Highlights

• Diversification strategy continues to accelerate:
  • Group revenue growth of 22%
  • Studios revenue and adjusted operating profit trebles
  • Digital revenue +6% and operating profit +16%
  • 75% of Group adj. operating profit outside broadcasting, well ahead of 50% target
• Adjusted Group operating profit of £20.1m down 22%, impacted by linear advertising revenue and cost inflation and related to broader UK macro uncertainty, as expected
• Strong on-screen performance, with STV Player streams + 28% and STV the most-watched peak time TV channel in Scotland for the 5th year in a row
• Advertising outlook improving; Q1 total advertising revenue expected to be up around 5%
• Board proposes final dividend of 7.4p and a full year dividend of 11.3p, in line with 2022
• New 3-year targets set to drive STV’s profitable growth
• CEO Simon Pitts to step down over the next 12 months to take up a new appointment beginning in Q1 2025

Financial highlights

• Total revenue of £168.4m, +22% on 2022: Studios and Digital growth more than offset expected linear advertising revenue declines
• Studios revenue of £66.8m, +182% and adjusted operating profit of £5.2m, +280%, due to organic growth and H2 impact of Greenbird acquisition
• Digital revenue of £20.2m, +6% (VOD revenue +7%), with digital operating profit up 16% to £9.9m
• Regional advertising revenue down 9% to £15.1m (excluding Scottish Government spend, regional down only 1%)
• Group adjusted operating profit £20.1m, down 22% on 2022, reflecting expected impact of declines in higher margin linear advertising revenue and inflationary cost pressure
  • Savings realised to offset broadly half the inflationary increases, as guided
• Total advertising revenue of £97.3m, down 12%
• Non-recurring costs (included within adjusting items) of £5.5m incurred in the period relating to the new agreement with ITV for digital content and national VOD sales representation (2023: £3.1m; 2022: £0.5m) and Greenbird acquisition and integration costs (2023: £2.4m; 2022: £nil
• Net debt of £32.3m, up £17.2m on 2022 and reflecting the consideration paid to date for Greenbird of £21.9m.  Leverage of 1.2x at year end, in line with guidance (2022: 0.5x)

Another year of strong audience performance

• STV & STV Player combined still the clear number 1 for commercial audiences in Scotland
• 20% share of total peak audience in 2023 (vs Netflix 12%, C4 11% and Sky 9%)
• 486 of top 500 commercial audiences were on STV in 2023 (97%)
• STV was the most watched peaktime TV channel in Scotland for the 5^th year in a row with a viewing share of 21.8%
• STV’s lead over BBC1 in peak widened to nearly 3 share points
• Highest lead over ITV Network (2.3 share points) since records began
• Most watched commercial TV channel on 361 days out of 365 in 2023
• STV Player delivered another record streaming performance, with growth across all key metrics:
• Online streams +28% and online consumption +25%
• Registered users up 17% to 5.7m, beating 5m target
• Active registered users +20% and STV Player VIP users +33%

Continued strategic momentum and new targets

• Studios: STV Studios now a leading UK production group:
• 58 new commissions in 2023, up 28 on 2022
• 68 series produced in 2023 delivering 620 hours of new television, +154%
• Transformative Greenbird acquisition delivered £15.0m revenue and £3.2m operating profit post acquisition on 6 July 2023
• Jan 2024 consolidation of Two Cities further evidence of successful investment model:
  • £55m+ future revenues secured; acquisition is materially earnings-enhancing3 new drama series commissions confirmed last month
• Major Apple drama Criminal Record launched in 100+ countries to widespread acclaim
• Digital: STV Player continuing to deliver strong viewing and commercial growth:
• Digital targets all exceeded for users, streams and revenues
• Year 1 of new ITV digital deal has driven increased viewing and advertising yield
• Long-term partnership in place until 2029 on a variable cost basis
• 18 programmes delivered 1m+ streams, up from 12 in 2022
• Continued strong performance of STV 3rd party content, with over 14m Brookside streams since launch
• UK Government Media Bill continues to progress through Parliament and should guarantee prominence for STV Player on all major digital platforms
• New 3 Year strategy and targets: Next-phase plan announced to drive STV’s profitable growth; strategic objectives will focus on four key areas:
  • CONTENT: Accelerate UK and international Studios growth
  • AUDIENCE: Drive streaming growth and maximise total STV viewing
  • MONETISATION: Maintain advertising leadership and grow new revenues
  • ORGANISATION: Modernise and simplify business for digital-first world
•  In terms of financial targets, by the end of 2026 STV will:
  • Double Studios revenues to £140m with a target to achieve a 10% margin
  • Grow Digital revenues by a further 50% to £30m* at a margin of at least 40%
  • Increase international revenues to 15% of Group / 25% of Stud
  • Achieve a further £5m p.a. savings in STV’s cost base

