Interim results are consistent with the guidance issued in July, and we make no changes to our full-year operating profit estimates. Trading remains challenging in Q3 for both advertising and programme commissioning, but STV is announcing a number of operating and financial cost actions that should underpin the group’s potential to bounce back strongly and deliver longer-term growth when markets recover.
A recent severe deterioration in both advertising and commissioning markets in the UK leads us to reduce our near-term estimates materially, following an unscheduled trading update from the group. Timing is clearly disappointing coming after the strategy update on 21 May, but the group strategy and key financial targets for 2030 are unchanged.
STV Group hosted a CMD on 20 May updating on strategy under new CEO Rufus Radcliffe. A clear path to long-term growth was laid out, in our view, including the launch of a new radio station, new reach and targeting propositions in broadcast, and further strong growth for the successful Studios business. STV targets EBITA of £30-35m in 2030 versus £18.5m now forecast for this year (CAGR of 10%-14% pa) with an additional £10m pa uplift in FCF when pension deficit payments cease in October 2030.
STV continues to deliver resilient profits through tough near-term markets, at the same time as shifting strategically towards the growth markets of content production and streaming. We cut FY25E/26E forecasts to reflect the ongoing absence of UK economic upside (as well as a higher NI burden) but we continue to see a good growth trajectory for the group beyond the four-year sports-cycle low year of FY25E. CEO Rufus Radcliffe plans a strategy refresh in May focused on what STV should look like by 2030: we see a growing business with strong cash generation and minimal pension overhang.
STV has announced an innovative partnership with Premier Sports. The two will offer STV Player+ (the ad-free subscription streaming service) bundled with the Premier Sports subscription package, for those signing up via STV Player. The deal should help STV attract new audience demographics (younger and male). We make no changes to forecasts, but this feels like a positive and productive partnership for mutual benefit. We look forward to the FY24 results on 11 March.
A trading update from STV points to unchanged group estimates despite tough markets in both advertising and commissioning that have continued into Q4. We see this as a benefit of the ongoing group strategy, with the steady shift away from broadcasting towards programme production and streaming delivering a resilient overall group outcome for 2024.
STV has reached agreement with pension trustees on its latest triennial valuation and funding plan, including a near halving in the actuarial deficit position, a slight reduction in cash payments and a maintained expectation of full funding by October 2030. As noted by STV, this provides the group with additional flexibility ‘across the full spectrum of capital allocation’.
A strong first half, helped by the continuing expansion of the Studios business (even in a tough commissioning climate) and improved advertising aided by Euro 2024. Recent acquisitions in Studios are contributing well and the group reiterates its stretching FY26 financial targets. STV looks well positioned for the incoming CEO to continue its strategic transformation from broadcaster towards streaming and content.
Despite a continuing tough market for new programme commissioning, STV has announced several further new wins, ranging from a second series of major drama Criminal Record for Apple TV+ to new competition format Game of Wool for More4. We make no changes to forecasts at this point, but see further underpinning for STV’s ambitious target of £140m of revenues from Studios by 2026. We look forward to a more detailed update with interim results due on 3 September.
Interim results from STV are confirmed for 3 September. Ahead of this, the group has released a timely update highlighting further new wins and recommissions for its Studios division, adding to major commissions already secured earlier in the year. Separately, ITV interims out this morning confirm a much-improved advertising picture around the recent men’s Euro football event.
STV provided a trading update on 5 June, noting stronger-than-expected advertising in Q2 helped by Euro football, a continuing strong order book for Studios and confirmation of supportive new media legislation. Given UK election uncertainty near term, we make no material changes to overall numbers at this point, but see clear encouragement in the update.
STV Studios continues to be busy, announcing significant recommissions within its auction content franchise. Separately, ITV reported an improving ad trend for 2024 (+3% Q1, +11% Q2) in a trading update. STV has not updated the market on FY24 trading since prelims on 4 March, but a site visit for investors scheduled for 5 June could provide a natural opportunity for the company to do so.
