Will Love Island creator ITV be a tough watch for investors next week?
As ITV gears up to report its full-year financial results next week, analysts have forecast falling revenue and profits amid the frosty advertising market.
Overall, analysts expect a three per cent decline in sales to £3.6bn and a sharp drop in pre-tax profit of over 40 per cent to £272m.
The dividend is forecast to come in flat at five pence a share and will be bolstered by the £235m share buyback, financed by the sale of ITV’s Britbox stake, announced on Friday.
Despite this sale sending ITV shares up 15 per cent, they remain down by 27 per cent over the last year. “The issues which have plagued the company may well spill over into next week’s numbers,” said Richard Hunter, head of markets at Interactive Investor.
Despite recent efforts to streamline operations and enhance profitability, ITV anticipates an eight per cent decline in advertising revenues compared to 2022. This was a particularly challenging benchmark to beat though, with ITV achieving its second-highest ad revenue ever, largely due to the Fifa World Cup.
It is a bad time for broadcasters who are at the mercy of advertising sales, with many other big industry players also suffering due to poor market conditions that have constricted ad budgets.
“ITV has latterly been a tough watch,” said Hunter, although he added the ITVX streaming platform has partially offset declining revenues.
ITVX has “got off to a flying start” since its launch in December 2022 and has been boosted by the continued popularity of shows like Love Island and regular FA Cup fixtures.
In addition to advertising and streaming, analysts will be looking for progress in ITV Studios, the division of the broadcaster which is the global production company behind hit shows such as The Chase and Schitt’s Creek.
Hunter said the Studios business is expected to grow because it has “produced a stream of quality content which it has been able to distribute both within the UK and overseas.” It can also make programmes for other channels, meaning it can grow revenues beyond the ITV stable.
ITV is targeting trend sales growth of five per cent a year for Studios in 2024, although this is considerably slower than its 19 per cent growth in 2022.
However, the production unit could potentially feel some effects from the US actors and writers’ strikes last year, according to Russ Mould, investment director at AJ Bell.
“Any update on content spend, where ITV has been phasing spending, will also be of interest,” he added. “The budget in 2023 was trimmed very slightly to £1.28bn from £1.29bn, so this extra £10m spend will presumably drop into 2024.”
ITV’s most recent financial report indicated it is on track to deliver £15m in cost savings for 2023, part of a broader aim to save £50m by 2026.