TIDMSTVG
RNS Number : 2487O
STV Group PLC
16 May 2018
PRESS RELEASE PRESS RELEASE PRESS RELEASE
Scotland's home of news and entertainment:
STV sets out strategy for creative and digital growth
16 May 2018
-- Comprehensive 3-year growth plan to focus the organisation on
content and digital to deliver long-term growth for
shareholders
-- More than a third of profits expected to come from outside
linear TV advertising by the end of 2020
-- GBP15m allocated for investment in new original content and
digital to help re-establish STV as a creative force; this
investment will be entirely self-funded
-- STV2 to close as STV's content investment shifts online;
commercial terms agreed to sell STV's local TV assets to That's
Media
-- News 2020 change programme launched to ensure STV remains the
best news service in Scotland while delivering significant cost
savings
-- Creation of a dedicated digital division to drive growth and
deliver a personalised STV for everyone
-- First content partnership announced to increase the scale of
STV Player; ad-free subscription version of the STV Player to
launch to access pay revenues for the first time
-- STV Productions to create a formats unit focusing exclusively
on returnable series and the nations & regions opportunity; new
MD recruitment process well underway
-- Launch of GBP5m advertising Growth Fund to maximise STV's
share of the advertising market and help drive the Scottish
economy
-- New investments to be funded entirely by cost savings; STV to
consult with shareholders on improving the effectiveness of the
current capital return
-- Progressive dividend to be further enhanced to 20p per share in 2018, +18% on 2017
-- Strong start to 2018 continues with total advertising
expected to be up 6% in H1: national advertising +2%, regional and
digital revenues both +20 to 25% and STV Productions +30%.
STV today announces a comprehensive new 3-year growth strategy
aiming to establish the integrated producer-broadcaster as
Scotland's home of news and entertainment. The new strategy will
bring changes to STV's management, culture and organisation and
will be delivered through 3 strategic objectives:
1. Maximising the value of STV's broadcast business by
delivering high quality, cost-effective news and entertainment;
2. Driving digital growth through the STV Player by creating an STV for Everyone;
3. Building STV Productions into a world-class independent production company.
A new organisational structure will mirror the 3 objectives,
creating 3 distinct divisions across Broadcast, Digital and
Production, each with its own Managing Director, P&L and KPIs.
Bobby Hain will be Managing Director of Broadcast while recruitment
processes are underway for the other two MDs who will be part of a
new, leaner management team focused on delivering the strategy.
Maximising our Broadcast business
-- STV's Broadcast business remains strong and is likely to
outperform the ITV Network due to a favourable deal with ITV which
insulates STV from both declines in the national advertising market
and increases in the ITV programme budget;
-- Reflecting the challenging economics of local television and
anticipated new competition from BBC Scotland, our loss-making STV2
channel will close at the end of June 2018, with content investment
shifting to the STV main channel and STV Player. This will result
in savings of GBP1m per annum and a headcount reduction of 25;
-- We have launched a comprehensive change programme in news -
STV News 2020 - which will bring investment in skills, technology
and digital, as well as reinforcing our reputation as the best news
service in Scotland, while delivering savings of GBP1m per year and
a headcount reduction of 34. We are recruiting a new Head of News
to lead this transformation;
-- We will use these cost savings plus other redirected content
spend to allocate GBP15m for new investments over the next 3 years
- the majority of which will be spent on new original content, with
a focus on formats and returnable series;
-- This new programming will be made by STV Productions and
showcased on the STV main channel, making the best of our
producer-broadcaster status and our unique Channel 3 "shop window"
in Scotland;
-- In partnership with advertisers we are also launching the STV
Growth Fund, investing GBP5m of TV airtime to support Scottish
businesses, grow future advertising budgets and drive the Scottish
economy.
Driving digital growth
-- We are placing digital front and centre in the organisation
by creating a dedicated digital team under a new Managing Director
whose sole focus will be to drive the growth of our online
streaming service, STV Player;
-- STV Player is already the fastest-growing PSB VOD service
with proportionately the largest registered user base (over 60% of
all adults in Scotland) and is converting these advantages into
strong, profitable growth;
-- We will focus on a number of revenue-driving priorities:
improving reliability, introducing new features and
personalisation, enhanced advertising, wider distribution and a
richer content proposition;
-- We will dedicate a proportion of our new content investment
to STV Player exclusive programming, targeting younger audiences
with short and long-form content;
-- We will aggregate other leading content brands within the STV
Player, broadening our content proposition and enhancing our VOD
advertising sell. Our first premium content partner will be
Hopster, the award-winning pre-school kids' TV app whose service
will be integrated and promoted within STV Player in an innovative
new deal;
-- We will also launch an ad-free subscription version of STV
Player for Scots at home and abroad, tapping into the burgeoning
market for subscription VOD services and accessing pay revenues for
the first time.
Building a world-class independent production company
-- Our aim is for STV Productions to become one of the UK's
leading production companies, with bases in Glasgow and London;
-- Under new leadership, we will reposition and rebrand STV
Productions to focus exclusively on developing returning series for
both terrestrial and SVOD players;
-- We will establish flexible creative partnerships with
producers, writers and IP owners to attract the best talent and
expand STV's creative pipeline;
-- We will create a new formats unit where new programme ideas
for the UK and international markets are piloted on the STV main
channel, exploiting STV's unique producer-broadcaster status;
-- We will also create a dedicated digital unit focusing on the
development of formats and short-form content for younger audiences
on and off STV.
Outlook and guidance
-- Our 2018 performance continues to be strong across all areas.
