ITV Reports Higher 2016 Studios Profit, Ad Revenue Falls 3 Percent

ITV CEO Adam Crozier

The company, led by CEO Adam Crozier, says ITV America revenue dropped 27 percent last year and ad revenue will be down 6 percent in the first four months of 2017 amid "economic uncertainty."

U.K. TV giant ITV on Wednesday reported its financials for the full year 2016, saying advertising revenue dropped and would be down 6 percent in the first four months of 2017 amid the "current economic uncertainty."

It had previously cited Brexit as a factor of uncertainty.

The company, which has aired such shows as The X Factor and Broadchurch on its flagship network, also once again reported higher earnings for its TV production business, whose revenue had crossed the 1 billion pound mark for the first time in 2015.

ITV, led by CEO Adam Crozier, reiterated that it would outperform the U.K. TV advertising market in 2017. "There has been some speculation that ITV could have a weak first quarter (-6 percent/-7 percent), although it is worth remembering that the first quarter is impacted in 2017 because Easter is in April and not in March, as in 2016," said Liberum Capital analyst Ian Whittaker. "Also, February has one fewer day than in 2017 than 2016."

Full-year external revenue at ITV rose 3 percent to 3.06 billion pounds ($3.78 billion), with earnings before interest, taxes and amortization up 2 percent to 885 million pounds ($1.09 billion) and adjusted basic earnings per share of 17 pence, up 3 percent from 16.5 pence, respectively.

Net advertising revenue dropped 3 percent for the full year, with the company saying that it again outperformed the broader U.K. market. According to one analyst, the 2016 drop marked the company's weakest full-year ad performance since 2009 when it was affected by the recession. Over the full year 2017, ITV predicted it would again "outperform the TV ad market" in Britain.

The firm's ITV Studios production arm reported a revenue gain of 13 percent, including acquisitions, for 2016 to 1.40 billion pounds ($1.73 billion), or down 3 percent adjusted for latest acquisitions. Earnings before interest, taxes and amortization jumped 18 percent to 243 million pounds ($300 million). ITV has acquired production firms in the U.K. and U.S. to boost its production business in recent years. 

The studios unit was affected by ITV America seeing a 27 percent revenue drop as two shows — Texas Rising and Best Time Ever — were canceled and Hell's Kitchen was not delivered in 2016 but will return for two seasons this year. "Aquarius has not been recommissioned for 2017, but we are confident we can replace it with our upcoming slate of new programs, including three dramas: Sun Records, Somewhere Between and a pilot for Snowpiercer as we continue to build our U.S. scripted business," ITV added. Meanwhile, the U.K. studios unit and Dutch producer Talpa helped results last year.

"Reflecting our growth and increasing scale in key production markets in Europe and the U.S., 50 percent of ITV Studios total revenue in 2016 was generated outside the U.K.," ITV said. "As our studios business grows internationally, foreign currency movements have an increasing impact on our results."

In 2017, ITV Studios is "on track to deliver good organic revenue growth," including in the U.S. Added the company: "increased investment in U.S. scripted content, including Somewhere Between, The Good Witch, Sun Records and Snowpiercer, along with the reversal of the one-off benefit of The Voice of China in 2016, means that ITV Studios profits in 2017 are likely to be broadly in line with 2016."

ITV also confirmed its previously announced 25 million pounds of cost savings in 2017, plus it recently said it would be closing The London Studios.

“ITV delivered a good performance in 2016 as we continue our strategy of rebalancing and strengthening the business creatively, commercially and financially," said Crozier. "The continued growth in revenue and adjusted profit, despite a 3 percent decline in spot advertising revenues resulting from wider political and economic uncertainty, is clear evidence that our strategy is working and remains the right one for ITV." In 2016, ITV saw 53 percent of revenue come from sources outside traditional TV spot advertising.

"Our production business, ITV Studios, is a global player of scale with 50 percent of total revenues coming from outside the U.K. and a stronger than ever pipeline of new and returning programs in the key genres of scripted and formats," the CEO added. "In 2016 ITV Studios supplied around 7,800 hours of content to 234 channels and platforms in the U.K. and internationally, including 155 hours of drama and 80 formats. There is growing demand for our content on OTT platforms with over 200 program supply agreements in place."