8th Nov 2023 11:47
(Alliance News) - ITV PLC on Wednesday touted a strong performance for its digital arm in the first nine months of the year, despite seeing advertising sales fall.
Shares in the television broadcaster and content producer fell 6.4% to 61.41 pence each in London on Wednesday morning. The stock has fallen 16% in the past 12 months.
For the nine months to September 30, the London-based firm reported total revenue of GBP2.98 billion, up just 0.9% from GBP2.95 billion a year prior.
ITV Studios revenue was up 9% to GBP1.52 billion from GBP1.39 billion, boosted by a range of new and returning programmes. Media & Entertainment revenue, however, fell 7% to GBP1.46 billion from GBP1.56 billion the previous year.
Digital advertising revenue, a component of digital revenue, was up 25% to GBP283 million from GBP227 million. However, total advertising revenue declined, falling 7% to GBP1.23 billion from GBP1.33 billion year-on-year.
On Wednesday, ITV assured investors that growth in both ITV Studios and Media & Entertainment digital revenues was "more than offsetting" the decline in linear advertising revenue.
Russ Mould, AJ Bell's investment director, was less optimistic.
"Scaling back marketing is often a go-to strategy when businesses are confronted with tough economic times. The company's linear TV looks a particular victim as the format is less appealing to advertisers and the amounts of eyeballs watching 'live' continues to decline," said Mould.
Though positive about the performance of both the digital and Studios arms of ITV, Mould argued that neither was "sufficient" to compensate for the poor results for "old-fashioned TV".
In light of tough conditions, ITV said that total content spend for the year would be GBP10 million lower than previously guided at around GBP1.29 billion.
Reflecting on this guidance, Mould argued that while the decision to trim spending on content "makes some sense if the company has less money coming through the door...any short-term benefit could be clouded by a long-term hit to audience numbers if ITV is not producing as many shows which people want to watch."
Total organic revenue growth for ITV Studios is expected to be at least 5% per annum on average to 2026. The broadcaster expects to deliver around 3% growth in total Studios revenue for the full year, following 19% growth in 2022.
Meanwhile, in light of a "challenging" advertising market, ITV TAR is project to fall around 8% versus 2022 TAR, which was the second highest in ITV's history and included the positive impact of the FIFA World Cup.
Analysts at UBS warned shares would react negatively following guidance earnings cuts, but were more optimistic than AJ Bell's Mould about ITV's prospects in television.
"In our view, cuts in TV ad spend this year likely reflect the weaker macro, with TV historically the most impacted ad medium in a downturn. As a result, in a more stable macro environment, we think TV ad revenue can recover," UBS said.
By Holly Beveridge, Alliance News reporter
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