ii view: ITV points to successful BritBox launch

Netflix, Amazon, Disney & Apple are all now competing for eyeballs. Where next for ITV?

Nine-month results to 30 September 2019

• External revenues down 2% to £2.2 billion
• Studios revenue up 1% to £1.12 billion
• Advertising revenue down 3% - online revenues up 23% - total down 3% to £1.46 billion

Guidance:

• On track to deliver full-year forecasts
• Full-year advertising revenue expected to be down 2%

Chief executive Carolyn McCall said:

"ITV's overall performance for the first nine months of 2019 was as we expected, and although the economic environment continues to be uncertain, we are making good progress in executing our strategy. We have successfully launched BritBox and are encouraged by the positive feedback received on the service so far. We have also agreed a distribution and marketing deal with BT (LSE:BT.A) and EE and a content partnership with Channel 4. Development of our addressable advertising platform is on track for a roll out to media agencies in Q1 2020.

"We remain very focused on building a digitally led media and entertainment company to create a stronger, more diversified and structurally sound business. We have a solid balance sheet which enables us to make the right investment decisions and deliver returns to shareholders in line with our guidance of at least an 8p dividend for 2019."

ii round-up:

ITV (LSE:ITV) is an integrated producer and broadcaster. It makes, owns and distributes content on multiple platforms globally.

It operates via three businesses. Broadcast & Online, which includes its free-to-air digital channels. Direct to Consumer, which includes Subscription Video On Demand (SVOD) via its ITV Hub+, competitions and gaming apps. And ITV Studios, which creates and produces content in the UK and internationally. 

Given the success of streaming services such as Netflix (NASDAQ:NFLX), ITV has now launched its own subscription payment TV streaming service. In conjunction with the BBC, BritBox will cost a £5.99 per month and showcases British programmes and boxsets. 

For a round-up of these nine-month results, please click here.

ii view:

Viewing figures, sporting events and economic downturns can all influence customer demand for advertising. More recently, the rise of streaming entertainment competition such as Netflix, Amazon.com Inc (NASDAQ:AMZN), and now Apple Inc (NASDAQ:AAPL) and The Walt Disney Co (NYSE:DIS), add further challenges. 

ITV is attempting to push back. Strong content remains key in the battle to win eyeballs and therefore advertisers. Shows such as Love Island and I'm A Celebrity underline its production ability. The launch of BritBox offers its own subscription streaming service and a diversification of revenue away from advertising.  

For investors, a forward price/earnings (PE) ratio at a discount to the 10-year average and a forward dividend yield of over 5.5% offer attraction. ITV has in the past also been subject to takeover rumours. However, while Netflix is embracing the new streaming competition, ITV is now competing against some very deep pockets. A degree of investor caution appears sensible. 

Positives: 

• Online revenue rose by 23%
• Attractive dividend payment
• Previously rumoured as a takeover target

Negatives:

• Events such as the football world cup create volatility in advertising revenues
• Younger audiences are increasing watching streaming services 
• Concerns for the dividend payment – covered 1.6 times and down from a three-year average of 2.1

The average rating of stock market analysts:

Strong hold