The share price tumbled 22p to 482p after STV disclosed pre-tax profits of pounds 13m. That figure was only achieved with an unexpected pounds 1.4m gain on the sale of fixed assets.
Without it, profits would have been up to pounds 2m below forecasts. One factor blamed was higher-than-expected programme costs, up by pounds 13m to pounds 110.3m. That was despite a sizeable redundancy programme, costing more than pounds 1.4m, and a pounds 2m Channel Four rebate.
Part of the problem lay in a 50 per cent rise in regional programming commitments after the re-award of STV's franchise, which added pounds 6m of the higher operating costs.
Turnover - down slightly from pounds 126.1m to pounds 125m - is not comparable with last year for several reasons. From the beginning of 1993, Channel 4 has sold its own advertising, rather than relying on ITV, although the broadcaster is no longer obliged to pay the Channel 4 subscription levy which in 1992 amounted to pounds 16.9m. Nevertheless, STV's share of ITV's total net advertising revenues still dropped last year from 5.52 per cent to 5.53 per cent.
The loss of Channel 4 revenues was to some extent compensated for by a 60 per cent increase in sales at Scottish Television Enterprises, STV's network programming producer, to pounds 35.2m. This rise was partly due to the success of the rejuvenated doctor's casebook, 13 more episodes of which have just been commissioned by ITV's network centre.
Gus Macdonald, STV's managing director, said: 'There are good prospects for STE programme sales in 1994 with pounds 30m already projected.'
Margins on programmes, however, have proved tougher than expected, with the STE contributing only pounds 1.8m to group profits.
Similarly, while sales at STV's outplacement subsidiary, Pauline Hyde & Associates, held steady at pounds 12.1m, profits took a hammering, falling from pounds 2.3m to pounds 104,000 and prompting the replacement of the management team.
William Brown, STV's chairman, was cautious about prospects, observing that 1994 had got off to a slow start. But he believed that PHA and GMTV, the loss-making breakfast broadcaster in which STV has a 20 per cent stake, were on their way to recovery: costs were being tackled and the outlook for profitable programme sales was encouraging.
Analysts said the shares had further to fall. 'I just don't think it looks too good,' said one. 'The outlook for advertising sales is poor. Until they get the cost base down further, or begin to see some benefit from the redundancies, there is little chance of them recovering. I think they'll slip back to around 430p.'Reuse content