Last checked at 6 Nov 2009 07:00
6 November 2009
STV Group plc
Interim Management Statement - Quarter 3
Summary
STV Group plc today releases its Interim Management Statement covering the period from 27 August to 6 November 2009.
Trading Update:
Continued improvement in airtime revenue to year end
Taggart: STV confirms it will make Taggart in 2010 should ITV Network not re-commission the series
Successful programming strategy continues to build STV brand whilst delivering planned cost savings
Independent production status: Government consultation process to conclude by 2 February 2010
New Media:
Opportunities to maximise new media revenues being discussed with international partners
STV Local launched: providing local information on what's happening in 284 places across Scotland extending STV's digital strategy
Plan to increase telephony revenues through moving operations in-house being implemented
Legal:
Defence of ITV claim (of £38m gross), which includes claims against ITV for £35m gross, together with STV's counter-claim being prepared
Further claims regarding ITV's abuse of video on demand (VOD) rights and significant prejudicial behaviour on the part of ITV plc and ITV Network are being prepared
Trading
Despite the challenging national advertising market conditions, during Q3 and Q4 there has been continued stabilisation and improvement across the market as the rate of decline continues to ease. However, visibility remains low and we will maintain a cautious approach.
The television airtime market is as follows:
| Q3 | October | November | December | Q4 | YTD | |
| STV national market | Par | -4% | +3% | +5% | +2% | -11% |
| STV Scottish market | -11% | -13% | -5% | Par | -7% | -13% |
Our culture of cost control and driving operating efficiencies continues to provide mitigation against the downturn. Additionally, our programming strategy which was successfully launched in early 2009 continues to deliver further savings whilst providing opportunities to build the STV brand. STV continues to build a diverse, distinct and relevant schedule for Scotland and has recently announced a raft of new programming for Q4 and early 2010, including the acquisition of Australian hit drama, Underbelly; a new series filming Scottish troops in Afghanistan; and a documentary with David Hayman, exploring the phenomenon that is Sherlock Holmes.
We remain in discussions with ITV Network on securing a commission or co-commission for Taggart. In the event that ITV do not re-commission Taggart, we can confirm that STV will make Taggart for delivery in 2010. STV recognises the widespread popularity of the programme and the strong ratings and return on investment the series delivers. This will ensure that this popular brand continues.
As ITV Network has not yet confirmed a re-commission and we will not be delivering further episodes of Taggart in 2009, this will result in a reduction in earnings in 2009 of approximately £2m. This is considerably lower than previously anticipated due to further mitigating actions and stronger airtime revenues.
We welcome the further and significant progress towards securing independent qualifying status for STV Productions arising from the 12 week consultation process being undertaken by the Department for Culture, Media and Sport, as announced this week. This change will improve our prospects of securing further commissions, in particular from the BBC.
New Media
STV continues to explore opportunities to maximise new media revenues and we are currently in discussions with potential international partners to achieve this.
Today, we are pleased to announce the launch of STV Local, providing information on what's happening in 284 places across Scotland. This ambitious project is the next development of STV's digital platforms and will support user based interactive listings.
It is also confirmed today that STV intends to bring control of Premium Rate Telephony Services (PRTS) in-house to increase the minimal revenue currently generated from these activities currently provided through ITV Network's management. STV has a primary right to control the management and collection of revenue streams directly and has a strong and unblemished track record with a proven compliance process and existing infrastructure in place. There will be no impact on viewers using PRTS services on STV as any changes will take place at an operational level.
Legal
As previously announced, ITV plc has launched a legal claim against STV for a potential net figure of £15m-£20m (£38m gross). STV completely refutes the claim and will submit a robust defence, which includes claims against ITV for £35m gross that is owed to STV and off-sets the ITV claim.
STV's strong defence against this claim also includes a counter claim against ITV plc, challenging the practices and transparency of the processes of ITV when operating as STV's sales agent for national airtime revenue. This counter claim relates to revenues which STV should have received under its Advertising Sales Agreement. As previously announced, on the 5% of related revenue which STV's independent auditor Deloitte was able to review, a potential shortfall of approximately £2m (covering only 30 months of a six year period) was identified. This defence and counter claim will be submitted by 13 November 2009.
STV is expecting to file further claims regarding ITV's abuse of video on demand rights and significant prejudicial behaviour on the part of ITV Network and ITV plc. An update on these will be made shortly.
Chairman/CEO statement:
Richard Findlay, Chairman of STV Group plc said: "STV has weathered the economic downturn well as a consequence of our strong management team and committed and motivated staff. We continue to build our digital and content businesses and we remain broadly on track to deliver our targets. Whilst it is disappointing that ITV plc has forced us into the legal arena in order to defend our legitimate rights and seek recovery of the monies we believe are owed to us, it is essential now that we fully pursue the legal process.' Rob Woodward, Chief Executive Officer of STV Group plc said: "To build shareholder value, it is essential that we protect and secure STV's rights within the Channel 3 Network. We have explored numerous routes to engage with ITV, but we have been left with no choice but to seek protection through the Courts and we are confident that our position will be upheld. Although we continue to operate in a challenging economic climate, we are beginning to see signs of an improvement in the market."
Enquiries:
STV Group plc
Rob Woodward, Chief Executive Officer
George Watt, Chief Financial Officer
Kirstin Stevenson, PR Manager 0141 300 3670
Brunswick
Simon Sporborg
Tom Batchelar 020 7404 5959