Hi, everyone. Thank you very much for joining us for our 2026 interim results. I will start with an overview, followed by the financial highlights from Lindsay, and then I'll do the strategic update and summary, followed by Q&A. Our first half performance was in line with expectations. Despite a difficult external environment, the audience division performed strongly. We successfully launched STV Radio and the growth in higher margin advertising revenue, the benefit of the FIFA World Cup, and cost savings helped offset the impact of significantly lower activity in STV Studios. The prolonged commissioning slowdown has also resulted in a non-cash impairment charge in STV Studios. This reflects a more cautious assessment of current market conditions and future cash flows. Advertising visibility remains limited, commissioning decisions remain slow, and we are continuing to prioritize financial flexibility.
Quarter three total advertising revenue is forecast to be down 5%, and no interim dividend is proposed. However, we are focused on the areas we can control. We have taken decisive action on costs and cash generation. STV remains a strong and increasingly diversified business with market-leading audience brands, a proven track record in content creation, and multiple avenues for future growth. We are positioning the business not for a return to the market of the past, but for the opportunities we see in the market tomorrow. Now over to Lindsay.
Thanks, Rufus. I'll kick off with a summary of the key financials for the first half, which are in line with the trading update that we issued in early June.
The group generated revenue of GBP 66 million in the first half of the year, down 27% on the prior year. Within this, total advertising revenue was GBP 48 million, up 5%, and driven by a strong national ad market performance around the FIFA World Cup. STV Studios revenues were lower than the first half last year, with H1 2025 including significant revenues in relation to scripted programs that don't tend to recur in consecutive periods. The commissioning market also remains subdued, with even greenlight processes for returning series protracted. The regional advertising market also benefited from the FIFA World Cup, albeit to a lesser extent in pound terms, but saw much tougher underlying conditions than national for the first time in a while.
Digital revenues grew 13% to just over GBP 12 million and include the first contribution from STV Radio, which has gotten off to a strong start. Adjusted operating profit at GBP 5.9 million was down 12% on the prior year, with an improved operating margin of 9%. Adjusted EPS at GBP 0.071 per share was in line with the prior year as a result of higher losses attributable to minority shareholders in certain production labels. Total net debt at just under GBP 43 million was down on the start of the year, well within our facility limit of GBP 75 million, and with key financial covenants also with significant headroom. Moving to the group P&L, there are a few points to highlight. Profitability in the audience division was up 27% on the first half of last year, benefiting from those high-margin FIFA World Cup ad revs.
This profit performance also reflects the impact of successful execution of our restructuring program announced in September last year. You can also see cost savings coming through as a reduction in corporate costs. The studio's loss of GBP 3.2 million is in line with our guidance in June and reflects the current challenging and evolving commissioning market. These market conditions have impacted the short to medium-term outlook for the business through slower decision-making on commissions across the board, less security on over-advanced developments or soft greenlit projects, and higher levels of competition for a limited number of commissioning slots. As a result, we have recognized a non-cash impairment of GBP 25 million in the first half of the year, the largest element of which is a goodwill impairment of GBP 17 million. A full breakdown of the adjusting items is included in the appendices.
Finance costs are down year-on-year because of timing differences on unrealized FX gains and losses in the prior year. Our interest on borrowings, which is the largest part of the balance, is the same as last year at GBP 1.8 million. Turning to advertising revenue, the table on the left shows the performance of each main advertising revenue category in Q1 and Q2 this year. You can see the contrast in year-on-year comparators in Q2, driven by the FIFA World Cup in June. When we spoke to you back in March, we talked about the strength of the FIFA World Cup and the boost that it would be for advertising markets. What we did not know at the time was whether it would be a positive stimulus for a wider recovery or whether macro factors would persist and conditions post the tournament would return to Q1 levels.
