From a business perspective, ITV (ITV) can be very proud of Love Island. The programme – which sees couples compete for a £50,000 prize – may have divided the nation’s sense of morality, but its army of young viewers has been gold dust for advertisers. ITV advertising revenue fell 8 per cent to £769m in the first six months of 2017, but that figure could have been much worse without the success of the broadcaster’s reality TV offering. Even so, concerns about the drop-off in advertising have forced broker Numis to cut its full-year pre-tax profit and EPS forecasts to £770m and 15.4p, respectively (from £847m and 17p in FY2016).
In the increasingly competitive TV market, original content is key. ITV’s studio arm – where revenue rose 7 per cent in the first half – is therefore well placed, having recently begun to produce shows for major online competitors Netflix and Amazon. The group is also buying an increasing proportion of its shows from in-house production companies, which helped send UK studios revenue up 5 per cent.
The acquisition of four new production companies, while further enhancing the portfolio, have come at a cost. The aggregate cost and a one-off earn-out payment have contributed to period-end net debt of £1.07bn, or 1.2 times adjusted cash profit on a 12-month rolling basis. However, cash inflows are reassuring and should pick up again in the second half.
| ITV (ITV) | ||||
| ORD PRICE: | 180p | MARKET VALUE: | £7.26bn | |
| TOUCH: | 180-180.4p | 12-MONTH HIGH: | 217p | LOW: 157p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 10.9p* | NET DEBT: | 225% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 1.50 | 309 | 6.1 | 2.40 |
| 2017 | 1.46 | 259 | 5.1 | 2.52 |
| % change | -3 | -16 | -16 | +5 |
| Ex-div: | 26 Oct | |||
| Payment: | 27 Nov | |||
| *Includes intangible assets of £1.7bn, or 41p a share | ||||
