STV Group - Foreign Telly?

STV Group: Over recent years the group has been steadily working its way back into financial health after a nasty bout of debt and pension fund flu. Back in July this year they announced that a new revised pension deficit funding plan had been agreed with the pension trustees. From a deficit of £83m (on an actuarial basis) at 31^st March 2014, they will instigate a ‘recovery plan period’ of 11 years (down from 18) by paying in £5.5m in 2014 and between £7.0m and £7.75m from 2015 to 2025 inclusive. (On an IAS19 basis the schemes are showing a surplus of £5.3m.) These interim results to June 2014 show revenue up 7% to £54.7m, pre-tax profits up 25% to £8.4m and eps up 31% to 18.7p. So, you can see that the pension payments are still very significant in scale but they are now manageable. Net debt is £40.1m, down from £43.4m this time last year and further reductions mean that net debt to EBITDA is forecast by the company to be less than 1.5x by year end, having been dangerously high in the late noughties. The bank facility has been extended to 2019 giving certainty on their debt funding. This better financial health is being reflected in a new enhanced dividend policy. The interim dividend has been doubled from 1p to 2p with 6p total forecast for the year. The group is on course for eps this year of the order of 38p (and maybe over 40p in 2015) according to Digital Look, so a 6p dividend is still covered over six times. The company have forecast a further 33% increase to 8p in 2015. This still leaves ample scope for further substantial dividend increases to come in the medium term as the balance sheet recovers further and the pension fund deficit comes down. Whilst the share price has been strong, at 375p, the stock is on barely 10x eps. The yield might only be 1.6% for 2014 and 2.2% for 2015, but given the likely further dividend growth over coming years this looks to be a really interesting stock for income investors. The Scottish independence issue is an uncertainty, but is unlikely to derail the investment case. (2^nd September 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk