ITV Reports Falling Revenue Amid Tough Operating Environment

ITV Reports Falling Revenue Amid Tough Operating Environment

ITV PLC (ITV), a British integrated producer broadcaster on 8th May, reported its Q1 FY19 trading update. The commercial broadcaster warned of a rough year as a Brexit-induced slowdown continues to bite. Britain’s largest free-to-air commercial broadcaster expects a 6 per cent decline in the total advertising sales in the first half of the year.

The company said in the first quarter, like-for-like revenues (ITV Broadcast & Online and ITV Studios) dropped by 4 per cent to £874 million, while total external revenue dipped by 4 per cent in the first quarter to £743 million. The group’s production arm – ITV Studios revenue surged by 1 per cent, to £385 million, while broadcast & online business segment revenue was down 7 per cent to £489 million. Total advertising revenue also declined by 7 per cent to £417 million. Total advertising revenue in the first four months of the year was down by 3 per cent. Compared to a strong June 2018 revenue, which was up 22 per cent in the previous year due to the Football World Cup, advertising revenue in June 2019 is expected to decline by approximately 20 per cent and revenue in May is forecasted to be down by 2 per cent.

A decline in spot advertising, impacted by the timing of Easter and economic and political uncertainty, led to a decline in total revenue, with a rise in the content production arm ITV Studios and 22 per cent growth in VOD revenues failing to offset a decline in advertising. The company reported some positive news as ITV HUB online viewing hours had increased by 16 per cent and Family share of viewing was up by 4 per cent in the quarter.  ITV Hub registered users also rose by 29 per cent to 28.4 million. However, a fall of 3 per cent year-on-year to 4.4 billion hours was reported for total viewing.

Moreover, the pre‐launch costs of BritBox, the planned essential investments, and the summer comparatives from the World Cup last year would also affect its performance. However, for the full year, the company anticipates good organic revenue growth in ITV Studios and reiterated its expectations to deliver double-digit growth in online revenue. It is on track to launch its BritBox streaming service, developed in partnership with the BBC, in the second half of the year.

The group creates, owns and distributes high-quality content on multiple platforms globally, and owns 13 of the regional licenses and sells advertising on behalf of all 15 licences, making it the largest family of commercial channels in the UK.

Share Price Commentary

 

On 9th May 2019, at the time of writing (before the market closed, GMT 8:55 am), ITV shares were trading at GBX 120.3, down by 2.7 per cent against its previous day closing price. Stock’s 52 weeks High and Low is GBX 183.10/GBX 118.45. Total outstanding market capitalisation was around £4.78 billion with a dividend yield of 6.74 per cent.