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STV predicts growth in first quarter ad revenue as national advertising performs better than expected

The Scottish broadcaster said it expected total advertising revenue growth of between 1-2% in its first quarter, helped by a boost in regional and digital ad income
STV building
The expected decline of 1-2% in national advertising revenue was better than the 5% fall predicted in February

STV Group PLC (LON:STVG) is expecting to report total advertising revenue growth of between 1-2% in its first quarter after a better than feared performance in its national advertising arm.

In an update ahead of its AGM, the Scottish broadcaster said the overall growth figure had been down to an expected increase of 20-25% in its regional advertising arm, as well as a 15-20% uplift in digital revenues from its STV Player platform.

The strong growth in the two segments offset a decline of 1-2% in national advertising revenue, although the fall was ahead of guidance, with the company having predicted a 5% drop in its full year results on February.

Meanwhile, STV said its production arm, which produces shows such as Antiques Road Trip and aired its first BBC-commissioned drama The Victim over the quarter, had performed “in line with expectations” with secured revenues in the period equivalent to over 60% of those for the whole of 2018.

Overall, the company said it had traded “in line” for the quarter, with chief executive Simon Pitts adding that the advertising revenues reflected “STV's increasing resilience in the advertising market even in an uncertain economic climate”.

Pitts also flagged the upcoming appointment of a new chief financial officer, Lindsay Dixon, who is due to take up the role on 21 May.

National ad revenue “pleasing” but watch out for Brexit, says house broker

In a note to clients, analysts at STV’s house broker Peel Hunt said the “more robust” performance in national ad revenues was “pleasing”, however cautioned that the potential impacts of Brexit on consumer and advertiser behaviour could arise in the Autumn following the extension of the UK’s exit date to 31 October.

Despite this cautious signal, Peel Hunt left its forecasts for the group unchanged, saying the revenue components that were “more fully in the company’s control” were “a very healthy statement to the effectiveness of the group strategy”.

Scottish presence helps beat ITV while new BBC Scotland channel could offer opportunities, says analyst

Commenting on the figures, Roddy Davidson, an analyst at broker Shore Capital, told Proactive that STV was “consistently outperforming” their main comparative company, FTSE 100 ITV PLC (LON:ITV), thanks mainly to their regional advertising line and an “incredibly strong identity and presence“ in the Scottish market.

Davidson added that the BBC’s new Scotland channel, which was launched in February, “hadn’t done very much” to pull viewers away from STV and was in fact cannibalising viewership from existing BBC channels in the region.

In fact, he said the expanded BBC presence could be “an opportunity” for STV’s production arm due to the new channel’s £32mln budget for new programming, as well as renewed commitments by the BBC to spend more of its budget on regional programming.

In early deals on Tuesday, STV shares were steady at 382.5p.

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