REG - ITV PLC - Half-year Report
25/07/2024 07:00
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RNS Number : 7426X ITV PLC 25 July 2024
ITV Plc Interim results for the six months ended 30 June 2024
Interim 2024 Highlights
● Significant improvement in group adjusted EBITA(1) in H1, up 40%,
despite Group external revenue down 2%
● Impacted by phasing of productions and US writers' and actors'
strikes in 2023, ITV Studios H1 revenue was down 13%(2), as expected, and
adjusted EBITA(3) grew 5% driven by a strong contribution from higher margin
catalogue sales and cost savings
● M&E adjusted EBITA grew 230% with total advertising revenue
growth ahead of expectations, up 10%
● ITVX continued to perform strongly with streaming hours up 15%,
monthly active users up 17% and digital advertising revenues up 17%
Carolyn McCall, ITV Chief Executive, said:
"ITV has been transformed over the last five years and we continue to build
upon this. We are confident of delivering increased adjusted EBITA this year,
following the year of peak net investment in 2023, and are on track to deliver
our 2026 KPI targets.
"ITV Studios is performing well despite the expected market backdrop and is
forecast to deliver record adjusted EBITA over the full year as a result of
its scale, its diversification by product, geography and customer, its
outstanding creative output and the actions we are taking to drive
efficiencies.
"Our digital advertising business continues to go from strength-to-strength
and we saw a 17% increase in digital advertising revenue in the period, which
contributed to the 10% increase in total advertising revenue. This was driven
by strong viewing across our broadcast channels and ITVX, with a very
successful Euros, a year-on year-increase in viewing of Love Island and a
slate of great dramas.
"We have strong momentum in improving efficiency and simplifying ways of
working right across ITV and are on course to deliver the £40 million of
incremental in year savings in 2024 that were previously guided. This includes
£30 million of additional savings as part of the new strategic restructuring
and efficiency programme."
Outlook: on track to deliver 2026 KPI targets
ITV Studios:
● Over the full year, ITV Studios is expected to deliver record
profits driven by an increase in higher margin catalogue sales, and continued
action to drive efficiencies. The full year margin will be lower than H1
reflecting the relatively lower mix of catalogue sales in the second half, but
will be within our 13 to 15% guidance range
● ITV Studios revenue will, as guided, be impacted by the 2023 US
writers' and actors' strikes, which will delay around £80 million of revenue
from 2024 to 2025, and lower demand from free-to-air broadcasters in Europe in
the short term. H2 deliveries will be weighted to Q4, with Q3 revenue expected
to be down by a similar percentage to H1
● Previous guidance was for ITV Studios total revenue for FY 2024 to
be broadly flat. Our view of the market has not changed but we now expect
revenue to be down low single digits, due to a small number of key productions
being contracted as executive productions rather than co-productions. The
change in contractual arrangement has no impact on profit but does mean we
recognise less revenue this year. There remain a small number of contracts
under negotiation, which may have a similar outturn of lower recognised
revenue, but the same profit if they are contracted as executive
productions. In the revenue guidance for 2024, we have assumed that we will
be the main or co-producer
● ITV Studios remains on track to deliver total organic revenue
growth of 5% on average per annum from 2021 to 2026 - ahead of the market, and
at a margin of 13 to 15%
Notes:
1. Statutory operating profit was £136 million, up 106% in H1
2024 (2023: £66 million). Our APMs are defined within the APMs section of
this report
2. This includes the impact of the transfer of ITV sports
production from Media & Entertainment to ITV Studios which was effective
from 1 January 2024. Excluding this £30 million transfer total Studios
revenue was down 16%
3. This includes a £3 million impact from the change in
legislation on Audio-Visual Expenditure Credits (AVEC), effective on
expenditure incurred from 1 January 2024. Expenditure credits on qualifying
expenditure is included within operating profit rather than within the
consolidated tax charge. As a result, EBITA, adjusted EBITA, adjusted EBITA
margin, profit before tax and tax charge will increase, but profit after tax
and EPS are unchanged, compared to the previous High-End TV accounting
treatment. Excluding the impact of AVEC, ITV Studios adjusted EBITA was £133
million, up 2%
Media & Entertainment (M&E):
● We expect ITVX to continue to perform strongly in H2 with further
improvements in content, product, distribution, marketing and monetisation
● Compared to the same period in 2023 which included the Rugby World
Cup, TAR is expected to be broadly flat in Q3, with continued strong growth in
digital advertising revenues
● We remain on track to deliver at least £750 million of digital
revenues in 2026
H1 Group Financial highlights - strong profitability and shareholder returns
● Total revenue was down 3% at £1,903 million (2023: £1,964
million), with growth in total advertising revenue (TAR) offset by the
expected decline in ITV Studios revenue
● Total external revenue was down 2% at £1,599 million (2023: £1,639
million)
● Group adjusted EBITA(4) was up 40% at £213 million (2023: £152
million), reflecting the operational gearing of Media & Entertainment, the
higher margin in ITV Studios and delivery of £23 million of cost savings.
