3rd Mar 2022 14:44
(Alliance News) - ITV PLC's plans to launch a new digital platform took the gloss off the broadcaster's strong 2021 earnings as investors appeared to baulk at restructuring costs required to make the transformation.
The move comes as part of Chief Executive Officer Carolyn McCall's strategy to propel ITV into the online streaming arena, where the 66-year old broadcaster will do battle with the likes of Netflix Inc, Walt Disney Co's Disney+ and Amazon.com Inc's Prime Video offering.
ITV shares were down 23% at 85.56 pence on Thursday.
The London-headquartered company on Thursday reported pretax profit in 2021 of GBP480 million, a 48% increase from GBP325 million in 2020. However, this is still down 9.4% from GBP530 million in 2019.
Total revenue grew by 24% year-on-year to GBP4.04 billion from GBP3.26 billion. Total external revenue grew 24% to GBP3.45 billion from GBP2.78 billion, which is still 11% short of revenue of GBP3.89 billion in 2019, or 2% down on a constant currency basis.
Advertising revenue had a record performance in the year, up 24% to GBP1.96 billion from GBP1.58 billion, including a 41% increase from video-on-demand revenue.
ITV also recovered revenue from its ITV Studios and Media & Entertainment segments, growing by 28% and 21% respectively.
ITV proposed a final dividend of 3.3 pence for 2021, having suspended dividends in 2020. ITV paid out 8.0p back in 2019. It is targeting a dividend of "at least 5p per annum" going forward, with potential for growth over time.
For 2022, ITV reports the year has started well, with growth in commercial viewing. Demand for advertising has remained strong so far, and is expected to be up around 16% in the first quarter. From April it will be up around 10%, ITV said, though it expects the second quarter to be impacted by tough advertising comparatives and the Euros from June.
In addition, ITV set out an "ambitious" target to double digital revenue to at least GBP750 million, driven by a doubling of streaming viewing, monthly active users and subscribers by 2026.
ITV unveiled plans to launch a new streaming service, dubbed ITVX, with new content launching online every week alongside an library of blockbuster movies.
The broadcaster set out an acceleration in its strategy to "supercharge" its streaming business and phase out its free 'Hub' digital video platform.
ITVX will allow viewers to choose to watch shows for free in an advertising funded tier or trade up to a subscription service which provides all content ad-free and also provides access to British boxsets from BritBox.
The ITV Hub will continue to be active with ongoing plans to scale up the amount of content on the service in the run up to the ITVX launch later in 2022.
ITV outlined digital-first content investment of GBP20 million in 2022 and GBP160 million in 2023 for ITVX subscription-funded streaming service.
Total content investment will be around GBP1.23 billion in 2022, increasing to around GBP1.35 billion in 2023 and remain at broadly that level going forward. This includes BritBox UK content previously guided, and the following incremental investment, it added.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "The market has been left unimpressed by the launch of ITV's latest digital expansion phase. The aspirations are certainly huge, with plans to double digital revenue by 2026.
"That will be no easy feat when the battle for our attention is already fierce, with companies with much deeper pockets on the opposing teams. It's likely part of the negative reaction stems from ITV's upping of its content budget - creating hit after hit comes with enormous financial implications. Rivals like Netflix can attest to the drains of having a content cash-pit. It's feasible this won't be the last time ITV has misjudged its budget.
"The strategy itself has merit, with traditional broadcast advertising revenue an unreliable source of long-term revenue growth. The idea to build up a Spotify-like subscription base for streaming, with both ad and ad-free versions, has the potential to catch on. However, whether this will be at the desired pace is another question entirely."
By Arvind Bhunjun; [email protected]
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