STV has declared its decision to restructure last year has paid off after more than doubling its interim pre-tax profit to £9.1 million, powered by growth in digital and regional advertising.
But the Glasgow-based broadcaster warned Brexit uncertainty will cause “market turbulence” in the second half, and lead to national advertising to fall between 6% and 7% in the nine months to the end of September.
National advertising was hampered in the first half by Brexit uncertainty and difficult comparisons with the same period last year, when revenues were boosted by the football World Cup in Russia.
READ MORE: STV launch partnership with Premier Sports to broadcast live football on '24 hour' channel
Total advertising revenue dipped by 5% to £54.9m, which the firm put down to the closure of the loss-making STV2 digital channel last year as well as the phasing of productions revenue.
STV2 was shut down by Mr Pitts last May under a restructuring carried out within weeks of succeeding Rob Woodward, with the move leading to the loss of 25 jobs. A further 34 redundancies were made as part of a review of STV’s news output.
Commenting on the interim results yesterday, Mr Pitts said “delivering a 10% profit increase in this market is proof we are doing a lot of the right things”.
He highlighted that revenue in its digital division had grown by 19% to £5.6m, driven by the increasing penetration of the STV Player, which is now available to Virgin customers with Sky households to follow. And he said regional advertising revenue increased by 19% to £7.3m, which he attributed largely to the STV Growth Fund, designed to help more local businesses advertising on television. “It is really doing its job of creating new TV advertisers,” Mr Pitts added.
READ MORE: STV boss: Cuts will not diminish our commitment to Scottish news
STV expects regional advertising to expand by between 10% and 15% and digital advertising to grow by 20% and 25% in the nine months to the end of September. Asked how concerned he was about the downturn in national advertising, Mr Pitts replied it was encouraging that it has been offset by trends in local and digital advertising. He added that STV was also protected by its trading relationship with ITV, which means its costs fall when revenue dips.
Mr Pitts said: “Yes, of course, uncertainty is bad for business, and there is quite a lot of uncertainty at the moment caused by Brexit. But we are not quite as exposed as other sectors.”
Mr Pitts noted that STV had recorded its best viewing share since 2009, at 18.7%, stating that it was now the “most popular peak time channel in Scotland” on the back of shows such as The Bay, Cheat and Manhunt.
“It is also down the success of our local Scottish output,” he added. “STV News is in great form.”
READ MORE: Saturday Interview: Telly addict Pitts backs STV against global giants
Mr Pitts has consistently underlined the importance of STV being able to produce more returnable programmes since joining the broadcaster from ITV in early 2018. The productions division saw operating losses for the first half widen to £1.7m from £1.2m, but Mr Pitts emphasised this reflected a phasing of revenue and would reverse in the second half.
He noted that the productions business has a “very strong pipeline” of new ideas.
Meanwhile, STV has announced a new partnership with Premier Sports and its sister free-to-air channel, FreeSports, which will see it host a live stream of the 24-hour sports channel on the STV Player. It will also see STV become the exclusive sales agent for Premier Sports subscription services.
STV unveiled an interim dividend of 6.3p per share, up 5% on last year. Shares closed down 6p at 349p.
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