Despite its first quarter update being in line with downbeat expectations shares in free-to-air broadcaster ITV (ITV) have dropped 3.8% in early trade to 126.7p.
Total revenue was down 4% year-on-year, with growth in ITV Studios revenue and 22% jump in video-on-demand revenues offset by the decline in cyclical TV advertising revenue.
This was at the more negative end of the 3% to 4% guided decline. ITV total advertising was down 7% as previously guided and things are not expected to get much better in the second quarter given the absence of a sporting tournament to drive advertising on the scale of 2018’s FIFA World Cup.
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For the first half as a whole ad revenue is expected to be down 6%. One positive thing investors can take from the statement is that the Britbox streaming joint venture with the BBC is on track to launch in the second half, though as AJ Bell investment director Russ Mould says ‘this itself will constrain earnings in the short-term given the heavy upfront investment involved’.
CAN ITV REMAIN RELEVANT?
Mould adds: ‘Investors can take some succour from underlying trends which show people still like to watch ITV - which is critical if the company is going to remain relevant to advertisers in the longer term.
‘Its share of viewing is up, and more people are registering for its ITV Hub platform. In delivering her growth strategy McCall needs to ensure she doesn’t take her eye off these basics.’
Online viewing is up 16% year-on-year, ITV’s aggregate share of viewing is up 4% and registrations to ITV Hub are up 29%.
Liberum comments: ‘There are many things to be positive about ITV, especially on its viewing performance, and the shares are undoubtedly cheap but, with an uncertain political environment and a continuing pattern of downgrades, it is hard to push a ‘buy’ case now.’
