STV profits are hit as channel launch nears
Revenue rises despite fall in television advertising
STV has reported a three per cent uplift in revenue to £120 million as the broadcaster saw earnings from non-broadcast activities rise to 23 per cent of the total.
Underlying pre-tax profits slipped three per cent to £15.7m, largely because of a decline in national television advertising.
And chief executive Rob Woodward said the impending launch of STV 2 and BBC Scotland marked “an exciting time for media in Scotland”.
STV 2 is set to launch in the spring, bringing together STV Glasgow and STV Edinburgh with three new licences in Aberdeen, Ayr and Dundee taking overall reach to 85 per cent of the population.
Part of the schedule will be a dedicated new programme incorporating Scottish, UK and international news.
“With two new channels specifically serving Scotland’s audiences, the overall winner is the consumer,” he said. “We’re launching 18 months ahead of BBC Scotland so we have 18 months to convince Scotland that STV 2 is going to be their channel of choice.”
The company hasn’t revealed the investment in STV 2 but Mr Woodward said just shy of 100 new jobs had been created to support new services.
“Our overall budget will be a lot smaller than that of the BBC but in our experience, it’s not about money, it’s about doing things that are smart, having an editorial narrative that can resonate with our audience and that’s what we’re delivering with STV 2.”
STV also said it had de-risked the business through confirming a long-term airtime sales agreement with ITV covering sales of national airtime and sponsorship rights.
Mr Woodward said this put the group in a “strong position to deal with any weakness in the advertising market in the short to mid-term whilst relentlessly pursuing our growth objectives”.
The growth of the high-margin digital business, with a 52 per cent margin helped push the overall consumer margin to an 11-year high of 18.5 per cent, in spite of the four per cent fall in national revenues declining. The regional airtime market was stronger, with sales up 19 per cent to £15m.
Non-broadcast revenue, which is predominantly digital, increased to 23 per cent; STV has a 30 per cent by 2018 target. “The digital profitability has doubled over the last three years and we will continue to offer new innovative digital services to expand that revenue,” said Mr Woodward.
Although underlying profits were down, bottom line pre-tax profit was up from £9.8m to £15.7m because exceptional charge were smaller last year than in 2015.
STV booked a £2.8m goodwill charge because its production unit missed a revenue target, in spite of sales growing 53 per cent to £12.7m. This follows a £5.1m writedown last year as part of a total £8.8m exceptional charge.
Mr Woodward said the target of £23m, which was set in 2013, was not in line with the group’s current growth trajectory, but added: “We have delivered and grown our production business.”
Mr Woodward added that the BBC’s commitment to commission
‘‘ Digital profitability has doubled over the last three years and we will continue to offer new digital services
more programming from Scotland would benefit STV’s production unit, which makes programmes such as The Antiques Roadshow for the BBC.
STV announced a final dividend of 11p, taking the total dividend for 2016 to 15p, up 50 per cent on the previous year. It also aims to pay out between 60 per cent and 80 per cent of cash generated after paying its pension-deficit payments, which Mr Woodward said was a “sign of the robustness of our business”.
STV has also launched a new operating division, STV External Lottery Management, to service the Scottish Children’s Lottery.