The Channel Changer

The Channel Changer

When Rob Woodward arrived at Pacific Quay in Glasgow, Scotland’s commercial television group was in debt-laden disarray. Kenny Kemp meets the man who helped switch the telly back on.

The top floor of Scottish Television’s modern Pacific Quay complex has urban vistas over the brooding River Clyde towards the SEC’s Armadillo, the Finnieston Crane and the nearly-completed Hydro, Glasgow’s pulsating live entertainment venue and one of the new venues for the Commonwealth Games in 2014.

Yet when Rob Woodward arrived in February 2007, the view from the business balance sheet was altogether more bleak. As STV moves into 2013, Woodward and his colleagues can celebrate the New Year with the satisfaction of knowing they have revitalised the company.

Indeed, on the day of the BQ interview, STV Productions have picked up a BAFTA Scotland award, its first for a number of years, for Antiques Road Trip, a series produced for BBC2, while a new eight-part commission for a show called Fake Reaction, due out in 2013, was just announced.

While Secretary of State Maria Miller has confirmed the renewal of STV’s licence for the next ten years, subject to negotiations with Ofcom. Rob Woodward, a cerebral media man whose formative years were spent at Marr College in Troon, its Latin mottos meaning ‘Here lies a field open to the talents’, has switched the company back on.

That’s good for all of us. Scottish Television is a fabric brand: an integral part of our national character, woven into our sense of identity and nationality. Since its arrival in the last 1950s, commercial television in Scotland was different from the posh Bee Bee Sea, it was more throaty working-class, more spikey West of Scotland, gallus game-shows and folksy soap operas, especially High Living and Take the High Road, and, of course, Taggart, its gritty Glasgow masterpiece

On the news front, there was Bill Tennent, hosting Here and Now, his successor, John Toye on Scotland Today, then Viv Lumsden and Shereen Nanjiani, who ended up at the BBC, and Scotsport, the world’s longest running sports show, once hosted by Arthur Montford, in tweed sports jacket, and axed in 2008.

Commercial television in the UK was changing dramatically and STV became Scottish Media Group, buying newspapers, radio stations and Chris Evans’ Ginger Media. SMG’s ambitions knew no bounds with its breathless ambition of becoming a £2bn a year business.

The fabric became too stretched and during the expansionist era of chief executive Andrew Flanagan and finance director Gary Hughes, it began to tear. STV’s cloth was unravelling in a sea of debt. Since Rob Woodward arrived on 28th February 2007, it has been an epic multi-series thriller.

And he shares the starring role with chairman Richard Findlay, former chief executive of Scottish Radio Holdings, who also joined the board in 2007. “It has been the quickest five and a half years of my life,” he says.

“We worked hard to rebuild our relations with all viewers, across all our platforms, one that is an STV one and not an ITV one,” he says. While explaining his business journey, he wants STV to remain current, relevant and able to connect with Scotland.

“I had been working with the shareholders and with the new board to implement a turnaround strategy for what was the SMG Group, which was a somewhat troubled organisation. The plan that I came up with we’ve pretty much stuck to. We’ve done what we said we would do, which was simplify the organisation.

£It was almost taking it ‘back to the future’. The strategy was to concentrate on STV’s core strength. This was in content production, broadcasting and building an online business to ‘super-serve’ Scotland.

“When I joined, the company was burdened with nearly £200m of debt. It had paid a very high price for a number of diverse acquisitions that included Ginger Media, Virgin Radio, Primesight, the outdoor media, and Pearl & Dean, the film advertising business. These were a number of assets which really didn’t complement the core business based in Scotland,” he says.

“My initial imperative was to ensure the survival of the company. We set up a turnaround plan with three different components. The first was to strengthen the balance sheet. And sort out the debts.”

In November 2007, a £95m right issues helped reduce the debt, but the share price stood at a meagre 24p. At least this was a breathing space that helped a programme of selling off all these extravagant non-core assets. To mark the sale of these businesses SMG, resorted back to its old name Scottish Television, STV. As we went to press, the share price stands at vastly improved 102p.

“We re-financed the business. We then went to our shareholders with a rights issue in order to give us some more time so we could go through a controlled sale process. We have used the proceeds from these sales to continue to drive down the debt,” he says.

By 2010, Woodward and George Watt, STV’s chief financial officer, told the City that their KPIs were increasing regional advertising market share, increasing margin, making more content [it was 110 hours and the aim was for 150 hours], increase digital revenues, and page impressions on STV.tv.

They even took pay cuts in line with a slim-line business. Scottish Television starts the new year with its EBITDA ratio at just over two times, which Rob Woodward says is normalised territory. However, he wants to get it down further.