While we have very limited visibility, our Q3 guidance for TAR is down around 5%, and so this would suggest that a wider recovery is not yet with us. In terms of individual category performance, regional is a bit of a standout as it has performed better than national for many years, driven by the success of the STV Growth Fund. It is definitely a tougher market at the minute, not in terms of fewer brands advertising with us, but in total campaign spend, which is being pulled back given broader uncertainty. This next chart shows the main moving parts in adjusted operating profit year-on-year. Most of these I have already mentioned, but a couple of points are worth picking out. The first is the radio performance, which is in line with our business plan.
The loss in the first half of the year is because we could not appoint national sales representation until our first RAJAR listening numbers were published. Our debut RAJAR hours were released in early August and were ahead of expectations. They are a great go-to-market for Bauer, our recently appointed national agent. I would then highlight the impact that the mix of scripted and unscripted programming can have on profitability in the studios business, where we had a couple of streamer dramas last year, but not this year. While we have talked a lot about the challenges in the market and specifically unscripted before, it is good to see that our overall unscripted profitability has improved a little year-on-year, as we continue to seek efficiencies and ensure our portfolio is best placed to face off to the market.
I'd also pull out the cost savings bar, which shows the improved profitability from the restructuring program we implemented in Q4, as well as other savings. In terms of that restructuring program, this was group-wide with around 60 people leaving from across the business. Our core principle was to seek savings and efficiencies without damaging our core operations, and we believe we've achieved this. Savings associated with the changes to our news commitments, approved by Ofcom in the first half, will start to come through in the second half of the year, following the launch of our new STV News at Six in July. Turning to cash and net debt, the group's total net debt at the end of June was just under GBP 43 million, and equivalent to leverage of two point four times. Interest cover was five point five times, with both metrics well within their covenant limits.
Production financing loans have been repaid during the period as cash has been collected from commissioners and tax credits received. The loan amounts drawn down at the end of June are for new facilities rather than amounts outstanding on those in place previously. We expect net debt to remain at or around this level at the year-end and are guiding to a range of GBP 40 million-GBP 45 million. On pensions, we continue to see the accounting deficit reduce. Our next triennial valuation is due at the end of December, and we've had early discussions with the trustees to rebalance the schedule of contributions to alleviate pressure on cash during 2027. Our previous schedule of contributions assumed a catch-up payment of GBP 21 million across 2027, which we've now evenly phased over the remainder of the recovery plan.
Our new profile of contributions sees us pay GBP 8 million in December 2027 and GBP 10 million per annum thereafter to the end of December 2031, a short extension to the recovery plan of one year. This last slide looks to pull all the guidance together onto a page. Most of it you've heard in the last 10 minutes, but it's worthwhile pausing to talk about our STV Studios guidance for this year and next. There are a small number of key significant commissioning decisions that have been delayed this year with a resultant impact on overall profitability for the division. We expect the division to be profitable in the second half of the year, as it usually is, but our full- year expectations are now for a break-even position.
Looking ahead to 2027, profits are subject to the timing and ultimate decision of a small number of individually material commissions, each of which could have a meaningful impact on the outturn for the year. I'll now hand back to Rufus to take you through the strategy update and outlook.
Thank you very much, Lindsay. So now, having taken you through the financial performance, I want to focus on how we are responding. We are not assuming that existing markets simply recover. We are adapting the business to the environment we face, scaling areas showing momentum, and remaining disciplined about where we allocate capital. On this slide, you can see the organizing principles for our strategy, providing clear direction while allowing us to respond to an evolving market. Firstly, in our audience division, we are maximizing reach and engagement across broadcast, streaming, news, audio, and social. This gives us a wider audience footprint and broader proposition for advertisers. In Studios, we are focusing the portfolio on the areas with the strongest prospects in the market, returnable IP, international customers, and selected digital-first opportunities. Thirdly, across the business, we are aligning our cost base and capabilities with our priorities.
