ITV 2015 Earnings Rise, Production Arm Continues to Drive Growth

Adam Crozier, CEO ITP

Led by CEO Adam Crozier, the company posts its latest financials, with ITV Studios crossing the £1 billion mark for the first time, but share of viewing for the year dropped 3 percent.

U.K. TV giant ITV on Wednesday reported improved financials for the full year 2015 and predicted another "good" year in 2016.

The company, which has aired such shows as X Factor and the recently ended Downton Abbey on its flagship network, also once again reported higher revenue and earnings for its TV production business, with revenue crossing the £1 billion mark for the first time.

ITV, led by CEO Adam Crozier, highlighted that it expects another "good" year in 2016 "with continued revenue growth" across its businesses. Plus, over the full year, the company said "we expect to outperform the television advertising market."

The firm's ITV Studios production arm reported a 33 percent revenue gain to £1.24 billion ($1.73 billion) for 2015. Its operating profit rose 27 percent to $288 million. ITV has acquired production firms in the U.K. and U.S. to boost its production business in recent years. Over the last six years, revenue has more than doubled. Crozier told an earnings conference call Wednesday that the company believes that this makes ITV Studios "the world's most profitable production business outside the U.S. majors."

Said Crozier: "ITV Studios continues to perform strongly both organically and from our recent acquisitions, particularly Talpa. Through our ongoing investment ITV Studios has become a global production business with total revenue up 33 percent to £1.2 billion and with 53 percent of revenues now coming from outside the U.K."

For 2016, the production arm is expected to post double-digit growth in revenue and operating profit, mostly driven by recent acquisitions, the company said.

"We have a very strong international pipeline of new and returning drama, including Victoria, Tutankhamun, Houdini and Doyle, Cold Feet, Poldark, Shetland, Aquarius, Endeavour and Vera as well as entertainment formats The Voice, The Voice Kids, Dance Dance Dance, I’m a Celebrity… Get Me Out Of Here!, The Chase, Hell’s Kitchen and Saturday Night Takeaway," ITV said. "ITV Studios has already secured a higher proportion of 2016 revenue at this point in the year than in previous years and our good drama slate gives us confidence into 2017."

We’ll continue to build scale and to capitalise on the strong demand for high quality content that travels, with a particular focus on investing in creative talent and scripted projects, and working with more channels and platforms in the UK and internationally.

Overall, ITV on Wednesday posted a 2015 adjusted pre-tax profit of $1.18 billion, up 18 percent from 2014. Earnings per share also rose as did earnings before interest, taxes and amortization before exceptional items. Total ITV revenue rose 15 percent, with advertising revenue up 6 percent.

While full-year ad revenue will outperform the broader U.K. ad market for 2016, ITV said the first quarter will be somewhat weaker, with the second quarter's Euro 2016 soccer tournament in France set to boost trends.

But ITV's share of viewing remains a concern. It declined 3 percent in 2015. "This reflects a 4 percent decline in the ITV main channel share of viewing, which was impacted by more competition from the launch of new digital channels in the year, some of our shows not performing as well as we had expected and the relatively strong performance of the BBC," ITV said. "Going forward we remain focused on strengthening our viewing performance and continuing to deliver mass audiences."

Crozier said on an earnings conference call that share of viewing improved in the back-half of 2015 and is up 2 percent so far in 2016. He cited such content as Six Nations rugby and Seth McFarlane shows, such as Family Guy, which recently moved to ITV.