ITV full year profit up, but shares slide on ad revenue outlook

ITV posted a rise in profit and revenue for 2015 thanks to a good performance in all parts of the business, and announced a special dividend but shares in the broadcaster slipped as it warned advertising revenue would be flat in the first quarter.

Profit rose to £641m from £605m as revenue increased 15% to £2.97bn and adjusted earnings before interest, depreciation and amortisation grew 18% to £865m.

Adjusted earnings per share were up 20% to 16.5p.

The company saw 6% growth in net advertising revenue to £1.72bn, with total ITV revenue for ITV Studios up 33% to £1.24bn. Meanwhile, online, pay and interactive was up 23% to £188m.

In addition, ITV said it will be returning £400m to shareholders via a 10p per share special dividend as well as the 4.1p final dividend, which it said reflect the group’s strong cash generation and the board’s confidence in the business.

The company said advertising revenue in the first quarter of the year was likely to be flat but would pick up in the second quarter thanks to the European football championships.

For the full year, ITV expects to outperform its estimate of the TV advertising market.

Chief executive Adam Crozier said: ““ITV delivered another strong year as we continue to grow and strengthen the business in the UK and internationally.

“We have a strong programme slate for 2016, with 50 hours more drama as well as major rugby and football tournaments. ITV uniquely delivers the mass audiences demanded by advertisers. Continuing to deliver this scale and reach, as well as further strengthening our onscreen performance, remains a key focus for the company and particularly for the new creative leadership in the Broadcast business.”

Societe Generale said the results were a beat, with earnings per share 2% ahead of consensus and the 10p special dividend higher than the French bank’s 5p forecast.

However, “flat Q1 NAR (net advertising growth) guidance may restrain enthusiasm,” said SocGen, which rates the stock at ‘hold’.

Investec, which also rates the stock at ‘hold’, said: “The outlook for 1Q is worse than we expected (and we had already cut) so bad for the bulls, but the special dividend of 10p/share (£400m) is positive - while not in our numbers, this was widely anticipated however.”

Nomura, which rates the stock at ‘buy’, said the forecast of flat first quarter net advertising revenue was softer than hoped for but offset by the strong dividend.

The Japanese bank added that the £400m special dividend was well ahead of its estimate of £250m.

At 1500 GMT, ITV shares were down 4.9% to 237.40p.