ii view: ITV accelerates its digital push

Covid-19 has hit this broadcaster and content maker hard, but 2021 offers hope. We assess prospects. 

Full-year results to 31 December 2020

• Revenue down 16% to £2.78 billion
• Pre-tax profit down 39% to £325 million
• No dividend compared to a previous full year of 8p per share
• Net debt down 39% to £545 million

Chief executive Carolyn McCall said:

"I'm proud of the work of all our colleagues and thank them for their dedication, creativity and hard work to successfully manage our way through the crisis while continuing to invest in our strategy.  Our production teams were very innovative in restarting productions quickly and safely in the UK and internationally, while our commercial colleagues inspired advertisers to restart their marketing campaigns.

"While total revenues and profits were down our financial performance was ahead of expectations driven by a strong end to Q4 and our firm control over costs.

"We are encouraged by the roadmap out of lockdown. We are seeing more positive trends in the advertising market in March and April and the majority of our programmes are now back in production. However, there remains uncertainty in all markets around the world with the potential risk of lockdowns, which if they materialise will affect revenues. We are committed to taking further cost out of the business while further investing to accelerate the delivery of our strategy and digital transformation.”

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 or the newly named Media and Entertainment, which includes its free-to-air digital channels.

Direct to Consumer, takes in its Subscription Video On Demand (SVOD) services including ITV Hub+, BritBox UK and BritBox International, a joint venture with the BBC which is currently available in the US, Canada and Australia. It also includes other revenue generating competitions and gaming apps. 

And finally, ITV Studios creates and produces content in the UK and internationally. 

For a round-up of these full-year results, please click here.

ii view:

Due to the internet, a major change in the way media is consumed has been underway for some years. In television, TV watching via linear channels received via an aerial has been changing to consumption online. Programmes can be downloaded to TVs, mobile phones and laptop computers and watched at a time convenient to the consumer. A recent review of ITV’s strategy by management concluded that the pandemic had accelerated this trend.  As such, an accelerated change in transforming the business digitally is now being pursued. 

Current strategy now includes expanding and strengthening its Direct to Consumer (DTC) relationships, transforming the broadcast or media and entertainment division and growing its UK and global production or content business. Its ITV Hub now has 33 million registered users, up 6% over 2020, along with over 2.6 million subscription video on demand subscriptions globally across its services. Its programme content maker studios business is one of the largest in Europe. 

For investors, despite growth in video on demand services such as BritBox, which competes against the likes of Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS), ITV was hindered by the pandemic in 2020. Cancelled live sporting events and a decline in advertising spend by its corporate customers both impacted. But on-demand rivals Netflix and Disney have reported significant growth in subscribers and, understandably, ITV’s once attractive dividend payment remains suspended.

That said, the rollout of vaccines is offering hope for 2021. Live sport has resumed, and advertising revenue is expected to grow during the first four months of this year. Debt has been reduced, costs continue to be tackled and the rollout of BritBox overseas is ongoing. In all, while ITV has slowly become a smaller player in a world of bigger global giants, its strengths and pedigree are unlikely to be completely forgotten. 

Positives: 

• BritBox US subscriptions rose 50% over the year
• A focus on cost savings

Negatives:

• Younger audiences are increasing watching streaming services 
• Dividend payment suspended

The average rating of stock market analysts:

Buy