STV to return £10m to shareholders

STV Group's (LON: STVG) interims released today show in-line figures and an unchanged outlook for year-end, while an additional cash distribution of £10m pounds will be issued to shareholders over the next 18 months.

This cash distribution was announced despite figures slightly down in H1 17 against the same period last year, as well as market concerns around the broadcast TV model and STVG’s pension deficit of £89m.

The Group's STV Productions has however secured a series commission for the BBC, and their second network channel STV is delivering four-fold commercial impacts. Revenue from the group's digital operations is also up 14%, representing a 50% margin.

Overall, revenue is down 3% and EBITDA is down 9%, operating profit is down 16% and net debt has grown £5m, an increase of 17%. Still, an interim dividend of 5p will be issued, up 25% from H1 16's 4p divi.

Panmure Gordon chimed in on the results today, with their comments saying:

For FY17E/FY18E we now forecast a dividend yield of 4.5%/4.9% from ordinary dividends, with a further boost of c6% spread over 18 months from the capital return.

Shares are slightly up around 2% this morning.

Management is clearly confident in the future pipelines of the Group, with the 25% increase in interim dividend, and the proposed year-end dividend resulting in a 13% boost over the year, as well as the additional £10m cash distribution.

The Group's current PE ratio is 9x versus the industry median of 12x, with a market cap of £148m. The balance sheet seems robust, with a cash balance of £13m and working capital of £38m. The large pension deficit is also being tackled with an 11-year funding plan, based upon deficit funding contributions of £8.6m per annum increasing by 2% per annum over the term of the plan.

The pension obligations of £89m will continue to weigh on the share price, with the annual £8.6m contributions accounting for around 40% of EBITDA. However, the plan set up in December of last year provides near-term clarity for shareholders. Furthermore, should bond yields begin to rise, the size of that obligation could reduce materially.