Yorkshire Tyne Tees Television Holdings plc today announced its preliminary results for the year ended December 31 1996.
The highlights as approved by the board on March 10 are:
- Profit before tax £30.2 million, up 40%
- Earnings per share 39.7p, up 38%
- A record year for programme commissions
- Continuing investment in greater efficiency
- Strong balance sheet and cash flow
- Recommended final dividend of 11.2p per share
£million Year ended Year ended 31 Dec 1996 31 Dec 1995
Turnover 270.8 261.8
Operating profit excluding ITC licence cost 93.1 83.4 Licence payments to the ITC 66.0 64.2 Profit before tax 30.2 21.6
Earnings per share FRS 3 38.2p 28.6p Adjusted FRS 3 39.7p 28.7p Dividends per share 18.0p 14.0p
The past year has been a very successful one for the company - with record profits and record programme success.
I am pleased to be able to announce that profit before tax has risen from £21.6 million in 1995 to £30.2 million in 1996, an increase of 40%. As a result your directors recommend a final dividend of 11.2 pence per share. Together with the interim dividend of 6.8 pence this makes a total dividend for the year of 18 pence, compared with 14 pence in the previous year.
Once again this result has been achieved by stringent cost controls combined with strong programme output, with programme revenues up 9% and costs, excluding licence fee, being held steady in spite of an increase in programme activity.
Programme success and profitability are inextricably linked in a company which is one of the major providers of programmes for both Channel 3 and Channel 4. ITV breaks down into two camps - Publisher Contractor and the older established Producer Contractor of which category we are long standing members. Without programmes you do not have an audience: maintaining several streams of successful programmes requires an experienced and talented corps of producers and an inherent production ethos in the organisation. That is what attracts talent - actors, actresses, writers and directors who have confidence in the company and entrust their reputation to it every time they agree to participate in a new series.
As the number of channels throughout the world multiplies we are finding an increasing market for our skills and our programme product. Programme making will continue to be our prime development, and I anticipate that expansion in that direction will take up all our skills, energy and financial resources in the coming years.
As part of that development plan we recently opened a new studio in Leeds with a floor area of 24,000 square feet. This is certainly by far the largest television studio in this country, and probably the world, and its size will make a great contribution to production capacity, efficiency and profit. The Prime Minister kindly performed the opening ceremony and was introduced to the customers of the Woolpack and the mysteries of line dancing performed on the Emmerdale set.
Emmerdale has been the most successful soap in terms of audience growth year on year. It has increased from two to three episodes per week and all three episodes now figure regularly in the ITV top ten ratings. We also produced three of the year's top five drama series - Touch of Frost, Heartbeat and the Catherine Cooksons. I think it is truly noteworthy that it is now quite usual to find that four of the programmes in the weekly Channel 3 top ten and five in the weekly Channel 4 top ten were produced by your company.
Our factual programmes also feature strongly in the network schedule: 3D continues its successful weekly run and we continue to be a major contributor to Network First. Additionally we have provided programmes for many other channels, including BSkyB, the Discovery Channel and Carlton Select.
During the course of 1996 we also revamped our regional programmes in both Yorkshire and Tyne Tees which we increasingly refer to as Channel 3 North East because the company coverage now extends far beyond the limited area described by that company's original title. Between them the two companies produce over 1,000 hours per year of programming of special appeal to their local audiences and it is rewarding to see the new formats proving highly successful, and winning a consistent majority share of audience. It was particularly pleasing to see Tyne Tees receive the Royal Television Society's award for the Best Regional Television News Programme in Britain. For many years the BBC's local programme in the North East had attracted the larger share of audience - a situation which has now been reversed and the RTS award was a timely recognition of what has been achieved.
Film programming for the US market continues to develop and six commissions are now in hand for major American clients. Additionally, we and other ITV companies will be making cinema quality films which will have a guaranteed airing on ITV, and with this in mind we have associated ourselves with a grouping which will seek funding from the financial pool to be created by the National Lottery.
While funding from the Lottery would be helpful it should be remembered that not only do we fund our own productions, but also we finance many other productions and this is part of the collaborative process that allows us to acquire access to such noteworthy drama productions as The Governor - and the forthcoming Midsomer Murders from Bentley Productions. The financing process not only secures invaluable programming but is a profitable activity, because we regularly provide facilities and administrative services for such programmes.
Our educational multimedia joint venture with International Thomson continues to develop satisfactorily. With the benefit of its new chief executive and our investment in CD ROM development capacity, the operation is being expanded in an integrated fashion across television, video, CD ROM and print. We continue to be confident that this will be a worthwile development. Many others in the CD industry have been experiencing a very difficult time - perhaps because too many sprang up too quickly. We are strictly focussed on the education market and as the computer screen plays an ever increasing role in the curriculum, we believe there will be a flourishing market for our product as long as we concentrate on quality and the themes that education requires.
We have a very effective manning arrangement, our studio and production facilities are tightly scheduled and as a result we are able to make available surplus time to outside users. This facility hire business is proving to be a valuable earner, with recent outside users including the BBC, United News and Media, Paradine Productions and Action Time.
Advertising sales have been disappointing - falling to 10.31% of total ITV advertising revenue - more than £12 million below expectations at the start of the year. It was a year in which the advertising pattern became very distorted by virtue of the fact that one major advertiser significantly reduced expenditure for the greater part of the year and there was an extremely large upsurge in telecommunications advertising in the south.
Both these adverse impacts have now been much reduced as the advertiser in question is increasing spend again and the telecommunications campaign has moved north. Revenue growth of more than 5% in the first quarter of 1997 allows us to have greater confidence that across the year the forecast of a 10.9% share of ITV revenue by Laser, our sales agents, will in fact be achieved. There are incentives for Laser to beat this target and penalties in the event of a shortfall.
Nevertheless, the present position is not satisfactory, and I am determined that our share must be restored to the levels achieved over very many years in the past. The region is prospering thanks to major inward investment and there is no logical reason why we should not regain lost ground. Consequently we are discussing with Laser the idea of marketing the total north as a single region - to encourage the advertiser to use the total northern area and to simplify some aspects of handling and transmitting commercials. We expect to come to a decision shortly, and I will be able to announce our future plans by the time of the Annual General Meeting in May.
Going into 1997, costs are under strict control and the only cost element to show a significant year on year increase is the Licence Fee which is subject to the effect of the Retail Price Index. The amount of our indexed increase is greater than the total fixed licence fee of some other companies, and I think this is a monstrous injustice by any standard. We have lobbied consistently for the present system to be replaced by our Level Playing Field concept and it is encouraging to see that this concept is increasingly accepted as a sensible way to move forward. The first special tax to be applied to commercial television in this country was introduced by Selwyn Lloyd, the then Chancellor of the Exchequer, in the 1961 Budget, and was termed Television Advertisement Duty. I believe that if Government went back to square one and reapplied such a duty to all commercial broadcasters we would have a regime which was not only even handed, but would leave producers such as ourselves with the resources to develop their programming to the benefit of the national economy and the viewing public. Importantly this would result in no loss of revenue to The Treasury, but would bring major benefits to your company.
The company is in good heart - we have excellent staff and management who have done sterling work in the past year. With rising advertising revenue and share, a strong forward order book for programming and costs under firm control, I am confident that your company can look forward to continuing growth in the current year.
Chairman and Chief executive
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SOURCE Yorkshire Tyne Tees Television