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ITV boosted by online, denies Liberty bid

July 30, 2014

Total revenues at ITV are up 7 per cent to £1.225 billion (€1.45bn). Online, Pay & Interactive revenues were up 20 per cent to £67 million whilst total ITV Studios revenues rose 2 per cent to £402 million. ITV said it delivered a ‘good’ performance in the first half of the year with revenue growth across the business and double digit EPS growth.

Meanwhile it denied any prospect of a takeover by Liberty Global – which recently bought BSkyB’s stake. “Liberty’s intentions are very much a matter for them,” said ITV CEO Adam Crozier. “There hasn’t been any contact at all, other than [Liberty chief executive] Mike Fries giving me a courtesy call the night before [the buy].”

ITV ended the first half with net debt of £201 million following the acquisition of Leftfield Entertainment, dividend payments, debt buyback and pension deficit contributions. Tight focus on working capital management remains and profit to cash conversion was 99 per cent on a six month basis and 97 per cent on a rolling 12 month basis.

Broadcast & Online delivered a strong performance with a 7 per cent increase in revenues driven by 7 per cent growth in ITV Family NAR and 20 per cent growth in Online, Pay & Interactive. Schedule costs were up as a result of the World Cup but given the highly geared nature of advertising revenues and the higher margins of Online, Pay & Interactive revenues, EBITA grew 10 per cent.

The economic recovery is leading to an improved advertising market with good growth across all key categories. However, as anticipated the television advertising market again showed significant fluctuations across the period particularly around the timing of Easter and the World Cup. ITV Family NAR was up 7 per cent in the first half, ahead of their estimate of the television advertising market. They expect ITV Family NAR to be up around 6 per cent in the nine months to the end of September and to significantly outperform the market over the full year.

On-screen performance was down in the first half with ITV main channel share of viewing (SOV) down 3 per cent with an improvement in Q2. ITV Family SOV was down 5 per cent, impacted by a disappointing performance from ITV2 and ITV3. However, ITV has confidence in our strong Autumn schedule with many new and returning programmes and later this year ITV will also be launching its new free to air lifestyle and reality channel, ITVBe.

Online, Pay & Interactive revenues continued to grow strongly, up 20 per cent, as ITV further improved the quality and distribution of  content and the rapid growth in audiences’ appetite for VoD is in turn fuelling demand from new and existing platforms for quality content both free and pay, and from advertisers for VoD inventory. ITV content is now available on 20 platforms which has helped drive long form video requests up 20 per cent.

ITV said it will continue to develop pay services. In the first half ITV renewed its agreement with Virgin for a further year and announced a new four year deal with Sky which sees content available on more platforms and included the successful launch of ITV Encore, the new pay channel.

Crozier said: “We have made further good progress with our strategy of growing and strengthening all parts of ITV. In the first six months of the year we again delivered double digit profit growth in every area of the business and increased revenues by 7 per cent.

ITV Family NAR was up 7 per cent, ahead of the TV advertising market and Online, Pay & Interactive performed strongly, up 20 per cent. Share of viewing improved during Q2, helped by the FIFA World Cup, and we’re confident of our strong Autumn schedule with both new and returning drama and entertainment. Online, Pay & Interactive is on track to deliver strong growth for the year as a whole, at least in line with the first half. The economic recovery is leading to an improved advertising market, with good growth across all key categories and ITV is well placed to take market share. We expect ITV Family NAR to be up around 6 per cent in the nine months to the end of September and we will significantly outperform the market over the full year.

For the first half total Studios revenues were up 2 per cent with the acquisitions coming through as expected while organic growth was impacted by the phasing in the delivery of some programmes and the proportion of ITV’s programme budget allocated to the FIFA World Cup. We continue to invest in growing internationally and, following the acquisition of Leftfield Entertainment, ITV is now the biggest unscripted independent production company in the US.

Looking forward we expect good growth in ITV Studios in 2014, driven by our acquisitions. In 2015 we will see further growth from these acquisitions and we will return to good organic growth helped by our investment in global scripted content, such as Texas Rangers and Aquarius in the US and Jekyll & Hyde, Jambusters and Thunderbirds Are Go in the UK.

We enter the next phase of ITV’s growth strategy as a demonstrably better business than when we launched the Transformation Plan in 2010. The plan we embarked on four years ago of rebalancing and strengthening ITV creatively and financially, both in the UK and internationally, is clearly the right one for the Company and our vision remains unchanged.

We will continue to rebalance the business and grow new revenue streams, both organically and through acquisition. We see clear opportunities for growth across the business – in content, online, pay and advertising and there will be an increasing emphasis on international content creation and distribution.

The market environment in which we operate is constantly changing, characterised by converging media and the increasing influence of technology, which brings both challenges and opportunities. ITV’s financial strength and its strategic advantages including the scale of our UK channels, our share of the advertising market, and our growing global network in the development, production and distribution of content, put us in a strong position to be able to meet these challenges and exploit opportunities for growth.

As ITV enters the next phase of the plan the Board believes it is important that we maintain capital discipline and the flexibility to invest in the business at the same time as delivering a normal payout ratio for shareholders. Reflecting the Board’s confidence in the ongoing growth and cash generation of the business the Board is committed to the full year ordinary dividend growing by at least 20 per cent per annum over the next three years – starting this year.”

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