* before commission

Improving outlook

• Advertising market showing resilience and growth so far in 2024
• Total advertising revenue (TAR) expected to be up around 5% in Q1 year on year
• Digital VOD advertising, before commission, expected to be +12% in Q1
• Scottish advertising down 4% in Q1 reflecting Scottish Government declines (underlying SME advertising +6-8%)
• Q2 will include live coverage of UEFA Euro 2024
• Studios forward order book stronger than ever
• £87m secured future revenue as at March 2024, £30m+ ahead of a year ago
• Multiple new drama commissions secured for Sky, BBC and others
• 2024 will see full year of Greenbird consolidated performance and 11 months of Two Cities Television
• 3-year cost savings plan in place with £1.5m identified for delivery in 2024 and £5m p.a. expected by end of 2026
• As in previous years, revenue and operating profit expected to be H2 weighted reflecting Studios delivery schedules

Dividend

• The Board proposes a final dividend of 7.4p per share for 2023, giving a full year dividend of 11.3p per share, in line with 2022, after considering all relevant factors including ongoing macroeconomic uncertainty.
• The Board remains committed to a balanced approach to capital allocation across investing for growth, fulfilling our pension obligations, and paying a sustainable dividend to shareholders.

Simon Pitts, Chief Executive, said:

“2023 was another year of strong strategic progress for STV as we delivered revenue growth of 22% and exceeded the stretching 3-year diversification targets we set ourselves to double the size of our digital business and quadruple our Studios business, ending the year with 75% of our profit coming from outside traditional broadcasting, well ahead of our 50% target.

Despite the challenging commissioning environment, STV Studios had a standout 2023, with revenues almost trebling and operating profit up 280%, propelled by fantastic dramas like Criminal Record for AppleTV+ and Screw for C4 and the transformative acquisition of Greenbird.

Our audience position remains unrivalled, with STV the most-watched peaktime TV channel in Scotland for the 5^th year in a row in 2023, ahead of BBC1, and nearly double the commercial audience of Netflix. STV Player growth also continued to accelerate, with streams up a further 28%, driving digital profit up 16%.

Our overall financial performance was impacted by weak linear advertising and cost inflation, as expected and related to the challenging UK macro environment, although the start of 2024 has been more encouraging. Q1 total advertising is expected to be up around 5% and we have a strong H1 schedule to come, culminating in live coverage of UEFA Euro 2024 featuring both Scotland and England. In January we also increased our stake to a majority in leading drama producer Two Cities, who have already secured £55m of future revenues across 3 high-end drama series.

Over the last 6 years STV has been successfully transformed into a digital-first media company with a high-growth streaming service and one of the UK’s leading production groups, and we have today set out further ambitious targets for the next phase of profitable growth. With STV’s latest diversification targets fully achieved, now is the right time to plan a smooth and orderly succession. As such I have informed the Board that I will step down as CEO over the next 12 months to take up a new appointment beginning in Q1 2025.

The Board has proposed a final dividend of 7.4p per share, giving a full year dividend of 11.3p, in line with 2022.”

There will be a presentation for analysts today, 5 March 2024, at 12.30 pm, via Zoom.  Should you wish to attend the presentation, please contact Angela Wilson, angela.wilson@stv.tv or telephone: 0141 300 3000.

Read the full report here.