ITV's revenues rise but Q3 affected by economic uncertainty

ITV’s revenues increased in the third quarter as it rebalanced the television network but advertising revenue was down due to political and economic uncertainty.

For the nine months ended 30 September, total external revenue increased 5% to £2.15bn, including currency benefit, compared to last year.

It was boosted by non-net advertising revenue which grew 15% to £1.25bn.

Revenue from ITV Studios rose 18% to £923m, driven by acquisitions during the period.

Broadcast and online revenue nudged up 1% to £1.53bn, with ITV Family non-net advertising revenues slipping 1% as expected, while there was continued “strong growth” in online, pay and interactive as it soared 22%.

Total viewing crept up 3% and ITV Family was flat, while online viewing rallied 49% and long form video requests rose 22%.

The company's studios worked across genres as scripted programmes such as Victoria, Poldark and The Good Witch have been sold to over 100 countries, and around 60 formats were sold internationally including The Voice, Hell's Kitchen, Love Island and This Time Next Year.

There are 162 new commissions and 139 recommissions in the pipeline across the business which the company said will drive revenue growth in 2017.

Chief executive Adam Crozier said: "As expected ITV ad revenue for the third quarter was down 4%. In recent weeks the political and economic uncertainty has increased and we are currently seeing more cautious behaviour by advertisers."

"As a result ITV advertising revenue is forecast to be down around 7% in the fourth quarter, which means full year will be down 3% “although ITV will again outperform the TV advertising market for 2016”.

The company said it expects to deliver double-digit revenue growth in online, pay and interactive, and also double-digit revenue and profit growth in ITV Studios due to acquisitions, while full year 2016 earnings are to be broadly in line with last year.

The company is on track to deliver £25m of cost savings for 2017 and due to the absence of a major sporting event next year, the network programme budget will be around £25m lower.

Crozier said: “We continue our tight control on costs to ensure we are operating as efficiently as possible and maximising investment in our high quality programming.

“We remain committed to our strategy of rebalancing and strengthening ITV and building a global content business of scale and we see clear opportunities to continue to invest for further growth across the business both organically and through acquisitions. The strength of our balance sheet and our underlying cash flows allows us to do so while at the same time delivering sustainable returns to our shareholders."

George Salmon, equity analyst at Hargreaves Lansdown, said: “Advertising spending falls under the discretionary category for most businesses, so it tends to wax and wane with the fortunes of the wider economy. While ITV has made strides in recent times to make and sell more of its own content, thus reducing its exposure to this trend, the group is still heavily dependent on selling commercial slots to generate its revenue.

“Given the current economic uncertainty, it may not be much of a surprise to see the group’s customers are pulling their horns in, but it is still not good news for the group. This has seen the shares slide in recent months.”

However, Salmon said ITV remains the prime place to advertise on a national scale, but the challenge for the company is to retain its position as Netflix and others grow in the on-demand market, with viewing habits changing, ITV will have to change with it.