REG - ITV PLC - ITV Q1 Trading Statement

ITVAnnouncement

09/05/2024 07:00

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RNS Number : 6805N  ITV PLC  09 May 2024

ITV plc Q1 Trading Update for the three months to 31 March 2024

 

Q1 2024 Highlights

●     ITV continues to make good progress and remains on track to
deliver its 2026 KPI targets

●     Total ITV Studios Q1 revenue was down 16%, reflecting the phasing
of deliveries and the expected impact of the US writers' and actors' strike

●     Total ITV Studios revenue for FY24 is expected to be broadly flat
with a strong pipeline of programmes heavily weighted to H2

●     ITVX continued to perform strongly with 16% growth in streaming
hours and 14% growth in digital advertising revenues in Q1

●     Total advertising revenue up 3% in Q1, with strong momentum into
Q2, expected to be up around 12%;  H1 expected to be up around 8%

●     ITV Pension scheme in surplus following latest triennial
valuation; removes a significant historic drag on free cash

 

Carolyn McCall, ITV Chief Executive, said:

"ITV continues to execute its strategy successfully.

 

"Over the full year we expect ITV Studios revenues to be broadly flat. We have
a strong pipeline of programmes, good demand for our quality content as we
increasingly diversify our customer base towards streamers and the phasing of
deliveries is heavily weighted to the second half of the year, including Hells
Kitchen US, The Better Sister, A.C.A.B, Showtrial and Ludwig.

 

"ITVX continued to build on its strong first year and delivered double-digit
growth in both digital viewing and digital advertising revenues in Q1 and we
expect continued strong growth in both throughout the year.

 

"Total advertising revenue grew 3% in Q1, in line with guidance, with good
momentum continuing into Q2 benefitting from the Euros in June. H1 TAR is
expected to be up around 8%.

 

"Our group cost savings programmes are on course to deliver £40 million of
savings this year as previously guided.  Overall we expect to continue to
make good strategic progress and we remain on track to achieve our KPI targets
for 2026."

 

 

Financial and operating performance for the three months to 31 March

●     Total revenue was down 7% at £887 million (2023: £952 million),
with growth in total advertising revenue (TAR) offset by the decline in ITV
Studios revenue

●     Total external revenue was down 6% at £727 million (2023: £776
million)

 

       ITV Studios

●     Total ITV Studios revenue was down 16% at £382 million (2023:
£457 million) due to the phasing of deliveries which are heavily weighted to
H2 and the expected impact from both the 2023 US writers and actors strikes
and the weaker demand from free-to-air broadcasters in Europe who have been
holding back spend until they see more certainty in the advertising market

●     ITV Studios delivered a wide range of new and returning programmes
and formats in the UK and internationally during the quarter, including

○      The Reluctant Traveller for Apple TV+, The Red King for Alibi,
The Gathering for Channel 4 and I'm A Celebrity…Get Me Out Of Here! in
Germany for RTL

 

  Media & Entertainment (M&E)

●    M&E revenue was up 2% at £505 million (2023: £495 million),
with total advertising revenue (TAR) up 3% as previously guided

○      Within this digital advertising revenue (a component of digital
revenue) was up 14%

○      Total M&E non-advertising revenue was down 5% driven by the
expected decline in partnership revenue as we improve the viewer proposition
and our monetisation of ITVX

●     ITVX's strong performance has continued in Q1 with total streaming
hours up 16% and monthly active users continue to grow in line with our
expectations

●     Digital revenues (refer to Note 4) grew 11% with strong growth in
digital advertising revenues partly offset by the short term impact of the
actions we have taken to simplify our paid streaming proposition

●     We maintained our strength in delivering mass reach for our
advertisers, with 91% of the top 1,000 commercially broadcast TV programmes
and 33.7% share of commercial viewing on our linear television channels

 

ITV Pension Scheme: Following the agreement of the latest triennial valuation
we expect no future deficit contributions while the Scheme is in surplus,
other than a small payment relating to a legacy asset-backed scheme.  This
removes a significant historic drag on free cash (refer to Note 6 for further
details).

 

 

Outlook

With the continued strong strategic progress we are making, we remain on track
to deliver our 2026 KPI targets.

 

As previously guided we expect to deliver a total of £40 million of cost
savings in 2024 - made up of £10 million from our 2019 to 2025 cost savings
programme and £30 million of additional in-year savings as part of our
strategic restructuring and efficiency programme which we announced as part of
the 2023 full-year results and are already executing upon.

