Results and Operating Profit

Like many businesses, RTÉ’s financial position was significantly impacted by the Covid-19 pandemic. The initial impact of the pandemic restrictions led to an unprecedented and severe decline in revenue, both commercial and licence fee, and cessation of production activity. The response from the RTÉ Executive was to implement an immediate financial recovery plan to curtail discretionary expenditure and protect cash. This, combined with the relative improvement in revenue towards the second half of 2020 and the significant savings resulting from curtailed production activity and sports events, led to a surplus for the year.

RTÉ’s EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) before special events costs was €25.9 million (2019 €8.4 million). The cost of special events in 2020 including the General Election amounted to €2.5 million and was lower than 2019 levels, resulting in a Net Surplus before Exceptional Items and Tax for the year of €9.8 million (2019 Deficit €9.1 million). The Net Surplus after Tax for the year was €7.9 million (2019 Net Deficit €7.2 million).

Commercial revenue declined by €11.3 million as Covid uncertainty curtailed advertising spend, although there was an improvement in the second half of the year and particularly the final quarter. Licence fee income remained flat, but this was due to the increase of €9.2 million from the DEASP announced in Budget 2019, which was a further part reversal of public funding cuts made since 2010. Underlying licence fee unit sales declined significantly year on year, which eroded the intended additional funding. Operating costs, including the costs of special events, of €307.7 million were €30 million lower than 2019 levels due to significant curtailment of production activity and sporting events in the year.

Summary Financial Highlights

	2020	2019	Change
	€ m	€ m	€ m
Commercial Revenue	134.5	145.8	(11.3)
Licence Fee Revenue	196.6	196.3	0.3
Total Revenue	331.1	342.1	(11.0)
Operating Costs (excluding Special Events)*	(305.2)	(333.7)	28.5
EBITDA** (before Special Events)	25.9	8.4	17.5
Special Events Costs	(2.5)	(4.1)	1.6
EBITDA	23.4	4.3	19.1
Depreciation & Amortisation	(13.5)	(13.8)	0.3
Gain on Disposal of Assets	-	0.3	(0.3)
Net Finance (expense)/income	(0.1)	0.1	(0.2)
Surplus/(Deficit) before Exceptional Items & Tax	9.8	(9.1)	18.9
Land Sale Gain less Sales-Enabling Project Costs	-	0.2	(0.2)
Surplus/(Deficit) before Tax	9.8	(8.9)	18.7
Tax	(1.9)	1.7	(3.6)
Net Surplus/(Deficit) for the Year	7.9	(7.2)	15.1

* Operating Costs before Depreciation & Amortisation and excluding the incremental costs of Special Events.

** EBITDA: Earnings before Interest, Tax, Depreciation, Amortisation and Exceptional items.

Commercial Revenue

2020 commercial revenue of €134.5 million represents a decline of 7.8% on the 2019 figure of €145.8m. Clearly the main reason for the decline was the impact of Covid-19, which manifested most dramatically in Q2 2020 and had varying impacts on individual revenue lines throughout the year.

	2020 v 2019 Change €m	Change %
Commercial Revenue 2019	145.8
Television Trading	(6.7)	-8.1%
Radio Trading	(0.8)	-3.4%
Digital Trading	-	-
Other Non-Trading Revenues	(3.8)	-11.6%
Year-on-Year Movement	(11.3)	-7.8%
Commercial Revenue 2020	134.5

TV Spot, the single biggest contributor to commercial revenue, declined by 6.3% on 2019, which was a better performance than the estimated market decline of 10%. The most significant decline was 35% in Quarter 2, driven by categories including Drink, Motors, Travel and Transport and Retail. Quarter 3 showed a 5% year on year decline with a very positive reversal to +12% in quarter 4. The very high audience levels generated by RTÉ from March onwards resulted in incremental client budget allocations to RTÉ TV in the latter part of the year.

Total TV trading revenue, including Sponsorship and Product Placement, declined by 8.1% overall. A number of expected sponsorships did not materialise due to changes in the programme schedule and a number of delayed productions.

