City reaction: STV posts solid profit gain but expresses caution over Brexit

Broadcaster STV Group has hailed its best viewing share figure in a decade and posted a 10 per cent hike in operating profit but warned of the negative impact on advertising revenues caused by Brexit uncertainty.

STV Productions was responsible for hit drama series The Victim, which was aired on the BBC. Picture: Mark Mainz

Releasing results for the six months to the end of June, the Glasgow-headquartered group said adjusted operating profit had risen to £11 million from £10m a year earlier.

Total revenue was down 5 per cent to £54.9m from £57.7m, primarily due to the phasing of programme deliveries at its STV Productions arm and the closure of the loss-making STV2 channel. The interim dividend was raised 5 per cent to 6.3p per share.

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The group highlighted the best STV all-time viewing share since 2009, at 18.7 per cent, noting that 99.7 per cent of all commercial audiences over 500,000 in Scotland had been delivered by the broadcaster.

A strong viewing performance was driven by entertainment hits including Britain’s Got Talent and The Chase, dramas Manhunt, Cheat and The Bay, which broke STV streaming records, and local content Sean’s Scotland and STV News at Six.

The group has also benefited from The Victim, an STV Productions drama which was aired on BBC1 earlier this year to much critical acclaim.

STV added that its growth fund had continued to underpin regional advertising, attracting more than 100 new advertisers since its launch.

It warned that national advertising would continue to be impacted by Brexit, with the nine months until the end of September expected to be 6 per cent to 7 per cent down.

Regional advertising is expected to be 10 per cent to 15 per cent up over the same period, while digital advertising is forecast to be 20 per cent to 25 per cent higher.

Overall, that would see total STV advertising broadly flat for the nine-month period.

Chief executive Simon Pitts said: “An operating profit increase of 10 per cent when national advertising revenues are down supports the decisions we took to reposition the group for profitable growth, focusing on STV’s regional strengths and the exciting growth potential offered by our digital and production businesses.

“In the first half of 2019 we have enjoyed the best all time viewing share on STV since 2009 and our total advertising revenue has outperformed the wider TV market.

“Although current political uncertainty around Brexit will continue to impact total national advertising revenue in the second half, we expect further growth in digital and regional revenue and an improved performance from STV Productions.”

Arlene Ewing, investment manager at Brewin Dolphin, said: “Despite revenues being down 5 per cent and still suffering from the closure of STV2, overall STV continues to outperform expectations.

“A mix of successful STV productions like The Victim and increased focus on digital and regional advertising have also contributed to the dividend increasing by 5 per cent to 6.3p.

“Despite Brexit effects, STV looks confident going forward, with high value offerings like the Rugby World Cup and I’m a Celebrity still to contribute to the coffers.”

Analysts at Peel Hunt noted: “These are strong interim results, with profit ahead of forecast. Brexit remains a macro concern, but one faced with a very beneficial trading structure with ITV. We retain the ‘buy’ recommendation.”

Shares were flat in early trading.