By Scott Wright

THE chief executive of STV has underlined the importance of new Prime Minister Liz Truss taking “urgent and decisive” action to ease the burden of surging energy costs, as the company warned the advertising market was “not immune” from the current economic uncertainty.

But Simon Pitts declared the broadcaster was in a strong position to navigate the crisis, highlighting the growth of “priority areas” such as STV’s burgeoning productions arm, the “resilience” of television advertising, and the strength of the company’s balance sheet.

Glasgow-based STV reported growth in turnover and profits for the first half yesterday, beating records set at the halfway stage in 2021 and ahead of pre-pandemic levels. The results were driven by growth in national and local advertising revenue, the continued expansion of digital services through STV Player, and the success of its rejuvenated productions division, which secured 25 new commissions.

However, Mr Pitts STV said was “not going to be immune from the ongoing economic uncertainty” as inflation and business costs continue to rise on the back of rocketing energy prices. Total advertising revenue for the nine months to September is expected to be “slightly down year-on-year”, though the company has forecast a stronger commercial and viewing performance in the fourth quarter, driven by the first-ever winter World Cup in Qatar.

STV said it expects to hit or exceed three-year targets to the end of 2023, which include doubling digital viewing, users and revenue, to £20m, quadrupling studios turnover to £40m, and achieving at least 50% of operating profit from outside traditional broadcasting.

“Of course, we are mindful of the ongoing economic uncertainty,” Mr Pitts told The Herald. “We are seeing the advertising market is not going to be immune from that. But the extent of that impact will in part be determined by the [UK] Government’s response on energy prices in a few days’ time.

“Either way, the TV ad market showed its resilience during Covid, time and time again, and we are also expecting a stronger finish to the year, boosted by what will be the first-ever football winter World Cup in Qatar – as part of what is going to a really strong programming line-up before the end of the year.”

Asked whether advertisers were hopeful that the Government will take sufficient action to soften the impact of the energy crisis, he said: “Clearly businesses, small, medium and large, as well as households, are all looking to the Government now to take urgent and decisive action that should make a difference. And we are all looking with real interest to what the new Prime Minister does.

“[It is] worth reminding ourselves that TV advertising is proven to be the best way to grow brands. You only need to look at how it bounced back after Covid to see how much it is valued by businesses.”

While Mr Pitts said it was not surprising that some brands are holding back spending until they see they how market conditions evolve and how much support the Government provides, he added: “Overall, we remain confident in the long-term future and resilience of advertising. We also have the perfect positioning for viewers and advertisers during the cost-of-living crisis.”

With a survey commissioned by STV, published yesterday, showing that consumers are cancelling commercial streaming services as the cost of living bites, Mr Pitts said the company’s status as a free-to-air broadcaster and streamer is a “big competitive advantage”.

The survey of 1,000 adults from research body ScotPulse found nearly two-thirds (64%) of subscription video on demand customers have cancelled or are planning to cut back or cancel their services, while nearly half (47%) of those questioned plan to spend less on TV entertainment subscriptions such as Sky, Netflix and Disney+.

Mr Pitts noted there are now around 5,500 hours of television content free to view on the STV Player, including in excess of 2,000 hours of drama.

“I’d rather be in our shoes than a paid-for service at this point,” he said.

STV reported an operating profit of £11.9 million for the first half, up 22% on last year and 8% on 2019 – before the pandemic. That came as it booked total revenue of £62.1m for the period, 3% ahead of 2021 and 13% up on 2019.

Mr Pitts highlighted the growing “momentum” of STV Studios, which is now turning over £40-£45m and is on course to make a profit of at least £3m next year. New commissions include a new drama series for Apple TV+, Criminal Record, which will air in 100 countries next year, while there now nine returning series on the broadcaster’s slate. These include season two of the prison drama Screw, which is filmed in Glasgow.

“We are in production right now on over 20 shows, more than we have ever been,” Mr Pitts said.

He added: “The production sector in Scotland is booming, and STV Studios is booming with it.”

STV reported net debt of £6.6m, up £6.9m since December, which the company said was because of expected short-term funding of increased productions activity. It said it has maintained “significant headroom”.

The board announced an interim dividend of 3.9p per share, up 5% on 2021.

Shares closed up 3.8% at 287.5p.