ITV 2014 Earnings Rise, Production Arm Continues to Grow
CEO Adam Crozier touts ad growth and discusses shareholder Liberty Global and potential further acquisitions of production businesses, such as Talpa Media.
U.K. TV giant ITV on Wednesday reported improved financials for the full year 2014.
The company, which airs hit drama Downton Abbey and such shows as X Factor on its flagship network, reported higher results for its TV production business and its strongest full-year advertising growth in years, as it had predicted it would.
ITV, led by CEO Adam Crozier, also highlighted it expects "another strong performance" in 2015.
The firm's ITV Studios production arm reported 9 percent revenue growth to $1.4 billlion (£933 million) for 2014, primarily driven by acquisitions. Its operating profit rose 22 percent to $249 million (£162 million). ITV has acquired production firms in the U.K. and U.S. to boost its production business in recent years.
In 2015, at ITV Studios "we’ll again see upside from our acquired businesses as well as a return to good organic growth as we continue to invest in creative talent and content," Crozier said.
The production unit's international revenue rose 24 percent in 2014, with almost half of that coming from outside the U.K. The company highlighted again on Wednesday that ITV Studios is now the largest unscripted independent production company in the U.S.
Overall, ITV posted a 2014 adjusted pre-tax profit of $1.1 billion (£712 million), up 23 percent from 2013. Earnings per share also rose as did earnings before interest, taxes and amortization before exceptional items. Revenue increased 8 percent to $3.98 billion (£2.59 billion). The results exceeded analysts' expectations.
Advertising revenue rose 6 percent to $2.50 billion (£1.63 billion), with ITV saying that was "well ahead of the TV advertising market and our strongest outperformance of the market" over the past five years. During an earnings conference call, Crozier said that there are early signs that an economic recovery was having a positive impact on the ad market. First-quarter ad revenue is trending up 11 percent, ITV said.
One area of weakness was the ITV family's share of viewership in the U.K., which declined 5 percent in 2014, following a strong year in 2013 when it grew 4 percent. "This largely reflects a 4 percent decline in the ITV main channel," the company said. "Although benefiting from the [soccer] World Cup in June, the main channel delivered a lower audience share against strong competition from the BBC."
Crozier also said on the earnings call that ITV was focused on improving its ratings performance, including via content investments that are bringing high-quality dramas, but also entertainment shows and other content, to the network this year. He acknowledged that ITV didn't get all programming choices right last year.
Crozier also discussed Liberty Global's stake in ITV, saying that "nothing out of the ordinary" was to be reported so far. "We’re kind of getting on with our lives and running our own business," he said. "We continue to do a lot of things with [Liberty Global's] Virgin Media," he added, saying he expects that to continue. John Malone's Liberty Global bought the 6.4 percent stake in 2014.
Asked about ITV's confirmation last week that it was in talks to acquire John de Mol's Talpa Media, Crozier said the talks were exclusive, but reiterated that no final agreement could be ensured. He also said that all acquisitions would need to fit the ITV Studios strategy for the coming years. The strategy focuses on building a global scripted content business of scale and developing more international formats that can travel, he said. Talpa, best known for The Voice and Utopia, would help with the second goal. In terms of scripted, Crozier said ITV Studios has produced 12 dramas over the past year, including Aquarius for NBC.
ITV has been launching new channels in the U.K., such as ITVBe, which targets young females, and ITV Encore, a pay TV-only drama channel on Sky. Asked if there were more pay-only channel launch plans, Crozier said he expected more launches after 2015. He said the company had no plans for channel launches in the U.S., at least "not at this time." "That genuine independence there is actually extremely helpful," he argued, highlighting that many ITV shows air on various U.S. networks.
Crozier also said Wednesday that ITV will continue bidding for sports rights, but not the English Premier League given its high cost. The English soccer league is "certainly beyond us," he said.
The ITV CEO in the earnings report also touted the progress the company has made based on a five-year transformation plan he unveiled in 2010 to make the firm less advertising-dependent and grow internationally. "ITV is now a high-growth business with increasing emphasis on international content creation and distribution, and is demonstrably much stronger, both creatively and financially, than when we set out on our five-year plan," Crozier said.