Annual Reports - RTÃ

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RADIO TELEFÍS ÉIREANN Financial Review International Financial Reporting Standards (IFRS) RTÉ’s Financial Statements for 2007 are the first to be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Previously RTÉ’s financial statements were prepared in accordance with Irish and UK Generally Accepted Accounting Practice (GAAP). Accordingly all 2006 figures presented for comparative purposes in the financial statements have been restated in accordance with IFRS. In addition, in order to identify the financial impact on RTÉ of the transition to IFRS, the reconciliation of selected 2006 financial information, as previously reported under Irish GAAP, to the restatement of this 2006 information under IFRS is provided in note 24 to the financial statements. The single biggest adjustment arising from the implementation of IFRS relates to the recognition of programme inventory where historically RTÉ has expensed programme costs as they have been incurred. This change results in the recognition of €44.4 million in the total level of Inventory reported in 2007 which is up from a restated 2006 inventory amount recognised of €41.5 million. Results Overall, in 2007, against a background of significant ongoing competitive and general cost pressures allied to sustained growth in revenue, RTÉ produced a stable financial performance, resulting in a Net Surplus After Tax of €26.4 million from total Revenues of €441 million. In interpreting RTÉ’s overall financial performance and position it is crucial to note that the assets and liabilities of the RTÉ Superannuation Scheme (a contributory, funded, occupational, defined benefit pension scheme) have grown over time to such a relatively large scale that they are now several times greater than the reported net assets of the scheme sponsor, RTÉ. Since accounting standards in effect report Defined Benefit Pension Scheme liabilities as akin to a form of Debt (and measured by reference to Corporate Bond rates) the disproportionate size of the Pension Liabilities of the RTÉ Superannuation Scheme relative to RTÉ’s Net Assets, has the potential to materially impact on a meaningful appreciation of the underlying operational and financial performance of RTÉ. Accordingly the commentary below is based on the results of the Group excluding the net defined benefit pension related finance income arising on the assets and liabilities within the RTÉ Superannuation Scheme. The individual integrated business divisions (IBD) and central activities within RTÉ contributed to the result for the year as follows: 2007 2006 Restated €m €m Television 10.1 2.2 Radio 2.7 2.7 News & Current Affairs (2.6) (2.7) Performing Groups - - Network 5.5 5.4 Publishing (1.0) - Corporate HQ (4.3) (4.5) Consolidation Adjustments 3.0 (0.5) Divisional Sub-Total 13.4 2.6 Net Defined Benefit Pension Related Finance Income 16.2 14.5 Income Tax (3.2) 0.9 Net Surplus After Tax 26.4 18.0 Commercial Revenue Commercial Revenue increased as follows: €m Television Advertising +17.3 Radio Advertising +0.5 Other areas +5.5 Year-on-Year movement +23.3 Commercial Revenue 2006 222.2 Commercial Revenue 2007 245.5 Television advertising revenue remained buoyant in 2007 albeit in an increasingly volatile market and with a growing number of competitors selling advertising ratings. “ Overall, in 2007, against a background of significant ongoing competitive and general cost pressures allied to sustained growth in revenue, RTÉ produced a stable financial performance.” 26
ANNUAL REPORT & GROUP FINANCIAL STATEMENTS 2007 “ RTÉ estimates that circa 14% of all eligible households in the Republic of Ireland currently do not hold a valid television licence. ” Television Licence Revenue An Post are the sole agents appointed by the Minister for Communications, Energy and Natural Resources (DCENR) with responsibility for the collection of television licence monies from the general public. Collection of monies due by the Department of Social and Family Affairs in respect of “Free” television licences is the responsibility of DCENR. DCENR makes a non-repayable grant-in-aid of appropriate amounts to RTÉ. The key factors behind the growth in licence revenue in 2007 were: €m Growth in the volume of TV Licences sold +10.1 Price Increase in the cost of a TV Licence +2.8 Year-on-Year movement +12.9 Licence income 2006 182.8 Licence income 2007 195.7 The underlying level of Licence Fee evasion continues to remain high by international standards running at approximately double that of the UK. The financial burden of this non-compliance has in recent years been masked by the growth in new licences issued as a result of the high-level of new household formations. RTÉ estimates that circa 14% of all eligible households in the Republic of Ireland currently do not hold a valid television licence. Utilisation of Each TV Licence Fee Collected 2007 2006 Restated € € RTÉ One 60.12 59.36 RTÉ Two 31.47 33.64 Sub-total RTÉ Television 91.59 93.00 RTÉ Radio 1 14.64 11.98 RTÉ RnaG 10.02 9.46 RTÉ lyric fm 5.68 5.44 Sub-total RTÉ Radio 30.34 26.88 RTÉ Performing Groups 10.89 11.14 Total RTÉ activities 132.82 131.02 RTÉ Support for TG4 8.34 7.53 Broadcasting fund 7.40 7.30 Collection costs: An Post / DCENR / DSFA 9.44 9.91 Average cost of each individual TV Licence 1 158.00 155.76 1: The Licence Fee increased from €155 to €158 from 1 October 2006. Licence Fee attribution and use The greater proportion of RTÉ’s activities are public service activities but the cost of providing these services is well in excess of the amount of public funding received in the form of Licence Fee revenue. As a result RTÉ is critically reliant on a Dual Public / Commercial funding model and must engage in ancillary commercial activities aimed at generating commercial revenues to bridge the gap in public funding received. The accompanying pie-chart shows the attribution of Licence Fee revenues, received by RTÉ during 2007, to some of the public service activities carried out. The table following separately sets out a representation of how the proportion of each Licence Fee received was utilised during 2007 as RTÉ neither receives, nor is entitled to the benefit of, all of the Licence Fee monies collected. 27
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