REG - ITV PLC - Half-year Report
27/07/2023 07:15
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RNS Number : 3250H ITV PLC 27 July 2023
ITV Interim results for the period ended 30 June 2023
Good strategic progress and strong execution; financial performance as
expected with ITV Studios revenues up 8% and digital revenue up 24%
Carolyn McCall, ITV Chief Executive, said:
"The continued momentum behind ITV's strategic transformation delivered strong
growth in Studios and Digital revenues in the first half of the year, largely
offsetting the expected weakness in the UK advertising market - with total
revenue declining just 1% in H1, even in a very tough advertising market.
"ITV Studios increased revenue by 8%, reaching £1 billion in H1 for the first
time with strong and growing global demand for ITV's content.
"ITVX drove an increase in digital revenue of 24%, ahead of plan, supported by
a step change in our viewer metrics - with more viewers watching more content
and staying longer.
"ITV maintained its strength in linear in a challenging advertising market.
Looking forward we see a more encouraging outlook as advertisers build their
campaigns around the large streaming and linear audiences expected to be drawn
to the Women's World Cup, the Rugby World Cup and the eagerly anticipated
return of Big Brother.
"We remain on track to achieve all our KPI targets which gives us confidence
we will deliver at least £750m of digital revenue by 2026. As we said at the
full year results in March, 2023 is the year of peak net investment in our
streaming business and we expect profit to grow from here."
Group Financial highlights - performance as expected with growth in ITV
Studios and M&E digital revenue
Total external revenue was down 2% at £1,639 million, with growth in ITV
Studios and digital revenues largely offsetting the decline in linear
advertising revenues
o Total ITV Studios revenue up 8% to £1,000 million, driven by the UK
o Media & Entertainment (M&E) revenue down 9% at £964 million, with
total advertising revenue (TAR) down 11% as guided. Within this, digital
advertising revenue was up 24% to £179 million
· Group adjusted EBITA was down 52% at £152 million, as expected.
This reflects the challenging advertising market and the planned investment in
ITVX. Adjusted EPS(1) was down 62% at 2.3p
· EBITA(2) was £133 million (30 June 2022: £295 million).
Statutory profit before tax was £45 million (30 June 2022: £219 million) and
statutory EPS was 1.0p (30 June 2022: 4.8p)
· The Board has declared an interim dividend of 1.7p (30 June 2022:
1.7p) and remains committed to paying a total dividend of at least 5p for the
full year, which is expected to grow over time
ITV Studios - good performance as we continue to see strong global demand for
ITV's content
· Strong revenue growth of 8%, ahead of the market with an industry
leading adjusted EBITA margin(1) of 13%, which is within our target range
· Studios KPI performance in the first half as expected and remains
on track to deliver targets:
o 109 high-end scripted hours, which is down over the first half as a result
of the phasing of deliveries (30 June 2022: 133 hours). Scripted revenue per
hour has increased year on year in H1. Over the full year, high-end scripted
hours are expected to be up year-on-year, based on the current delivery
plan.
