ITV plc Interim Results 2012

Thu 26 Jul 2012

Sector

Broadcast

 

ITV plc Interim Results for the half year ended 30 June 2012

 

ITV Transformation Plan delivers double digit revenue and profit growth

  • External revenues up 10% to £1,130 million (2011: £1,027 million), with growth in all areas of the business
  • Total non-NAR revenues up £106 million, 26%, to £514 million (2011: £408 million) driven by ITV Studios
  • ITV Studios revenues up £91 million, 34%, with double digit growth from UK and international businesses, reflecting in part the front loaded delivery of a number of shows
  • ITV Family NAR up 3%, outperforming the TV advertising market up 2%
  • ITV Family SOV down 1%, with digital channels performing strongly up 5%
  • EBITA before exceptional items up 10% to £265 million (2011: £240 million)
  • Adjusted PBT up 15% to £235 million (2011: £204 million)
  • Adjusted EPS up 15% to 4.7p (2011: 4.1p)
  • Positive net cash position of £92 million
  • Continued improvement in efficiency of balance sheet with £275 million bond buyback in June
  • Board has declared an interim dividend of 0.8p (2011: 0.4p)
  • We expect ITV Family NAR to be broadly flat over the nine months to the end of September

 

Adam Crozier, ITV plc Chief Executive, said:

“The Transformation Plan continues to gain momentum.  External revenues are up 10% with all areas of the business delivering growth. The £106 million increase in non-advertising revenues – from content, pay and online – was particularly significant and is further evidence that our strategy of rebalancing the business and growing new revenue streams is working.

“Our relentless focus on cash and costs remains key. We’re on track to deliver cost savings of £20 million this year and our cash conversion is over 100%. We’ve also further increased the efficiency of the balance sheet with a £275 million bond buyback in June, bringing total debt buybacks to £937 million since October 2009. We now have positive net cash of £92 million compared with £612 million of net debt at the end of 2009.

“ITV Studios is performing strongly both in the UK and internationally with double digit revenue growth across all divisions and an increasing share of ITVS programmes aired on ITV1. Our investment in the creative pipeline is now clearly coming through in the financial results.

“While ITV Family Share of Viewing was down 1%, our strong Autumn and Winter schedule gives us confidence for the full year. Online we performed well with long form video requests up 20% and further improvements in the reliability and distribution of ITV Player. Our pay and online strategy has made good progress with the launch of our archive pay deals and YouView, and is soon to take another step forward with the roll out of ITV Pay Player.

“As we anticipated, ITV Family NAR was up 3% in H1, outperforming the television advertising market. The underlying TV advertising market continues to be relatively flat and while we remain cautious about the outlook for the TV advertising market for the rest of 2012, we expect to outperform it for the year as a whole. Over the full year we expect ITV Studios revenues to grow at a similar rate to 2011 and to grow the ITV Studios share of ITV1 output.”

Half year results

Six months ended 30 June (£ million)

  2012 2011 Change (£m) Change (%)
Broadcasting & Online revenues 924 887 37 4
ITV Studios revenues 355 264 91 34
Total revenues 1,279 1,151 128 11
Internal supply (149) (124) (25) (20)
Group external revenues 1,130 1,027 103 10
         
Broadcasting & Online EBITA 215 202 13 6
ITV Studios EBITA 50 38 12 32
EBITA before exceptional items 265 240 25 10
         
Adjusted profit before tax* 235 204 31 15
Adjusted earnings per share (EPS)* 4.7p 4.1p 0.6p 15
Dividend 0.8p 0.4p 0.4p  

* Adjusted profit before tax and adjusted EPS remove the effect of exceptional items, impairment of acquired intangible assets, amortisation of intangible assets acquired through business combinations, financing cost adjustments, and prior period and other tax adjustments from the statutory numbers.

Financial position

We have delivered strong financial results in the first half with double digit revenue and profit growth. Much of the revenue growth has come from our non-NAR revenues as we continue to grow and rebalance the business. We remain focused on cash and costs and are on track to deliver £20 million of cost savings over the full year. We will use these savings to fund £25 million of investment aligned to our strategic priorities.

Our 10% EBITA growth and our good profit to cash conversion, once again over 100%, saw us end the half year with positive net cash of £92 million, having paid the pension contribution and the 2011 full year dividend and having completed the bond buyback. We bought back £275 million of bonds in June for a cash cost of £309 million. As a result of the good profit to cash conversion and the bond buyback the balance sheet is stronger and more efficient.

In July we improved our financial flexibility following this bond buyback through executing a committed £250 million three year Revolving Credit Facility (RCF). The RCF remains undrawn.

Broadcasting & Online

Broadcasting & Online has seen 4% revenue growth and a 6% improvement in EBITA before exceptional items. The high operational gearing of advertising revenues has helped profitability but schedule costs were higher as a result of the phasing of sports costs.

ITV Family NAR grew 3%, again outperforming the market which was up 2%. ITV Family SOV was down 1%, with ITV1 down 3% and the digital channels continuing to perform well, up 5%. ITV Family SOCI was down 3%, with ITV1 down 5% and the digital channels up 3%. We will work to improve our on-screen performance over the full year and into 2013.

Online, pay and interactive revenues continue to grow as we make our content available on more platforms and improve the quality of ITV Player. Long form video requests were up 20% driven by mobile and we have launched our redeveloped News and Sport online sites and have completed consumer trials of the new ITV Pay Player.

ITV Studios

We are delivering double digit revenue growth across all the Studios businesses. The £91 million of additional revenue has led to a £12 million increase in EBITA. Revenue growth has partly been helped by the front loaded delivery of a number of shows in H1, as well as the inclusion of ITV Breakfast production now that Daybreak is produced by ITV Studios. Over the full year we expect ITV Studios revenues to grow at a similar rate to 2011.

