ITV revival continues but ads market still sluggish

The revival by terrestrial broadcaster ITV continued in 2011, with the group shrugging off concerns about a subdued advertising market to achieve top-line growth and forecast-beating profits.

External revenues were up 4% in 2010 to £2,140m from £2,064m in 2010, with the improvement driven by non- advertising revenues (NAR). Total non-net advertising revenues (non-NAR) jumped 11% to £922m from £829m in 2010, mainly due to revenue growth from the UK and international studios businesses.

Adjusted profit before tax was comfortably ahead of market expectations of £365m at £398m, up 24% from 2010's £321m.

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Adjusted earnings per share (EPS) climbed 23% to 7.9p from 6.4p in 2010 and was well ahead of market forecasts of 7.16p.

The company did not pay dividends in 2008 and 2009, and seems to be making up for it at it announced a final dividend of 1.2p, taking the full year pay-out to 1.6p, ahead of the market consensus forecast of 1.38p.

The generous dividend may be due to the group finding itself in the unusual position of being cash positive, having ended 2011 with net cash of £45m, having ended the previous year with net debt of £188m, and that was despite the company buying back £339m of its bonds during the course of the year.

Although the focus of the markets will be on the group's advertising revenues, the ITV Studios division is clearly making waves.

'ITV Studios, under the new management team, has made real progress creatively and operationally both in the UK and internationally. We have delivered double digit revenue growth and a 28% increase in new commissions to 111, of which 45 are international," said Adam Crozier, ITV's Chief Executive Officer.

The studios division is still the junior partner in the business but its top line is growing faster than the broadcasting & online side of the business, although rapid earnings growth is proving harder to achieve. While ITV Studios external revenue rose 9% to £320m from £2923m the year before, its earnings before interest, tax and amortisation (EBITA) edged up 2% to £83m from £81m in 2010.

Broadcasting & online revenue improved just 3% to £1,820m from £1,771m a year earlier, but thanks to operational gearing that improvement flowed through to earnings, with the division's EBITA up 16% to £379m from £327m the year before. The core part of the business, the ITV flagship channels - what the group calls ITV Family - saw net advertising revenues (NAR) inch up just 1% but the group noted this was ahead of the industry as a whole, which saw an increase of 0.7% in NAR in 2011.

The group expects ITV Family NAR to be down 2% in the first quarter of the current year and April to be broadly flat year-on-year. "While we remain cautious on the outlook for advertising, we expect to outperform the market over the full year," the company statement said.

ITV Family share of viewing (SOV) was up 1% in 2011, with a strong performance from the digital channels which were up 10%. ITV1 SOV, which benefited from the successful launch of ITV1+1, was down 2%, below where ITV management want it to be, prompting a vow to "work to improve this performance in 2012."

Online revenues increased by 21% to £34m (2010: £28m).

Group EBITA before exceptional items climbed 13% to £462m from £408m the year before.

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