Radio trading, which includes spot, sponsorship and promotions, had a successful year in relative terms, with a year on year decline of 3.4%. This decline was driven to some extent by a decline in sponsorship revenue but was primarily due to a drop of almost 70% in radio promotions revenue, due to the cancellation of all outside broadcasts and all concerts.

Radio spot performed uniquely well in 2020 and grew by 4.3% on 2019. This level of year on year growth compares favourably with a market estimated to have declined by 7%. While declines were experienced in similar categories to TV above, an increase in Government spend more than compensated for this. While all Government spend represented 9% of total radio spot revenue in 2019, the comparative 2020 figure was 21%.

Digital trading revenues were in line with the prior year. Digital VOD revenue was up 3.3% year on year and was less affected than TV as some clients continued their digital campaigns to maintain a level of presence. Market estimates are that digital video revenue was up 8% in 2020 but broadcaster VOD was down by 4%. Digital display revenue across rte.ie declined by 3.6% year on year.

Other non-trading revenue lines were significantly affected by the pandemic and in total were down 11.6% year on year. Notably, Orchestra revenue was 78% down year on year due to the absence of live events.

PIC (Programme Interaction Competitions) revenue declined 24% year on year, largely due to the editorial decision not to run viewer competitions on The Late Late Show from March onwards. Instead the programme raised money each week for individual charities.

The RTÉ Guide had a strong year in circulation terms and was less than 3% down year on year. Total copy sales of 1.86m included a 4% growth figure for the flagship Christmas issue, which sold 270,990 copies. Advertising revenue was however adversely impacted in line with the print market, and declined by 31% on 2019.

Television Licence Revenue

As RTÉ is a dual-funded public-service broadcaster with a broad range of statutory responsibilities, the level of public funding it receives to fulfil its role is crucial. The Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media (DTCAGSM) is responsible for the collection of licence fee monies from An Post (the appointed agent for the sale of TV licences) and from the Department of Employment Affairs and Social Protection (DEASP) in respect of ‘free’ television licences. The DTCAGSM then makes a grant to RTÉ out of licence fee monies collected.

Of the €223.6 million licence fee collected in 2020, €196.6 million (88%) was received by RTÉ. The remaining licence fee collected, €27 million, was used to pay An Post collection costs and related charges and to provide funding for the BAI Sound & Vision Fund. Licence fee income received by RTÉ in 2020 was just €0.4 million higher than 2019, despite an increase of €10 million in the amount received from the DEASP in respect of ‘free’ television licences, which was a part reversal of the public funding cuts made since 2010. Unfortunately the benefit of this funding has been eradicated by the decline in licence fee unit sales in the year due to the impact of the Covid-19 restrictions on licence fee inspector activity and the economic impact on households.

Latest evasion levels for 2019 as calculated by the DTCAGSM are 13% of chargeable domestic households and business premises. Evasion levels in Ireland are significantly higher than the UK and other European countries and collection costs are more than double other European PSBs. An Post, DTCAGSM and RTÉ continue to work to address evasion levels.

Of concern is the increase in the number of homes that do not have a traditional television set. This has been growing steadily over recent years, as per the Nielsen Establishment Survey, and is now 13% (January 2021), an increase of over 1% in the past year. As media consumption patterns become more complex, the television licence fee mechanism reflects less and less how people consume public-service content. It is for this reason that the mechanism is being changed in other countries to a media charge or other methods, rather than being device dependent.

Despite the Broadcasting Authority of Ireland’s (BAI) recommendation of an immediate increase of €30 million in public funding, made in 2018 as part of its review of RTÉ’s 2018–2022 strategy, RTÉ’s public funding has increased by only c.€8 million since then. The need for increased public funding remains as acute as ever, despite the temporary relief on RTÉ’s finances resulting from the curtailment of content and production in 2020. The Future of Media Commission was established by Government to address this issue and its recommendation is due in 2021.

