ITV to cut costs by £25m in preparation for tough ad market
ITV said it would tighten its belt by £25m next year to brace itself for the potential impact of leaving the EU on the advertising market.
The broadcaster said in its half-year results, which cover the six months to June 30, including one week after the referendum result, that it was planning for economic uncertainty. It told investors that advertising sales in August were expected to be down 7pc and in September by as much as 10pc.
Chief executive Adam Crozier said the negative forecasts were driven by increased competition for viewers from the Olympics on the BBC and tough comparatives with a record September last year. “ITV’s advertising perform- ance is [going in the direction] expected and it is too early to say what impact the Brexit vote will have post September,” he said.
“I don’t think the result of the vote really changed anything so far. I think people are starting to realise that actually nothing much is going to happen soon and that this is going to be a two to five-year process.” Mr Crozier said the £25m in cost cuts would come from across the business and could include job cuts.
Around half of ITV’s revenues and most of its profits are drawn from advertising. The market is seen as particularly vulnerable to a downturn as it is often among the first costs companies cut to manage their finances. In the six
months, ITV’s overall advertising sales were flat against the prior year at £838m. The performance matched the first quarter and was helped by a boost to viewing from Euro 2016.
Big audiences for live football helped reverse a long-term decline in the broadcaster’s share of viewing. The main ITV channel was up 7pc compared with last year.
ITV’s total external revenues, including advertising, programme sales and online were up 11pc to £1.5bn. Most of the growth was driven by ITV Studios, the programme-making division built by rapid acquisition in recent years.
The cost of one of the largest of those production deals, the £355 takeover of Talpa, the maker of The Voice, hit profits. Statutory pre-tax profit was £309m, down £18m.
Nevertheless ITV raised its interim dividend by 26pc to 2.4p per share.
Mr Crozier said that after six years leading a turnaround of ITV he remained committed to the company under its new chairman, Sir Peter Bazalgette. The broadcaster will continue to make production acquisitions, he added.