10th May 2006 11:00
ITV PLC10 May 2006 10 May 2006 AGM Statement 2006 Over the two years since the merger we have continued to improve ourprofitability and achieve greater efficiencies from the business. Operatingprofit before amortisation and exceptional items has more than doubled, rising42% in 2005 to £460 million. Earnings per share before amortisation and exceptional items rose by 25% in 2005to 8.0 pence per share. The proposed final dividend for 2005 of 1.8 pence pershare will make 3.12 pence for the full year, an increase of 30% on 2004. New channels Digital multi-channel television has continued to increase rapidly - Freeviewalone has now sold more than ten million boxes. With the first UK regionscheduled for digital switchover in 2008, and subsequent rollout across thecountry, it is encouraging that ITV's digital channels continue to perform well,with ITV2 and ITV3 the top two rated digital channels in Freeview homes over thefirst 15 weeks of 2006. Over the coming months we expect ITV2 in particular tobenefit from brand extensions of a number of event television shows on ITV1.Six months ago we launched ITV4, aimed at attracting a 25-44 male demographicaudience, and it is performing well. This year we shall be launching more new channels: • CITV, which is aimed at pre-school and 4-9 year old children, startedon Freeview on 11 March and over its first five weeks has delivered a 0.6% shareof viewing on that platform. • ITV Play, our participation TV format, started on Freeview on 19April. During trials run earlier in the year on ITV1 during the night-timeslot, participation TV programming had been achieving a profit of approximately£2 million per month. With a combination of this new dedicated channel, windowsof programming on other ITV channels and cross-promotion between those channelswe expect ITV Play to contribute meaningfully to our profits this year. • In the autumn we will commence trials of broadband Internet ProtocolTV using a combination of download and streaming video. This will includeChampions League football programming for the 2006/07 season as well as bothcurrent and archive ITV material. We have recently raised our target for advertising and interactive revenues fromour digital channels to £250 million per annum by the end of 2008. Viewing performance ITV1's viewing share in analogue homes is 27% compared to 20% in Freeview homesand 17% in multichannel. Over the first 15 weeks of 2006, the effect of thecontinuing move to digital has been ITV1's share of adult commercial impactsreducing to 34.9% from 38.8% at the beginning of 2005. Clearly as digitalmultichannel penetration reaches completion, we expect to see ITV1's share ofcommercial impacts stabilise. Increasing digital multichannel penetration does also have a positive effect onITV's digital channels. In the first 15 weeks of 2006 those channels grew theirshare of commercial impacts by a third to 6.1% partly as a result of thatincreasing penetration, and partly through an improved viewing performance forITV's digital channels taken together on all the digital platforms. There was a lot of debate a year ago on the potential impact of personal videorecorders (PVRs) which allow advertisements to be skipped when watching timeshifted programming. Data from BARB on the use of PVRs is becoming availableand is extremely encouraging for ITV. The initial findings in PVR homes arethat 86% of viewing is live, with 6% viewed on same day as broadcast (includingpaused and continued) and 8% viewed over the following seven days. As one mightexpect, the live viewing of ITV1, with a greater proportion of must-see andevent programming, is above 86%. A separate qualitative UK study conducted inconjunction with the London Business School also supports this positive view oflive viewing in PVR homes. The new commissioning and scheduling team is now in place and they areimplementing improvements to the schedule architecture and to the commissioningprocess to provide ITV1 with the best original material for peak time audiences.They are also targeting more US acquisitions for ITV's digital channels. Already this year, ITV1 has had a number of successful new shows that will bereturning in 2007. These included Dancing on Ice, Soapstar Superstar, Lewis,Wild at Heart and Rebus. Over the coming months ITV1 will have new event programming including SoccerAid and Celebrity X-Factor as well as returning favourites like Cracker, PrimeSuspect, Cold Blood and Vincent. Revenue Total television market net advertising revenue ("NAR") in Q2 2006 is estimatedto be up 3.3% on 2005 although the market indications for June are lessencouraging than expected. Total ITV plc NAR in Q2 2006 is estimated to be up2.0% on 2005 whilst our ITV1 NAR in Q2 2006 is estimated to be 1.6% lower than2005. This is a relatively good performance compared to both the totaltelevision and the display advertising markets in the period. An even betterperformance is that of ITV's digital channels, up by 50% at £39 million in Q2.As a result of Q2 performance we have in the first six months to June 2006improved on Q1 performance and total ITV plc NAR is likely to be down by some 4%on the first six months of 2005. Regional advertising as a component of total ITV plc NAR has continued toperform well and in the first half is up by 16% on 2005 at £97 million. Inaddition we are continuing to grow sponsorship revenues, up 19% to £23 millionin the first half. Total revenues outside ITV1 NAR are forecast to be up 20% in H1 and we have atarget of achieving 50% of our revenue outside ITV1 NAR by the end of 2010. Capital structure Last year when addressing capital structure we outlined three priorities: • to renew the financial terms of the ITV1 licences; • to address the defined benefit pension scheme deficit; and • to identify growth opportunities through small acquisitions. Having made progress with those priorities, we announced in March an initialreturn of cash to shareholders of £300 million. We have just commenced thatprogramme with some share buy-backs in the market. We are continuing to review our capital structure to assess: • the appropriate level of distributions to shareholders, especially asour disposal programme continues; • maintaining a stable and efficient balance sheet and taking account ofthe needs of our stakeholders; and • improving the returns for our shareholders. Business review Our focus in 2006 is to use our substantial content assets to: • strengthen our channel brands; • develop content outside ITV; and • drive new revenue streams using all available distribution means. We are progressing on each of those areas. We have launched new channels,appointed a new commissioning team, increased revenues from our UK andinternational production businesses, and are demonstrating early and positiveresults from some of the new businesses in our Consumer division. Alongside those initiatives we continue to review our operational efficiency andthe use of our strong cash flows to enhance value for shareholders. Sir Peter Burt, Chairman, said: "We have a clear focus on improving our efficiency and building on the doublingof profits over the last two years. We are implementing our strategy for growththrough strengthening our channels, exploiting content and developing newrevenue streams. Our Consumer division is demonstrating some early successeswith businesses like SDN, Friends Reunited and ITV Play and we will continue toseek additional areas to leverage the value of our content." Contacts: Analysts Tel: 020 7620 1620Georgina Blackburn Head of IR Media ITV Tel: 020 7396 6000Brigitte Trafford Communications DirectorJim Godfrey Head of Corporate Affairs Citigate Dewe Rogerson Tel: 020 7638 9571Simon RigbyAnthony Kennaway This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ITV