On screen, STV has had its strongest start to a year since 2009,
with peak time viewing share at 21.7% January to April, 0.7 share
points (or 3%) ahead of ITV. Online viewing is also up 29%;
-- National advertising revenue is expected to be up 2% in H1,
regional and digital advertising revenues are expected to be up 20
to 25% over the same period, resulting in total advertising growth
of 6% in H1. STV Productions has already secured 30% more revenue
in 2018 than for the full year 2017;
-- We are allocating GBP15m for investment in new content,
creative partnerships and the STV Player over the next 3 years.
This will be funded entirely by cost savings from news and STV2, as
well as redirected C3 programming cost. We expect the return on
this investment to come from a mix of C3 sponsorship revenue,
increased VOD advertising revenue, and higher production and
secondary sales revenues;
-- We expect to incur reorganisation costs of around GBP5m, of
which GBP2 to 3m will be cash, covered by funds originally
earmarked for the buyback programme. We will also be consulting
with shareholders on options to improve the effectiveness of the
existing capital return.
-- As a sign of our confidence in the underlying business, the
Board is proposing to further accelerate the dividend, increasing
the proposed full year dividend in 2018 by a further 2p to 20p,
+18% on 2017;
-- The new organisational structure will create 3 profitable
business divisions where costs are allocated in line with viewer
consumption. We will report in this new format from our Interim
results in September;
-- We expect to move to a position whereby around one third of
our profit base (measured as non-broadcast EBIT under the new 3
division structure) is derived from non-television advertising
sources within 3 years.
Simon Pitts, STV Chief Executive, said:
"This is a positive vision for STV that will re-establish the
company as a creative force in Scotland and beyond. We will invest
in creative talent, new original programming and digital to ensure
STV becomes Scotland's home of news and entertainment and delivers
long-term value for advertisers, shareholders and viewers
alike.
Our de-risked broadcast business is resilient and provides the
engine room for STV's growth. We will use our unique marketing
platform to showcase new formats from STV Productions, drive
viewing to STV Player and get even closer to advertisers through
the launch of our new Growth Fund for Scottish business.
News is fundamental to the STV brand and we remain committed to
offering the best news service in Scotland. However, given how
quickly news consumption is changing it is vital that STV evolves
to stay competitive, and we are therefore launching a comprehensive
change programme - STV News 2020 - that will see us invest in
skills, technology and digital as well as delivering cost
savings.
As a result of the challenging economics of local television and
anticipated increased competition from BBC Scotland, we have taken
the difficult decision to close our loss-making STV2 channel to
focus our future content investment on STV and the STV Player. I'd
like to thank the STV2 team for everything they have achieved over
the last 4 years.
We have ambitious growth plans for STV Productions which is well
placed to take advantage of the surge in demand for new programming
from the Nations and Regions. We will exploit STV's unique
producer-broadcaster status to attract the best creative talent and
showcase new formats and ideas for the UK and international
markets.
The STV of 2020 will have creativity as its heart, working in
partnership to drive the Scottish economy and showcase Scotland to
the world."
For Enquiries:
Ellen Drummond, PR & Communications Manager: 0141 300 3341 /
07803 970143 / ellen.drummond@stv.tv
Harriet Moll, Charlotte Street Partners: 07717 501626 /
harriet.moll@charlottestpartners.co.uk
APPENDIX 1
Changing media landscape
-- Despite changing viewing habits, TV still dominates video
viewing, accounting for over 80% of all viewing. In Scotland TV
viewing levels are also 10% higher than the UK average;
-- Within that, the public service channels (including STV)
still account for the vast majority of viewing, while smaller
digital channels are largely in decline as VOD viewing continues to
grow;
-- While there is structural pressure on TV advertising, there
is no cliff edge. TV's share of total UK advertising has stayed
constant for the last 15 years at around 25%, with evidence showing
that it is getting more not less effective;
-- One reason for this is that broadcasters have developed new
on demand platforms that work in tandem with live TV and make it
bigger, delivering high-quality video inventory across platforms.
Google and Facebook have the volume but broadcasters have the
quality, and one is not a substitute for the other. That's why
broadcaster VOD attracts premium pricing, in contrast to Google and
Facebook;
-- Television news has undergone a fundamental shift in
consumption, with more news watched online and via social media
than on television. More under 55s browse STV news online than
watch our regular bulletins;
-- There has never been a better time to be a producer of
high-quality television programming, with more buyers than ever.
STV Productions' addressable market is set to grow by over GBP200m
per annum over the next 3 years to GBP2.2bn, driven by the global
SVOD players and a significant increase in "nations & regions"
spend by C4 and BBC in particular.
APPENDIX 2
Restatement of new Broadcast and Digital divisions with existing
divisions
(GBPm) H1 16 H2 16 FY 16 H1 17 H2 17 FY 17
Revenue
Broadcast 49.4 49.1 98.5 44.7 47.1 91.8
Digital 3.3 4.1 7.4 4.0 4.4 8.4
Total (Consumer) 52.7 53.2 105.9 48.7 51.5 100.2
Operating Profit
Broadcast 11.2 6.4 17.6 9.3 6.8 16.1
Digital 1.1 1.2 2.3 1.2 1.7 2.9
Total (Consumer) 12.3 7.6 19.9 10.5 8.5 19.0
Productions (1.3) 1.1 (0.2) (1.3) 1.3 -
ELM - - - - - -
Group total 11.0 8.7 19.7 9.2 9.8 19.0
Ends
This information is provided by RNS
The company news service from the London Stock Exchange
END
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