o 9 formats were sold in three or more countries, as our programmes continue
to travel, including The Voice; Love Island; My Mum, Your Dad; and Come Dine
With Me (30 June 2022: 9 formats). Over the full year, we expect this to be
broadly in line with 2022
o Percentage of total Studios revenue from streaming platforms grew to 27%
with commissions or development deals with most of the major streamers (30
June 2022: 19%)
· ITV Studios has a high level of committed revenues for the full
year of 89% (2022: 90%), supported by a strong pipeline of new and returning
programmes
· Successful integration of recent acquisition, Plimsoll
Productions. Original commissions such as A Year on Planet Earth on ITVX and
ITV1 and Big Beasts on AppleTV+ have been delivered
Notes:
1. Reconciliation between adjusted and statutory results is provided in the
APM section
2. Statutory operating profit before interest, tax, amortisation and
exceptional items
Media & Entertainment (M&E) - ITVX is driving a step change in key
viewing metrics and strong growth in digital advertising revenue, up 24%
· M&E financial performance is as expected with revenue down 9%
at £964 million reflecting the impact of the challenging advertising market,
with TAR down 11% as guided
· ITVX's strong performance has continued. The planned investment
in content is attracting increased users, who are watching more and staying
for longer compared to ITV Hub in 2022. Monthly active users were up 29% to
12.5 million and total streaming hours increased 33% to 737 million hours
driving strong growth in digital revenues up 24% to £218 million
· Planet V, continues to see strong demand for data-driven,
targeted advertising benefitting from the increased scale of online inventory
on ITVX driving digital advertising revenue up 24% in H1 to £179 million
· We have maintained our unique position in linear through the
quality and breadth of our schedule with:
o 33.6% share of commercial viewing (SOCV) (2022: 33.7%) and
o 93% of top 1,000 commercial broadcast TV programmes (2022: 94%)
· M&E adjusted EBITA(3) was £23 million as expected,
reflecting the challenging advertising market and the planned investment in
ITVX (30 June 2022: £194 million)
Outlook
ITV Studios:
· We expect ITV Studios to deliver at least 5% average organic
revenue growth per annum to 2026, having grown organically at 8% on average
for the 18 month period from 1 January 2022 to 30 June 2023. We expect to grow
ahead of the market as we continue to strengthen the business, against the
background of strong global demand for our content. In 2023, we are on track
to deliver mid-single digit revenue growth, ahead of the market
· We are committed to maintaining an adjusted EBITA margin for ITV
Studios of 13% to 15% over the period to 2026. As previously guided, we expect
the margin to be at the lower end of the range in the shorter term as a result
of the current inflation in the production market
Media & Entertainment
· With the successful performance of ITVX, we remain confident in
delivering at least £750 million of digital revenues by 2026
· We are looking forward to the second half of 2023 with the
Women's Football World Cup, the Rugby World Cup and Big Brother, all set to
draw large broadcast and streaming audiences
· Compared to the same period in 2022, TAR is expected to be down
4% in July 2023 and up 7% in August. It is too early to give a forecast for
September but early signs are positive and we expect to see growth in TAR in
Q3, with continued strong growth in digital advertising revenues
We remain committed to delivering £15 million of permanent cost savings in
2023 as part of our previously announced £50 million cost saving target
between 2023 and 2026. £11 million of this was delivered in H1. This is in
addition to the £106 million cost programme delivered between 2018 and
2022.
ITV has made really good strategic progress in the first half of 2023 driven
by strong execution and we enter the second half of the year with real
momentum and are on track to deliver all our KPI targets by 2026.
While linear will continue to have an important role in the advertising mix,
by 2026 we expect around two-thirds of ITV's total revenues to come from our
growth drivers - ITV Studios and M&E digital revenues. This is expected to
drive increased profits from 2023, which is the year of peak net investment in
our streaming business.
Our balance sheet is robust which enables ITV to invest behind our strategic
priorities and deliver returns to shareholders in line with our capital
allocation policy.
Virtual Results presentation webcast and Q&A:
ITV's virtual results presentation and Q&A session will be held for
investors and analysts at 8.30am today via the following link:
https://www.investis-live.com/itv/649ef2349b8a600d00429159/wtrth
(https://www.investis-live.com/itv/649ef2349b8a600d00429159/wtrth) You are now
able to pre-register to join.
If you would like to ask a question, you will be able to do so via the
following Conference Call details:
· United Kingdom (Toll-free): 0800 358 1035
· United Kingdom (Local): 020 4587 0498
· All other locations: +44 203 936 2999
· Participant access code: 792583 - Participants will be greeted
by an operator who will register their details.
Notes:
3. Refer to APMs for key adjustments to EBITA and adjusted EBITA
Notes to editors
1. Unless otherwise stated, all financial figures refer to the 6 months
ended 30 June 2023, with the change compared to the same period in 2022.
2. Group financial performance
We measure performance through a range of metrics, particularly through our
alternative performance measures and KPIs, as well as statutory results, all
of which are set out and defined in this report. Please refer to the APMs for
a reconciliation between adjusted and statutory results.
