REG - ITV PLC - ITV plc Full Year results 2023
07/03/2024 07:00
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RNS Number : 9059F ITV PLC 07 March 2024
ITV Plc Full Year results for the twelve months ending 31 December 2023
Strong strategic execution driving robust financial and operating performance,
despite challenging macroeconomic environment
● Significant progress against ITV's three strategic pillars
● ITV Studios delivered record revenues and profits
● ITVX delivered strong growth in digital viewing and revenues
● 2026 KPI targets on track
Carolyn McCall, ITV Chief Executive, said:
"In 2023 we saw the benefit of the actions we have taken to reposition ITV
towards higher sustainable growth. Our Studios business recorded the highest
ever revenues and profits and in its first year ITVX delivered strong growth
in viewing and digital revenue with investment on plan. This growth in
production and streaming substantially offset the challenging linear TV
advertising market conditions.
"We remain confident in delivering our KPI targets, and are making good
progress towards these - most notably ITV Studios organic revenue growth of 5%
on average per annum between 2021 and 2026 at a margin of 13 to 15% and to
deliver at least £750 million of digital revenues by 2026.
"We remain firmly committed to creating shareholder value and applying a
disciplined approach to capital allocation. As announced on 1 March 2024, we
will return the entire net proceeds of the sale of BritBox International
through a share buyback of £235 million and the Board has proposed a final
dividend of 3.3p giving an ordinary dividend of 5.0p per share or c.£200
million, for the full year.
"Our existing cost saving programme targeting £150 million between 2019 and
2026, has delivered £130 million of annualised savings to date. We are on
track to deliver the full £150 million by 2025 - one year early. In addition,
we are now in the early stages of a new strategic restructuring and efficiency
programme across the Group to reshape the cost base, enhance profitability,
and support the growth drivers of Studios and Streaming. By the end of 2024 we
expect the programme to have delivered incremental annualised gross savings of
at least £50 million per year, giving a £30 million in year gross benefit in
2024. The ongoing programme is designed to deliver further material
incremental savings over a number of years.
"2023 was the year of peak investment for Streaming, which together with the
successful execution of our strategy and the efficiencies delivered to date
have made ITV more robust. ITV has a leading, scaled, global Studios business,
a high growth Streaming service and a cash generative linear advertising
business. This ensures that we are well placed to grow profits from here as
we continue to drive material efficiencies, invest behind our strategic
priorities and deliver returns to shareholders."
Robust financial performance, with good growth in ITV Studios and M&E
digital revenues
● Total revenue was down 2% and total external revenue was down 3% at
£3,624 million, with record revenues in ITV Studios, up 4%, and 19% growth in
digital revenues substantially offsetting a 15% decline in linear advertising
due to a challenging advertising market
● Group adjusted EBITA(( 1 )) was down 32% at £489 million which
reflects the decline in linear advertising revenue and the previously guided
investment in ITVX. Adjusted EPS(1) was down 41% at 7.8p
● EBITA(( 2 )) was £404 million (31 December 2022: £668 million).
Statutory profit before tax was £193 million (31 December 2022: £501
million) and statutory EPS was 5.2p (31 December 2022: 10.7p)
● Strong cash generation with 102% profit to cash conversion(( 3 )) and
robust balance sheet, with net debt of £553 million (31 December 2022: £623
million) and net debt to adjusted EBITDA leverage of 1.0x (31 December 2022:
0.8x)
● In line with ITV's dividend policy, the Board has declared a final
dividend of 3.3p (2022: 3.3p), giving an ordinary dividend of 5.0p per share
for the full year 2023 (2022: 5.0p)
● On 1 March 2024 we announced that ITV had sold its 50% holding of
BritBox International to the BBC for a total consideration of £255 million.
The Board intends to return the entire net proceeds to shareholders through a
£235 million share buyback, which is expected to commence today.
Strong operating performance
ITV Studios - delivered record revenues and profits
● Total revenue grew 4%, with growth remaining ahead of the market.
