ITV reports resilient results despite ad slump

LONDON: ITV Plc, the UK’s largest commercial broadcaster, announced its full year results for 2023, showing a robust financial performance despite a challenging advertising market. The company saw a 2% drop in total revenue and a 32% fall in adjusted EBITA, but also achieved record revenues in ITV Studios and 19% growth in digital revenues.

ITV Studios, the company’s production arm, delivered a 4% increase in total revenue and a 10% rise in adjusted EBITA, with an industry-leading margin of 13.2%. The division produced several hit shows for ITV and other platforms, such as Mr Bates vs The Post Office, Fool Me Once, Squid Game: The Challenge, Love Island, and My Mum, Your Dad.

Media & Entertainment, the company’s broadcasting and online division, saw a 7% decline in revenue and a 56% drop in adjusted EBITA, mainly due to a 15% fall in linear advertising revenue. However, the division also reported strong growth in digital viewing and revenues, driven by ITVX, the company’s online video platform. ITVX saw a 19% increase in monthly active users, a 26% increase in total streaming hours, and a 21% increase in digital advertising revenue.

The company also announced that it had sold its 50% stake in BritBox International, a subscription video-on-demand service, to the BBC for £255 million. The board intends to return the entire net proceeds to shareholders through a £235 million share buyback, which is expected to start today.

The company declared a final dividend of 3.3p per share, giving an ordinary dividend of 5.0p per share for the full year 2023, in line with its dividend policy. 

Carolyn McCall, ITV Chief Executive, said: “In 2023 we saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth. Our Studios business recorded the highest ever revenues and profits and in its first year ITVX delivered strong growth in viewing and digital revenue with investment on plan. This growth in production and streaming substantially offset the challenging linear TV advertising market conditions.

“We remain confident in delivering our KPI targets, and are making good progress towards these – most notably ITV Studios organic revenue growth of 5% on average per annum between 2021 and 2026 at a margin of 13 to 15% and to deliver at least £750 million of digital revenues by 2026.

“We remain firmly committed to creating shareholder value and applying a disciplined approach to capital allocation. As announced on 1 March 2024, we will return the entire net proceeds of the sale of BritBox International through a share buyback of £235 million and the Board has proposed a final dividend of 3.3p giving an ordinary dividend of 5.0p per share or c.£200 million, for the full year.

“Our existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. We are on track to deliver the full £150 million by 2025 – one year early. In addition, we are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. By the end of 2024 we expect the programme to have delivered incremental annualised gross savings of at least £50 million per year, giving a £30 million in year gross benefit in 2024. The ongoing programme is designed to deliver further material incremental savings over a number of years.

“2023 was the year of peak investment for Streaming, which together with the successful execution of our strategy and the efficiencies delivered to date have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth Streaming service and a cash generative linear advertising business.  This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.”

Restructuring and efficiency programme

The existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. Company is on track to deliver the full £150 million by 2025 – one year early.

In addition, company now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming.

Savings will come mainly from technology and operational efficiencies, organisational redesign across Group functions, M&E and Studios and permanent reductions in discretionary spend across the Group.

By the end of 2024 ITV expect the programme to have delivered incremental annualised savings of at least £50 million gross per year, giving a £30 million in year gross benefit in 2024. There will be c.£50 million of one-off costs to deliver these savings. The ongoing programme is designed to deliver further incremental material savings over a number of years which will further build ITV’s resilience. 

ITV Studios:

●    ITV Studios is on track to deliver total organic revenue growth of 5% on average per annum from 2021 to 2026 – ahead of the market, and at a margin of 13 to 15%

●    Going forward we expect to see growth in key segments in which we operate – content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content which we are well positioned to take advantage of

●    We are confident that we will continue to grow our market share to 2026 driven by our scale; our diversification by customer, geography and genre; a strong track record of high-quality content; a very strong slate for 2024 and beyond; and our leading creative talent

●    As previously guided, 2024 will be impacted by the 2023 US writers and actors strikes, which will delay around £80 million of revenue from 2024 to 2025 as well as weaker demand from free-to-air broadcasters in Europe who are holding back spend until they see more certainty in the advertising market

Media & Entertainment:

●    We remain on track to deliver at least £750 million of digital revenues by 2026

●    We have had a good start to 2024 and will build on ITVX’s successful launch year through continuous improvements in content, product, distribution and marketing

●    ITVX’s strong performance in 2023 has shown us that we can grow viewing significantly with slightly lower overall content spend. Therefore we expect to marginally reduce our content cost in 2024 to around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation.  At the same time we will increase our marketing spend by £15 million to drive both streaming and linear viewing

●    Non-TAR M&E revenues will come down year on year in 2024. This will reflect lower partnership revenues following our decision to revise our partnership agreements to improve the viewer proposition and our monetisation. In addition subscription revenue will be broadly flat as we simplify our paid streaming proposition and migrate subscribers from BritBox UK onto ITVX Premium

●    Compared to the same period in 2023, TAR is expected to be up 3% in Q1, with continued strong growth in digital advertising revenues.