STV today rewarded shareholders with a return to the dividend and declared it will pursue a progressive payout policy as long as its financial performance continues to improve.
The company confirmed speculation by recommending its first payment to investors in seven years after posting strong growth in earnings and profits for 2013. It proposes a final dividend of 2p per share, higher than the 1.5p most analysts expected.
STV intends to raise that payment to 3p in 2014, split between a 1p interim and a 2p final dividend. Chief executive Rob Woodward said the group would thereafter continue increasing the dividend as a percentage of profit as long as key financial targets are met. “It is basically about affordability,” he added.
Net debt fell to less than twice earnings for the first time since 1999, when the company began an acquisition spree that took it close to collapse by 2007. Pre-tax profits rose 16 per cent to £15.2 million on revenues which were 9 per cent higher at £112.1m.
STV’s production arm generated strong revenue growth of 32 per cent driven by commissions for programmes like Antiques Road Trip for BBC Two and Let Me Entertain You for ITV.
The production division is expected to continue generating double-digit growth in the current year following yesterday’s announcement that it will make 25 episodes of a new quiz show called The Link for BBC One. The shows, which are to be filmed in Glasgow, will be presented by actor Mark Williams of The Fast Show and Harry Potter fame.
STV, which recently secured a ten-year extension to its broadcast licences from regulator Ofcom, has also agreed a deal with Warner Bros. International Television to sell The Link into other markets around the world.
Digital revenues were 23 per cent higher last year, generating an operating profit of £3m. Overall, non-broadcasting revenues rose by 8 percentage points to 19 per cent, taking STV closer to its target of generating one-third of turnover from activities other than broadcasting by the end of 2015.
Despite these efforts at diversification, Woodward said broadcasting itself was “proving to be very robust”. “For the first time in ten years, our audience size actually increased,” he said.
Like ITV last month, STV reported a bright start to television advertising for the current year, with revenues up 5 per cent in the first quarter. Continued benefits are expected from this year’s World Cup, with sales to increase by as much as 8 per cent.
Woodward said STV was on course to launch its first local television station in Glasgow by June of this year, ahead of the start of the Commonwealth Games.
The group won licenses covering Glasgow and Edinburgh as part of a government-promoted initiative being rolled out across the UK. Despite some scepticism as to whether city TV stations will be commercially viable, Woodward believes STV is in a strong position because it will cover two-thirds of the Scottish population.
The Edinburgh station will be launched later this year after the Glasgow roll-out. The cost of launching both is expected to be about £1m.
Shares in STV closed up nearly 6 per cent yesterday, rising 20p to 359p.