26th Feb 2014 16:00
LONDON (Alliance News) - ITV PLC increased its payout to shareholders Wednesday, as it reported a rise in 2013 pretax profit driven by higher revenues across the business and cost cutting and gave a positive outlook for 2014.
The television broadcaster reported pretax profit of GBP435 million, up 30% from GBP334 million in 2012, as revenues rose 9% to GBP2.40 billion, from GBP2.20 billion, and it made GBP28 million of cost savings, pushing its operating margin up to 26%, from 23%.
The company said it would pay a total dividend of 3.5 pence for the year, up from 2.6 pence in 2012, and it announced another special dividend of 4.0 pence, the same as it paid in 2012. Its net cash actually declined to GBP164 million at the end of December, from GBP206 million at the end of 2012, as it invested in acquisitions.
However, its shares were one of the biggest decliners on the FTSE 100 Wednesday because some investors had expected ITV to increase its payout by more.
On a call with journalists, Chief Executive Adam Crozier said ITV has "always tried to balance the requirement to invest and progressive returns to shareholders." ITV is continuously looking at acquisition opportunities, and that was kept in mind when proposing dividends, he said.
Revenues rose across ITV's business units in 2013, but growth was strongest in its Studios business. Revenues in this unit rose 20% to GBP857 million, from GBP712 million, driven by both organic growth and after the company bought four production studios - The Garden and Big Talk in the UK and Thinkfactory Media and High Noon Entertainment in the US.
ITV has already acquired a 51% controlling interest in US producer DiGa Vision in 2014, and said the acquisitions would drive further growth in the Studios business this year.
It said it expects to see further growth across all parts of its businesses in 2014. It expects ITV Family net advertising revenue to grow 5% to 6% over the four months to the end of April and to outperform its estimate for the television advertising market over the full year, after advertising revenues returned to growth in 2013, rising 2%..
It also expects double-digit revenue growth from its Online, Pay & Interactive division, helped by the launch of two new channels, ITV Encore and ITV Be.
In 2014, ITV is also looking to make further cost savings of GBP10 million, and an investment of GBP15million to GBP20 million covering the launch of the two new channels.
Revenue rose 3% to GBP1.90 billion in ITV's Broadcast & Online segment in 2013, driven by 16% growth in Online, Pay & Interactive and the 2% growth in ITV Family net advertising revenue.
ITV said the television advertising market had seen fluctuations across the year, mostly driven by the timing of sports events and programmes. Schedule costs dropped as a result of savings ITV secured on its FA Cup and Champions League rights, and lower overall costs as there had been no large one-off sporting events.
UK productions revenues grew 12%, driven by programmes like 'Mr Selfridge', 'Lewis'', and 'Ant & Dec's Saturday Night Takeaway'. It also produced the 'Graham Norton show' and 'Shetland' for the BBC, '24 Hours in A&E' for Channel 4 and 'Four Weddings' for Sky Living.
International productions revenues also rose strongly, up 56%, driven by strong growth in the US.
ITV's share of UK television viewing was up 16.2%, from 15.7%, and ITV Family share of viewing was up to 23.1%, from 22.3%, which the company attributed to an increase in the quality and variety of its programming schedule.
Crozier told journalists that ITV was not looking into the potential purchase of Channel 5, following press speculation that the channel may be up for sale.
Despite the strong earnings growth, which beat analysts' consensus, shares in ITV were trading down 2.5% at 200.90 pence Wednesday afternoon, the fourth biggest faller on the FTSE 100.
Analysts at Liberum, who had expected a higher cash return because they expected fewer calls on ITV's gross cash in 2014 compared with last year, said ITV's full-year normal dividend also came in below forecasts, which Liberum said "may raise questions as to whether ITV is planning more spending on acquisitions."
However, after returning from meeting the company Liberum had a more positive outlook, as it was made clear that ITV is pushing the regulator for the right to charge pay-TV operators for ITV1. The brokerage thinks that this could add GBP100 million a year to earnings if it comes about.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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