Investors were unperturbed by a slowdown in advertising at ITV this summer, as the broadcaster's ongoing transformation plan more than compensated with a sharp increase in non-advertising revenues, which rose by a quarter to £514m and now account for approaching half of revenues. The shares rose 7 per cent on the results, but with the recovery story gathering momentum they still look too lowly rated.
The improvement in non-advertising revenue was led by a 34 per cent increase in turnover at ITV Studios. Although that was boosted by a disproportionately busy first-half schedule, the business is still expected to grow at around 9 per cent over the full year on the back of a strong investment in commissioning. The studios business is also gaining traction internationally; eight programmes are now produced in three or more countries, up from four in 2011 - a figure that should be further boosted by the recent acquisition of Nordic production company Mediacircus.
Despite the current soft advertising market - which will see ITV's net advertising revenue (NAR) down 10 and 11 per cent in July and August - the broadcaster still expects nine-month NAR to be flat, better than the market as a whole. That's also being partially offset by strong growth in online and interactive revenues, which rose 24 per cent to £47m in the half.
Broker Peel Hunt expects underlying pre-tax profits of £421m and EPS of 8.5p this year (from £385m and 7.9p in 2011).
ITV (ITV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 74p | MARKET VALUE: | £2.91bn | |
| TOUCH: | 74-75p | 12-MONTH HIGH: | 91p | LOW: 51p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 21p* | NET CASH: | £92m | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.03 | 181 | 3.50 | 0.40 |
| 2012 | 1.13 | 167 | 3.20 | 0.80 |
| % change | +10 | -8 | -9 | +100 |
Ex-div: 31 Oct Payment: 30 Nov *Includes intangible assets of £915m, or 23p a share | ||||