This is about building a broader business while protecting cash, improving returns, and preserving our ability to invest. STV continues to be Scotland's leading platform for audiences. We delivered 99% of the top 500 commercial audiences in the first half of the year. STV Player had its best six months ever, with more than 40 million hours of content watched on the service. The World Cup was huge. 3 million Scots watched across STV and STV Player, generating more than 39 million viewing hours, peaking with Scotland's game against Morocco. This matters commercially. In an increasingly fragmented media market, STV still brings large-scaled audiences together whilst also allowing viewers to watch in a way that suits them. Now to STV Radio. On this slide, a quick reminder of the strategic rationale for launching the service. The rationale was simple. Radio is highly complementary to television.
It allows us to reach audiences at different points in the day, while filling a clear gap in the market for Scotland's only national commercial radio station produced in Scotland for Scottish audiences. TV is also highly complementary for advertisers, but more of that to follow. The stations got off to a strong start. After only six months on air, it is reaching 139,000 weekly listeners and has already become a top 10 commercial station in Scotland. The nine point three hours of average weekly listening is particularly encouraging because it shows that we already have a substantial loyal audience. Radio gives us another way to reach Scottish audiences, expands the inventory we can offer to advertisers, and also creates opportunities to develop content across audio, TV, social, and digital. Our STV Radio Football Podcast has already amassed 21 million video views.
We've had 20 million video views of STV Radio content on our social channels, and there's also now a dedicated STV Radio Football Takeover show on STV every Friday night. It is still early, and our focus is on growing awareness and increasing reach, but we are ahead of plan and pleased with where we are at. You can see here the impact of our diversification on audience reach in this snapshot from April of this year. On the left-hand side of this slide, you can see amongst all adults, STV and STV Player combined reached 71% of people in Scotland. This figure increases to 77% when you add in radio, digital news, and social platforms. On the right-hand side, when you look at under 45s, the impact is even more significant, with reach increasing by around 10 percentage points.
We are focused on protecting the reach we have today, but also ensuring that STV remains relevant to younger, multi-platform audiences in the future. Now to news. We were granted permission by Ofcom to update our news licenses requirements for the first time in 20 years, and rolled out our new 6:00 P.M. programs on July 13th. It has gone well with share and volume of viewing both up since we implemented the changes. The changes have also allowed us to put news on a sustainable cost footing, but importantly, also allows us to scale up our digital news proposition. We have been doing this throughout the first half of the year with digital video views up 31% year-on-year, helped by some amazing stories of the Tartan Army in Boston during the FIFA World Cup.
Not only is STV Scotland's leading platform for audiences, but that is also why we are Scotland's leading platform for advertisers. Advertisers now have more ways than ever to talk to their customers through STV. Not only do we have an ever-growing range of advertising products, but all the evidence is that TV remains the most effective advertising platform, which when combined with radio, increases effectiveness by a further 20%. Effectiveness ultimately is every advertiser's number one KPI. You can see that some of our new ad products have had a strong market reaction. We have 25 active brands using pause ads, which are served when a viewer presses pause on STV Player.
We have 37 active brands on STV Radio, and are particularly pleased that 10 of those have never advertised with STV before, encouraged now by the lower STV Radio price point, unlocking a new part of the market. We have a record 66% of brands on our register who are now using more than one STV platform. There is more to come during the second half. STV ADapt, our new AI-enabled targeted advertising, has been designed to make it easier and more cost-effective for SMEs to access targeted advertising through STV. Technical development is well advanced ahead of the planned Q4 rollout. We are also developing STV Win, our competitions proposition, which will help deepen audience engagement, and is of course, a new revenue stream as well. Now to studios. The market remains challenging, and that is reflected in today's results.
