ITV 2019 Earnings Drop, Studio Unit Grows, Coronavirus Causes Travel Ad Deferments

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ITV CEO Carolyn McCall

The U.K. TV giant, led by CEO Carolyn McCall, also commented on the contributions from 'Love Island,' which has been the topic of much debate since the death by suicide of former host Caroline Flack.

U.K. TV giant ITV on Thursday reported lower earnings and lower advertising revenue for 2019, due in part to Brexit uncertainty, but its ITV Studios unit posted improved results.

The company also mentioned the hit reality show Love Island, which helped advertising but has caused much debate after the recent death of former host Caroline Flack by suicide. ITV on Thursday also highlighted the show's various international versions.

The company also addressed the business impact of the coronavirus. "In March and April, we have seen an impact from travel advertising deferments relating to the coronavirus," it said. "All deferments to date have been included in [our] guidance. At this stage it is too difficult to assess the further implications of the coronavirus but we continue to monitor the situation closely."

On Thursday's earnings conference call, ITV CEO Carolyn McCall said the company has told staff to focus on "essential travel only" amid the coronavirus and is drawing up contingency plans. Beyond the impact on travel ads and the delay of the latest James Bond film, No Time to Die, the exec said there has been no impact, including "so far none" on productions.

ITV forecast its advertising would be up 2 percent for the first quarter, with January down 1 percent, February up 8 percent and March up 1 percent. "Early indications are that total advertising revenue will be down 10 percent in April," it added. 

ITV said adjusted earnings before interest, taxes and amortization (EBITA) fell 10 percent to £729 million ($939 million) in 2019, with earnings per share down 10 percent. The ITV Studios production unit reported a 5 percent increase in adjusted EBITA to £267 million ($344 million).

Total revenue rose 3 percent for the year, better than expected, with ITV Studios jumping 9 percent on an organic basis "with growth in all areas, particularly ITV Studios U.S. and ITV Studios International."

McCall had said in November: "ITV Studios' performance in 2019 will benefit from a very strong second-half delivery schedule, and our third-quarter performance reflects this, with good growth across the business, particularly from ITV America with Love Island U.S. and the part delivery of Hell's Kitchen and Snowpiercer. We expect this performance to continue in the fourth quarter, and over the full year we are confident that we will deliver at least 5 percent growth in ITV Studios' total revenues."

Advertising revenue for 2019 dropped 1.5 percent, compared with management's previous guidance for a 2 percent drop, but the Rugby World Cup, where England reached the final, helped ad revenue. "There were outstanding contributions from the Rugby World Cup, Love Island and drama," ITV said.

ITV's direct-to-consumer revenue grew 4 percent in 2019, but broadcast revenue declined 2 percent, "with continued strong growth in online advertising, up 21 percent, and growth in sponsorship and creative partnerships, more than offset by the decline in spot advertising revenues."

ITV's outlook for the full year 2020 mentioned the impact of Brexit. "Despite the ongoing economic uncertainty around the outlook for the U.K. following its departure from the European Union, we currently remain on track to deliver our medium-term targets," the company said. "We have started the year well with very strong online viewing up 89 percent driven particularly by The Masked Singer and Love Island. ITV's family share of viewing is flat year to date, and we have a strong schedule coming up with the return of Saturday Night Takeaway, new entertainment show The Epic Gameshow, dramas including the second [season] of The Bay, and Quiz," and the European soccer championships. Asked about a potential coronavirus effect on the Euro 2020, McCall said the summer soccer tournament across Europe is further down the road, suggesting it was too early to discuss any potential impact.

ITV Studios will deliver revenue growth for the full year, but "will be impacted by the phasing of deliveries in 2019," ITV said. 

ITV and the BBC in early November launched the streaming service BritBox in the U.K., making good on their promise to start offering an alternative to global streamers like Netflix and Amazon. Channel 4 and Viacom's Channel 5 are content partners in BritBox. ITV controls a 90 percent stake in the venture, compared to the BBC's 10 percent.

McCall on the earnings call said it was early days for BritBox U.K., but the streamer has seen "good performance in line with business plans" thus far. She added that BritBox in North America has crossed the 1 million subscriber milestone. 

BritBox U.K. on Wednesday unveiled that the return of the puppet sketch show Spitting Image was its first original commission, with management on Thursday's call said there would be a ramp-up in original content over the next three years.

BritBox has already been available in the U.S. and Canada. In Britain, it is priced at £5.99 ($7.69) per month in HD, which the partners said "is less than other streaming services," and is available "across multiple screens and devices." ITV and BBC executives have said the service is designed to strengthen their audience reach and business amid competition from global streaming giants. But they have also said they don't see it as a real rival to Netflix.

ITV on Thursday also said that it and the BBC will launch BritBox in Australia "later" in 2020 as part of its international expansion.

McCall on Thursday was also asked if she was interested in the director general role at the BBC after Tony Hall's recent announcement that he would step down this summer and whether she has been contacted about it. While she didn't comment on the latter, the ITV CEO said, "I can say it is not something I am considering."