“Cautious” bank report on ITV

There are near-daily stories in the UK national press as to who might be the new CEO at commercial broadcaster ITV. Meanwhile, the share price remains under pressure, and a new report to investors from equity analysts at Exane/BNP-Paribas sums up the problems the new CEO will have to address.

The bank reminds investors that the UK television ad-market has been week for more than a year because of a variety of what it describes as “structural issues (digital ad market share growth, falling TV audience), competition (ad smart, falling ITV audience share vs peers) and cyclical headwinds (Brexit caution, constrained real wage growth despite solid GDP growth/PMIs) have dragged on industry/ITV growth after a strong post-financial crisis performance.”

The report continues saying that 2017 is not going to get any better, although there could be a “tepid rebound” next year. “We estimate digital advertising now represents c.60 per cent of total advertising spend in the UK and going forward, with Google and Facebook set to sustain their impressive growth rates, we see limited prospects of a sharp rebound in TV industry Net Ad-Revenue. We note that UK TV ad growth’s long-term positive correlation with healthy PMIs has weakened in the last 12 months due to the issues discussed above.”

The bank says it expects more cuts to ITV’s earnings per share (EPS) in 2017-2018 and lower ITV Studio FY17 organic revenue growth (5 per cent cut to 4 per cent).

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