THE boss of STV has backed the advertising market to recover sharply after encountering near-term challenges arising from the current economic uncertainty.

Shares in the Glasgow-based broadcaster closed down nearly two per cent after it reported total advertising revenue had fallen by 2% to £110 million in the year to December 31 amid the “uncertain economic climate” and has subsequently fallen by 15% in the first quarter of 2023.

STV added that Scottish advertising is expected to be down 20-25% in the first quarter, or flat to slightly up when Scottish Government spend is excluded, while total advertising revenue is forecast to be fall 10-15% in April.

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Chief executive Simon Pitts acknowledged the pressure but backed the advertising market to recover quickly, while emphasising the growing importance of the company’s burgeoning production and digital operations.

Mr Pitts told The Herald: “Of course, we are very mindful of the ongoing economic uncertainty. We are not immune from it going into 2023. You see that our total advertising revenues were down last year, but only by 2% [to] our second highest ever, in fact, and they were still comfortably ahead of the pre-Covid year of 2019.

“Q1 2023 advertising is down, but even there we are seeing some encouraging signs, with Scottish SME advertising slightly up in the first quarter, digital advertising strongly up, around 20% ahead, and of course we have been here many times before. We have seen the advertising market bouncing back quickly from any economic shocks because TV advertising in our view remains the most effective way of building a brand.”

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Asked if he detected any sign of sentiment improving among advertisers, in light of growing conviction that any UK recession this year will be shorter and shallower than previously feared, Mr Pitts said: “It is worth saying that in a cautious market advertisers plan in a more short-term way, they don’t deploy discretionary budgets. And that was the case before Christmas. They were definitely protecting profit. That inevitably impacts on Q1 bookings because you book advertising in advance. But now we are deeper into the quarter we can actually see the advertisers are starting to feel a little bit more positive.”

While Mr Pitts said it is “hard to predict the remainder of the year”, he is taking confidence in the ability of the advertising market to bounce back, and in STV’s content line-up. This includes exclusive coverage of the Rugby World Cup, in which all of the UK home nations will compete, in the autumn.

STV reported yesterday that adjusted profit before tax had edged up 2% to £24.1m in 2022, as total group revenue dropped by 5% in 2022 to £137.8m.

The company emphasised the growth of its production and digital operations to the diversification of the business, with the divisions now accounting for 38% of earnings.

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The broadcaster declared 2023 would be a “breakthrough year” for STV Studios, which has won 30 new commissions and 11 returning series. The productions arm has secured £50m of commissions for delivery, more than double the amount it landed in 2022, which includes three major new returnable drama series currently in production for Apple, BBC, and Channel 4. The Apple commission, STV’s first for a streaming service, is a crime thriller starring Scottish actor Peter Capaldi and Cush Jumbo, and will launch simultaneously in more than 100 markets later this year.

“That is a real step change in the performance of STV Studios,” Mr Pitts said. “More than a third of that £50m of secured revenue in 2023 will come from returning series. Those returning series are the foundation of a successful productions business.”

STV also highlighted the continuing expansion of its digital offer. Registered users of the STV Player increased by 17% in 2022 to 4.9 million, with that number growing to more than five million in the first quarter of this year.

Mr Pitts said the digital offer stood to benefit amid evidence consumers are cancelling subscriptions to other streaming services. He noted that the STV Player was free and included significantly more UK content than the likes of Netflix and Disney Plus, which tends to be favoured by UK viewers.

The STV board has proposed a final dividend of 7.4p per share for 2022, up 1% on last year. This will result in a full-year dividend of 11.3p per share, up 3%.

Shares closed down 6p at 309p.