Don’t switch off ITV just yet

Shares in broadcaster ITV jumped by 12% after CEO Carolyn McCall said she thinks the advertising market is rebounding from the worst recession since the financial crisis, says Alex Farber in The Times.

Income over the first three months of 2024 is expected to have eclipsed the same period in both 2023 and 2019. The outlook could improve further, as the Euro 2024 football tournament, is expected to “very positive” for advertising revenue. The expansion in the sales of catalogues of old programmes and unscripted programming for streamers adds further revenue.

The expected softening in the rate of decline for the traditional advertising market is clearly welcome, but the “critical new development” is the performance of streaming service ITVX, says Nils Pratley in The Guardian. McCall’s plans to “ramp up the broadcaster’s adventures in streaming” are being vindicated, with digital revenue increasing by 19% last year.

At the same time, production house ITV Studios is going from strength to strength. The balance sheet is in “decent shape”, the £200m-a-year dividend is “secure”, and a share buyback is being planned. ITV’s investors “can breathe again”.

An increasing share of ITV’s money now comes from streaming and production, rather than “fickle” TV ad sales, suggesting that ITV is definitely changing, albeit “slowly”, says Lex in the Financial Times. Still, even though the shares jumped on last week’s news, the market clearly remains sceptical.

If you break down the company’s valuation into the sum of its various parts, it becomes evident that investors are undervaluing the studios business, in particular – especially given that investment group RedBird IMI recently bought rival production company All3Media at a trailing enterprise value/earnings before interest, taxes, depreciation and amortisation (Ebitda) multiple of just under 12 times. ITV still hasn’t managed to “jolt the market into seeing it as anything but an ex-growth, linear broadcaster”.