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STV looking to digital for growth

It had a good year after advertising revenue bounced back but its future growth is dependent on digital growth.
September 9, 2021
  • 66 per cent growth for STV player (digital)
  • Total advertising revenue up 32 per cent  

If you switch to channel three in Scotland you get STV (STVG). During the past year, lots of people have been turning it on, either to catch up on Covid-19 updates and/or to watch Scotland’s 'historic' 0-0 draw with England during Euro 2020. The consequence of record high viewing figures and a recovering advertising market is that broadcast revenue was up 40 per cent to £50.2m in the first half of the year.

The digital business currently only contributes £8.5m (14 per cent) of total revenues but should be the driver of any future growth. It had 64m streams from January to June, which is a 94 per cent year-on-year increase, and the aim is for 50 per cent of profit to come from outside broadcasting by 2023. STV is looking beyond Scotland for a boost and launched STV digital across the UK at the start of the year.

Growing digital would be great for its margins. Companies can sell digital advertising at more than double the rate of broadcast because they have more data on their digital users. In the first half of the year, the operating margin on digital was 46 per cent compared with 21 per cent for broadcast.  

House broker Panmure Gordon has lifted its 2021 EPS guidance to 36.8p from 25.7p and is now forecasting 41.6p for 2022.

The streaming business is a very competitive industry, although Scots watch 15 per cent more TV than the rest of the UK and are loyal to the STV brand. The population of Scotland is only just over 5m but there are more than 800,000 Scots living in the rest of the UK. Potentially fertile ground, but we believe more attention is needed on the balance sheet prior to any recommendation update. Hold.

Last IC View: Hold, 234p, 1 September 2021

STV (STVG)    
ORD PRICE:339pMARKET VALUE:£158m
TOUCH:339-349p12-MONTH HIGH:371pLOW: 234p
DIVIDEND YIELD:2.9%PE RATIO:8
NET ASSET VALUE:*NET DEBT:£28m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
202044.7-4.90-9.103.0
202160.38.5015.43.7
% change+35--+23
Ex-div:30 Sep   
Payment:05 Nov   
*Negative shareholder equity