U.K. TV giant ITV, led by CEO Carolyn McCall, on Thursday reported a 17 percent revenue drop for the first half of 2020, including a drop at its production unit and “the most severe decline in the history of ITV” in advertising, due to the novel coronavirus pandemic.
Total revenue came in at £1.45 billion ($1.91 billion), including advertising of £671 million ($883 million), for the January-June period. Earnings before interest, taxes and amortization dropped 49 percent to £159 million ($209 million), and profit after tax fell by 92 percent to £15 million ($20 million).
Ad revenue fell 21 percent for the six-month period, with ITV saying that July was down 23 percent after a 46 percent May and a 42 percent June drop. It had previously said that April advertising revenue dropped 42 percent after a 2 percent advertising gain in the first quarter.
On an earnings conference call, McCall said July saw the return of advertisers that had stopped marketing amid the pandemic, including interior design and DIY firms, along with “a little bit of travel.” She said ITV was in talks with the U.K. government about a recent anti-obesity initiative that includes a ban on ads for salty, sugary and fatty snacks before 9 p,m., which media firms have said could cost the industry much revenue. How big an ad category is it for ITV? “It is not an overriding category, but all categories are important,” McCall said.
At production arm ITV Studios, with many of its productions shut down amid the pandemic since late March, revenue for the first six months of the year fell 17 percent.
“This has been one of the most challenging times in the history of ITV,” McCall said on Thursday. “While our two main sources of revenue – production and advertising – were down significantly in the first half of the year and the outlook remains uncertain, today we are seeing an upward trajectory with productions restarting and advertisers returning to take advantage of our highly effective mass reach and addressable advertising platform, in a brand safe environment.”
Looking ahead, she said: “The future is still uncertain due to the pandemic but the action we have taken to manage and mitigate the impact of COVID-19 puts us in a good position to continue to invest in our strategy of transforming ITV into a digitally led media and entertainment company.”
ITV has addressed the virus pandemic with what McCall previously called “swift and decisive action to manage and mitigate the impact of COVID-19.” The company previously said it had “furloughed around 800 colleagues, broadly 15 percent of our U.K. workforce, the majority of whom work in ITV Studios.” On Thursday, it said: “We are bringing staff back from furlough as we restart productions and now have fewer than 300 colleagues on furlough.”
ITV also previously unveiled plans to cut its programming budget by “at least £100 million,” or $125 million, while doubling its 2020 target for overhead cost reductions to £60 million ($75 million).
ITV also abandoned its dividend and full-year 2020 guidance amid the uncertainty brought on by the virus crisis, as well as scrapped bonuses and cut executives’ salaries to preserve cash. It previously said its cost savings unveiled at that time would help boost its cash reserves by more than 300 million pounds ($350 million), giving it more financial flexibility.
Of 230 productions that were impacted or paused by the pandemic lockdown, “around 70 percent have been delivered or are back in production as of today,” ITV said on Thursday. “The impact on the rest of the year and 2021 will depend on how quickly COVID restrictions are reduced. We do expect some increased costs of production as a result of COVID measures. We are seeing good demand for library content.”
On an earnings conference call, McCall said about the state of drama production that thinks are looking up. “It is looking very much more positive than it was a month ago,” she said, lauding a government insurance fund for giving producers confidence. “Quite a lot of dramas are in pre-production or production,” she said. “You will see, I think, a lot of the U.K. studios coming back now.”
Among ITV Studios dramas that have restarted work, she mentioned Italian crime thriller Suburra and modern love story Summertime for Netflix, along with French crime procedural Balthazar. Meanwhile, Gomorrah in Italy is in pre-production.
ITV on Thursday also said its direct-to-consumer business was “performing well,” with 390,000 Hub+ subscribers and “good growth” in subscriptions for streaming service BritBox in both the U.K. and the U.S.
Asked about the impact of the virus crisis on TV and streaming, McCall said traditional and digital operators both saw audience gains. “Whether [it] was Netflix or BritBox, viewing in COVID was strong across the board,” she said, including across genres. “It will have got people to realize that there is more on TV….than they thought.”
McCall on the earnings call was asked whether ITV sees itself as a takeover target due to a stock price hit by the pandemic, but she, as she has done before, declined to comment on any “speculative” issues and pointed out that many companies’ stock prices have been hit hard. “We are doing well on our own,” she said, adding that the stock price was “not reflective” of what the company is really worth. “We have the ability to grow value.”