Despite spiking higher at the start of the year, ITV shares have been treading water for the last few months, ranging between £1.25 and £1.40 without finding a true sense of direction either way. ITV shares currently sit at a trading price of £1.35.
There was a lot to process in February’s full year results. Total external revenue jumped 3% to £3.2 billion, with a 1% increase in advertising revenue and a 6% rise at ITV Studios. But while statutory pre-tax profit was up 13% to £567 million, adjusted earnings were down 4% to 15.4p per share, in part thanks to World Cup coverage-related £30 million increase in schedule costs.
The big announcement was the confirmation of BritBox, a rare moment of co-operation between ITV and BBC in order to (try and) combat Netflix. Investing in an on demand streaming service – which is set to launch in the second half of 2019 with a ‘competitive’ price tag – isn’t cheap, with ITV looking at a £25 million outlay in 2019, rising to £40 million in 2020 and declining thereafter.
As for its 2019 forecasts, due to ‘economic and political uncertainty’ total advertising revenues are set to fall 3% to 4% over the first 4 months of the year. That breaks down as a 7% decline in the first quarter – in large part thanks to a forecast 17% plunge in what was meant to be Brexit March – rescued by an expected 6-10% increase in April. The first half as a whole, meanwhile, faces the tough comparatives of last June’s World Cup-boosted performance, alongside H1 investments and ‘ITV Studios deliveries being weighted to the second half’.
Given Britain didn’t actually leave the EU in March – though the month was no less tense because of it – it’ll be fascinating to see exactly how sharp ITV’s advertising drop off was, something that could dictate the state of its overall Q1 showing. Revised forecasts for the full year, and any further word on BritBox – including pricing – may
ITV shares have a consensus rating of ‘Hold’ alongside an average target price of £1.58.
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