ITV hikes dividend as it warns ad revenues likely to slow in third quarter

ITV's revenue growth slowed in the latter part of the first half of the year and, as the broadcaster cautioned that television advertising is likely to be down in the third quarter, it hiked the interim dividend 26% to 2.4p to keep investor's glued.

Total revenues grew 12% to £1.7bn for the six months to 30 June, down from the 14% growth in the first quarter despite continued strong non-advertising growth.

Net advertising revenue (NAR) was flat at £838m over the half, as the company had predicted at its first quarter update in May, but with viewers switching increasingly to the BBC over the period of the summer Olympics, ITV foresees NAR falling 1% over the first nine months of the year.

The share of viewing (SOV) was up 3% for the 'family' of ITV channels helped by a 7% gain for the main channel, ITV One, which benefited from sporting events such as the Six Nations Rugby and the Euro Football Championships, as well as drama including The Durrells, Marcella and Vera along with an improved daytime schedule.

Half year sales from the Online, Pay & Interactive division were up 26% to £107m, accelerating in the second quarter.

Audience demand for video on demand continued to grow, driving a 14% increase in long form video requests and a 50% increase in consumption.

ITV studios generated a 31% increase £651m, half of which from outside the UK and so contributed some £14m of currency benefit, but this was not enough to keep up with the first quarter's breakneck speed.

Group adjusted earnings before interest, tax and amortisation (EBITA) rose 10% to £438m, the bulk of which came from broadcast and online but Studios generating most of the growth.

Chief executive Adam Crozier pointed out that the company was continuing to deliver double-digit revenue and adjusted EBITA growth as it pursued its strategy of rebalancing to reduce reliance on TV advertising.

"Looking forward to the full year, we expect to deliver double-digit revenue and EBITA growth in ITV Studios as the acquisitions continue to deliver and double digit revenue growth in Online, Pay & Interactive.

With NAR anticipate to be down, and against the backdrop of wider economic uncertainty following the EU referendum, he said the cost cuts for 2017 were part of a "robust plan to allow us to meet the opportunities and challenges ahead".

Analysts at broker Shore Capital said, on a first look at the results, they would leave their forecasts unchanged in light of the NAR and cost reduction guidance, viewing ITV’s valuation as "very attractive" following a the 21% decline in the share price over three months. #

"We also remain confident on ITV’s medium-term attractions including its unrivalled ability to deliver a mass market audience to advertisers, its growing content exposure, strong cash generation and rock-solid balance sheet with which to fund acquisitions and special dividends, and its strategic value within a consolidating industry."

ITV shares opened 6.5% higher to 196.84p after almost half an hour of trading on Wednesday.