Production paused

STV saves £10m in costs as virus impacts advertising

Liar STV

Liar: one of a number of drama productions

STV is expecting a big hit to its advertising revenue because of the coronavirus outbreak and has instigated a series of cost-cutting measures that will retain £10 million in the business.

This includes cancellation of its final dividend payment and delaying capital expenditure. It has also halted filming of some its popular programmes.

“We are very focused on cash and have already taken steps to reduce costs and cash commitments,” said the company in a trading update.

“National programming costs will reduce in line with any reduction in revenues (thanks to our unique variable cost model) and we have identified a further £2m of other cost savings across the business for 2020, along with c.£2.5m of cash savings from delayed capital expenditure.”

The board said it is no longer recommending a final dividend of 14.7p per share for the year ended 31 December and this will no longer be paid, conserving a further £5.5m.

“We recognise how important the dividend is to our shareholders and the board will revisit the position for future dividends once there is greater clarity on the impact of COVID-19 on the business,” said the company.

We guided to single digit revenue growth in regional advertising for 2020 and this now looks challenging

– STV update

“Taken together these actions will ensure that at least an additional £10m of cash (over and above current cash balances) is retained within the business in the short to medium term.”

On the impact of the lockdown on advertising, it said: “The new restrictions implemented by Government are…having an increasing impact on our advertising revenues across a range of categories, both nationally and regionally, and national forecasts have deteriorated for March and April.

“In our preliminary results announcement on 10 March we guided to single digit revenue growth in regional advertising for 2020 and this now looks challenging.”

Offsetting this it is the long-standing arrangement with ITV whereby programming costs (60% of cost base) vary in line with national advertising revenues. Therefore, if national advertising is down 10%, STV’s programming costs also reduce by 10%, protecting its broadcast profit margins.

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