STV expected to see profits tumble by 5%

PROFITS at STV are tipped to be down on the first six months of last year, when the broadcasting and media group benefited from the airing of the World Cup.
Esther Ranzen and Rebecca Wilcox in STVs series Antiques Road TripEsther Ranzen and Rebecca Wilcox in STVs series Antiques Road Trip
Esther Ranzen and Rebecca Wilcox in STVs series Antiques Road Trip

Analysts at Numis are pred­icting a profit before tax of 
£8 million when STV posts its first-half results on Thursday, a decline of almost 5 per cent on 2014, which saw national airtime revenues driven higher by broadcasts of the Fifa competition in Brazil. Performance this June will suffer by comparison, though there are suggestions the decline may not be as steep as feared.

“We had expected a double-digit decline in June against the World Cup comparative, though when ITV subsequently reported its AGM in May, followed by interims [last month], June significantly outperformed our expectations,” Numis said in a note.

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Glasgow-based STV holds the two ITV franchises for Scotland, and following re-neg­otiations of contractual arrangements between the two, the flow of revenues to STV from UK-wide advertising has been reduced. However, Numis said last week’s figures from ITV still put “significant upwards pressure” on its prediction that STV’s national advertising revenues will increase by just 2.5 per cent in the first half.

Regional advertising revenues have been more volatile, with a 13 per cent dip in the Scottish advertising market during the first quarter.

A dec­line of 10 per cent is forecast for the first half as a whole.

Speaking at STV’s annual meeting in April, chief executive Rob Woodward said the relatively small size of the Scottish market meant swings in advertising tended to be greater than those seen nationally.

“Our prediction for the year is we are expecting a much stronger second half, post the general election, and expecting the Scottish market to mimic the overall UK market,” he added.

Revenues from the group’s production arm – which makes in-house programmes as well as shows for other broadcasters – will be heavily weighted to the second half of the year when many completed projects are due to be delivered. The div­ision is responsible for a number of series such as Catchphrase for ITV, The Link and Antiques Road Trip for BBC One and The Lie for Irish broadcaster TV3.

The group also has a growing portfolio of digital outlets that feed off the broadcasting product, which has been augmented by the launch of City TV services in Glasgow and Edinburgh. STV is aiming to generate a third of this year’s profits from non-broadcasting activity, led by its digital services.

Following a strong run this year by STV shares, Numis has put its “buy” recommendation under review pending Thursday’s results.

The broker said it thereafter expects to upgrade its forecasts with a “concomitant benefit to our target price”.