The section ‘How Your TV Licence Fee Is Used’ (see pages 26–27) outlines how the licence fee is used, with 84% of total licence fee invested in RTÉ services and activities. The remaining 16% is invested in non-RTÉ activities, including the BAI Sound & Vision fund, TG4 deduction and support, and An Post collection fees.

Operating Costs

2020 total operating costs were €307.7 million, a reduction of €30.1 million on 2019 levels. During 2020, RTÉ availed of the Government’s Temporary Wages Subsidy Scheme for part of the year.

The cost of special events in 2020 was €2.5 million and included coverage of the General Election and other events.

Operating costs, excluding special events, fell by €28.5 million as a result of a combination of factors:

1. The negative impact of Covid-19 restrictions on both in-house and commissioned production.
2. The curtailment of many sports events.
3. Savings were achieved as a result of restrictions on travel and having employees working remotely for most of the year.
4. As part of RTÉ’s Revised Strategy 2020–2024, published in late 2019, RTÉ committed to deliver savings of €60 million over three years 2020–2022. The target savings for 2020 were €10 million and these were achieved through a combination of pay, content and generic cost saving initiatives.

	2020 v 2019 Change € m
Operating Costs 2019	337.8
Decrease in Operating Costs	(28.5)
Decrease in Special Events Costs	(1.6)
Year-on-Year Decrease (Including Special Events)	(30.1)
Operating Costs 2020	307.7

Employee Numbers

At 31 December 2020, there were 1,866 (2019: 1,831) employees, of which 240 (2019: 240) were part-time/casual. The full-time equivalent headcount at 31 December 2020 was 1,758 (2019: 1,714). The headcount increase in the year is mainly due to the regularisation of individuals previously engaged as contractors or through agencies and the return of individuals from unpaid leave.

Net Finance Expense

A net finance expense of €0.1 million arose in 2020 (2019 net income of €0.1 million), comprised as follows:

Finance income for 2020 was €1.6 million compared to €1.3 million in 2019. It included net interest income of €1.4 million related to IAS 19 defined benefit pension scheme (2019: €1.0 million); and investment income of €0.2 million from a joint venture (2019: €0.3 million).

Finance expense for 2020 amounted to €1.7 million compared to €1.2 million in 2019. The expense of €1.7 million included interest payable on borrowings, refinancing costs, interest on restructuring costs and fair value loss on derivative foreign currency contracts.

Taxation

There was an overall tax charge of €1.9 million in 2020 (2019 tax credit of €1.7 million). A tax charge arises in the year as a result of the surplus generated. The Income Statement tax charge includes a deferred tax credit of €0.2 million resulting from timing differences between capital allowances claimed and depreciation charged.

Cash Flow and Borrowings

Total cash balances including liquid investments at 31 December 2020 amounted to €87.2 million (2019: €69.1 million), an increase of €18.1 million primarily due to the improved operation results for the year. The movement in 2020 cash balances can be summarised as follows:

Summary Cash Flow Statement

	2020	2019
	€m	€m
EBITDA	23	4
Operating cash flows: – Working Capital (increase)/decrease	(2)	3
Restructuring cash flows: – Payments	(1)	(3)
Investing Activities:
– Capital Expenditure	(6)	(13)
– Taxes refunded on Sale of Assets	-	2
Financing cash flows:
– Borrowing Drawdown	5	10
– Interest Paid	(1)	(1)
Net Increase in Cash and Liquid Investments	18	2

Given the financial pressures experienced in recent years there has been an increased focus on cash management and funding. This continued to be a key financial management priority throughout 2020, especially with the uncertainty that Covid-19 brought to the trading environment. Although the initial outlook following the introduction of Covid-related restrictions was expected to be negative, the final position showed improved cash balances as the curtailed activity reduced expenditure in the year.

At 31 December 2020, RTÉ had bank borrowings of €65 million (2019: €60 million) comprised as follows:

• 2rn, RTÉ’s transmission subsidiary, has a €60 million Club Facility with Barclays and Bank of Ireland. €45 million of this facility relates to project finance for the transmission and distribution infrastructure required for the Digital Terrestrial Television network, and is outstanding at 31 December 2020. An additional term loan facility for €15 million is in place, of which €10 million is drawn as at 31 December 2020.
• RTÉ has a €20 million facility with Bank of Ireland, which includes a €10 million revolving credit facility and a €10 million term loan facility. As at 31 December 2020 the €10 million term loan is drawn.