Adjusted EBITA(1) grew 10% with an industry-leading adjusted EBITA margin of
13.2%, restored to within our target range. Total organic revenue grew 3%,
again ahead of the market
● ITV Studios delivered a good performance against its KPIs in 2023
with outstanding creative deliveries including;
○ Mr Bates vs The Post Office (ITV's biggest new drama in over a
decade)
○ Fool Me Once (one of Netflix's all time top 10 English language
dramas)
○ Squid Game: The Challenge (one of Netflix's most-watched unscripted
originals in 2023)
○ Love Island (format sold to 27 countries) and
○ My Mum, Your Dad (new format already sold to 10 countries)
● Since 2018, ITV Studios total revenue (excluding acquisitions) has
grown by c.5% CAGR, faster than the market CAGR of c.4% CAGR(( 4 ))
Media & Entertainment (M&E) - ITVX driving significant growth in
digital viewing and revenues
● Media & Entertainment (M&E) revenue was down 7% at £2,090
million, with total advertising revenue (TAR) down 8% as guided and
outperforming the TV ad market
● ITVX's strong performance has continued. Monthly active users were up
19%, and total streaming hours increased by 26%, which drove 19% growth in
digital revenues(( 5 )) to £490 million
● Planet V is seeing growing demand for data-driven, targeted
advertising benefitting from the increased scale of online inventory on ITVX
driving digital advertising revenue up 21%
● 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
● M&E adjusted EBITA(( 6 )) was £205 million, reflecting the
decline in linear television advertising and the planned investment in ITVX
(2022: £464 million)
Restructuring and efficiency programme
Our existing cost saving programme targeting £150 million between 2019 and
2026, has delivered £130 million of annualised savings to date. We are on
track to deliver the full £150 million by 2025 - one year early.
In addition, we are now in the early stages of a new strategic restructuring
and efficiency programme across the Group to reshape the cost base, enhance
profitability, and support the growth drivers of Studios and Streaming. We are
building on the foundations we have established in digital and data and the
significant progress we have made in transforming ITV from a linear
broadcaster to a multi-platform broadcaster and streamer.
Savings will come mainly from technology and operational efficiencies,
organisational redesign across Group functions, M&E and Studios and
permanent reductions in discretionary spend across the Group.
By the end of 2024 we expect the programme to have delivered incremental
annualised savings of at least £50 million gross per year, giving a £30
million in year gross benefit in 2024. There will be c.£50 million of one-off
costs to deliver these savings. The ongoing programme is designed to deliver
further incremental material savings over a number of years which will further
build ITV's resilience. We will provide further information as the programme
progresses.
Outlook
We have made great progress towards our 2026 KPIs. 2023 was the year of peak
investment for Streaming, which together with the successful execution of our
strategy and the efficiencies delivered to date, have made ITV more robust.
ITV has a leading, scaled, global Studios business, a high growth Streaming
service and a cash generative linear advertising business. This ensures that
we are well placed to grow profits from here as we continue to drive material
efficiencies, invest behind our strategic priorities and deliver returns to
shareholders.
ITV Studios:
● ITV Studios is 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%
● Going forward we expect to see growth in key segments in which we
operate - content licensing, demand from streaming platforms for unscripted
content and cost effective premium scripted content which we are well
positioned to take advantage of
● We are confident that we will continue to grow our market share to
2026 driven by our scale; our diversification by customer, geography and
genre; a strong track record of high-quality content; a very strong slate for
2024 and beyond; and our leading creative talent
● As previously guided, 2024 will be impacted by the 2023 US writers
and actors strikes, which will delay around £80 million of revenue from 2024
to 2025 as well as weaker demand from free-to-air broadcasters in Europe who
are holding back spend until they see more certainty in the advertising market
Media & Entertainment:
● We remain on track to deliver at least £750 million of digital
revenues by 2026
● We have had a good start to 2024 and will build on ITVX's successful
launch year through continuous improvements in content, product, distribution
and marketing
● ITVX's strong performance in 2023 has shown us that we can grow
viewing significantly with slightly lower overall content spend. Therefore we
expect to marginally reduce our content cost in 2024 to around £1,275 million
as we further optimise linear, evolve our windowing strategy and improve
personalisation. At the same time we will increase our marketing spend by
£15 million to drive both streaming and linear viewing
● Non-TAR M&E revenues will come down year on year in 2024. This
will reflect lower partnership revenues following our decision to revise our
partnership agreements to improve the viewer proposition and our monetisation.