Adjusted EPS(1) was up 43% at 3.3p (2023: 2.3p)
● EBITA(5) was £200 million (2023: £133 million). Statutory profit
before tax was £330 million (2023: £45 million) and statutory EPS was 6.6p
(2023: 1.0p). The main adjustments between adjusted and statutory results are
exceptional items and the profit on disposal of BritBox International
● Profit to cash conversion of 73% on a rolling 12-month basis. Profit
to cash conversion in H1 was unusually low at 17% reflecting a significant
increase in working capital as a result of the resumption of production in the
US following the strikes in 2023
● Robust balance sheet, with net debt of £515 million(6) (31 Dec
2023: £553 million, 30 June 2023: £724 million) and net debt to adjusted
EBITDA leverage of 0.9x (31 Dec 2023: 1.0x, 30 June 2023: 1.2x)
● In line with ITV's dividend policy, the Board has declared an interim
dividend of 1.7p (2023: 1.7p)
● £53 million of buybacks completed by 30 June 2024, as part of the
overall £235 million programme to return the entire net proceeds from the
sale of BritBox International
● Following the agreement of the latest triennial valuation, we expect
no future pension deficit contributions while the Scheme is in surplus, other
than a small payment relating to a legacy asset-backed scheme and a potential
one-off contribution in relation to a long running pension dispute (refer to
note 8). This removes a significant historical drag on free cash
ITV Studios performance impacted by previously guided factors
● As expected, total ITV Studios revenue was down 13% at £869
million (2023: £1,000 million) due to the phasing of deliveries, which are
heavily weighted to H2 and particularly Q4, and the impact of the 2023 US
writers and actors strikes. Excluding the impact of the transfer of ITV sports
production from Media & Entertainment to ITV Studios, total Studios
revenue was down 16%
● Adjusted EBITA(1) was up 5% to £136 million (2023: £130 million),
with an adjusted EBITA margin of 15.7% reflecting an increase in higher margin
catalogue sales, and £9 million of cost savings. Excluding AVEC(3), adjusted
EBITA was up 2% to £133 million with an adjusted EBITA margin of 15.3%
● ITV Studios delivered a wide range of new and returning programmes
and formats in the UK and internationally to a diversified portfolio of
customers during the period, including:
○ Missing You and Inganno (in Italy) for Netflix, A Cruel Love: The
Ruth Ellis Story for ITV, The Gathering for Channel 4, Showtrial for the BBC,
Love Island USA for Peacock, and My Kitchen Rules for Seven Network in
Australia
● We continuously manage our portfolio of labels to strengthen our
creativity. In July we acquired 51% of the scripted independent production
company Hartswood Films in the UK, producer of Sherlock, and sold our minority
shareholding in Blumhouse Television in the US(7)
Notes:
4. Our APMs are defined within the APMs section of this
report. It also includes a full reconciliation between adjusted and statutory
results
5. Statutory operating profit before interest, tax,
amortisation and exceptional items
6. Excluding the net proceeds that have been designated to
fund the remainder of the buyback, net debt in H1 2024 is £697 million and
net debt to adjusted EBITDA leverage is 1.2x
7. ITV Studios sold back its minority shareholding in
Blumhouse TV to Blumhouse Holdings, for a consideration of US$60 million.
Blumhouse and ITV America will continue their unscripted partnership
Media & Entertainment (M&E): strong advertising growth and significant
improvement in profitability
● M&E revenue was up 7% at £1,034 million (2023: £964 million),
with total advertising revenue (TAR) up 10%, ahead of previous guidance
○ Within this digital advertising revenue (a component of digital
revenue) was up 17%
○ Total M&E non-advertising revenue was down 5%, driven by the
expected decline in subscription and partnership revenues, as we improve the
viewer proposition and monetisation of ITVX
● M&E adjusted EBITA was up 230% at £76 million (2023: £23
million), reflecting the growth in TAR and £14 million of cost savings
delivered
● ITVX's strong performance has continued in H1 with total streaming
hours up 15% and monthly active users up 17%
● Digital revenues (refer to Note 5) grew 12%
● As previously guided we have taken action to simplify the paid
streaming proposition, including migrating BritBox UK onto ITVX Premium, which
has a short term impact on subscriptions and subscription revenue
● We have maintained our unique position in linear television through
the quality and breadth of our schedule, as we continue to deliver mass
simultaneous reach and innovative commercial and creative partnerships
Restructuring and efficiency programme
● The cost saving programme is progressing well, and is on track to
deliver the £40 million of incremental in year savings in 2024 that were
previously guided:
○ £30 million in year savings from new restructuring and efficiency
programme
■ savings from technology and operational efficiencies,
organisational redesign across Group functions, M&E and Studios, and
permanent reductions in discretionary spend
■ cost of change will be around £30 million in 2024, rather than
£50 million as previously guided
■ an ongoing programme that is designed to deliver further
incremental material savings over a number of years
○ £10 million from our existing £150 million cost saving programme
Planning assumptions for the full year 2024
The following planning assumptions for 2024 are based on our current best view
but may change depending on how events unfold over the rest of the year. They
are largely unchanged from the guidance given at the full year results.
