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ITV “limited visibility” for 2017

November 11, 2016

By Chris Forrester

The UK’s largest commercial broadcaster, ITV, has delivered “tepid” 9-month results, and equity analysts are concerned as to the broadcaster’s revenue and profitability prospects for 2017.

ITV itself, in its November 10th numbers, admitted to being cautious about 2017. “In recent weeks the political and economic uncertainty has increased and we are currently seeing more cautious behaviour by advertisers,” said the broadcaster, although played down anxieties that ad-campaigns were being cancelled.

Indeed, as analysts at Exane/BNP-Paribas stated: “Management are confident of outperforming the TV ad market in 2017 (horse racing, strong drama line-up), but refused to be drawn on their view of market prospects. We forecast a further -3 pe rcent Net Advertising Revenue decline in FY17 (-3 per cent in full year 2016).

Laurie Davison, research analyst at Deutsche Bank, said that organic revenues at ITV Studios were down 9 per cent at the 9-month point, “implying that Q3 [revenues] were down 18 per cent…[while] a production market growing 10-15 per cent in the US and UK for the key genres in which ITV Studios is operating.” Davison points out that the US market has cancelled Texas Rising, and Best Time Ever (after just 8 episodes) and the failure of ITV Studios’ big budget Jeckyll drama.

Indeed, analysts at Berenberg suggest that the challenges at ITV Studios may raise questions from investors. “Management has previously explained the lumpiness of this business, but the reality is that the investor community has considered Studios as a high quality revenue stream that is more predictable and less cyclical than advertising; -9 per cent does not, in our view, support that view. Meanwhile, management said that ITV Studios will deliver good organic growth in 2017, but that profit will be flat versus 2016. This is lower than consensus.”

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