ITV Cuts Program Spending, Dividend to Save $350M-Plus Amid Virus Crisis

U.K. TV giant ITV, led by CEO Carolyn McCall, said it would pull its dividend and make other cost savings, including in program spending, amid the new coronavirus, which it says has had an “increasing” impact on its advertising revenue. It said the moves, along with the impact of forced programming changes, will help boost its cash reserves by more than 300 million pounds ($350 million), giving it more financial flexibility.

“Management is very focused on cash and has implemented measures to reduce our costs and to tightly manage our cash flow,” ITV said early Monday. “We have reviewed our programming spend in light of the weaker advertising environment and we expect to reduce our program budget by at least £100 million ($116 million),” both by “active” spending reductions and forced programming changes, it said without breaking out figures for the two categories. “This reflects savings from sport, including the postponement of [the] Euro 2020 [soccer tournament], the late delivery of commissioned programming and active decisions to reduce our spend.”

ITV added that it has also “taken steps to reduce discretionary spending by £20 million ($23 million) in 2020…. Further, we have identified £30 million ($35 million) of savings in our capital expenditures.”

The company highlighted that it has pulled its proposed final dividend for 2019 and decided “to withdraw its previously announced intention to pay [a]…full-year dividend for 2020.”

Overall, “the savings from not paying the 2019 final dividend, taken with the cash impact of our cost and capital expenditures savings, will ensure that more than £300 million ($350 million) of cash will be retained within the business.”

ITV also provided an update on advertising trends from social distancing and self-isolation measures. “The additional measures implemented by [the U.K.] government, which have led to the closure of shops, factories and entertainment facilities, have had an increasing impact on our advertising revenues, and therefore forecasts for March and April have deteriorated since we last updated the market on March 16,” it said. “We have seen further deferrals in advertising, which are now coming from across the advertiser categories rather than just in travel and we are staying in close contact and working constructively with our client and agency partners. The situation remains dynamic and therefore we are not in a position today to give guidance for March or April…. Over a full year each 1 percent decline in total advertising revenue reduces revenue and profit by circa £17 million ($20 million) before any mitigation.”

At its ITV Studios unit, the company highlighted that its cost base is “largely variable,” adding that, “we expect to benefit from an additional offset due to increased demand for library sales.” It emphasized: “It is too early to quantify the impact of [the pandemic] on ITV Studios’ revenue and profit. This depends on how long the restrictions are in place.”

But it highlighted that demand for quality content “remains strong,” and therefore we continue to work on our development slate and we are ready to resume production as soon as we are able.” Added the firm: “As one of the largest international producers of unscripted content which has a shorter lead time, we will be able to ramp up production quickly.”

ITV also discussed programming for its networks amid the virus, which has shut down many productions, such as its soap operas Coronation Street and Emmerdale. “We are implementing contingency plans to enable us to continue to produce as many programs as possible, particularly our news output and live productions,” the company said. 

It was the latest entertainment industry company to comment on the fallout from the virus crisis. On March 20, WarnerMedia owner AT&T said it was canceling planned stock buybacks, including an accelerated share repurchase agreement with Morgan Stanley to buy back $4 billion of its stock, to maintain financial flexibility. “The impacts of the pandemic could be material, but due to the evolving nature of this situation, we are not able at this time to estimate the impact on our financial or operational results,” the telecom giant said.

A day earlier, the Walt Disney Co. had said that, “the impact of the novel coronavirus…and measures to prevent its spread are affecting our businesses in a number of ways,” including “ad sales impacts.” Disney highlighted that the impact of the virus on its revenue and earnings was difficult to predict amid the fluid situation and its impact across various businesses, saying the financial fallout would hinge on the size of disruptions and how long they last, along with “governmental regulations that might be imposed in response to the pandemic.”

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