Shares in the TV group have rallied this year with analysts impressed by its efforts to diversify its business beyond advertising revenue, while dividends are expected to rise in 2014.
As at 15 September, ITV made up 5.2% of UK Select Opportunities Fund with Thomas stressing earlier this year that his investment was well-timed in terms of its own recovery and that of the economy in general.
“National Advertising Revenue for ITV looks like it could grow by 5% in the fourth quarter of 2013 and is now expected to grow by 5% for 2014,” he said this week.
“However, recent research from Credit Suisse has reinforced the attraction of its content, as produced by ITV Studios. Studios’ revenues from original commissions grew by 37% between 2010 to 2012 – the content pipeline probably having been replenished after a long period of underperformance when Studios’ revenues had fallen in the previous five years.
“Growth from distributing this content globally, where margins are estimated to be over 50%, would also add to profitability.”
ITV is just one of a number of companies which Thomas says follows the ‘total shareholder returns’ ethic, including the likes of Next, Wolseley, ITV, Dunelm, St James’s Place, Rotork, Vodafone, WPP Elementis and Rightmove, all of which he owns.
He adds: “We are seeing more and more companies wholly embracing and aligning themselves with total shareholder returns. This involves dialogue with shareholders regarding growth of earnings and dividends, special dividends and share buybacks.”
Thomas believes that the influences that have buffeting equity markets since 2007 will continue and, quoting British philosopher Peter Marshall, he concluded: “When contemplating the past [Marshall] commented, ‘When we long for life without difficulties, remind ourselves that oaks grow strong in contrary winds and diamonds are made under pressure’. Some management teams can cope with change and willingly embrace total shareholder returns. It is in these companies that we will try to allocate our investors’ capital.”
