.3m in the six months ended 30 June 2021). The net disposals amounted to £nil in the current period and for the year ended 31 December 2021.

During the six months ended 30 June 2022, the Group did not have any additions of right-of-use assets (£11.1m in the year ended 31 December 2021; £0.1m in the six months ended 30 June 2021). The net disposals amounted to £nil in the current period and for the year ended 31 December 2021.

14. Investments

On 9 March 2022, the Group acquired a 25% stake in quiz show producer Mighty Productions for consideration of £0.9m.

15. Deferred tax asset

At 30 June 2022, total deferred tax assets of £17.5m were recognised on the balance sheet (31 December 2021: £26.5m). Of this, £10.6m relates to the deficit on the Group's defined benefit pension schemes (31 December 2021: £19.8m) and the balance of £6.9m relates to tax losses, accelerated capital allowances and short-term timing differences (31 December 2021: £6.7m).

16. Inventory

17. Trade and other receivables

18. Borrowings

In 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 with two one-year extension options available. One of the options was exercised in February 2022, extending maturity to March 2025. 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.

19. Share capital

Issued share capital at 30 June 2022 and 31 December 2021 amounted to £23.3m (46,722,499 shares).

20. Notes to the condensed interim statement of cash flows

Net debt reconciliation

(i) Non-cash movements relate to the amortisation of borrowing costs (for long-term borrowings) and

interest charged on lease liabilities.

21. Retirement benefit schemes

The fair value of the assets and the present value of the liabilities in the Group's defined benefit pension schemes at each balance sheet date was:

The reduction in the net pension deficit is largely driven by an increase in the discount rate due to a rise in corporate bond yields over the period, partly offset by the reduction in the market value of scheme assets.

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:

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).

The sensitivities regarding the principal assumptions used to measure the defined benefit obligation are set out below:

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.

Funding arrangements

Deficit recovery plans, which end on 31 October 2030, were agreed in 2021 with aggregate monthly payments unchanged from the previous recovery plans. The 2022 deficit recovery payments will total £9.5m, with annual payments increasing at the rate of 2% per annum over the term of the recovery plans. Contingent funding payments equivalent to 20% of any outperformance above a benchmark of available cash will be paid to the schemes. This resulted in an additional £2.4m payment to the schemes in the interim period in relation to 2021.

22. Transactions with related parties

As disclosed in the 2021 Annual report, the Group has agreed to provide programme production financing to Two Cities Television Limited for the production of Blue Lights, a drama series commissioned by the BBC and scheduled for delivery in the second half of 2022. £3.0m was drawn down at the balance sheet date, with the facility maturing at the end of May 2023 by which time all monies will be repaid.

The Group provided advertising with an estimated fair value of £0.1m (2021: £0.4m) for nil consideration to the charity organisation STV Appeal.

23. 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 to exclude the effects of exceptional items and adjust for other material amounts that it believes are distortive to the underlying trading performance of the Group.

By presenting these alternative performance measures, the Group believes it is providing additional insight into the performance of the business that may be useful to stakeholders. Below sets out a reconciliation of the statutory results to the adjusted results:

Independent review report to STV Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed STV Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the half year results to 30 June 2022 of STV Group plc for the 6 month period ended 30 June 2022 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

· the Condensed interim balance sheet as at 30 June 2022;

· the Condensed interim income statement and Condensed interim statement of comprehensive income for the period then ended;

· the Condensed interim statement of cash flows for the period then ended;

· the Condensed interim statement of changes in equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the half year results to 30 June 2022 of STV Group plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half year results to 30 June 2022 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with this ISRE. However, future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half year results to 30 June 2022, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the half year results to 30 June 2022 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the half year results to 30 June 2022, including the interim financial statements, the directors are responsible for assessing the group'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 to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the half year results to 30 June 2022 based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, 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.

PricewaterhouseCoopers LLP

Chartered Accountants

Glasgow

6 September 2022