In addition subscription revenue will be broadly flat as we simplify our paid
streaming proposition and migrate subscribers from BritBox UK onto ITVX
Premium
● Compared to the same period in 2023, TAR is expected to be up 3% in
Q1, with continued strong growth in digital advertising revenues.
Virtual Results presentation webcast and Q&A:
ITV's virtual results presentation and Q&A session will be held for
investors and analysts at 9.00am today via the following link:
https://www.investis-live.com/itv/65ae9816bacfa60c00b892a8/wopwp
(https://www.investis-live.com/itv/65ae9816bacfa60c00b892a8/wopwp) . 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:
o United Kingdom (Toll-free): +44 800 358 1035
o United Kingdom (Local): +44 20 3936 2999
o All other locations please refer to:
https://www.netroadshow.com/events/global-numbers?confId=60300
(https://www.netroadshow.com/events/global-numbers?confId=60300)
o Participant access code: 631126 - Participants will be greeted by an
operator who will register their details.
Notes to editors
1. Unless otherwise stated, all financial figures refer to the twelve
months ended 31 December 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.
Twelve months to 31 December 2023 2022 Change £m Change
£m £m %
ITV Studios total revenue 2,170 2,096 74 4
Total advertising revenue 1,778 1,931 (153) (8)
M&E non-advertising revenue 312 318 (6) (2)
M&E total revenue 2,090 2,249 (159) (7)
Total group revenue 4,260 4,345 (85) (2)
Internal supply (636) (617) (19) 3
Group external revenue 3,624 3,728 (104) (3)
Total non-advertising revenue 2,482 2,414 68 3
ITV Studios adjusted EBITA 286 259 27 10
M&E adjusted EBITA 205 464 (259) (56)
Adjusted EBITA 491 723 (232) (32)
Unrealised profit in stock adjustment (2) (6) 4 (67)
Group adjusted EBITA 489 717 (228) (32)
Group adjusted EBITA margin 13% 19% - (6% points)
Statutory operating profit 238 519 (281) (54)
Profit before tax (adjusted) 396 672 (276) (41)
Adjusted EPS 7.8p 13.2p (5.4p) (41)
Statutory EPS 5.2p 10.7p (5.5p) (51)
Net debt as at 31 December (553) (623) 70 11
Reported net debt to adjusted EBITDA leverage 1.0x 0.8x
Profit to cash conversion 102% 75%
3. Total advertising revenue (TAR), which includes ITV Family NAR, digital
advertising and sponsorship, is expected to be up around 3% in Q1 with
continued strong growth in digital advertising revenues. Figures for ITV plc
are based on ITV estimates and current forecasts.
4. Key performance indicators
Twelve months to 31 December 2023 2022 Change
%
Group adjusted EPS 7.8p 13.2p (41%)
Cost savings £24m £23m 4%
Profit to cash conversion 102% 75% 27% pts
ITV Studios total organic revenue growth 3% 14% (11%)
ITV Studios adjusted EBITA margin % 13.2% 12.4% 0.8% pts
Total high-end scripted hours 316hrs 276hrs 14%
Number of formats sold in 3 or more countries 19 19 -
% of ITV Studios total revenue from streaming platforms 32% 22% 10% pts
Total digital revenue £490m £411m 19%
Total streaming hours 1,505m 1,192m 26%
Monthly active users 12.5m 10.5m 19%
Share of top 1,000 commercial broadcast TV programmes 91% 93% (2% pts)
Share of commercial viewing (SOCV) 32.6% 33.8% (1.2% pts)
UK subscribers as at 31 December 1.3m 1.4m (7%)
● 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. For the 2022 full-year, total streaming
hours were reported as 1,139 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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