The FTSE 100 broadcaster said that total external revenue was down 4% at £743mln in the quarter due to declines in spot advertising, which was blamed on the timing of Easter and “economic and political uncertainty”
ITV plc (LON:ITV) shares slipped on Wednesday after it delivered a decline in first quarter revenues in line with its previous expectations.
In a trading update, the FTSE 100 broadcaster reported that total external revenue was down 4% at £743mln in the quarter due to declines in spot advertising, which was blamed on the timing of Easter and “economic and political uncertainty”.
The fall also offset 22% growth in revenues from the firm’s video-on-demand (VOD) service and a 1% revenue rise in its content production arm ITV Studios, which has produced shows such as Love Island and Bodyguard.
Meanwhile, revenue for ITV’s broadcast and online segment was down 7% at £489mln, while total advertising had also fallen 7%.
There was some positive news, with ITV’s Family share of viewing up 4% in the quarter, while online viewing had increased 16%. Total viewing, meanwhile, had fallen 3% year-on-year to 4.4bn hours.
The group also continued to state that its first half would be impacted by the ongoing political and economic uncertainty, which has dampened demand for advertising, while the summer comparatives from the World Cup last year would also affect its performance.
Overall, ITV’s total advertising revenue is expected to fall 6% in the first half.
Despite the decline, the broadcaster reiterated its expectations of “double digit growth” in online revenues and “good organic growth” for ITV Studios over the full year, adding that its BritBox streaming service, developed in partnership with the BBC, is scheduled for launch in the second half of 2019.
The groups chief executive, Carolyn McCall, said the performance had been “very much as we expected” in the quarter but the company was “very focused on delivering in the areas we can control” and trying to mitigate the impact of factors outside their control.
“We have a solid balance sheet which enables us to make the right decisions to build a robust and growing business and deliver returns to shareholders in line with our guidance.”
The outlook failed to assuage investors, with the shares falling 3.8% to 126.7p in early deals.
Liberum disappointed by lack of outperformance, downgrades to ‘hold’
The decline in revenue came as a surprise to analysts at Liberum, who had previously expected that ITV would outperform its initial forecasts after a better-than-expected performance in the first quarter for Scottish broadcaster STV Group PLC (LON:STVG), which holds the license for the ITV 1 in the region and thus provides a read-across for ITV’s main channel.
READ: STV first quarter numbers provide “positive read across” for ITV, says Liberum
In a note on Wednesday, the broker also downgraded the stock to ‘hold’ from ‘buy’ and cut its target price to 145p from 190p, saying that in addition to the “dissapointing” lack of outperformance they did not see a material improvement in the company’s conditions “any time soon”.
“There are many things to be positive about ITV, especially on its viewing performance, and the shares are undoubtedly cheap but, with an uncertain political environment and a continuing pattern of downgrades, it is hard to push a buy case now.”
Figures highlight “scale of challenges”, says analyst
Richard Hunter, head of markets at interactive investor, said that while there were “signs of progress” in the figures, the scale of ITV’s challenges “were clear” as the group seeks to move its business model away from a reliance on TV advertising and more toward online viewers and content production.
“In its quest to become more than a terrestrial broadcaster, ITV has entered a global arena where competition for viewership is both intense and evolving,” Hunter said, adding that the next stage of the company’s progress was “not yet obvious” either as an independent entity or as part of another media group should it be acquired.
He also said that given the disappointing predictions for the first half, ITV would be under “additional pressure” to deliver a strong second half.
Source – Proactive Investors
