REG - ITV PLC - ITV plc Q3 Trading Update

ITVAnnouncement

07/11/2024 07:00

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RNS Number : 2624L  ITV PLC  07 November 2024

ITV plc Q3 Trading Update for the nine months to 30 September 2024

 

Q3 Key Messages

●     As expected, ITV Studios Q3 revenue was impacted by the phasing of
deliveries and the 2023 US writers' and actors' strike. Q3 YTD total Studios
revenue was down 20%(( 1 ))

●     ITV Studios is on track to deliver record adjusted EBITA(( 2 )) in
FY 2024, reflecting efficiency gains and a significant Q4 delivery schedule.
Total Studios revenue is expected to decline mid-single digits over the full
year which is only marginally down year on year excluding the impact of the US
actors' and writers' strikes

●     ITVX continued to perform strongly with 14% growth in streaming
hours and 15% growth in digital advertising revenue in the nine months to 30
September

●     Total advertising revenue was flat in Q3, as expected. Full year
2024 TAR is expected to be up around 2.5% with Q4 expected to be down around
6-7% against the 2023 Rugby World Cup comparative. In addition, Q4 advertising
bookings were impacted by the uncertainty in the lead up to the UK budget

●     Today we are announcing an additional £20 million of net cost
savings in 2024, £10 million of which is a reduction in content costs and
£10 million of which is the early delivery of non-content savings planned for
2025

 

Carolyn McCall, ITV Chief Executive, said:

"ITV's good strategic progress has continued in the first nine months of 2024
driven by strong execution and industry leading creativity.

 

"ITV Studios is performing well despite the expected impact of both the
writer's strike and a softer market from free-to-air broadcasters.  ITV
Studios has had an excellent start to Q4, in line with expectations, which
will ensure it achieves record profits in 2024.  Studios has great creative
and commercial momentum as demonstrated in the last few weeks with shows
including Rivals for Disney+ and Ludwig for the BBC and is on track to deliver
good revenue growth in 2025 and 2026.

 

"ITVX continued its strong performance, delivering double-digit growth in
streaming hours and digital revenues. ITV maintained its unique position in
linear television through the quality and breadth of its schedule, and ITV1
was voted Channel of the Year at the Edinburgh TV Awards.

 

"Our cost saving programme is progressing well and today we are announcing
further cost savings in addition to the previously announced £40 million of
incremental cost savings through restructuring, improved efficiency and
simplifying ways of working. Coupled with our strategic delivery and revenue
outlook, this continues to give us the confidence that we will deliver an
increase in group profit(( 3 )) this year."

 

Group revenue performance for the nine months to 30 September 2024

●     Group revenue was down 8% at £2,741 million (2023: £2,975
million), with growth in total advertising revenue (TAR) offset by the decline
in ITV Studios revenue

●     Group external revenue was down 8% at £2,321 million (2023:
£2,532 million)

 

ITV Studios

 Revenue performance for the nine months to 30 September 2024

●     Total ITV Studios revenue was down 20% at £1,217 million (2023:
£1,516 million) impacted by the expected phasing of production deliveries
which are heavily weighted to Q4 and the impact from both 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

●     During the period, ITV Studios delivered a wide range of new and
returning programmes and formats in the UK and internationally to a
diversified portfolio of customers, including:

○      My Mum, Your Dad for ITV, Queer Eye for Netflix, Showtrial for
the BBC and Love Island US for Peacock

 Outlook

●     Over the full year, we continue to expect ITV Studios to deliver
record adjusted EBITA, at a margin within our 13 to 15% target range. With the
impact of the US strikes and lower demand from free-to-air broadcasters, we
expect total revenue to decline by mid-single digits in 2024

●     ITV Studios is on track to deliver an unusually high number of
productions in Q4 2024 which is expected to include, in the US: The Better
Sister for Amazon Prime Video and Hell's Kitchen for Fox; in the UK: Shetland
for the BBC, Grace S5 for ITV, Destination X for the BBC and NBC, and The
Forsytes for PBS Masterpiece; and Internationally: Petra for Sky Italia and
Gladiators for TF1

●     ITV Studios is expected 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%

 

 Media & Entertainment (M&E)

 Revenue performance for the nine months to 30 September 2024

●    M&E revenue was up 4% at £1,524 million (2023: £1,459 million)
for the nine months to 30 September, with TAR up 6% in line with previous
guidance

○      Within this digital advertising revenue (a component of digital
revenue) was up 15%

