ITV switching over to a profitable strategy
ITV’s half-year results show a 3 per cent decline in revenue, and profits falling 8 per cent to £403million. This was driven by an 8 per cent decline in net advertising revenue, which fell to £769million. ITV increased the interim dividend by 5 per cent, to 2.52p per share.
Despite these results, ITV shareholders will be raising a glass to outgoing CEO Adam Crozier.
Mr Crozier made a conscious effort to build up the Studios business, which makes programmes including Come Dine With Me and the hit Love Island series.
The growth of this division has helped diversify ITV away from the highly cyclical world of advertising, and has given the group more international exposure. The group is now the largest independent reality TV producer in the US.
The first six months of this year saw Studios revenue rise 7 per cent to £697million, boosted by continued growth in America.
With advertising customers tightening the purse strings in response to heightened economic uncertainty, ITV would likely be in a much worse position were it not for his efforts over the past seven years. However, while ITV is now a more diverse business than the one he took over in 2010, it still generates about half of its profits from advertising. Net advertising revenues are expected to fall by 4 per cent in Q3, so Carolyn McCall, who joins from easyJet in January as the new CEO, will have to hit the ground running.
In the longer-term, we feel she will also have to devise a strategy to fend off the rising competition from digital rivals like Netflix and Amazon Prime. But for now at least, she can take heart from the fact that ITV is doing a good job of getting eyeballs on screens. Given the new CEO joins with a CV including a good stint as CEO of easyJet and previous media experience as head of the Guardian Media Group, we are confident ITV will continue to be a well-run business.
However, with the group still likely to be plugged in to fortunes of the wider economy, investors will need to be aware the share price could have plenty of ups and downs.
“This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you should seek advice. Shares can rise and fall in value so you could get back less than you invest.”