STV profits to take hit from slump in advertising market but outlook positive
In a trading update to investors, the Glasgow-headquartered group flagged an operating profit of about £20 million for 2023 amid “UK macroeconomic uncertainty”. That comes despite overall revenue increasing by 30 per cent for the first nine months of the year. Digital and studios revenue and operating profit are expected to be “materially up” on 2022, underlining the “continued success” of the group’s diversification strategy.
Chief executive Simon Pitts said STV was making “strong strategic progress” despite a challenging advertising and commissioning market impacted by ongoing economic uncertainty in the UK. He added: “Our diversification strategy delivered total revenue growth of more than 30 per cent for the first nine months of the year as well as material profit growth in our digital and studios businesses.
“We remain confident in our future growth prospects, with a strong content line-up on STV and STV Player, a compelling pipeline of new programme ideas across the expanded STV Studios, and a clear growth strategy, ensuring that we are well placed for the economic recovery when it comes.”
Revenue from the fast-growing STV Studios business will nearly treble this year to £65m-£70m, compared with a £40m target, with operating profit of “at least” £5m, the group noted. Regional advertising is down 10 per cent for the nine months to the end of September, against a national decline of 14 per cent.
Panmure Gordon analyst Johnathan Barrett said: “The announcement is bittersweet with downgrades souring the strong execution on scaling studios and growing the digital business. STV is hardly alone in feeling the cold macro wind so this announcement may in time be seen as a cyclical bump. Valuation and yield remain attractive.”
Roddy Davidson, an analyst at house brokerage Shore Capital, said the operating profit projection of around £20m compared with his estimate of £24m. He added: “This release flags a robust performance over the period but, in a similar fashion to ITV’s third-quarter update, highlights the negative impact of uncertain economic conditions on the linear TV advertising and content commissioning markets.”
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