ITV buoyed by advertising revenues - but for how long?

ITV (ITV) chief executive Carolyn McCall brought an end to speculation that the broadcaster was looking to capture a stake in BT Sport, but declined to comment on whether it would put in a bid for Channel 4, also the subject of media speculation. The update came as the group revealed that half-year profitability was boosted by strengthening advertising volumes, the resumption of productions, and helped along by a tightening rein on working capital, leading to £21m of savings.

The group registered its biggest ever month for advertising revenue in June, helped along by the delayed Euro 2020 tournament and the return of the hugely popular Love Island series. Covid-19 locked audiences in through 2020, so total viewing fell six per cent over the period, yet registered users on ITV Hub were up 7 per cent to 34.6m. Indeed, the first half saw the highest ever number of streams for drama viewing on the ITV Hub. The group also revealed that subscriptions for BritBox UK continued to ratchet-up, increasing by over 10 per cent to c.555,000 at 30 June 2021 from 500,000 in January despite the loosening of lockdown restrictions in Q2.

However, management tried to play down relative expectations for the remainder of the year, due to tougher comparators through the second half of the year, though it forecast advertising revenue would be 68 per cent higher in July and up as much as 20 per cent in August. So, although half-year figures provide encouragement for shareholders, and the shares are priced at a lowly 10 times consensus earnings, the trading backdrop remains uncertain as advertising regulations continue to tighten and competition intensifies. Hold.

Last IC view: Hold, 118p, 21 Apr 2021