“Our number one objective as a board is to build shareholder value and one of the ways we need to do that in these particularly difficult economic times is to take our net debt down to one and half times EBITDA,” he says.

Scottish Television is cash-generative, its turnover last year was £102m, and Rob is confident of hitting the EBITA target in the course of the next 12 to 18 months. marking ‘an amazing transition’.

City analysts have predicted Scottish Television’s debts will be down to manageable £42m and continue to fall. Last year pre-tax profits were £14m. Digital revenues generated from video on demand; display advertising; classified advertising and transactional activities continue to grow, by up to 70% although national advertising revenues in the third quarter dipped by 3%.

“Five years ago the initial deal with the banks was very difficult. There was a breakdown of trust between most stakeholders and the old SMG Group, but we’ve worked really hard to rebuild that trust and I would include the banks and our shareholders in this.”

Institutional investors include UBS Global Asset Management, Henderson Global, Blackrock, Fidelity and hedge fund multimillionaire Crispin Oday

Crispin, the contrarian city financier who was once married to Rupert Murdoch’s daughter, Prudence, and now married to Nicola Pease, of the Barclay bank dynasty, and a non-executive director of Schroders, runs Odey Asset Management, which manages £3.5bn of assets.

“I include all stakeholders in the business because we’ve conducted and led this turnaround in the most transparent way I know possible. I think this has helped. It has given people more confidence about who we are and what we are trying to do,” he says.

By offloading the businesses, the turnover might have fallen from £120m to £102m, profitability for the slimmed-down business hasn’t been impaired, and earning per share is rising again.

“I’ve got an absolutely brilliant team. Businesses are formed because of the people within them. We’ve attracted great talent to the company,” he says. Battle-hardened George Watt has been with the company since 1998, joining the board in 2001 as group finance director.

“He is essentially my right-hand guy in the business. He is the director responsible for finance but being a relatively small company we all roll our sleeves up with different initiatives and George is no exception to that,” says Rob.

The leadership team, including Watt and Woodward, drives the implementation of STV’s strategy and meet every week.

“We’ve recruited some excellent strong new talent into the top team. This includes Alan Clements, who has grown the content and production business, and Steven Walker, the former commercial directory of News International in Scotland, and managing director of The Scotsman Publications, who is driving new business relationships; Peter Reilly, who joined from ITV as commercial director; Bobby Hain, director of channels which is all the business carrying the STV name, including the relationship with ITV; Suzanne Burns, director of HR and communications; Elizabeth Partyka, who has been with the business for a number of year and is controller of the schedule and online activities; Helen Arnot, who is head of legal and regulatory affairs, who has been at the sharp-end of the business over the last years; and chief technology officer Alistair Brown.”

However, STV doesn’t stop with the leadership team, says the chief executive. “Through the rebirth of the company we have proven that this a company that is strong and has ambitious people who want to come and work here. Every person in the top team is here because they shared the same passion that I have. And where we are taking the company and that’s a really exciting mix.”

There are 370 people employed by STV with 700 freelancers added over the year, while relations with Glasgow Caledonian and Edinburgh Napier helps create opportunities for their students.

“When I joined we barely had a digital team and now we have a first-class one, including a development department, which we didn’t have before. In production we’ve been recruiting to make sure we have the right skills. We are the first broadcaster in the UK to be using a more automated production system.”

This up-to-date Ross technology has allowed STV to keep the money on screen and maintain and grow the investment in journalistic skills while taking out labour costs from production. Five and a half years on, is he able to relax a bit more?

“It has had its moments and by and large I’ve never lost my faith in what this company could do and what our staff could achieve. What it needed was that shared belief and leadership through some really difficult times. I’m not one for relaxing though.”

He knows the current exam question is about growth and maximising STV’s relevance in a multi-platform, digital environment. If the first pillar was sorting out the balance sheet, the second was ensuring that the cost base was in line the revenue.

“We’ve gone through and taken a lot of cost out of the business. We now operate the core of the business at 25% less cost that we did five years ago. We’ve seen that the margin of our core business has consistently ticked up through my tenure. At the half year we announced a margin of 20%. Our expectation is to hit our 15.5% margin which would be our highest margin delivered by the broadcast business since 2005.”

Being a regional television company, the third component is to make stuff. As Woodward puts it: dropping the seeds of new business ideas, watering them and then letting them grow. This has been through STV’s digital footprint and its core STV Productions.

“When I first arrived here the company had a nascent digital strategy and we getting about 30,000 unique visitors onto the STV site every month and now we get over three million, we are serving 3.3 million videos every month and 20 million page impressions a month. These are big numbers for an organisation where 90% of our traffic is coming from Scotland,” he says.

