ITV profit halves during pandemic amid ‘most challenging period in history’
ITV has reported a 50 per cent slump in earnings for the six months to 30 June, as the public service broadcaster warned of the “significant impact” of the pandemic, which it said presented “one of the most challenging times in the history of ITV”.
The results
Adjusted earnings before tax, amortization and depreciation (Ebitda) slumped 50 per cent to £165m in the six months to June, down from £327m in the same period last year.
Earnings per share plummeted 53 per cent to 2.9p year on year, down from 6.2p in the same period in 2019.
Advertising revenue slumped 43 per cent in the second quarter, after a plunge in demand across categories, wiping out the two per cent rise in the first quarter. Total advertising revenue for the first half of 2020 sank 21 per cent.
Total revenue for ITV Studios, which heads up ITV’s own productions, shed 17 per cent over the half-year to £630m after it was forced to pause the majority of its global productions at the start of the national lockdown in March.
ITV refused to issue guidance for the full year, citing “significant uncertainty”.
Shares fell 4.4 per cent to 58.2p at 8.20am.
Why it’s interesting
ITV had an extremely tough period during the pandemic, after lockdowns around the world pressed paused on filming schedules and wiped out demand for advertising.
The broadcaster saw some of its main attractions zapped from its schedule, after most sporting events were cancelled and quarantine measures pulled filming for summer blockbusters such as Love Island.
ITV took swift action to mitigate the fallout from the coronavirus crisis, rolling out a cost cutting scheme that has so far saved the company £51m.
The public service broadcaster will defer £90m of pension contributions and tax payments for the first half of 2020, in a bid to boost cash flow.
McCall added that ITV will be turning down the government bonus of £1000 for every furloughed employee brought back to work, saying “it wouldn’t be right” as the company always intended to return furloughed workers.
Social distancing measures have hampered the restart of production, however ITV has been “innovative” in its restart of Coronation Street and Emmerdale in June, and will soon roll out a highly-anticipated new series of Spitting Image.
In a call with journalists, ITV chief Carolyn McCall today said the broadcaster will focus on becoming a “digitally-led media and entertainment company” going forward.
McCall announced the rollout of its Britbox streaming service in 25 countries across the globe,
However, she stressed that ITV’s “future is still uncertain due to the pandemic”.
The 65-year-old company’s share price has fallen dramatically during the crisis, slumping 60 per cent so far this year to 59p, trimming its market value down to £2.3bn.
Analysts warned that the steep decline signals bid speculation, but McCall argued that it merely shows that the company is significantly undervalued.
“We have been speculated as an acquisition target for about 12 years, maybe 15, I don’t think there has been a year or a month that passes by that that doesn’t happen so we don’t comment on that,” she told reporters.
“We are doing well on our own and the share price is not reflective of the performance of the company or indeed the value of the company. We have very strong foundations … we have the ability I think to build the business and create value going forward.”
Julie Palmer, partner at Begbies Traynor, said: “Advertising spend is often a bellwether for the broader UK economy and ITV has seen a substantial fall in revenue during lockdown.
“The cancellation of major shows such as Love Island… combined with the cancelled production schedule means that the broadcaster will be in for a rough ride over the next 12 months.
“ITV bosses will be hoping that the launch of Britbox will go some way to claiming a stake in the ever-growing streaming market and will help reclaim some of the lost revenue.”
What ITV said:
Carolyn McCall, ITV chief executive, said:
“This has been one of the most challenging times in the history of ITV. I am really proud of the way that our colleagues have responded to the Covid-19 pandemic and helped demonstrate the enduring value of ITV as a public service broadcaster.
“While our two main sources of revenue — production and advertising — were down significantly in the first half of the year and the outlook remains uncertain, today we are seeing an upward trajectory with productions restarting and advertisers returning to take advantage of our highly effective mass reach and addressable advertising platform, in a brand safe environment.
“We have made good progress in our digital transformation. The majority of our colleagues are working seamlessly at home thanks to the investment we have made in technology and systems and this has helped us continue to deliver on our strategic objectives.
“The future is still uncertain due to the pandemic but the action we have taken to manage and mitigate the impact of Covid-19 puts us in a good position to continue to invest in our strategy of transforming ITV into a digitally led media and entertainment company.”