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ITV hits its mark

ITV continues to make both domestic and international gains, and takeover speculation may support its shares.
July 30, 2014

A potent mix of foreign acquisitions, an improved advertising market and the FIFA World Cup drove a 13 per cent rise in ITV ’s operating profit to £287m. But it wasn’t a clean sweep for the broadcaster, as its fledgling production business put in a weak performance.

IC TIP: Hold at 204p

Rising net advertising revenues from ITV’s family of channels, which includes ITV and CITV, helped sales at its main broadcast and online segment rise 7 per cent to £981m. The group’s online, pay and interactive segment also grew sales by a fifth amid soaring interest in on-demand video. The studios division trailed the pack with an 8 per cent organic sales decline, reflecting the phasing of programme delivery and the programming costs of the World Cup.

ITV also bought a majority stake in ‘Pawn Stars’ owner Leftfield Entertainment, its fifth acquisition in 3 years in the enormous US market. But the downside of international expansion is currency exposure - that could depress ITV’s full-year sales by £25-30m and reduce its after-depreciation cash profits by £6-8m.

US cable giant Liberty Global’s recent purchase of a small stake in ITV adds ‘speculative spice’ to its shares, according to broker Numis. Following these results, it expects to upgrade its EPS forecast by 3 per cent to 13p (11.2p in 2013).

ITV (ITV)
ORD PRICE:204pMARKET VALUE:£8.2bn
TOUCH:203-204p12-MONTH HIGH:210pLOW: 153p
DIVIDEND YIELD:1.9%†PE RATIO:21
NET ASSET VALUE:18p*NET DEBT:25%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131.141793.41.1
20141.232504.91.4
% change+7+40+44+27

Ex-div:29 Oct

Payment:01 Dec

*Includes intangible assets of £1.2bn, or 29p a share

†Excludes special dividend of 4p in 2013