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ITV tunes into a picture of recovery boosted by Euros ad spend

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, discusses the bounce back of ITV advertising revenues with the Euros helping ITV receive the biggest revenues for June to date.

“ITV has tuned into a picture of recovery with half year advertising revenues to the end of June bouncing back by 29%, as all eyes turned on screens for the summer blockbusters. Adjusted group profits jumped by 98% to £327 million as productions started rolling again and ad campaigns restarted. Given the crisis faced by the broadcaster during the depths of the pandemic, a bounce back was expected but the trajectory is sharper than some expectations and that has helped boost the share price in early trading.

The Euros were like a mega hit series, helping the broadcaster pull in the biggest revenues for the month of June in its history, even as the tournament was in the early stages.

The best may be yet to come, with a record audience scored and advertising revenue netted when England played Denmark in the semi final in July. Given ITV’s exclusive rights to showing that game, it will have kicked off a frenzy of ad spend and although coverage of the final was shared with the BBC, companies will have paid handsomely to be part of the action. Total advertising revenue is expected to have risen by 16% to the comparable period in 2018 when ITV broadcast the football world cup and series 4 of Love Island.

Brands are still prepared to pay big numbers to be associated with the Love Island franchise, given its loyal following along young fans. While the Euros and Love Island are the superstar goal scorers, other TV players on the pitch like Saturday Night Takeaway and Unforgotten also pulled in strong ratings, helping ITV increased its main channel share of viewing. This rose from 16.9% to 17.4% while viewing on the ITV Hub rose 6% over the half year. This helped drive a surge in video on demand advertising revenue, which rose by 55% over the period.

The broadcaster is also making sustained progress in its efforts to change channels, be less reliant on ad spend, and bring in more revenue from its content division ITV Studios. The remote control over this part of the business has had its glitches due to set-backs brought on by Covid, but production is clearly back on track, with revenues growing by 26%. ITV Studios has prowess in picking star players here, producing 6 of the 10 top rated UK dramas including Line of Duty, and selling The Chase to the US, Germany and Australia. It now plans to ramp up production for some of the biggest names in the streaming business. Covid restrictions on set though are still proving a costly headache, particularly for location shoots. The picture is still fuzzy regarding the spread of new variants, but a fresh easing of restrictions should help boost margins for its production arm. But it could mean that there will be fewer eyes on screen during the key Autumn TV season, if more people find the confidence to go out socialising more.

ITV is trying to play catch up in the streaming world, with some success. The number of subscribers pales into comparison with the likes of Netflix or Disney+, coming in at 3 million globally but the cachet of Britbox does appear to be a niche attraction with growth of 15% over the period. The global roll is likely to see an initial surge in fans of British drama and comedy signing up, but with so many other kids on the streaming block, Britbox may be lower on the list of favourite direct debits.

Bringing back the dividend is a welcome development for shareholders, and not unexpected given these resilient numbers. A progressive dividend policy being introduced, starting with a 3.3p final dividend which will be proposed at the final results.”

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