ITV Studios:

●     We expect ITV Studios total revenues to be broadly flat over the
full year 2024 with good underlying growth offsetting the impact of the US
writers and actors strikes which, as previously guided, will delay around £80
million of revenue from 2024 to 2025. Q2 will also see revenue decline year on
year but we have a strong pipeline of programmes with deliveries heavily
weighted to H2 including Hells Kitchen US for Fox, A.C.A.B for Netflix, The
Better Sister and Lazarus for Amazon Prime Video, Ludwig and Showtrial for the
BBC, Sentinelles for OCS and Canal+, Love Island in the UK, US and Australia,
and The Voice in Australia and Germany

●     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%

●     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 strong slate for 2024
and beyond; and our leading creative talent

 

 

Media & Entertainment

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

●     ITVX has started the year strongly and we will continue to build
on its successful launch year through further developments in content,
product, distribution and marketing

●    Compared to the same period in 2023, TAR is expected to be up around
12% in Q2 and up around 8% in H1 2024 benefitting from the Euros in June, with
continued strong growth in digital advertising revenues

 

 

Notes to editors

1.   Unless otherwise stated, all financial and operating figures refer to
the three months ended 31 March 2024, with growth compared to the same period
in 2023.

 

2.   Group financial performance

 Revenue for three months to 31 March (£m)   2024   2023   Change  Change

                                                           £m      %
 Media and Entertainment                     505    495    10      2
 ITV Studios(( 1  (#_ftn1) ))                382    457    (75)    (16)
 Total revenue                               887    952    (65)    (7)
 Internal supply                             (160)  (176)  16      (9)
 Total external revenue                      727    776    (49)    (6)

 

 

 Revenue for three months to 31 March (£m)   2024   2023   Change  Change

                                                           £m      %
 Total advertising revenue                   432    419    13      3
 Non-advertising revenue                     455    533    (78)    (15)
 Internal supply                             (160)  (176)  16      (9)
 Total external revenue                      727    776    (49)    (6)

 

3.   Total advertising revenue (TAR), which includes ITV Family NAR, digital
advertising and sponsorship, is expected to be up around 12% in Q2 with
continued strong growth in digital advertising revenues and will be up around
8% for the first half of 2024. Figures for ITV plc are based on ITV estimates
and current forecasts.

4.   Key performance indicators

 Three months to 31 March                               2024    2023    Change

                                                                        %
 ITV Studios total organic revenue growth               (15%)   (9%)    (6% pts)
 Total digital revenue                                  £118m   £106m   11
 Total streaming hours (hrs)                            449m    387m    16
 Share of commercial viewing                            33.7%   34.5%   (0.8% pts)
 Share of top 1,000 commercial broadcast TV programmes  91%     93%     (2% pts)

●         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 first quarter
of 2024, the unfavourable translation impact of foreign exchange on total
revenue was £6 million. There were no acquisitions in the current or prior
period.

●         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 spend watching ITV across all streaming platforms.  This figure
includes both ad-funded and subscription streaming. For Q1 2023, total
streaming hours were reported as 389 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.   ITV continues to have good access to liquidity. At 31 March 2024, net
debt(( 2  (#_ftn2) )) was £272 million (31 December 2023: £553 million). ITV
had total liquidity of £1,514 million, comprising total cash of £614 million
and committed undrawn facilities of £900 million.

 

6.   The net pension surplus of the defined benefit schemes at 31 March 2024
on an accounting basis was £216 million (31 December 2023: £209 million
surplus). The marginal increase in the surplus since the year-end is the
result of an increase in corporate bond yields offset by market-implied
inflation.

 

The triennial valuation of the ITV Pension Scheme (the Scheme) as at 31
December 2022 has been completed. At the valuation date, the Scheme had a
surplus of £83 million. This is compared to a deficit of £252 million at the
previous valuation date of 31 December 2019.

 

As the Scheme is in surplus, there are no deficit contributions payable. The
Group will continue contributing an annual payment of c. £3 million under the
London Television Centre Pension Funding Partnership. The Group's pension
deficit contributions for the year to 31 December 2023 were £40 million, and
for the year to 31 December 2022 were £137 million.

 

The scheme is well hedged against inflation, interest rate volatility and
longevity. Refer to Note 3.7 of the ITV Plc 2023 Annual Report and Accounts
for further details of the Group's pension schemes.

 

Going forward we will report the net pension surplus or deficit at the
half-year and full-year results only.

 

7.   As of market close on 8th May 2024, ITV had bought back 45,071,121
shares, all of which have been held in Treasury.

 

8.   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

 

LEI for ITV plc: ZLECI7ED2QMWFGYCXZ59

 

 

(( 1  (#_ftnref1) )) 2024 includes a £13 million revenue benefit from the
transfer of ITV Sport from Media & Entertainment to ITV Studios effective
from 1 January 2024.

(( 2  (#_ftnref2) )) Net debt is defined as total loans and facilities
(including cross currency interest rate swaps held against euro-denominated
borrowings) and lease liabilities less total cash and cash equivalents and
restricted cash.

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