STV Pins Falling Ad Revenues on Brexit

STVScottish broadcaster STV said it expects Brexit to have a substantial negative impact on its national advertising revenues, which it expects to be down by between six and seven percent for the first three quarters of 2019. In its H1 financial results today, STV said that continued uncertainty around Britain’s withdrawal from the European Union is causing advertisers to pull back ad spend on linear television, hampering what would otherwise be a strong year for ad sales for the company.

STV forecasts that overall, while national advertising revenues will fall, regional advertising will be up by between ten to fifteen percent. Digital advertising meanwhile is forecast to be up by between 25 to 30 percent during the same period. But given that national advertising makes up the bulk of STV’s ad revenues, this growth in regional and digital ad revenue isn’t expected to outweigh the Brexit-led decline, with overall ad revenues set to decrease by less than one percent.

Simon Pitts, CEO of STV, said he believes that the broadcaster is in a healthy position despite the negative impact of Brexit. “An operating profit increase of ten percent when national advertising revenues are down supports the decisions we took to reposition the group for profitable growth, focusing on STV’s regional strengths and the exciting growth potential offered by our digital and production businesses,” he said. But while operating profits were up in H1, overall revenues were down by 4.9 percent, from £57.7 million in H1 last year to £54.9 million this year.

STV’s forecast mirrors warnings from across the industry about the effects of Brexit on the UK’s TV ad revenues, as advertisers lower ad spend in uncertain economic circumstances. Enders Analysis published a report a few weeks back saying it expects overall TV ad revenues to be down five percent year-on-year in 2019, and ITV earlier this year blamed “economic and political uncertainty” caused by Brexit for a decline in ad revenues.

While uncertainty around Brexit is hardly new (there’s been political and economic uncertainty in the UK since the referendum over three years ago), the seemingly increasingly likely prospect of a no-deal Brexit poses another threat. If no trade deal is reached between the UK and EU, sales of EU products in the UK will be expected to significantly decrease as trading becomes much more expensive. And if EU-based brands scale back their operations in the UK, their ad spend will fall too.

There is one small upside – the government this week launched its £100 million ‘Get ready for Brexit’ ad campaign, and analyst Liberum expects a significant amount of that fund to be spent on TV campaigns. But this budget will still be split between digital, outdoor and radio campaigns as well, as well as between multiple broadcasters, so the impact on any individual business is likely to be minimal.

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