○      M&E non-advertising revenue was down 7%, as expected

●     ITVX's good performance has continued in Q3 with a range of
programmes such as the Euros, Love Island, The Tower and Douglas Is Cancelled
driving total streaming hours up 14% year-on-year over the nine months to 30
September. Monthly active users continue to grow in line with our expectations

●     Digital revenues grew 11% with strong growth in digital
advertising revenue partly offset by the actions we have taken during the year
to simplify the paid streaming proposition, which have an impact on
subscriptions and subscription revenue

●     We have maintained our unique position in linear television
through the quality and breadth of our schedule, with 92% of the top 1,000
commercially broadcast TV programmes and 32.3% share of commercial viewing on
our linear television channels

 

 Outlook

●    Over the full year, we expect TAR to be up around 2.5% compared to
2023 with Q4 expected to be down around 6-7% against the 2023 Rugby World Cup
comparative, which gave ITV1 and ITVX their biggest audiences of the year. In
addition, Q4 advertising bookings were impacted by the uncertainty in the lead
up to the UK budget

●     With ITVX's continued strong performance we are further maximising
viewing and optimising investment. We expect total content costs over the FY
2024 to be around £1,265 million, £10 million lower than previously guided

●    We remain on track to deliver at least £750 million of digital
revenues in 2026

 

 

Notes to editors

1.   Unless otherwise stated, all revenue and operating figures refer to the
nine months ended 30 September 2024, with growth compared to the same period
in 2023.

 

2.   Group revenue performance

 Revenue for nine months to 30 September (£m)   2024   2023   Change  Change

                                                              £m      %
 Media and Entertainment                        1,524  1,459  65      4
 ITV Studios                                    1,217  1,516  (299)   (20)
 Group revenue                                  2,741  2,975  (234)   (8)
 Internal supply                                (420)  (443)  23      5
 Group external revenue                         2,321  2,532  (211)   (8)

 

 

 Revenue for nine months to 30 September (£m)   2024   2023   Change  Change

                                                              £m      %
 Total advertising revenue                      1,313  1,233  80      6
 Non-advertising revenue                        1,428  1,742  (314)   (18)
 Internal supply                                (420)  (443)  23      5
 Group external revenue                         2,321  2,532  (211)   (8)

 

3.  Based on ITV estimates and current forecasts, total advertising revenue
(TAR), which includes ITV Family net advertising revenue (NAR), digital
advertising and sponsorship, is expected to be down around 6-7% in Q4 2024 and
up around 2.5% over the full year 2024 compared to 2023, with continued strong
growth in digital advertising revenues.

 

4.  Key performance indicators

 Nine months to 30 September                            2024    2023    Change

                                                                        %
 ITV Studios total organic revenue (decline)/growth     (19)%   7%      -
 Total digital revenue                                  £376m   £340m   11
 Total streaming hours (hrs)                            1,247m  1,095m  14
 Share of commercial viewing                            32.3%   32.8%   (0.5% pts)
 Share of top 1,000 commercial broadcast TV programmes  92%     93%     (1% pt)

●      Our definition of total organic revenue excludes the impact of any
acquisitions made during the current or prior period. It also excludes the
year-on-year movement in foreign exchange.  In the nine months to end of
September 2024, the unfavourable translation impact of foreign exchange on
total revenue was £13 million.

●       Total digital revenue includes digital advertising revenue,
subscription revenue, 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
spend watching ITV across all streaming platforms.  This figure includes both
ad-funded and subscription streaming. For the nine months to 30 September
2023, total streaming hours were reported as 1,096 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.

●       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
programmes with a duration of less than ten minutes. This metric is calculated
as a 12-month rolling average to normalise seasonal scheduling.

●      ITV Family share of commercial viewing is the total viewing of
audiences over the period achieved by ITV's family of channels as a proportion
of all commercial broadcast TV viewing in the UK, from transmission and seven
days post transmission on catch up. ITV Family includes ITV1, ITV2, ITV3,
ITV4, ITVBe, CITV and CITV Breakfast in 2023 only, ITV Breakfast and
associated "HD" and "+1" channels.

●         % change for performance indicators is calculated on
rounded numbers.

 

5. Total Studios organic revenue at constant currency was down 19% to £1,230
million for the first nine months of 2024. This includes £46 million of
revenue following the transfer of ITV sports production from M&E. The
unfavourable translation impact of foreign exchange on total revenue over the
nine months to 30 September was £13 million. Our definition of constant
currency assumes exchange rates remain consistent with 2023.

 

6. On 30th October 2024, ITV Studios announced it had acquired a majority
stake in UK scripted producer Eagle Eye Drama. Eagle Eye produces a wide range
of scripted content, including Professor T and Hotel Portofino, and is led by
the team behind the international drama streaming service, Walter Presents. As
part of the deal, ITV Studios also acquired a majority stake in Belgium-based
production company Happy Duck Films, the production services partner on Eagle
Eye's slate.

