Release Date: September 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- STV Group PLC (LSE:STVG, Financial) reported a 20% increase in total ACV revenues and a 33% rise in adjusted operating profit for the first half of 2024.
- Studios revenue grew by 38%, with new commissions swelling the forward order book to over GBP100 million for the first time.
- Streaming revenues through STV Player increased by 14%, maintaining a strong digital margin.
- Broadcast revenue grew by 12%, with a 47% boost in broadcast profit, partly due to the successful Euro 2024 football tournament.
- The company announced an incremental investment in Glasgow-based formats creator, Hello Halo, increasing its stake from 30% to 51%, which will be earnings enhancing from day one.
Negative Points
- The macroeconomic backdrop remains challenging, impacting both advertising and program commissioning markets.
- Despite growth, the company remains cautious about the full-year outlook due to tough Q4 comparators, including the Rugby World Cup from the previous year.
- Interest costs have increased due to higher average base rates and net debt, impacting overall financial performance.
- The significant reduction in Scottish government advertising spend, down almost 60% year-on-year, has offset growth in the core regional advertiser base.
- The company faces risks from the recent announcement of spending cuts by the Scottish government, which could impact future campaign funds.
Q & A Highlights
Q: Can you provide more details on the financial performance of STV Studios in the first half of 2024?
A: Simon Pitts, CEO: STV Studios saw a 38% revenue growth, driven by new commissions and the acquisition of Two Cities. The forward order book reached over GBP100 million for the first time, indicating strong future revenue potential.
Q: How did the Euro 2024 football tournament impact STV's financial results?
A: Lindsay Dixon, CFO: The tournament significantly boosted revenues, with total advertising revenue up 13%, national advertising up 16%, and broadcast revenue growth of 12%. This also led to a 47% increase in broadcast profit.
Q: What are the strategic objectives for STV moving forward?
A: Simon Pitts, CEO: The objectives include accelerating UK and international Studios growth, driving streaming growth, maintaining advertising leadership, and modernizing the business for a digital-first world. The company aims to double Studios revenues to GBP140 million by 2026.
Q: Can you elaborate on the recent acquisition of Hello Halo?
A: Simon Pitts, CEO: STV increased its stake in Hello Halo from 30% to 51%. This Glasgow-based formats creator focuses on factual formats, children's shows, and natural history programming. The investment is expected to be earnings-enhancing from day one.
Q: What is the outlook for advertising revenue in the second half of 2024?
A: Lindsay Dixon, CFO: We expect low single-digit growth in Q3 advertising revenues, driven by the second half of the Euros tournament. However, we remain cautious for the full year due to tough Q4 comparators, including the Rugby World Cup from last year.
Q: How is STV's digital performance, particularly STV Player, shaping up?
A: Simon Pitts, CEO: STV Player had a record first half in terms of streams, with active registered users up 33%. Digital revenues grew by 14%, maintaining a strong digital margin. The platform aims to deliver 50% of total reach by 2026.
Q: What are the key financial highlights for the first half of 2024?
A: Lindsay Dixon, CFO: Total revenue was over GBP90 million, up 20% year-on-year. Adjusted operating profit increased by 33% to GBP10.6 million, and adjusted EPS was up 5% to 15.5p. Total net debt was GBP28 million at the end of June.
Q: How is STV addressing cost savings and efficiency?
A: Lindsay Dixon, CFO: We are on track to deliver at least GBP1.5 million in savings for 2024 through various actions, including the integration of Greenbird and streamlining operations. We have a clear line of sight for additional savings targeted for 2025.
Q: What are the future growth targets for STV?
A: Simon Pitts, CEO: By 2026, we aim to double Studios revenues to GBP140 million, drive digital revenues by 50% to GBP30 million, grow international revenues to at least 15% of group revenues, and achieve GBP5 million in annual cost savings.
Q: What changes are expected in STV's leadership?
A: Paul Reynolds, Chairman: Simon Miller will step down in December, and Colin Jones has joined as a new Non-Executive Director and Chair of the Audit and Risk Committee. Rufus Radcliffe will take over as CEO in November, succeeding Simon Pitts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
