The chief executive of STV Group, Simon Pitts, has underlined the broadcaster's "big ambitions", after strong performances by its productions and divisions offset a tumble in advertising revenue in the first half.

Glasgow-based STV reported a 33% fall in adjusted operating profit to £8 million in the six months to June 30, as economic uncertainty and cost inflation contributed to a drop in advertising revenue, by 14% to £45.8m.

But the company said the growth of its studios and digital businesses offset what had been an anticipated decline in advertising, with overall revenue surging by 21% to £75.3m.

STV Studios was the firm’s “standout performer” and saw revenue surge by 300% to £27.2m, boosted by 12 returning series including second seasons of Blue Lights and Screw. And a material increase in profits and turnover is forecast for the division in the second half, following the “transformative” acquisition of production company Greenbird Media in a deal worth around £24m in July.

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Mr Pitts told The Herald that the deal for Greenbird, which increased STV Studios’ slate from 12 to nearly 40 returning series, “turns our studios business into a major UK production player”.

Revenues from the division will reach £50m on an organic basis this year, ahead of the £40m target, rising to more than £70m with a contribution from Greenbird.

The Greenbird schedule includes new reality TV format The Fortune Hotel hosted by Stephen Mangan, which will debut in 2024, and Lego Masters. Seven new commissions have been secured by the Greenbird team since its acquisition by STV was announced in July.

Further to the deal, STV Studios now holds stakes in 24 production companies. These include nine majority investments and 15 minority stakes.

Mr Pitts said: “We are ahead of plan. The growth in STV Studios has been fantastic over the last two, three years. And to be up 300% and become a £70m business, delivering what we are forecasting – around £6.5m of profit for the full year 2023 – is really strong progress.

“We have got big ambitions here. We want to be a world class content business, headquartered in Scotland but facing out to the rest of the world. This year is a real breakthrough year for us.”

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Mr Pitts, meanwhile, said there are signs of improvement in the outlook for the advertising market. STV expects advertising revenue to increase by 3% to 5% in the third quarter, helped by live coverage of major sporting events such as football’s Women’s World Cup and the forthcoming men’s Rugby World Cup, though it is expected to be down overall for the year.

Mr Pitts said: “We have a very strong content line-up and advertisers want to be associated with a football World Cup and a rugby World Cup and the big shows that we have in our portfolio. But we are also seeing some signs of improvement in both the national and the local market.

“Across national and digital advertising, the biggest growth driver for the quarter so far is FMCG (fast-moving consumer goods) advertising, food and household stores in particular. Confectionery is also up. Although retail is down supermarket spend is improving, which is encouraging too. And our regional advertising continues to outperform the national picture.

“If you looked at SME (small and medium-sized enterprises) advertising in isolation for the first half of this year it was only 2% down, which is a really resilient performance. This is the sort of market where our advertising growth fund really comes into its own.”

STV said digital revenue grew by 9% in the first half to £10.1m, which came as registered viewers on the STV Player increased by 18% to 5.3 million.

The company said 30 new series had premiered on the STV Player over the period under a new streaming partnership with ITV, adding to the thousands of hours of content that were already available on the platform.

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Mr Pitts said the quality of the content which is available free on its Player is helping STV compete strongly with the likes of Amazon and Netflix, amid signs people have been looking to save money amid the cost-of-living crisis by cancelling paid-for subscriptions.

He added: “Overall, our diversification strategy is working. We are expecting that more than 60% of our profit will come from new growth areas this year, well ahead of our 50% target. We are becoming a more resilient and balanced media business, focused on growth, and focused on the future.”

STV declared an interim dividend of 3.9p per share, in line with last year.

Shares closed up 1.55% at 197p.