As it prepares to welcome new CEO Carolyn McCall in January, ITV laid out its 2017 first-half earnings on Wednesday with revenue declines it said were in line with expectations. For the six months ended June 30, revenues were down 3% to £1.46B ($1.9B) while adjusted EBITDA dipped 8% to £403M ($525M) and pre-tax profit fell 16% to £259M ($338M). Despite the declines, the company remains confident the full year will outperform the ad market and pointed to a “robust” broadcast business — boosted this summer by ITV2’s beachy dating show Love Island which was a must-see for the 16-34 demo.
Still, amid ongoing economic and political uncertainty spurred on by Brexit, advertisers have pulled back with an 8% decline in net advertising revenue at the broadcaster to £769M ($1B). That’s the steepest drop since 2008, although ITV said it was partially offset by “good growth” in non-advertising revenue.
In the ITV Studios segment, revenues grew by 7% to £697M ($909M) while adjusted EBITDA was down 9% to £110M ($143M). ITV Executive Chairman Peter Bazalgette said the numbers were reflective of continued investment in the U.S. scripted business and the fact that last year included a four-year license deal for The Voice Of China.
Of the total first-half ITV Studios revenues, 52% was generated outside the UK. ITV America’s total revenue increased 49% to £143M, driven by new and returning formats like Big Star’s Little Star, Sideserf, World Hip Hop Star, Car Spotters, American Grit, Alone, Forged In Fire and First 48 along with new scripted commission Sun Records and the third season of Good Witch. The second half of 2017 will see the delivery of more Hell’s Kitchen USA, new scripted order Somewhere Between for ABC and a pilot of Snowpiercer for TNT along with unscripted commission Queer Eye For The Straight Guy for Netflix.
Speaking of Netflix, Bazalgette called the streaming giant a “frenemy” given it’s a competitor for eyeballs, but also a buyer of ITV Studios programming. He did note that were Netflix a TV channel in the UK, its market share would be about 4% versus ITV’s 21%.
The broadcast business “remains robust,” Bazalgette said. On screen, ITV2’s escapist reality series Love Island has been a not-so-guilty British pleasure with record overnight ratings in June and July. It helped drive a 15% increase in the 16-34 demo. The main channel also boasts 2017’s most-watched drama with the final season of Broadchurch.
Nevertheless, after growth through May, the first half of 2017 was flat in terms of viewing given June 2016 included the Euro Cup soccer tournament.
Addressing other matters, Bazalgette said ITV’s SVOD joint venture with the BBC, Britbox, will ramp up marketing to drive subscribers in the second semester. Britbox brings “the best of British television” to the U.S. and may have “further international opportunities” to exploit in the future.
Amid the current furor over equal pay issues at the BBC, Bazalgette said ITV takes gender issues “very seriously.” But as a commercial broadcaster not held to the same requirements as the BBC, it “would never discuss confidential contracts for anyone working at ITV.” He did note that 52% of staff at the company is female.
Bazalgette said guidance for 2017 remains unchanged. ITV Studios has already secured 85% of its expected full-year revenues with adjusted EBITA expected to be broadly flat year-on-year impacted by continued investment and the timing of program deliveries. In the first half of 2017, the aggressively acquisitive ITV bought Line Of Duty producer World Productions in the UK, Tetra Media Studio in France and Elk Production in Sweden as well as a 45% stake in Jason Blum’s Blumhouse Television.
When McCall joins, replacing seven-year ITV boss Adam Crozier, it will be “business as usual,” said Bazalgette. However, he noted, “Every strategy of every company benefits from being refreshed, and that’s a job we’ll be doing with Carolyn in the new year.”