We continue to invest in our creative pipeline. In the first half we had 61 new commissions and 61 recommissions as we increasingly look to formats that return. In the UK we have grown our revenues both on and off ITV and over the full year expect to grow content globally. We now have eight ITV Studios programmes that are produced in three or more countries, compared to four in 2011 and are building scale in our distribution business with our own and third party content.

We are building on our own strength with selective investments and partnerships in the UK and internationally. We have recently signed an agreement to acquire Mediacircus in the Nordics and signed a joint development agreement with Reshet, the Israeli broadcaster which will increase our production capability and distribution network in key genres and territories.

Adjusted EPS

Adjusted EPS was up 15% to 4.7p (2011: 4.1p) reflecting our strong trading performance.

Adjusted financing costs of £25 million are £3 million lower than the prior year as the impact of the bond buybacks carried out in 2011 are partially offset by a step up in the interest on the 2019 loan. For the full year interest costs will be about £6 million lower than the prior year as a result of the net impact of the RCF and the recent bond buybacks. As these bonds were repurchased at above par there was a £36 million exceptional loss in the period.

The adjusted effective tax rate of 23% is lower than the statutory rate of UK corporation tax due to the utilisation of prior year losses. It is expected to be maintained at around this level in 2013.

Statutory EPS

Statutory EPS is lower in 2012 at 3.2p (2011: 3.5p) due to the exceptional loss from the bond buybacks.

Pension

The aggregate IAS 19 deficit of the defined benefit schemes at 30 June was £421 million (31 December 2011: £390 million), impacted by a reduction in the implied discount rate, but this was partially offset by a decrease in the market expectation of long-term inflation.

Full actuarial valuations of the three sections of the pension scheme have been carried out, with the funding deficit standing at £587 million as at 1 January 2011. As a result of the valuation a 15 year funding plan has been agreed for the main section (Section A) to repay its pension deficit.  As in previous years it is a mixture of fixed and performance related contributions.  The current contribution plan remains in place until the end of 2014 and then there is a gradual increase in the fixed contribution from £48 million to £50 million for the period from 2015 onwards, with any performance related contribution payable in addition to these amounts.  If the performance related elements of the main section pay out, the funding period reduces to ten years.  For Sections B and C, we will continue to make contributions of £5.5 million per annum in order to eliminate the deficits of these sections by 31 March 2021.

There is potentially a step up in the total cash cost of the three sections from £72 million in 2012, to a maximum annual average of £87 million from 2015 to 2020.

The funding plan will be reviewed by the Trustees at subsequent valuations and may be revised with the agreement of the Company.

Dividend

The Board has declared an interim dividend of 0.8p. The Board is committed to a progressive dividend policy, taking into account the outlook for earnings per share, while balancing the need to invest in the business and to maintain financial prudence against the backdrop of an uncertain economic environment. The Board has set this interim dividend with a view that it is likely to be roughly one third of the total dividend for this year.

Outlook for 2012

We expect ITV NAR to be broadly flat for the nine months to the end of September, with July down 10%, August down 11% and September between flat and down 5%. The underlying TV advertising market continues to be relatively flat and while we remain cautious about the outlook for the TV advertising market for the remainder of 2012, we expect to outperform it for the year as a whole. Over the full year we expect ITV Studios revenues to grow at a similar rate to 2011 and to grow ITV Studios’ share of ITV1 output.

Notes to editors

1. Unless otherwise stated, all figures refer to the six month period ending 30th June 2012, with growth compared to the same period in 2011.

2.

Revenues for six months to 30 June (£m)

  2012 2011 %
ITV Family NAR 765 743 3
Non-NAR Revenue 514 408 26
Internal Supply (149) (124) (20)
Total External Revenue 1,130 1,027 10

3. Figures for ITV plc and market NAR are based on ITV estimates.

The estimate for ITV Family NAR to be broadly flat over the 9 months to 30 September assumes that ITV Family NAR is up 3% in H1, down 10% in July, down 11% in August and September between flat and down 5%.

4.

Broadcasting & Online performance indicators: six months to 30 June (% except where otherwise stated)

  2012 2011 %
ITV Family share of viewing 23.0 23.2 (1)
ITV1 share of viewing* 16.3 16.8 (3)
ITV Family adult SOCI 39.0 40.0 (3)
ITV1 adult SOCI* 27.1 28.5 (5)
ITV1 adult impacts* 122bn 125bn (2)
Long form video requests (all platforms) 217m 180m 20

* This includes ITV Breakfast. Excluding ITV Breakfast ITV1’s share of viewing was 15.4% (2011: 15.9%), ITV1’s adult SOCI was 25.5% (2011: 26.8%) and ITV1’s adult impacts were 115bn (2011: 118bn).

Share of viewing data based on BARB/AdvantEdge data and share of commercial impact (SOCI) data based on BARB/DDS data. Share of viewing data is for individuals and SOCI data is for adults. ITV Family includes: ITV1, ITV2, ITV3, ITV4, CITV, ITV1 Breakfast, CITV Breakfast and associated “HD” and “+1” channels.

Total video requests across all platforms for Online & On Demand are based on data from ComScore Digital Analytix, Virgin, BT, iTunes, Lovefilm, Sky, 3UK and Hospedia.

5. This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of ITV. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to (i) a major deterioration in the current outlook for UK advertising and consumer demand, (ii) significant change in regulation or legislation, (iii) failure to identify and obtain, or significant loss of, optimal programme rights, and (iv) the loss or failure of transmission facilities or core systems.

 

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