This Scottish TV broadcaster is going cheap

Trading on 8 times current year earnings and yielding 5.6%, the shares of this broadcaster appear to be an excellent purchase, writes Mark Watson-Mitchell.

If you were one of the several millions of TV viewers who watched the crime four-parter The Victim on BBC earlier this month, then you helped the STV Group (LON:STVG) to earn extra revenue. If you ever watch any of the almost daily antiques shows, then again you are helping STV’s coffers to grow.

The principal activities of the Group are the production and broadcasting of television programmes, internet services, the sale of advertising airtime and space in those media and lottery management services. It is the dominant commercial TV broadcaster and go-to solution for TV advertising in Scotland and it consistently outperforms other broadcasters in the ITV network.

STV is Scotland’s leading digital media brand, providing consumers with quality content on air, online and on demand. STV’s broadcast channel reaches 3.5 million viewers each month with first class programming including national shows and dramas, its own home-grown productions and the most comprehensive local news service in the UK.

The aim of the Broadcast division is the delivery of high quality, cost-effective news and entertainment to maximise the value of this stable and profitable business. The underlying strength and resilience of the business was evident during 2018 as STV delivered its highest viewing share in a decade and the highest viewing share growth of any UK channel.

Its digital business incorporates Scotland’s most popular commercial media website, stv.tv, and includes an enhanced digital news app serving consumers local, national and international news as well as features, sport and weather in one place. The STV Player offers consumers within STV’s licence areas in Scotland the opportunity to enjoy programmes live or on catch-up. Its content is available across platforms including iOS, Android, YouView and Samsung Smart TV.

STV Productions is one of the UK’s leading content businesses, with ambitious plans for domestic and international growth. With a track record of producing quality drama like The Victim (which could well go to a second series), Taggart and Rebus, it undoubtedly has the ability to win even further business from the BBC, ITV, Sky and other leading broadcasters.

This side has recently received another significant commission to produce a further two series (taking it to its 20^th) of the long-running hit show Antiques Road Trip for BBC One, along with a ninth series of celebrity version Celebrity Antiques Road Trip for BBC Two.

The group’s strategic growth plan has a straightforward aim: to build a world class production business based out of Scotland. This includes a co-production deal with Primal Media, the creators of hit entertainment shows including Release the Hounds for ITV2, Carnage for Sky and Bigheads for ITV. Primal will work in partnership with STV’s talented entertainment team to pitch to UK and international networks with the aim that commissions are co-produced in Scotland.


It has also been announced that the William Morris Endeavour agency has been appointed international sales agent to support the increased focus on developing dramas and formats for UK and international audiences. WME is one of the world’s leading entertainment and media companies and has an unparalleled list of artists and content creators on its books. WME will work with STV Productions to develop IP for international markets and broker co-development and co-production deals.

The results for 2018 wereon the face of it quite disappointing. However, the closing of its STV2 operation created the need for big exceptionals, which impacted the figures, coming out at just £1.9m pre-tax on the back of £125.9m of revenues. Before those exceptionals, profits were £19m, with earnings at 41.10p per share covering the 20p dividend more than twice.

2018 was a year of significant change and progress at STV, with a new management team and organisation now fully in operation and excellent early progress having been made with the implementation of the strategic growth plan.

For the current year, £130m of revenues could see pre-tax profits coming out at £21.9m, with 46.33p of earnings and 21p of dividend per share. The coming year is estimated to earn £136m of revenue and £24.5m pre-tax, generating nearly 52p of earnings and 22p of dividend per share.

With its shares trading at around the 370p level, STV is valued at £145m. They are trading on a very attractive 9 times historic, 8.2 times current and just 7.2 times prospective earnings. And there is a very appealing 5.6% yield to boot. At current levels, they appear to be an attractive purchase.