“Our production capability is being rebuilt. If you think back five years we had one excellent commission with ITV, which was Taggart, and now we have moved away from that.”

Antiques Road Trip and Celebrity Antiques Road Trip have both become prime-time favourites and the shows represent a new-found confidence.

“We are delighted that we won the BAFTA Scotland last night, which is great recognition for everyone involved on that show. This follows our recent commissions of Country Show Cook Off, a 20 part for BBC2 and Catchphrase for ITV1.”

Who would have suspected that cooking and antiques would be such a lucrative path for the hard-noses of Glasgow media types?

“The secret is in the detail around the narrative of the show and we’ve developed a strong formula. We are still making network drama such as The Poison Tree, produced by Margaret Enefer, based in London. The production team is split 50-50 between London and Glasgow,” he says. So will Taggart be making an arresting return to the wee screen?

“It’s been a great brand for STV,” he smiles, and adds that it is now resting. You never say never, he says, but gives the clear impression that STV has much fresher fish to fry. “We are going into genres that STV hasn’t operated in for a while. Catchphrase a popular game show is being revived and on air in February, a prime time Saturday night slot with Stephen Mulhern as the host.”

And STV Productions has been commissioned to make eight episodes of Fake Reaction, a panel show which emerged from the complex a Fuji TV games show. Matt Edmondson will host the show for ITV2. These kinds of commissions would have been virtually impossible to win several years ago. Rob Woodward inherited a nasty Mexican standoff with ITV when he took charge.

“It was a dysfunctional relationship between STV and ITV and we brought it all to a head. We worked on three simultaneous High Court actions and what was a stake was the long term independence and sovereignty of the company, which was why it was such a fundamental fight. I’m delighted on where we have ended up and we’ve secured the sovereignty of access of ITV One on programming in Scotland.

"But we’ve simplified the relationships and the contracts which tie us together. So STV has moved to a much more simplified world where it doesn’t take a forklift truck to move the contracts.

They are fit for purpose and fit for the 21st century and able to deal with service such as video-ondemand or mobile and catch-up which were not really heard of when the original contracts were drawn up. It was a mammoth, time-consuming effort. So how is the relationship with ITV now?

“It’s just gone through a transformation. Our relationship with Adam Crozier [the chief executive of ITV] and other members of his senior team has certainly never been better in my time.”

Rob Woodward is convinced there is an opportunity to work closer together. “You can take it that the commissioning of Catchphrase is a sign of that. At the height of the hostility it is unlikely that ITV would have commissioned a prime time slot from STV,” he says. Locally, STV’s commitment to covering the news agenda more comprehensively has also been noted by the Scotland’s chattering classes. The late night current affairs show Scotland Tonight launched in October 2011 has already a solid following.

“Given our strong reputation for news, we thought there was an opportunity for a revamped, more modern and lessargumentative style around current affairs and that is what Scotland Tonight is all about. It has gone from strength to strength and we’ve created a debating ring for Scotland to talk about itself. With John MacKay and Rona Dougall we’ve got two first class presenters.”

With news pivotal to STV, Rob Woodward says certain brand values are vital: impartiality, fairness and some new ones such as breaking news and telling genuine stories. It is ensuring that STV is an authority in Scotland.

Added to the mix is a current affairs programme, the Road to the Referendum, leading to the vote on independence in 2014, and run in conjunction with the Herald newspaper group.

“This is all about our commitment to covering Scotland. It’s a critical time in the country’s history and people want to know in detail what it all means.

“We know over the course of the last few months we generated a ten-year high in our audience. One of the key changes has been the more localised format, STV is now anchoring three simultaneous shows in Edinburgh, Glasgow and Aberdeen, with a five minute opt out in Dundee, so that each of Scotland four major cities their own dedicated component of a show.” Scottish sport remains an Achilles’ heel for STV. “As a free-to-air broadcaster we struggle to cover sport.

“We had the rights for the World Cup and the Champions League but the domestic game is driven by the pay platforms and there is very little we can do about that.

“So we continue our online activities and, of course, the Rangers story was a huge online story for us and we were setting the news agenda.

”STV is also bidding for the local TV franchises in Edinburgh and Glasgow with ETV and GTV, working with the universities and their broadcasting courses.

“They will be very different. And the budgets are a fraction and a very different proposition,” he says.

“For 53 years there has always been some confusion between ITV and the local licensees in terms of where the loyalty lies but I think most people understand that we are an independent Scottish company and proud to be here to support Scotland and that our content is relevant for Scotland. So we are not just ITV One in Scotland.”