When Carolyn McCall left EasyJet (LON:EZJ), she may well have felt that turning ITV (LON:ITV) around would probably be an easier job than turning a budget airline into a household name. This may prove to be easier said than done and the sharp fall in profits that we saw at the beginning of the year will only have made her realise the extent of the job she has taken on. A sharp fall in advertising saw its revenues decline to £1.5bn.
In that first quarter update it was ITV Studios that picked up the slack with a range of programmes from Broadchurch to Love Island that allowed it to push its total revenues up by 2%. In today’s first half trading update ITV Studios once again outperformed with revenues rising 16% to £803m. Of the revenue generated by ITV Studios, 57% came from outside the UK, up 5% from 2017.
In the UK, production of The Voice, Love Island and Dancing on Ice helped deliver a rise of 7% in total revenue, while deliveries of Poldark and Age before Beauty for the BBC also helped.
The World Cup as expected delivered a boost to advertising revenue despite the channel starting to gain a reputation as a curse on England’s chance of ever winning a competitive knock out game. Growth here was up by 2% as expected, with 48% growth of that on line, which could probably be viewed as a little disappointing given how far England progressed on the tournament.
Share of viewing saw growth of 9% helped by the World Cup as well as Love Island. The broadcaster also announced plans to produce the format in all seven countries which has been sold the format this year.
Total profits for the business came in at £354m, with revenues coming in at £1.59bn, slightly above estimates of £1.5bn, and the dividend came in at 2.6p, an increase of 3%.
The big concern for ITV is that its programming budget is tiny when compared to its rivals, at £1.1bn, and while it is true that ITV is predominantly a domestic broadcaster, unlike Netflix (NASDAQ:NFLX) which has to deliver programming across its global platform which is why its budget is almost eight times larger, that surely doesn’t preclude ITV selling its content from ITV studios to a global audience.
The company also needs to improve its online offering, the ITV Hub, which is clunky and not particularly easy to navigate in terms of ease of use. Technology problems also need to be addressed after the problems earlier this year after a number of complaints from on line customers that they were unable to view Love Island.
As part of its new strategy CEO Carolyn McCall pledged to invest £40m in 2019, while also cutting costs, and focus on looking to grow and scale the UK and global production business, and deliver content direct to consumers.
The company went on to warn on a weak outlook for advertising as Brexit uncertainty made advertisers cautious. CEO Carolyn McCall also said that the broadcaster wanted to start a subscription video service, probably expanding the ITV Box Office which started as a trial in 2017 and hasn’t really developed beyond a streaming vehicle for live events, particularly boxing.
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