Profit and Loss impact:
● Total content costs are expected to be around £1,275 million as we
further optimise linear, evolve our windowing strategy and improve
personalisation. We will invest an additional £15 million in marketing
● Adjusted financing costs are expected to be around £35 million
● The adjusted effective tax rate is expected to be around 26% in 2024
and over the medium term which is slightly above the UK statutory tax rate of
25% and above previous guidance of 25%
● Exceptional items are expected to be around £65 million mainly due
to costs associated with the ongoing strategic restructuring and efficiency
programme and digital transformation costs. This is down from previous
guidance of £90 million predominantly due to lower cost of change. The cash
cost will be the same as the P&L impact
Cash impact
● Total capex is expected to be around £75 million as we further
invest in our digital capabilities
● Profit to cash conversion is expected to be around 80% out to 2026.
In 2024 profit to cash conversion will be lower reflecting an increase in
working capital. Across 2023 and 2024 we expect cash conversion to be around
80%
● There are no pension deficit funding contributions for 2024
following the completion of the triennial valuation other than an annual
payment of c.£3 million under the London Television Centre Pension Funding
Partnership
● The Board has proposed an interim dividend of 1.7p, which will be
paid in November 2024. Going forward, the Board intends to pay a full year
ordinary dividend of at least 5.0p, which it expects to grow over the medium
term
Virtual Results presentation webcast and Q&A:
ITV's virtual results presentation and Q&A session will be held for
investors and analysts at 9.30am today (BST) via the following link:
www.investis-live.com/itv/667a7333f95b7a0d0032410c/partd
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:
Conference Call Dial-In:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 800 358 1035
Global Dial-In Numbers
(https://www.netroadshow.com/events/global-numbers?confId=67722) (linked)
Access Code: 072622
Press *1 to ask a question, *2 to withdraw your question, or *0 for operator
assistance.
Please refer to the Global Dial-In Numbers hyperlink above for alternate phone
numbers.
Notes to editors
1. Unless otherwise stated, all financial figures refer to the 6 months
ended 30 June 2024, with the change compared to the same period in 2023.
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.
Six months to 30 June 2024 2023 Change £m Change
£m £m %
ITV Studios total revenue(8) 869 1,000 (131) (13%)
Total advertising revenue 889 811 78 10%
M&E non-advertising revenue 145 153 (8) (5%)
M&E total revenue 1,034 964 70 7%
Total group revenue 1,903 1,964 (61) (3%)
Internal supply (304) (325) 21 6%
Group external revenue 1,599 1,639 (40) (2%)
Total non-advertising revenue 1,014 1,153 (139) (12%)
ITV Studios adjusted EBITA(1) (inc AVEC in 2024) 136 130 6 5%
M&E adjusted EBITA 76 23 53 230%
Adjusted EBITA 212 153 59 39%
Unrealised profit in stock adjustment 1 (1) 2 200%
Group adjusted EBITA 213 152 61 40%
Group adjusted EBITA margin 13% 9% - 4% pts
Statutory operating profit 136 66 70 106%
Profit before tax (adjusted) 178 118 60 51%
Adjusted EPS 3.3p 2.3p 1.0p 43%
Statutory EPS 6.6p 1.0p 5.6p 560%
Net debt as at 30 June (515) (724) 209 29%
Reported net debt to adjusted EBITDA leverage 0.9x 1.2x - -
Profit to cash conversion 73% 88% - (15% pts)
Notes:
8. 2024 includes a £30 million revenue benefit from the
transfer of ITV sports production from Media & Entertainment to ITV
Studios effective from 1 January 2024
3. Total advertising revenue (TAR), which includes ITV Family NAR, digital
advertising and sponsorship, was up 17% in Q2 and up 10% in H1. Compared to
the same period in 2023 which included the Rugby World Cup, TAR is expected to
be broadly flat in Q3, with continued strong growth in digital advertising
revenues. Figures for ITV plc are based on ITV estimates and current
forecasts.
4. Key performance indicators
Six months to 30 June 2023 Change
2024
Group adjusted EPS 3.3p 2.3p 43%
Cost savings £23m £11m £12m
Profit to cash conversion 73% 88% (15% pts)
ITV Studios adjusted EBITA margin % (inc AVEC) 15.7% 13% 2.7% pts
Total high-end scripted hours 107 hrs 109 hrs (2%)
Number of formats sold in 3 or more countries 11 9 22%
% of ITV Studios total revenue from streaming platforms 22% 27% (5% pts)
Total digital revenue £244m £218m 12%
Total streaming hours 846m 738m 15%
Monthly active users 14.6m 12.5m 17%
Share of top 1,000 commercial broadcast TV programmes 91% 93% (2% pts)
Share of commercial viewing (SOCV) 33.2% 33.6% (0.4% pts)
UK subscribers as at 30 June 0.9m 1.4m (36%)
● 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.
● 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 2023, total streaming hours were
reported as 737 million hours, which included some estimates of total
streaming viewing from third-party data providers. This has since 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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