Financial Risk Management

The Board of RTÉ sets the treasury policies of the Group, which cover borrowings, cash management, counterparty credit risk, liquidity risk, interest rate risk and foreign exchange risk. RTÉ’s exposure under each of these risks is set out in note 23 to the financial statements.

Capital Grant

A capital grant was received from the DTCAGSM to facilitate the clearing of the Spectrum 700 MHz frequency band, as stipulated by the EU. Capital grants are recorded as deferred income and released to the Income Statement on a basis consistent with the depreciation policy of the underlying assets.

Capital Expenditure

RTÉ’s total expenditure incurred on capital projects in 2020 was €7.5 million (2019: €15.6 million), which included investment in technology, 2rn network renewals and the Spectrum 700 MHz project. RTÉ has also incurred capital expenditure on a number of key strategic capital projects agreed by the RTÉ Board to be funded from the net proceeds of the 2017 land sale.

Capital expenditure incurred on the 700 MHz migration project during 2020 was €0.7 million (2019: €1.6 million). This project involved migrating broadcast services out of the 700 MHz frequency band by 2020 and is primarily funded by the DTCAGSM.

Spend is underway on a number of Strategic Capital projects approved by the RTÉ Board to be funded from the land sale, including an upgrade of the Channel & Rights Management system, a new Storage Platform, upgrades on the Radio Studios, a new ERP system and the upgrade of our Post Production systems.

Segmental Reporting and Cost Allocation

RTÉ’s segmental analysis is prepared in accordance with IFRS 8 Operating Segments which is set out in note 2(d). RTÉ’s primary reporting segments are its divisions which were established on 1 January 2018 under the One RTÉ restructuring project. As a result of the change in the organisational structure and the increase in non-linear output, with additional programmes getting first showings on digital and a move towards a ‘digital-first’ approach particularly in news, RTÉ revised and updated its cost allocation methodologies in 2018 to reflect the new structure. These have been consistently applied for 2020 as outlined and presented in Note 2, Segmental Reporting.

Regulation

RTÉ is regulated by the BAI in relation to its obligations as a public-service broadcasting corporation. RTÉ (as required by the Broadcasting Act 2009) cooperates with the BAI in the annual and five-year public funding reviews carried out by the BAI under section 124 of the Act. In October 2017 RTÉ submitted its five-year strategy 2018–2022, Renewing RTÉ for the Next Generation for consideration. In October 2018, the BAI endorsed RTÉ’s strategic plan and recommended “at a minimum, that RTÉ should receive an increase in its annual public funding of €30m per annum”. In late 2019, RTÉ published its Revised Strategy 2020–2024, a plan that brings Ireland’s public service media to sustainability and addresses many of the challenges RTÉ faces. RTÉ is fully engaged in the subsequent annual reviews with BAI and has also engaged fully with the Future of Media Commission in relation to its role in recommending reform of the future funding model for public service media.

In line with Government and BAI requirements, RTÉ’s Fair Trading Policy and Procedures is published on RTÉ.ie. The policy and procedures set out a framework grounded on:

• Clear separation between commercial activities and public services
• Fair trading in line with market principles
• Transparency and accountability

The Commission for Communications Regulation (ComReg) previously designated RTÉ and 2rn as having significant market power (SMP) in the markets for the provision of transmission and distribution services to radio broadcasters and the DTT multiplex operator as well as the downstream supply of DTT multiplexed services to broadcasters. The decision placed certain obligations on both RTÉ (Market B) and 2rn (Market A). Separated accounts comprising regulated accounts for each of Market A and Market B, together with primary accounting documentation, are published in accordance with regulatory requirements.

