ITV Ad Revenue Slips, Studios Helps to Lift Results

LONDON: ITV’s ad revenues dipped 3 percent, though the British broadcaster still saw revenue growth for the full-year 2016.

ITV posted full-year external revenue of £3.06 billion ($3.78 billion), with adjusted EBITA up 2 percent to £885 million ($1.1 billion). Net advertising revenue was down 3 percent to £1.67 billion ($2.05 billion), though the company said this is still performing ahead of the TV ad market. Revenues at ITV Studios rose 13 percent to £1.4 billion ($1.7 billion), while online, pay and interactive revenue was up 23 percent to £231 million ($284 million).

Adam Crozier, ITV’s chief executive, said: “ITV delivered a good performance in 2016 as we continue our strategy of rebalancing and strengthening the business creatively, commercially and financially. The continued growth in revenue and adjusted profit, despite a 3-percent decline in spot advertising revenues resulting from wider political and economic uncertainty, is clear evidence that our strategy is working and remains the right one for ITV.

“External revenue was up 3 percent to more than £3 billion, driven by strong growth in non-NAR as we further reduce our dependence on spot advertising and grow new revenue streams. In 2016, 53 percent of total ITV revenues came from sources outside traditional TV spot advertising.

“Our production business, ITV Studios, is a global player of scale with 50 percent of total revenues coming from outside the U.K. and a stronger than ever pipeline of new and returning programs in the key genres of scripted and formats. In 2016 ITV Studios supplied around 7,800 hours of content to 234 channels and platforms in the U.K. and internationally, including 155 hours of drama and 80 formats. There is growing demand for our content on OTT platforms with over 200 program supply agreements in place.

“Our broadcast business is robust and onscreen we performed well with share of viewing up 3 percent on our main channel. ITV maintains its leading position in the U.K. television advertising market, delivering 99 percent of all U.K. commercial audiences over 5 million, and remains highly demanded by advertisers. Whilst our net advertising revenues have declined, we again outperformed the U.K. television ad market as a whole.

“Our online, pay and interactive revenues rose 23 percent driven by increased demand for advertising online. The ITV Hub continues to thrive with online viewing up 42 percent and around half of all the U.K.’s 16- to24-year-olds registered. We are also making selective investments in digital content companies, including New Form, Rocket Jump, AwesomenessTV and Ginx TV as we build our expertise in digital-first content.

“We’ve taken an important step forward in our strategy of building our pay and distribution business with the soon to launch BritBox US, an SVOD 50/50 joint venture with the BBC offering the best of British TV from both broadcasters including recent series and classics. It is our intention to roll the service out internationally under the BritBox brand.

Looking forward to 2017, ITV Studios will return to good organic revenue growth. As we previously stated, increased investment in U.S. scripted content, including Somewhere Between, The Good Witch, Sun Records and Snowpiercer, along with the reversal of the one-off benefit of The Voice of China in 2016, means that ITV Studios profits in 2017 are likely to be broadly in line with 2016.

“We expect ITV NAR to be down around 6 percent over the first four months against the backdrop of current economic uncertainty, although over the full year we expect to again outperform our estimate of the television advertising market. Online, pay and interactive will perform strongly and a particular focus for 2017 will be the launch of BritBox.

“We see a good pipeline of investment opportunities across ITV, organically and through acquisitions, and our strong balance sheet and healthy cash flow allows us to take advantage of these while delivering sustainable returns to our shareholders. We remain focused on growing our international content business and on building digital assets throughout the company to drive further value from the programs we create and own.

“Given our good performance the board is proposing a final dividend of 4.8p, bringing the full year dividend to 7.2p, up 20 percent. Looking ahead, the board is committed to a long-term sustainable dividend policy. The ordinary dividend will grow broadly in line with earnings, targeting dividend cover of around 2x adjusted earnings per share over the medium term. Reflecting ITV’s strong cash generation and the Board’s confidence in the business, the Board is proposing a special dividend of 5.0p per share, worth just over £200 million.”