ITV – Grand Aspirations, But Challenges Weigh

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ITV plc (LON:ITV)’s first half underlying revenue rose 8% to £1.7bn, reflecting better than expected growth across ITV Studios and Media & Entertainment.

Increased revenue was offset by increased investment in the new streaming project, ITVX. Underlying pre-tax profit was flat at £301m.

ITV is “mindful of macroeconomic and geopolitical uncertainty” and expects Total Advertising Revenue (TAR) to fall 9% in July and 18% in August compared to the previous year. This is broadly in-line with expectations and partly reflects tough comparisons with last year when the group broadcast the Euros.

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The shares rose 2.4% following the announcement.

ITV's Earnings

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown:

“ITV has some very grand aspirations, which include being the go-to producer of content for traditional TV and streaming platforms. The idea certainly has merit as binge-watching culture continues, and ITV has already amassed impressive scale in the UK and gathered clout in the US. The only issue with the over-arching plan is one of margins.

Profitability is being supported by costs cuts, which can’t continue forever. Increased health and safety protocols from Covid are looking pretty permanent, and sets are clunky and expensive places to run at the best of times. The ambition is an admirable one, so now the scrutiny turns to one of execution. The division is likely to enjoy growth, but profits are less likely to shoot the lights out.

While grandiose ideas are churning over in the background, ITV is still reliant on traditional advertising revenue in its broadcast business. Supercharged efforts to boost digital TV is helping here, but old-school real-time TV ads still play a big part. The group’s responsible for smash hits like Love Island and also sees marketing teams queuing up when it broadcasts headline sport. But demand is bumpy at best, that’s unlikely to change.”


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