GDPR (General Data Protection Regulation) legislation came into force on 25 May 2018. GDPR introduces new rights for individuals and introduces new and increased obligations on organisations that are data processors or data controllers, such as RTÉ. It also gives new and extensive powers to the privacy regulator, the Data Protection Commission. RTÉ complies fully with GDPR legislation.

Pensions

RTÉ operates three pension schemes for its employees: a defined benefit (DB) scheme, a defined contribution (DC) scheme and a hybrid scheme (elements of DB and DC).

RTÉ Superannuation Scheme

The RTÉ Superannuation Scheme is a funded, contributory DB scheme, established under legislation and sponsored by RTÉ. No new employees have been admitted to the scheme since 1989. As at 31 December 2020, RTÉ had 98 employees (2019: 119) who were members of the scheme.

As at 31 December 2020, the assets of the scheme had a market value of €1,096 million (2019: €1,091 million). The liabilities of the scheme, as valued in accordance with IAS 19 Employee Benefits, were €949 million (2019: €984 million). As required under IAS 19, the excess or shortfall of the assets compared to the liabilities of the scheme is reported as an asset or liability on RTÉ’s statement of financial position. Therefore, as at 31 December 2020, there is a pension asset of €147 million reported in respect of the scheme (2019: €107 million). Strong investment returns and reduced mortality assumptions for 2020 led to the increase in surplus.

The scheme has a surplus under MFS and meets the solvency requirements under the risk reserves, therefore no funding proposal is required for this scheme.

RTÉ Defined Contribution Scheme

The RTÉ Defined Contribution Scheme is a funded, contributory DC arrangement that has been open to new members since 1989. As at 31 December 2020, RTÉ had 1,252 employees (2019: 1,220) who were members of the scheme.

RTÉ 50/50 Risk-Sharing Pension Scheme

The RTÉ 50/50 Risk-Sharing Pension Scheme is a funded, contributory hybrid scheme with DB and DC elements sponsored by RTÉ. The scheme commenced in September 2010 as an optional pension arrangement for eligible employees. As at 31 December 2020, RTÉ had 385 employees who were members of the RTÉ 50/50 Risk-Sharing Pension Scheme (2019: 366).

As at 31 December 2020, the assets of the DB section of the scheme had a market value of €28.3 million. Under IAS 19, the liabilities of the DB section were €24.3 million, giving rise to a surplus of €4.0 million (2019 surplus €3.4 million). This is reported as an asset on RTÉ’s statement of financial position.

The DB section of the scheme has a surplus under MFS and meets the solvency requirements under the risk reserves, therefore no funding proposal is required for this scheme.

Insurance

Appropriate insurance cover is held for a range of material insurable risks, including sizable catastrophe risks, subject to relevant deductions and exclusions.

Legal Proceedings

RTÉ and its subsidiary companies are party to a range of legal proceedings, including ones in which claims have been asserted against RTÉ or its subsidiaries but the outcome of which remain uncertain. Based on the advice received, RTÉ believes that necessary steps have been taken to ensure the outcome of all of these proceedings will not, in aggregate, have a long-term significant adverse effect on RTÉ’s financial condition, results or liquidity.

Outlook

• At the time of writing the Covid-19 pandemic continues to disrupt all elements of Irish society. The country remains under Level 5 restrictions. As a result of these restrictions both commercial income and licence fee income are tracking below 2020 levels, compounding the income drop seen in 2020. As was the case in 2020, the restrictions impose difficulties on programme making and have curtailed sports events in the early part of 2021. While the loss of income is currently being offset by cost savings, the situation remains very volatile and it is very difficult to forecast.

• RTÉ continues to implement the savings targets in the Revised Strategy 2020–2024. Savings of €20 million have been targeted in 2021.

How Your TV Licence Fee Is Used

The utilisation of licence fee monies received by RTÉ to fund its public services is reported in note 2 to the financial statements.

The basis on which the licence fee is attributed to channels and services is set out in note 2(c). RTÉ attributes public funding to individual services in a way that reflects the net cost of the public service. The net cost of public service is determined by deducting the contribution from commercial activities from the gross cost of delivering the public service.

