AS STV continues to closely monitor the rapidly evolving situation with COVID-19, we today provide a trading update covering a number of areas of the business and the steps being taken to ensure STV remains financially resilient and can continue to execute its successful growth strategy in the future.
Our people and our viewers
Our main priority remains to protect our people and we will continue to follow all government advice. We have implemented contingency plans to ensure that we continue to offer a high quality schedule of new drama, entertainment and factual programmes over the coming months, and in particular to sustain our public service news output which provides the most popular local news service in Scotland, and is of critical and increasing importance to our viewers in these uncertain times.
Liquidity, cash and costs
STV has good ongoing access to liquidity through its £60m overdraft and revolving credit facility. Net debt was £37.5m at the end of 2019 and is expected to be c.£38m at the end of March 2020, comprising cash balances of £10m and £48m of drawn down facility. The unutilised portion of the facility is £12m and this is accessible under the terms of the agreement.
We are very focused on cash and have already taken steps to reduce costs and cash commitments. National programming costs will reduce in line with any reduction in revenues (thanks to our unique variable cost model) and we have identified a further £2m of other cost savings across the business for 2020, along with c£2.5m of cash savings from delayed capital expenditure.
As an additional measure to ensure maximum flexibility, it is also confirmed that our board is no longer recommending a final dividend of 14.7p per share (financial year ended 31 December 2019) and this will no longer be paid, conserving a further £5.5m. We recognise how important the dividend is to our shareholders and the board will revisit the position for future dividends once there is greater clarity on the impact of COVID-19 on the business.
Taken together, these actions will ensure that at least an additional £10m of cash (over and above current cash balances) is retained within the business in the short to medium term.
Simon Pitts, STV chief executive (pictured), said: “Over the last two years, STV has demonstrated its resilience and ability to grow the business in the face of challenging market conditions. These are now extraordinary times and our immediate focus must be on protecting our brilliant people and fulfilling our public service role to keep our viewers informed and entertained in the most trying of circumstances.
“We have implemented contingency plans to keep our programmes on air, especially our news coverage, have taken decisive steps to reduce costs, manage our cashflow and make funding available to support the local businesses and charities in Scotland who now need it most, and we remain committed to our successful growth strategy for the long term.”
Updates by division
Our broadcast channel continues to perform very strongly, with STV’s peaktime and all time share of viewing up a further nine per cent and six per cent for Q1 year to date respectively, nine per cent ahead of the ITV Network.
Last week (16th – 22nd March) STV’s peaktime audience was up 45 per cent, with 16-34s up 20 per cent, while daytime was up 22 per cent (+13 per cent for 16-34s). Audiences for STV News were up 48 per cent.
The new restrictions implemented by Government are, however, having an increasing impact on our advertising revenues across a range of categories, both nationally and regionally, and national forecasts have deteriorated for March and April. In our preliminary results announcement on 10th March, we guided to single-digit revenue growth in regional advertising for 2020 and this now looks challenging.
Offsetting this it is important to note that STV’s broadcast cost base is uniquely variable, as programming costs (60 per cent of our cost base) vary in line with national advertising revenues under our long-term arrangements with ITV. Therefore, if national advertising is down ten per cent, our programming costs also reduce by ten per cent, protecting our broadcast profit margins.
STV’s Growth Fund uses our broadcast strength to reduce the cost of local airtime for Scottish advertisers. Last week, we announced a doubling of the fund to £20m to help local businesses maintain engagement with their customers through these difficult times. We will launch a new Growth Fund initiative, STV Local Lifeline, which will initially use £1m of the increased fund to provide free advertising across STV to local charities and small local businesses who are working tirelessly to get people through the current crisis.
Our digital business grew strongly in 2019, well ahead of expectations, and this growth accelerated in Q1. Online viewing is up 80 per cent in Q1 year to date, with over eight million hours of STV Player viewing so far.
Within that, long-form Player streams are up 72 per cent, comprising an 84 per cent growth in on-demand streams and a 21 per cent increase in live streams.
White House Farm became STV’s best watched on demand drama ever with over 1.2m streams. Flesh and Blood is also performing strongly and there is much to come, including Liar, Belgravia and Quiz.
Encouragingly, STV’s Player-only content accounted for 21 per cent of streams in Q1 (up from six per cent a year ago), driven by exclusive drama box sets like Janet King, Rake and The Slap. In total, we now have over 50 boxsets available to enjoy on the Player, with more coming soon.
However, our digital revenues are not immune from the wider market uncertainty at present and our full year guidance of strong double digital growth will likely come under some pressure in the coming weeks, though the continued strong performance of the STV Player should help mitigate this impact.
The increased restrictions on working practices are having a significant impact on the whole TV production sector and we have paused filming on Antiques Road Trip and Celebrity Antiques Road Trip, as well as new factual entertainment series, Clear Out Cash In.
However, STV Productions’ relatively small scale and largely variable cost base mean that the profit impact on STV is likely to be limited for the full year, albeit achieving profit growth in line with previous guidance will be increasingly difficult the longer the current situation persists. We are, however, already benefitting from increased demand for high margin library sales and we expect this to continue.
Our creative pipeline is stronger than ever with over 50 drama projects in development together with an exciting and diverse range of unscripted projects across the genres. The next few weeks will allow our creative teams to hone their slates further and focus on the development of scripts in order that production can be ramped up quickly when we are able.
This announcement constitutes inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014.
STV Group plc:
Kirstin Stevenson, head of Communications, Tel: 07803 970106
Geoffrey Pelham-Lane, partner, Tel: 020 3757 4985
Ben Woodford, partner, Tel: 020 3781 8333
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