Strong start to 2014
STV Group’s (STVG) Q1 IMS has confirmed a strong start to 2014, with airtime revenues expected to be up by 7% for the five months to May. Our full-year estimates are unchanged from those published on 7 March. 2014 is a big year for Scotland (Commonwealth Games, Ryder Cup, referendum) and STV’s strong brand is enabling it to capitalise on a favourable advertising backdrop. The share rating remains below the peer group with the 2014e P/E at 10.2x and EV/EBITDA of only 8.0x.
Q114 airtime revenues (NAR) are reported to be up by 5%, slightly ahead of management’s expectations in March, with national NAR up 5% and Scottish NAR up 7% (versus an expected 4% and 6% respectively). April NAR is expected to be up by 18% (helped by the timing of Easter). The favourable advertising backdrop is illustrated by the latest IPA Bellweather report (17 April) which revealed the “largest single upwards revision to marketing budgets in 14 years of data collection”.
STV also reported progress towards its new 2014 to 2016 KPIs, which include the strategic aim of one-third of earnings to come from non-broadcast services by the end of 2015. Q114 digital revenue increased by 15%, STV Productions continues to grow and the new Glasgow City TV service will launch on 2 June. With strong operational gearing, we expect the H114 normalised PBT to be comfortably ahead of last year’s £6.7m and anticipate a further reduction in net debt towards our year-end target of £28.5m (only 1.4x 2014e EBITDA). The 2013 dividend of 2p (the first payout since 2007) is due to be paid on 23 May (XD 22 April).
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