ITV: Ad deferrals across all categories
March 23, 2020
Amid the Covid-19 crisis, ITV has issued a trading update.
Carolyn McCall, ITV Chief Executive, commented: “We are operating in unprecedented and uncertain times, requiring us to take difficult decisions, plan carefully and act with speed. Our absolute priority is to protect our people, while trying to ensure that we deliver the news and programmes our viewers value and love to watch, and to keep them informed. We are actively taking measures to reduce costs and manage our cash flow so that we are best positioned to continue to deliver our strategy of building a digitally led media and entertainment company over the medium term.”
The company’s trading update read:
“ITV continues to closely monitor the evolving COVID-19 (coronavirus) situation and its impact on the business. ITV’s priority remains to protect its people and we will continue to follow all government guidelines.
The recent restrictions on working practices are now having a significant impact on ITV Studios’ ability to film productions. We have had to pause a significant number of productions in the UK and internationally, which we are doing in a systematic manner to ensure that we are well placed to resume production as soon as we are able to and to minimise the costs of disruption. We are implementing contingency plans to enable us to continue to produce as many programmes as possible, particularly our news output and live productions. It is too early to quantify the impact of this on ITV Studios’ revenue and profit. This depends on how long the restrictions are in place.
ITV Studios cost base is largely variable. We expect to benefit from an additional offset due to increased demand for library sales. As a leading global distributor, we are well placed to deliver this, with a high quality library and strong relationships with broadcasters and platform owners. Demand for quality content remains strong and therefore we continue to work on our development slate and we are ready to resume production as soon as we are able. As one of the largest international producers of unscripted content which has a shorter lead time, we will be able to ramp up production quickly.
The additional measures implemented by Government, which have led to the closure of shops, factories and entertainment facilities, have had an increasing impact on our advertising revenues and therefore forecasts for March and April have deteriorated since we last updated the market on 16th March. We have seen further deferrals in advertising which are now coming from across the advertiser categories rather than just in travel and we are staying in close contact and working constructively with our client and agency partners. The situation remains dynamic and therefore we are not in a position today to give guidance for March or April. We will update again at our Q1 Trading Update in May. Over a full year each 1% decline in total advertising revenue reduces revenue and profit by c.£17 million, before any mitigation.
Management is very focused on cash and has implemented measures to reduce our costs and to tightly manage our cash flow. We have reviewed our programming spend in light of the weaker advertising environment and we expect to reduce our programme budget by at least £100m. This reflects savings from sport including the postponement of Euro 2020, the late delivery of commissioned programming and active decisions to reduce our spend. We have also taken steps to reduce discretionary spending by £20m in 2020. This is in addition to the £10m of savings already guided for 2020. Further, we have identified £30m of savings in our capex.
Given the current uncertainty we are withdrawing our market guidance for 2020. In addition, the Board has decided that it is prudent not to propose the final dividend of 5.4 pence per ordinary share (£216 million in total) for the year ended 31 December 2019 at the forthcoming AGM, and to withdraw its previously announced intention to pay an 8p full year dividend for 2020. The savings from not paying the 2019 final dividend, taken with the cash impact of our cost and capex savings, will ensure that more than £300m of cash will be retained within the business. The Board recognises the importance of the dividend to our shareholders and will consider the quantum of any interim dividend for 2020 in light of this and of circumstances at that stage.
As we stated on 16th March 2020, ITV has good access to liquidity. We have £150m of unrestricted cash, a £630 million Revolving Credit Facility expiring in December 2023, of which £100 million is currently drawn, and a £300 million undrawn bilateral facility expiring in June 2021. In addition, we have no bond repayments until September 2022.
We will continue to execute our strategy over the medium term and will carefully monitor our ongoing investment in the ITV Hub, Planet V and BritBox in 2020, as we continue to build a digital media and entertainment company.
Our talent across the organisation is a key driver of our future success. We’ll do everything we can to protect our employees to ensure that we are in the best possible position to succeed when the conditions normalise again.
As a Public Service Broadcaster we know how important our programmes are to inform, connect and entertain millions of viewers. In the event of a protracted period of production restrictions, we will strive to broadcast news and our daytime programmes and we have a good slate of scheduled drama and entertainment (pre-recorded) in the coming months. “
Meanwhile, ITV has confirmed that it will cease production of lon-running soaps Coronation Street and Emmerdale.
A statement read: “ITV has sadly taken the decision to suspend production of the soaps Coronation Street and Emmerdale with effect from Monday 23 March 2020. We’ve been doing our best to carry on filming, whilst adhering to the Government’s latest health guidelines, to ensure we’ve episodes of both soaps airing on ITV until at least the early summer. However, the health and well-being of the production teams, actors, crew and their families is of paramount importance to us and we now feel that the time has come to stop filming. We’d like to thank our viewers for their support and hope they continue to enjoy both soaps in the coming months.“
ITV Daytime has also taken the decision to stop broadcasting chat shows Lorraine and Loose Women live from March 23rd. This decision has been made to minimise the number of staff travelling in and out of its studios. ITV will instead run an extended version of Good Morning Britain from 6am until 10am. At 9am Kelly will the Good Morning Britain studio for the last hour