 

7. ITV's cost saving programme is progressing well. We are on track to deliver
the previously announced £40 million of incremental in year savings in 2024
which included:

○      The new ongoing strategic restructuring and efficiency programme
which will deliver £30 million in year savings in 2024 (annualised savings of
at least £50 million per year)

○      £10 million from our existing £150 million cost saving
programme

 

Today we are announcing an additional £20 million of net cost savings in
2024, of which £10 million is a reduction in content costs and £10 million
of which is the early delivery of permanent non-content savings across the
Group planned for 2025.

 

8. As at 30 September 2024 net debt was £437 million (30 June 2024: £515
million). ITV continues to have good access to liquidity of £1,326 million,
comprising total cash of £426 million and committed undrawn facilities of
£900 million.

 

Net debt includes net proceeds from the sale of BritBox International which is
funding the current £235 million share buyback. Excluding the proceeds
designated to fund the remainder of the buyback, net debt was £573 million.

 

As at 30 September 2024, the net cash held in Hartswood Films (acquired by ITV
Studios on 25 July 2024) was not included in the Group's net debt position.
The Group expects to complete the valuation of acquired assets and liabilities
before the end of the year when the assets, liabilities and financial
performance of Hartswood Films will be included in the Group's results.

 

9. In October 2024, the Group entered into a new £200 million bilateral loan
facility with a term of six years to December 2030. The facility is free of
financial covenants and is available for drawing until June 2030. Utilisation
requests are subject to the lender's ability to source ITV Credit Default
Swaps (CDS) in the market at the time the utilisation request is made.
Drawings under the facility are intended to be deliverable by the lender under
market standard CDS contracts. This new bilateral CDS facility will sit
alongside the existing £300 million CDS facility until that matures in June
2026.

 

10. On an accounting basis, the net pension surplus of the defined benefit
schemes as at 30 September 2024 was £181 million (30 June 2024: £225 million
surplus). The reduction in the surplus is the result of a decrease in
corporate bond yields which has more than offset the reduction in
market-implied inflation.

 

11. As of market close on 31 October 2024, ITV had bought back 177,871,955
shares, of which 48,892,678 have been cancelled, 8,500,000 have been
transferred to the Employee Benefit Trust (EBT), and 120,479,277 are being
held by ITV as Treasury Shares until required by the EBT.

 

12. Figures presented in this Trading Statement are not audited. This
announcement contains certain statements that are or may be forward looking
statements. Words such as "targets", "expects", "aim", "anticipate", "intend",
or the negative of these terms and other similar expressions of future
performance or results, and their negatives, are intended to identify such
forward-looking statements. These forward-looking statements are based upon
current expectations and assumptions regarding anticipated developments and
other factors affecting ITV. Although ITV believes that the expectations
reflected in these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct. By their
nature forward looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
They are not historical facts, nor are they guarantees of future performance;
actual results may differ materially from those expressed or implied by these
forward-looking statements. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by such forward looking statements. These factors include, but are not
limited to (i) the general economic, business, political, regulatory and
social conditions in the key markets in which the Group operates, (ii) a
significant event impacting ITV's liquidity or ability to operate and deliver
effectively in any area of our business, (iii) a major change in the UK
advertising market or consumer demand, (iv) significant change in regulation
or legislation, (v) a significant change in demand for global content, and iv)
a material change in the Group strategy to respond to these and other factors.
Certain of these factors are discussed in more detail elsewhere in this
announcement and in ITV's 2023 Annual Report and Accounts including, without
limitation, ITV's approach to risk management.

 

Forward-looking statements speak only as of the date they are made and, except
as required by applicable law or regulation, ITV undertakes no obligation to
update any forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information, future events
or otherwise. Nothing in this statement should be construed as a profit
forecast.

 

For further enquiries please contact:

Investor Relations

Pippa Foulds                    +44 7778 031097

Faye Dipnarine                +44 20 7157 6581

 

Media Relations

Paul Moore                       +44 7860 794444

Laura Wootton                  +44 7917 862293

(( 1 )) This includes a £46 million revenue benefit from the transfer of ITV
sports production from Media & Entertainment to ITV Studios effective from
1 January 2024. Excluding this transfer, total ITV Studios revenue was down
23%

(( 2 )) This includes the impact from the change in legislation on
Audio-Visual Expenditure Credits (AVEC), effective on expenditure incurred
from 1 January 2024

(( 3 )) Adjusted EBITA

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