ITV First-Half Earnings Rise as Ad Revenue Climbs 5 Percent, Production Arm Grows
The U.K. TV giant posted improved results despite a drop in viewership, with CEO Adam Crozier reiterating the company's confidence in its position as an independent.
U.K. TV giant ITV on Tuesday reported higher financials for the first half of the year as its ITV Studios production arm continued to grow and advertising revenue rose despite audience figures that were the company's lowest in more than 15 years.
ITV, led by CEO Adam Crozier, airs such shows as Downton Abbey, The X Factor and Broadchurch.
ITV's family of channels saw a 4 percent decline in audience share to 22.1 percent in the first half.
The company reported a 25 percent increase in adjusted profit before taxes to $609 million (£391 million) for the first six months of 2015. Earnings before interest, taxes and amortization (EBITA) before exceptional items and pre-tax profit also rose, while revenue climbed 11 percent to to $2.38 billion (£1.53 billion).
ITV Studios first-half earnings, in the form of EBITA, grew 18 percent to $132 million (£85 million), driven by acquisitions and organic growth. Revenue also rose 23 percent, or 8 percent organically, to $772 million (£496 million). Crozier said ITV Studios U.S. had 21 percent organic growth, adding that the U.S. business, if anything, has a slightly higher margin than the U.K. business, although margins depend on genre and the like. The company highlighted that more than half of ITV Studios revenue now comes from outside the U.K.
ITV has been expanding its ITV Studios unit to become less reliant on advertising revenue. In recent years it has acquired such U.S. companies as Gurney Productions, the company behind Duck Dynasty; Real Housewives of New Jersey producer Leftfield; Cake Boss maker High Noon Entertainment; Hatfields & McCoys producer Thinkfactory Media; Teen Wolf's DiGa Vision; The Voice creator Talpa Media; U.K. producer Mammoth Screen and U.K. producer Twofour.
Crozier said ITV would continue to look for acquisition opportunities. "We are one of the consolidators" amid global consolidation of production businesses and networks, he emphasized, predicting that trend would continue.
ITV's broadcast and online revenue rose 6 percent, while EBITDA was up 26 percent.
ITV net advertising revenue was expected to be up around 5 percent in the first half, and the company hit that mark. It said it was slightly trending behind the U.K. ad market mid-year, but would end the year ahead.
ITV said it was on track for "another strong year," Crozier in a statement said that improving audience share "remains a key focus for the year", but added: "As previously stated, we expect to see improvements in [the second half] when we have exclusive rights to the Rugby World Cup as well as a strong slate of high quality drama including Jekyll & Hyde, Unforgotten and The Trials of Jimmy Rose."
On the earnings conference call, Crozier also said about the drop in viewing share that "it’s not impacting our commercial performance ...
but clearly we are focused on share of viewing." He said the company was increasing "our investment in high-quality new and returning drama," working on daytime content, which is already improving in the ratings, investing more in established soap operas and launching new entertainment shows, such as Ninja Warrior. He said as part of this ITV has also been working on boosting The X Factor with a recently unveiled new panel and still-to-be-unveiled format changes.
Crozier on Tuesday also again emphasized that ITV is well positioned as an independent company. Last summer, John Malone's international cable company Liberty Global bought a 6.4 percent stake in ITV, fueling debate whether a pay TV giant like it could acquire full control of the company. Earlier this year, some market chatter suggested Comcast could be interest in ITV.
Crozier said ITV as an independent integrated producer and broadcaster can be “tremendously successful.” He added: “I absolutely believe the industry is consolidating, but I think we are one of the consolidators, so we are part of that drive. And I don’t see any reason why ITV can’t have a very strong future as an independent company."
He added: "We are fairly unique in being such a strong commercial broadcaster in one country, but also an international content company."
Asked if he felt companies like ITV had to be part of a bigger company, he said: "I don’t believe we need that. I think we have a very strong position in the U.K. Financially ITV is in extremely good shape." He concluded by emphasizing that the company can follow its strategy “without the backing of anyone.”