The following table represents how an individual TV licence fee is used, bearing in mind that RTÉ is not the sole recipient of TV licence fee monies:

Utilisation of Each TV Licence Fee Collected

	2020 €	2019 €
RTÉ One	48.72	47.46
RTÉ2	26.45	27.37
RTÉ Television	75.17	74.83
RTÉ Radio 1	14.04	12.69
RTÉ 2fm	2.71	2.39
RTÉ Raidió na Gaeltachta (RnaG)	8.14	8.33
RTÉ lyric fm	3.62	4.24
RTÉ Radio	28.51	27.65
RTÉ Orchestras	7.98	9.15
Online Services	10.74	8.31
Other Channels and Services	8.30	9.39
Governance and Financing Charges	2.75	3.30
DTT Related	0.64	0.91
RTÉ Activities	134.09	133.54
	84%	83%
RTÉ Support for TG4	5.31	5.44
BAI Levy	1.30	1.23
BAI Sound & Vision Fund	10.59	10.55
An Post Collection Costs and Related Charges	8.71	9.24
Non-RTÉ Activities	25.91	26.46
	16%	17%
Cost of TV licence	160	160

The pie chart below summarises the attribution of the TV licence fee revenues that were received by RTÉ to the public-service element of RTÉ’s activities during 2020.

Cost Per Transmitted Hour

As part of its Annual Statement of Performance Commitments, RTÉ publishes the average cost per transmitted hour of programmes broadcast by channel. The table below provides this information for 2020, together with comparative figures for 2019.

2020	RTÉ One	RTÉ2	RTÉ Radio 1	RTÉ 2fm	RTÉ lyric fm	RTÉ RnaG
	€’m	€’m	€’m	€’m	€’m	€’m
Costs
Indigenous Programming	98.7	31.4	27.9	5.0	3.9	9.9
Acquired Programmes – Ireland	2.9	0.6	-	-	-	-
– Overseas	13.2	9.3	-	-	-	-
General Broadcast & Transmission Operations	12.1	8.3	5.4	4.2	0.6	0.5
Transmission & Power Charges	2.2	2.1	1.9	1.1	1.1	1.1
	129.1	51.7	35.2	10.3	5.5	11.5
Hours	Hours	Hours	Hours	Hours	Hours	Hours
Annual Transmission Hours (incl. simulcast)	8,784	8,784	8,845	8,784	8,784	8,784
Overall Average Cost per Transmitted Hour – 2020	€	€	€	€	€	€
All Transmission Hours	14,700	5,900	4,000	1,200	600	1,300

2019	RTÉ One	RTÉ2	RTÉ Radio 1	RTÉ 2fm	RTÉ lyric fm	RTÉ RnaG
	€’m	€’m	€’m	€’m	€’m	€’m
Costs
Indigenous Programming	105.8	44.5	28.6	5.2	4.8	10.1
Acquired Programmes – Ireland	2.0	1.2	-	-	-	-
– Overseas	12.8	8.9	-	-	-	-
General Broadcast & Transmission Operations	12.8	9.4	5.2	4.2	0.6	0.5
Transmission & Power Charges	2.2	2.2	2.0	1.1	1.1	1.1
	135.6	66.2	35.8	10.5	6.5	11.7
Hours	Hours	Hours	Hours	Hours	Hours	Hours
Annual Transmission Hours (incl. simulcast)	8,760	8,760	8,855	8,760	8,760	8,760
Overall Average Cost per Transmitted Hour – 2019	€	€	€	€	€	€
All Transmission Hours	15,500	7,600	4,000	1,200	700	1,300

Annual Movement
% Change in Cost per Hour1
All Transmission Hours	(5.1)%	(22.1)%	(1.3)%	(2.9)%	(15.7)%	(2.6)%

1. Costs per hour are rounded to nearest hundred euro. Percentage changes are calculated from the costs per hour before rounding.

Changes in average cost per transmitted hour are due to changes in programme costs due to a range of factors including changes in programme type and programme mix, levels of co-funding, the number of first transmission hours and repeat programming.