STV has agreed the sale of its cinema advertising division, Pearl & Dean.
A long-time strategic objective of the current board, the sale – subject to the agreement of shareholders – will be for £1. STV had been required to pay the Vue Cinemas chain minimum revenue guarantees which were in excess of the income generated in recent years.
Subject to the approval of shareholders, the agreement is to relieve STV Group plc of minimum income guarantees to the Vue Cinemas chain rather than to generate revenue. For the last few years, the group's management have consistently declared Pearl & Dean to be a non-core part of their business.
The sale plan announcement comes ahead of the company's annual general meeting, taking place later today.
Shareholders will decide on the proposed sale on the 12th of next month.
Says a statement: “STV Group plc is delighted to announce the proposed sale of Pearl & Dean Cinemas Limited to Image Limited, a newly incorporated company backed by Thomas Anderson, a director and the ultimate beneficial owner of Empire Cinemas Limited. This represents the final step in the board's plan to dispose of legacy businesses which it inherited and refocus the group on its core businesses.”
The statement adds that STV plc has already paid Vue Cinemas its 2010 minimum income guarantee of £17.6 million, but that £9.1 million of it has been designated a loan to Pearl & Dean that will be paid back.
Continues the company: “As part of the deal agreed with Image, Pearl & Dean will repay the portion of this loan relating to the period from 1 May 2010 to 31 December 2010, amounting to £9.1 million. The first repayment of £2.5 million will be received upon completion [of the sale], with further monthly repayments to be received thereafter. STV expects the loan to have been repaid in full by January 2011, with the backstop date for full repayment being June 2011. The loan is secured and STV retains a pledge over the shares of Pearl & Dean.”
Continues STV: “After taking into account transaction costs, the disposal is expected to be broadly neutral for STV, in terms of its expected impact on the group's earnings in the current financial year, compared to continued ownership of Pearl & Dean.”
At today's AGM, shareholders will hear an upbeat summary of advertising revenue trends.
Chair, Richard Findlay, will tell shareholders: “As stated at our preliminary results eight weeks ago, we have seen a strong start to 2010. During the first quarter, STV has experienced an encouraging performance in national television airtime revenues, up 17 per cent on last year, and an improving position in the regional television airtime market, up four per cent.
“The total television advertising market is forecast to be up 21 per cent in April and up 23 per cent in May with preliminary indications for June showing 10 per cent to 20 per cent growth on 2009. STV is trading in line with the national market. The regional advertising market continues to recover more slowly and is forecast to be up five per cent in the second quarter.”
These figures are to prompt “an acceleration of investment in High Definition”.
Says the company: “Initially, this HD service will be available on digital terrestrial and digital cable services and we expect this to be in place for the 2010 World Cup.”
Recently, STV was part of a consortium that was unsuccessful in bidding for a publicly-funded news pilot on channel 3 in Scotland, meaning that – should the independently-funded news consortia (IFNC) plan go ahead after the General Election – it would be broadcasting news, as part of its licence obligations, made by someone else: a consortium including the publishers of The Scotsman, The Herald and the Sunday Post newspapers.
Labour is in favour of the IFNCs, the Tories not.
Says STV”: “We note that the IFNC pilot process in Scotland is essentially on hold whilst the General Election proceeds. We expect more clarity on how regional news funding will evolve after the election.”
PS Good piece on the BBC website, by Jamie McIvor.