ITV First-Half Earnings Decline as Studios Unit Profit and Advertising Drop

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The U.K. TV giant, which recently hired a new CEO who will start in January, posts its latest financials.

U.K. TV giant ITV on Wednesday reported lower earnings for the first half of the year amid a decline at the ITV Studios production arm and a drop in advertising revenue.

ITV said adjusted earnings per share were down 9 percent and adjusted earnings before interest, taxes and amortization (EBITA) fell 8 percent to 403 million pounds ($525 million).

The ITV Studios unit reported a 9 percent drop in EBITA to 110 million pounds ($143 million). The company cited its investment in its U.S. scripted business and a year-ago benefit from a China deal as the driver behind the lower ITV Studios profit.

Overall first-half revenue dropped 3 percent to 1.46 billion pounds ($1.90 billion), with ITV Studios revenue up 7 percent to 697 million pounds ($907 million), but advertising revenue down 8 percent to 769 million pounds ($1.00 billion). The company cited "continued economic and political uncertainty" after last year's decision by British voters to leave the European Union, or Brexit, and the recent general election that gave Prime Minister Theresa May a parliamentary majority only with the support of a smaller party.

ITV had guided to a TV advertising revenue decline of around 8 percent-9 percent in the first half, with June hit by tough year-ago comparisons due to the Euro Championships soccer tournament in 2016. 

For the full year, ITV continues to forecast that it will outperform the overall U.K. TV market in terms of advertising and that ITV Studios "will deliver good organic revenue growth with adjusted EBITA broadly in line with last year, impacted by ongoing investment in drama and the timing of program deliveries."

ITV's stock rose in early Wednesday trading. As of mid-day, it was up 3.1 percent. 

ITV recently named easyJet CEO and former CEO of The Guardian Media Group Carolyn McCall its new CEO, effective Jan. 8, 2018.

She will become the first woman to run ITV. Longtime CEO Adam Crozier earlier this year had announced he was stepping down June 30.

ITV finance chief Ian Griffiths was recently promoted to a newly created combined role of COO and group finance director to lead the executive team for an interim period. ITV chairman Peter Bazalgette has taken on the more active role of executive chairman during that interim period.

Crozier oversaw the company for more than seven years, transforming it from an advertising-centric networks company into a broader-based business with a big TV production arm, which has grown via acquisitions. Among the TV production companies ITV has acquired in recent years are Dutch firm Talpa, Gurney Productions, the company behind Duck Dynasty, Real Housewives of New Jersey maker Leftfield, Cake Boss producer High Noon Entertainment and Hatfields & McCoys creator Thinkfactory Media.

"ITV’s performance in the first six months of the year is very much as we anticipated and our guidance for the full year remains unchanged," said Bazalgette. He cited "continued good growth in non-advertising revenues, which is a clear indication that our strategy of rebalancing the business is working. We are confident in the underlying strength of the business as we continue to invest both organically and through acquisitions."

About the performance of ITV Studios in the first half, he said: "This was impacted by our ongoing investment in our U.S. scripted business and the fact that the prior year includes the full benefit of the four-year license deal for The Voice of China."

Looking ahead, Bazalgette said: "We have a very strong pipeline of new and returning drama and formats, and we are building momentum in our U.S. scripted business. We continue to grow our global family of production companies and in [the first half] we further strengthened our international drama and format business with the acquisition of Line of Duty producer World Productions in the U.K., Tetra Media Studio in France and Elk Production in Sweden."

Through the end of May, ITV networks' share of viewing grew, but the company ended the first half flat as June last year included the benefit of the European Championship soccer tournament. "ITV continues to deliver the mass audiences demanded by advertisers as well as delivering the key target demographics," Bazalgette said. "ITV is the only channel to deliver a commercial audience over 5 million, and Love Island demonstrates that young viewers engage in great TV content."

ITV's ITV2 network on Wednesday announced that the show, which sees sexy singles searching for love in a sunshine paradise, would return in 2018, citing "record ratings" that made it "ITV2’s most successful format amongst 16-34s."

ITV's chairman highlighted that the company was ready to invest into growth, Bazalgette said: "We see opportunities to continue to invest in growing an even stronger and more resilient business. The strength of our balance sheet and healthy cash flows allow us to do so while delivering sustainable returns to our shareholders."


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