TSW Company Report 1991

 
Brian Bailey

When, in 1980, we learned that TSW had been awarded the South West ITV franchise, one of my first public comments was to express deep sympathy for all those involved with Westward Television.

Now we know how it feels. Ten years ago, we won what was then described as 'a beauty contest'. This time we have lost in a lottery. The programme plans we submitted were entirely acceptable. Our people were highly regarded. Our track record of service to the region. of healthy returns for our shareholders, of ten years of financial prudence, counted for nothing.

Your board submitted a bid which was financially prudent, offered a proper return to our shareholders and a quality service to our viewers but was judged high enough to win against serious competition. We secured expert advice and based our bid on forecasts of revenue that were entirely credible and. as shown later, were consistent with the ITC's own experts. However the ITC used lower forecasts and this was one of the major factors which led them to decide that our business plan might not be sustainable over the next ten years.

This was the auction in which the highest bid won - unless it lost!

Your Board felt it must in the best interests of shareholders, employees and viewers to test this outcome in the Court of Appeal where judges were divided as to decision but united in criticism of the ITC - so much so that. most unusually, they required each party to bear its own costs.

This issue was so crucial that TSW requested and were granted leave to appeal to the House of Lords. We were interested in pursuing the matter further but only if there were genuine grounds for such a move.

We decided there were such grounds and it must be stated that. despite the unsuccessful outcome of that appeal, TSW remains convinced it was appropriate to pursue the matter in the courts.

Financial Results

The general uncertainties for independent television throughout 1991 have been greatly exacerbated by the economic recession and many Independent Television Companies are reporting smaller profits.

Our results are complex because of the 17 month accounting period, the necessity of providing, for redundancies as activities are scaled down and the various expenses relating to the license application, its subsequent loss, and judicial review. Profits from operations before charging levy were £7.0 million (17 months) compared with £7.2 million for the 12 months to 3lst July, 1990. The profit before tax, after charging levy and substantial amounts as exceptional items, is £1.95 million (1990 - £4.7 million).

Profit after tax is £1.1 million (1990 - £2.8 million) which gives a figure for earnings per share of 5.0p (1990 - 12.6p).

There is also an extraordinary charge of £4.1 million which includes expenditure related to the license application and judicial review, and an amount to provide for closure costs following the non-renewal of the Channel 3 Franchise.

Dividend

Two interim dividends have already been paid - 4.0p per share in aggregate.

In my second interim review dated 1st November I stated that it was the intention of the Board to recommend the payment of a final dividend of 3.0p net per share. I am pleased that the Board is now able to recommend this final dividend which will be paid to shareholders on the register at llth May and will be paid on l2th June after the Annual General Meeting.

The Future

We have negotiated an agreement with the sales house, TVMM. to commence on lst August. this will enable TSW to maximize its advertising revenue at minimum cost until 31st December 1992. TVMM will represent our successors in 1993. Programme planning has ensured the maintenance of high standards for viewers, in the South West for the remainder of the franchise period. These developments are being achieved against a background of significant staff reductions and a vigorous attack on costs generally.

In addition to planning a phased reduction in staff numbers, the Board of TSW is considering all the options open to it following the loss of the license. Although these include a realization of all assets and a cash distribution to shareholders, this is by no means the only possible route. Others are being explored in considerable depth, as our ultimate responsibility is to secure a future for the company that is the most advantageous for shareholders.

Brian Bailey

April, 1992

(Taken from the TSW Company Annual Report)