Robust interest in the Euro 2016 football tournament shored up advertising sales at ITV (ITV) in the reported period. Combined with strong growth in non-advertising revenue and the £100m purchase of Irish peer UTV's television assets, that propelled the Britain's Got Talent broadcaster's adjusted cash profits up a tenth to £438m. Management also hiked the half-year dividend, sending the group's shares up strongly.
ITV's main channels posted flat net advertising revenue, as demand from bookmakers and car companies to advertise during European football matches was offset by weaker spending among supermarkets and banks ahead of the EU referendum. Nonetheless, they grew their audience share to 21.7 per cent, as viewers tuned into Six Nations Rugby and dramas such as The Durrells.
Online, pay and interactive revenue jumped 26 per cent, driving non-advertising sales up more than a quarter to £874m. That reflected lucrative licensing deals with Sky, Virgin and Vodafone for certain channels and on-demand video, as well as soaring consumption of catch-up TV and digital programming.
Headline revenue also leapt 31 per cent at ITV Studios, but exclude recent acquisitions and currency movements and the production arm's turnover slid 4 per cent. That was largely due to a sharp drop in US sales, which was down to the phasing of shows such as Hell's Kitchen. But the division benefited from past acquisitions and ongoing commissions from the BBC and Channel 4 for Poldark and The Jump, respectively. It also inked a four-year licensing deal for The Voice in China.
ITV's directors predict third-quarter advertising demand will suffer from a tough comparative against the Rugby World Cup, as well as Olympics coverage on the BBC. They expect core net advertising sales to dip 1 per cent in the nine months to 30 September 2016. Given the murkier outlook, management intends to unearth £25m in cost savings in 2017.
Broker Numis expects pre-tax profit of £850m in 2016, giving EPS of 16.6p (from £843m and 16.5p in 2015).
| ITV (ITV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 200.7p | MARKET VALUE: | £8.1bn | |
| TOUCH: | 200.6-200.8p | 12-MONTH HIGH: | 270p | LOW: 141p |
| DIVIDEND YIELD: | 3.2%† | PE RATIO: | 17 | |
| NET ASSET VALUE: | 22p* | NET DEBT: | 87% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.36 | 327 | 6.4 | 1.9 |
| 2016 | 1.50 | 309 | 6.1 | 2.4 |
| % change | +11 | -6 | -5 | +26 |
Ex-div: 27 Oct Payment: 28 Nov *Includes intangible assets of £1.63bn, or 41p a share †Excludes special dividend of 10p in 2015 | ||||
