ITV sees revenue from advertising fall and looks to Love Island for hope

ITV’s advertising revenues fell by 10 per cent in the three months to the end of March, in line with expectations. 

The group said the decline in ad sales should be cushioned by the next series of reality TV favourite Love Island and the FA Cup Final on 3 June, which look set to bolster its coffers in this regard.

ITV Studios also saw revenue drop by 7 per cent to £776million, against £834million at the same point a year ago, a steeper decline than analysts had expected.  

Money from ads: ITV saw revenue from advertising fall by 10% in the three months to the end of March

ITV shares fell 3.68 per cent or 2.84p to 74.28p this morning, having risen around 8 per cent in the last year. 

Revenue from the group’s Media & Entertainment arm slipped by 9 per cent to £495million, against £545million over the same period last year. 

But ITV said it was ploughing ahead with Phase Two of its More Than TV strategy – its efforts to become a ‘vertically integrated producer, broadcaster and streamer’ – despite ‘the current challenging macro and geopolitical environment’.

While total advertising revenue fell by 7 per cent, digital advertising revenue was up 30 per cent year-on-year at £87 million.

The broadcaster said ITVX, its ad-funded streaming service, continued to ‘perform strongly’. Total digital revenues were up 29 per cent and total streaming hours were up 49 per cent in the period, it said.

Exclusives like Nolly and The Twelve attracted new viewers, 80 per cent of whom went on to explore other content on ITVX, ITV said.

It added: ‘We maintained our strength in delivering mass reach with 93 per cent of the top 1,000 commercially broadcast TV programmes and 34.4 per cent share of commercial viewing on channels.’

ITV expects ITV Studios to deliver at least 5 per cent average organic revenue growth per annum to 2026.

It said: ‘In 2023, we are on track to deliver mid-single digit revenue growth, ahead of the market, following record revenues in Q4 2022 and the phasing of deliveries within 2023 weighted to the second half.’ 

The group said it was ‘committed’ to delivering adjusted EBITA margin for ITV Studios of 13 per cent to 15 per cent over the period to 2026. 

Via initiatives like ITVX, the group said it still expects to deliver at least £750million of digital revenues by 2026.

When it comes to future total advertising revenue, ITV said the outlook is ‘challenging as expected given the current macroeconomic environment with TAR forecast to be down 12 per cent in Q2’.

On now: ITV is showing I’m a Celebrity Get Me Out Of Here South Africa at present 

ITV is carrying on with its plan to make £15million worth of cost savings this year, with the aim of having saved £50million by 2026. This is in addition to the £106million cost programme delivered between 2018 and 2022, ITV said.

The group said: ‘ITV’s balance sheet remains robust, enabling us to invest behind the strategy and deliver returns to shareholders in line with our capital allocation policy.’ 

Carolyn McCall, ITV chief executive, said: ‘ITV continued to make significant strategic progress in the quarter and all parts of the business performed in line with expectations.’

‘Total advertising revenue in Q1 was down 10 per cent – as expected and better than the wider TV advertising market. We are looking forward to Q3 with Love Island and the Rugby World Cup set to draw large broadcast and streaming audiences.

‘ITV is successfully executing Phase Two of its More Than TV strategy, despite the current challenging macro and geopolitical environment, as we continue to satisfy the growing demand for content globally and the desire for advertisers to secure both mass reach and targeted digital audiences.’

Richard Hunter, head of markets at Interactive Investor, said: ‘ITV remains a tough watch, with a decline in revenues partially offset by a promising launch of the ITVX streaming service.’

He added: ‘The share price has faltered of late, having dropped by 14 per cent over the last quarter, possibly as a result of as yet unsubstantiated rumours of a partial sale of the Studios business, which could totally alter the dynamic of the listed group. 

‘Over the last year, however, the price has risen by 15 per cent as compared to a decline of 1.9 per cent for the wider FTSE 250. 

‘The shares have had a chequered recent past, having been in and out of the FTSE 100 as fortunes have wavered, and over the last five years the price remains down by 52 per cent. 

‘Despite the progress which is being made within ITVX and Studios, investors remain skittish on prospects, as evidenced by an initial share price reaction which reflects the broader and more obvious concerns around general advertising revenues. 

‘The market consensus of the shares as a cautious buy, however, perhaps offers some positive hope that the group can deliver its own strategic progress.’

This post first appeared on Dailymail.co.uk