6 months to 30 June 2023 2022 Change Change
£m £m £m %
ITV Studios total revenue 1,000 927 73 8%
Total advertising revenue 811 910 (99) (11%)
M&E non-advertising revenue 153 155 (2) (1%)
M&E total revenue 964 1,065 (101) (9%)
Total group revenue 1,964 1,992 (28) (1%)
Internal supply (325) (313) (12) 4%
Group external revenue 1,639 1,679 (40) (2%)
ITV Studios adjusted EBITA(4) 130 127 3 2%
M&E adjusted EBITA 23 194 (171) (88%)
Adjusted EBITA 153 321 (168) (52%)
Unrealised profit in stock adjustment (1) (3) 2 67%
Group adjusted EBITA 152 318 (166) (52%)
Group adjusted EBITA margin 9% 19% - (10% pts)
Statutory operating profit 66 228 (162) (71%)
Profit before tax (adjusted) 118 301 (183) (61%)
Adjusted EPS 2.3p 6.0p (3.7p) (62%)
Statutory EPS 1.0p 4.8p (3.8p) (79%)
Net debt as at 30 June (724) (615) (109) (18%)
Reported net debt to adjusted EBITDA leverage (on a 12-month rolling basis) 1.2x 0.8x*
Profit to cash conversion (on rolling 12 month basis) 88% 81%
* As at 31 December 2022
3. Total advertising revenue (TAR), which includes ITV Family NAR, AVOD
and sponsorship was down 12% in May, down 10% in June, down 11% in Q2 and down
11% in H1. Going forward, TAR is forecast to be down 4% in July and up 7% in
August. It is too early to give a forecast for September but early signs are
positive and we expect to see growth in TAR in Q3 compared to the same period
in 2022. Figures for ITV plc are based on ITV estimates and current forecasts.
Notes:
4. ITV Studios adjusted EBITA for 2022 has been restated to remove the
unrealised profit in stock adjustment as this is an adjustment required on
consolidation only
4. Key performance indicators
6 months to 30 June 2023 2022 Change
%
Group adjusted EPS 2.3p 6.0p (3.7p)
Cost savings £11m £11m -
Profit to cash conversion (12-months rolling) 88% 81% 7% pts
ITV Studios total organic revenue growth 2% 15% (13% pts)
(ITV Studios average total organic revenue growth across 2022 and H1 2023) 8% - -
ITV Studios adjusted EBITA margin % 13% 14% (1% pt)
Total high-end scripted hours 109 133 hrs (18%)
Number of formats sold in 3 or more countries 9 9 -
% of ITV Studios total revenue from streaming platforms 27% 19% 8% pts
Total digital revenue 218m 176m 24%
UK subscribers 1.4 1.4m* -
Total streaming hours 737m 556m 33%
Monthly active users 12.5m 9.7m 29%
Share of top 1,000 commercial broadcast TV programmes 93% 94% (1% pt)
Share of commercial viewing (SOCV) 33.6% 33.7% (0.1% pt)
Total BritBox International subscribers 3.2m 3.0m* 7%
* As at 31 December 2022
· Total digital revenue includes digital advertising revenue and
subscription revenue as well as linear addressable revenue, digital
sponsorship and partnership revenue, ITV Win and any other revenues from
digital business ventures.
· UK subscribers captures total UK subscriptions to ITV streaming
platforms and services (including free trials).
· Total streaming hours measures the total number of hours viewers
spent watching ITV across all streaming platforms. This figure includes both
ad-funded and subscription streaming. In H1 2022, total streaming hours was
reported as 523 million hours, which included some estimates of total
streaming viewing from third party data providers and has been updated to
reflect more recently available and accurate data.
· Monthly active users captures the average number of registered
users throughout the period who accessed our owned and operated on demand
platforms each month.
· The share of top 1,000 commercial broadcast TV programmes KPI
includes TV viewing from transmission and seven days post-transmission on
catch up, as well as six weeks prior to the transmission window. It excludes
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