Join our community of smart investors

ITV shows studio, digital and pay-TV growth

The Downton Abbey broadcaster cashed in on a positive advertising backdrop and attractive content.
March 2, 2016

Broadcasters have scrambled to follow audiences onto laptops and tablets and fend off online competitors such as Netflix and Amazon Instant Video. ITV (ITV) has been among the most successful: strong demand for original, on-demand and pay-TV programming, combined with a robust advertising market, drove the Downton Abbey broadcaster's adjusted cash profit up 18 per cent to £865m in 2015. Management also surprised investors with a special dividend of £400m.

IC TIP: Buy at 242p

ITV's net advertising sales rose 6 per cent, but the real stars were the studio arm and the smaller online, pay and interactive segment. Organic production revenue climbed 8 per cent as shows such as Thunderbirds are Go! took off. Meanwhile, digital and pay-TV turnover soared 23 per cent as consumers flocked to ITV Hub, a new platform for both live and catch-up television. But underperforming factual shows and fierce competition from the BBC and new digital channels eroded the audience share of the group's main channels by 3 per cent to 21.2 per cent.

 

Management also went on a shopping spree. It shelled out £406m to acquire The Voice creator Talpa Media, factual entertainment and drama producer Twofour and Mammoth Screen, the producer of premium dramas Poldark and Endeavour. And it recently completed the £100m takeover of Irish peer UTV's television assets.

ITV's directors expect Euro 2016 and a strong content slate to help the group outperform the TV advertising market in 2016. They also expect double-digit sales growth in the production and online segments. Broker Numis raised its forecasts and now expects adjusted pre-tax profit of £930m in 2016, giving EPS of 17.7p (from £842m and 16.5p in 2015).

ITV (ITV)
ORD PRICE:242pMARKET VALUE:£9.7bn
TOUCH:242.2-242.4p12-MONTH HIGH:282pLOW: 216p
DIVIDEND YIELD:2.5%PE RATIO:20
NET ASSET VALUE:28p*NET DEBT:28%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)†
20112.143276.41.6
20122.203346.62.6
20132.394358.33.5
20142.5960511.64.7
20152.9764112.46.0
% change+15+6+7+28

Ex-div: 28 Apr

Payment: 27 May

*Includes intangible assets of £1.5bn, or 37p a share

†Excludes special dividends of 4p a share in 2012 and 2013, 6.25p in 2014 and 10p in 2015