The U.K. commissioning market remains well below recent levels, and decisions are taking longer across the industry. At the same time, viewing continues to shift towards digital platforms, changing how content is commissioned, distributed, and monetized. That creates both challenges but also opportunities for producers, and it is reflected in our performance this year. Our response is set out on this slide. We are focusing development spend on returnable IP because successful returning brands create longer-term value. We are broadening our customer base through relationships with international buyers and streamers, and we are also building our understanding of digital-first content, giving us valuable capability and insight in a fast-growing area of the market. At the same time, we are maintaining strong discipline around costs, cash generation, and investment. We are actively reviewing the portfolio and directing resources to the opportunities with the strongest long-term potential.
There are really attractive opportunities in returnable IP, growing international customers, and digital. For now, our priority is improving performance and creating the capacity to invest more meaningfully as conditions improve. A bit more on returnable IP, which is a clear STV Studios priority. It has helped underpin the business as market conditions continue to be challenging. This slide shows the quality of our unscripted business, where despite the difficult market backdrop, we see resilient demand for our returning brands. We have an established portfolio across entertainment and factual, and only last week we announced the recommissions of both "Bridge of Lies" and "Celebrity Catchphrase." Our development spend is always judged against its potential to create repeatable formats and enduring IP. Value develops as a successful program returns, scales, and creates future rights opportunities.
You will also see on this slide "Blue Lights," one of the most popular dramas on British TV, which returns for its fourth series this autumn on BBC One and BBC iPlayer. Our priority also continues to be to broaden our customer base beyond U.K. commissioning, and we have made real progress. "The Witness" was our first drama for Netflix and was the most-streamed drama in the world for two weeks in June on the service. In fact, it was the most-streamed program in the world on that service, demonstrating the ability for our content to connect with audiences internationally. Primal Media, one of our labels, has secured its first commission for Disney's Hulu, giving us another relationship with a global buyer.
Our partnership with Kevin McKidd, one of the stars of "Grey's Anatomy" under the Ferryman Films label, strengthens the scripted pipeline and gives us access to distinctive creative talent with a truly global profile. These successes do not remove the near-term market pressure, and we should not imply that they do, but they demonstrate that STV Studios has creative capability, relationships, and IP that can compete beyond the U.K. market. Our task is to turn that creative progress into more consistent financial performance. The third focus is on digital-first content. This is clearly an important and growing part of the media market, but our approach needs to be disciplined and proportionate to our financial capacity. Fan Club , a specialist ad-funded branded content business in which we took a minority stake last year, has helped us build capability, understand platform economics, and develop relationships in the creator economy.
We are testing where existing STV Studios IP, talent, and genre expertise can translate effectively into digital-first formats and audiences. You can see examples of early activity on this slide. Building a YouTube community around "Game of Wool" called Let's Get Knitting. Rockerdale Studios, the makers of "The Assembly," recently announced a new YouTube proposition, "The Assembly: B-Sides," and Fan Club have delivered some excellent early work for clients, including Vinted and Russell Hobbs. We have a high-quality STV Studios business with outstanding creative leaders and a track record of creating successful content for broadcasters and streamers. We continually review our portfolio of labels, but the scale and pace of change in the commissioning market means it is right to take a fresh look at how the portfolio is positioned for the future.
The objective is a stronger, more focused studios business that is aligned with where the market is moving while retaining the creative breadth that has been a longstanding strength of the portfolio. Bringing the story together, STV is becoming a broader, more diversified business. In the audience division, we have market-leading reach in Scotland, a strong streaming growth, trusted news service, and a promising and growing audio proposition with an increasingly broad proposition for our advertisers. In STV Studios, we have a production label portfolio with some of the industry's most admired creative leaders with established returnable IP, strong scripted capability, and growing relationships with international buyers. We are also clear that we must adapt to a more difficult commissioning market, as well as move into the digital creator space with discipline. Our priorities are clear.
Deliver the audience growth initiatives already underway, reshape STV Studios around the areas where we can win, protect cash and balance sheet flexibility. Whilst we remain cautious about the near-term outlook, we are confident that the actions we are taking will give us greater resilience and more opportunities to create longer-term value.