ITV’s final results were a veritable mixed bag, reflecting the group’s progress in adapting the business to compete in an increasingly digitised world and its shortcomings in mitigating the effects of political and economic uncertainty.
On the one hand, total external revenue rose by 3%, reaching a record £3.1bn, though this still fell shy of consensus expectations.
Revenue for its production company, ITV Studios, saw a healthy growth of 14% year-on-year, generating £1.4bn in revenue.
Chief executive Adam Crozier attributed this positive growth to the group’s strategy of “rebalancing and strengthening the business creatively, commercially and financially.”
He was pleased to report that the group’s ITV Studios business was a “global player of scale,” deriving 50% of its total revenues from outside the UK and that viewership for its online streaming network had continued to climb by 42%.
The largest British broadcaster’s gains in market share were tempered, however, by news that its net advertising revenue had slipped for the first time in seven years.
Over the period, ITV’s ad revenue sank 3% to £1.7bn with Crozier predicting further losses in the first four months of 2017.
He told shareholders: “We expect ITV NAR to be down around 6% over the first four months against the backdrop of current economic uncertainty, although over the full year we expect to again outperform our estimate of the television advertising market.”
Despite the decline in ITV’s ad market, adjusted EBITA for the year was strong, growing 2% to £885m.
Based on the broadcaster’s yearly performance, it declared a final dividend of 4.8p, bringing the full-year dividend to 7.2p, up 20%.
The market interpreted these highs and lows surprisingly well, sending ITV shares up 2.4% to 207.2p, at the time of writing.
The Share Centre’s investment research analyst Helal Miah arrived at a similar conclusion from the mixed set of results. In a note to investors, he suggested they were right to be wary of the effects from the hit to ITV’s ad revenues, but also admitted that he was impressed by Crozier’s confidence in delivering further revenue growth in 2017 and cost savings.
Miah’s final verdict was to recommend the stock as a ‘buy’ for medium risk investors with a balanced portfolio.
“ITV sees a good pipeline of investment opportunities across the group, both organically and through acquisitions,” he explained, with the caveat that “investor’s drip feed, at least until the situation for advertising rates becomes a little clearer,” he said.
