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ITV endures ongoing uncertainty

The group expects to launch its ‘BritBox’ joint offering with the BBC in the second half
May 8, 2019

ITV (ITV) suffered a further decline in advertising revenue during the first quarter, as political and economic uncertainty continued to bite.  

IC TIP: Hold at 125p

Total external revenues dipped by 4 per cent to £743m, as a marginal rise in revenues for ITV studios (the group’s production wing) was offset by a 7 per cent decline in sales for broadcast and online. Total advertising revenue was down 7 per cent, as guided. 

Economic uncertainty is expected to impact the entire first half – along with the lack of a Football World Cup, “planned essential investments”, the timing of ITV Studios deliveries and pre-launch costs tied to ‘BritBox’ – a subscription video-on-demand (SVOD) service due to be launched in the UK in the second half. At the full-year stage in February, this SVOD platform already had more than half a million US subscribers. We learnt then that ITV’s net investment in BritBox will be up to £25m this year, rising to around £40m in 2020 before starting to decline.

For chief executive Carolyn McCall, “ITV's performance in the first three months was very much as we expected”. Management is confident about pulling off “good organic revenue growth” for the full year in ITV studios, with £120m in additional revenue already secured for 2019 versus 2018.

Liberum has downgraded its rating from 'buy' to 'hold', given analysts had expected ITV to outperform expectations, following STV’s (STV) recent positive trading update. The Scottish broadcaster’s national airtime advertising revenues “match exactly ITV1 TV advertising revenues for ITV plc as STV holds the ITV1 licence in Scotland”. The broker notes that ITV’s digital channels – which STV does not have – are seemingly “performing much worse than expected”, and has lowered its revenue and cash profit forecasts for 2019-21. Analyst at Numis retained their 'add' rating, assuming "trading improves slightly" in the second half.