STV’S directors will consider reinstating its dividend payments to shareholders after the Glasgow-based broadcaster continued to slash its debt pile and grow its production business.
Chief executive Rob Woodward told The Scotsman that STV’s debt-to-profits ratio will fall below 2.5 later this year, at which point the board will look at a return to the divi list.
Woodward said the business was generating a lot of cash, but that its major shareholders had agreed last year that the priority was paying down debt.
“Our big investors unanimously agreed that they didn’t want us to start paying a dividend too early during our recovery,” he said.
“But we’ll pass the 2.5 threshold later this year and then we will hit 1.5 within a short space of time. That will be the point at which we will almost certainly start paying a dividend again, if not sooner.”
His comments came as STV posted a 3 per cent rise in underlying pre-tax profits for 2012 to £14.4 million on the back of revenues edging up by 1 per cent to £102.7m. Woodward highlighted that revenues from STV’s growing production unit rose by 21 per cent to £10.2m, although this was still below the company’s target of £12m.
“Margins at the production
division were squeezed, but that’s because we’re recruiting staff under Alan Clements, our head of content,” Woodward said.
The unit yesterday revealed that the BBC has commissioned a third series of Celebrity Antiques Road Trip.
STV is also due to revive the classic Catchphrase game show for ITV and is making its first film for cinemas, a documentary to mark the 25th anniversary of the Piper Alpha disaster, based on the book by Scotsman journalist Stephen McGinty. “I’ve seen early extracts from it and it looks great,” Woodward said. “It will be shown in art-house cinemas and then on the BBC around the time of the anniversary in July.”
Revenues from STV’s online operations also missed their target, hitting £6.5m against the company’s aim of £9.1m, but Woodward pointed out that the margin on digital operations was higher than expected at 26 per cent instead of 20 per cent.
He added that delays at communications regulator Ofcom meant the local television stations in Edinburgh and Glasgow – being launched in partnership with Edinburgh Napier and Glasgow Caledonian universities – would be launched early next year instead of this year.
Patrick Yau, an analyst at house broker Peel Hunt, said: “This is an important trading statement, underlining continued focus on the most important issues – cash generation and net debt. Management continues to run a tight operation into 2013 and we remain positive on margin recovery.”
Numis Securities analyst Paul Richards added: “We continue to believe that one more good year of cash generation will see debt come down to more tolerable levels which will see value build in the equity. Due to the timing of Easter and Euro 2012 comparatives, we expect flat advertising for the first half of 2013.”
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