Adaptable ITV’s looking a picture of health
WE last looked at ITV in June 2013, since when the share price has added 67 per cent to stand at £ 2.30. As such, we now update prospects for the company.
The Television Act of 1954 enabled commercial television for the first time, loosening the monopolistic grip of the BBC, and ITV began broadcasting a year later on Channel 3 in the London area.
Today, the company is a member of the FTSE100, with a market value of £ 9.3billion.
ITV is split into two distinct divisions. Broadcast & Online deals with the channels in its portfolio ( ITV and the digital channels of ITV2, ITV3, ITV4, ITV Encore and CITV). According to its latest numbers, the company has a 23.1 per cent share of viewing in the UK and the largest share of the UK television advertising market at 45.4 per cent.
Apart from advertising, this division also delivers programming across 20 multiple platforms, such as ITV Player.
The ITV Studios division produces and sells programmes and formats. It is the largest production company in the UK.
The company’s third quarter trading update in mid- November was solid, with all parts of the business growing.
In particular, Broadcast & Online revenues grew 7 per cent and ITV Studios 10 per cent, while cost savings for the year were estimated to come in at £ 15million over the full year.
In addition, the positioning of rivals in the sector has led to and is continuing to lead to consolidation in the sector, with ITV having attracted vague bid speculation throughout.
Less positively, the company is not content with its current share of viewing figures, while the dividend yield of 1.3 per cent is somewhat anaemic ( although ITV has committed to a progressive dividend policy) and a pension deficit of £ 362million remains, although improving. Even so, the shares have risen 14 per cent over the past year, compared to a 3 per cent hike for the wider FTSE100.
With management’s broader ambition to produce and acquire content and reduce its reliance on volatile advertising, the market consensus remains positive on prospects and comes in at a buy.