ITV First-Half Earnings Rise, CEO Says Company Is Not Mulling Sale of Any Units
LONDON – U.K. TV giant ITV on Wednesday reported improved results for the first half of the year as its ITV Studios production arm, which has been on an acquisition spree, once again recorded growth.
The TV giant, led by CEO Adam Crozier, also provided updates on its TV advertising revenue and other business trends as of the mid-year mark. And it said soccer World Cup coverage helped its ratings.
On an earnings conference call, Crozier said that his team had no plans to sell any parts of its business amid deal chatter across the industry and a recent deal that made John Malone's Liberty Global an ITV shareholder.
"There clearly is a lot of consolidation across the market" driven by companies looking to grow and gain leverage and the availability of cheap financing, Crozier said. "But if I look at ITV, we have a very, very clear positioning [and growth plan]. We see plenty of growth ahead of us," so the company is focused on executing its business plan.
"We are certainly not considering selling off any parts" of the business, Crozier said in response to a question by THR. "We are very much in growth mode right across the company." Some observers have suggested in the past that ITV could divest its production business.
Discussing the recent deal that saw international cable operator Liberty Global acquire a 6.4 percent stake in ITV from BSkyB, he said people have to ask Liberty Global about its intentions. "We are fully focused on delivering [our growth plan]," Crozier said.
The ITV CEO said Liberty Global CEO Mike Fries gave him a courtesy call when the deal was being finalized, but otherwise there has not been any contact with the new shareholder. Crozier didn't discuss whether ITV would be open to Liberty Global buying a bigger stake or full control of the company.
Some analysts have argued that Liberty Global bought the ITV stake simply as an investment opportunity, but others have said it could down the line look to buy a bigger part of the business or even make a play for the whole company.
ITV will also continue to look for acquisitions that fit into its strategy, with much recent focus having been on international production firms. Crozier vowed ITV would remain financially disciplined on deals though.
The company, whose flagship ITV network airs such shows as Downton Abbey and The X Factor, recorded a 16 percent increase in adjusted profit before taxes to $529 million (£312 million) for the first six months of 2014. Earnings before interest, taxes and amortization before exceptional items rose 11 percent, and pre-tax profit rose 40 percent, while revenue climbed 7 percent to $2.03 billion (£1.2 billion).
ITV Studios earnings grew 14 percent to $122 million (£72 million) driven by acquisitions. Broadcast and online earnings rose 10 percent to $423 million (£250 million).
ITV Studios' acquisitions, mostly in the form of majority stakes, have included such U.S. companies as Cake Boss producer High Noon Entertainment, Duck Dynasty maker Gurney Productions, Hatfields & McCoys producer Thinkfactory Media and Pawn Stars maker Leftfield Entertainment, as well as Britain's Shaun of the Dead producer Big Talk.
For the first half of 2014, ITV Studios revenue rose only 2 percent, "with the acquisitions coming through as expected, while organic growth was impacted by the phasing in the delivery of some programs and the proportion of ITV’s program budget allocated to the FIFA World Cup," the company said. "We continue to invest in growing internationally and, following the acquisition of Leftfield Entertainment, ITV is now the biggest unscripted independent production company in the U.S."
International content creation and distribution will be a big focus for the company going forward, ITV management said, with Crozier highlighting that the firm will particularly focus on building out its scripted business.
Crozier highlighted that the economic recovery is leading to an "improving" advertising market. For the first six months, ad revenue was up 7 percent, with the company saying that was ahead of the broader British ad market. For the full year, the CEO predicted ITV would "significantly" outperform the market.
After a first-quarter ad revenue gain of 2 percent, the second quarter recorded a 13 percent increase, thanks in part to the World Cup. But the Cup also led to higher programming costs.
Crozier on Wednesday was also ask about criticism of ITV by U.S. guilds, saying that was partly due to ITV now having about 10 times as many shows on in the U.S. than a few years ago. "We're in conversations with the various parties," he said. "I think that common sense no doubt will prevail."
The ITV CEO also highlighted the company's focus on reaching more younger viewers, including via a deal to create 18 multi-channel networks for YouTube, the recent purchase of production firm DiGa, whose content targets younger audiences and the upcoming launch of lifestyle and reality network ITVBe, which targets young women. Highlighting the need to reach out to younger audiences, Crozier said "we will be doing that in a number of different ways."