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STV struggles in a tough advertising market

The Scottish broadcaster of ITV reported a decline in revenues, operating profits and earnings
March 1, 2018

STV (STVG) may be Scotland’s most watched commercial television channel, but that doesn't make it immune to the ongoing slump in on-screen advertising. Like it’s English cousin, ITV (ITV) – which sells all of the advertising space on STV’s main channel – the broadcaster reported a decline in both national and regional marketing, which dragged revenues in its consumer division down 5 per cent to £100m.

IC TIP: Hold at 372p

But STV’s shareholders responded well to these numbers. That may be because the group reported a 14 per cent increase in revenues from its digital operations, booked £1.7m of sales from its independent channel, STV2, and managed to maintain operating margins thanks to the structure of its partnership with ITV.

Management also gave a cheery update on the 2018 outlook. STV’s national airtime revenues are expected to tick up slightly thanks to an anticipated increase in advertising during the Fifa World Cup, while its regional division is forecast to grow between 20 and 25 per cent. The productions business is also expected to recover after a disappointing 2017.

Broker Numis forecasts pre-tax profits of £20m and EPS of 44.2p in 2018 (up from £18m and 39.6p in 2017).

STV (STVG)    
ORD PRICE:372pMARKET VALUE:£146m
TOUCH:372-375p12-MONTH HIGH:392pLOW: 305p
DIVIDEND YIELD:5%PE RATIO:12
NET ASSET VALUE:*NET DEBT:£35.5m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201311214.332.22.0
201412017.338.78.0
20151179.829.810.0
201612015.732.515.0
201711713.930.117.0
% change-3-11-7+13
Ex-div:12 Apr   
Payment:31 May   
*Negative shareholders' funds