ITV Interim results for the period ending 30 June 2021
Carolyn McCall, ITV Chief Executive, said:
“Our H1 results demonstrate that ITV is emerging from the worst effects of the pandemic. We've continued to implement our key strategic priorities and have further strengthened the business. Total external revenue was up 27% driven by 26% growth in ITV Studios revenue and a 29% increase in total advertising revenue within which total video on demand advertising was up 55%.
“We are now a more flexible, more efficient and more digital business. We have successfully completed the first phase of our More Than TV strategy and look forward to building on this platform to accelerate our transformation to a digitally led media and entertainment company.
“We are optimistic about the future, despite the ongoing pandemic risk on our advertising and ITV Studios revenues. We know that the dividend is important to our shareholders and we intend to re-commence a progressive dividend policy based on a notional dividend of 5p per share which we expect to grow over time. The first dividend under the new policy would be a final dividend of 3.3p per share proposed at the full year results in respect of 2021.”
ITV has delivered a strong financial performance in H1
Total external revenue was up 27% at £1,548 million (30 June 2020: £1,218 million)
– ITV Studios total revenue was up 26% at £798 million (30 June 2020: £632 million) with the substantial majority of programmes back in production and also benefitting from a number of programmes and licences being delivered earlier than expected. This was up 5% on 20191. ITV Studios external revenue was up 31% at £523 million
– Total Media & Entertainment (M&E) revenue was up 25% at £1,028 million (30 June 2020: £822 million), with total advertising revenue (TAR) up 29% within which video on demand advertising (AVOD) was up 55%. Total M&E revenue was up 4% on 20191
Adjusted group EBITA2 was up 98% at £327 million (30 June 2020: £165 million). This was driven by: the strong recovery in the advertising market; resumption of productions; and tight cost control delivering £21 million of savings, of which £15 million are permanent
Adjusted EPS was up 103% at 5.9p (30 June 2020: 2.9p). This compares to 6.2p in 2019
Reported EBITA3 was £316 million (30 June 2020: £159 million). Statutory profit before tax was £133 million (30 June 2020: £15 million) and statutory EPS was 2.4p (30 June 2020: 0.5p)
Operational update
ITV Studios:
– Significant new and returning programme commissions in UK and internationally, including
Scripted: labels within ITV Studios produced six of the top 10 rated dramas in the UK including Line of Duty, Pembrokeshire Murders and Unforgotten; Physical and Cowboy Bebop in US and Summertime in Italy
Unscripted: The Cabins and Dancing On Ice in UK; Love Island in UK, Spain, Germany and Netherlands; and The Chase in the UK, US, Germany and Australia
– Challenges remain in delivering programmes under COVID-19 restrictions, particularly multi-location shoots
M&E:
– Advertising has rebounded strongly
TAR in H1 was up 29% with May up 87% and June up 115% compared to the same period in 2020
June 2021 delivered the largest advertising revenues for the month of June for ITV in its history, benefitting from the easing of restrictions and the Euros
Total TAR for June and July 2021 is expected to be 16% higher than the same period in 2018 when ITV broadcast the Football World Cup and series 4 of Love Island
Strong growth in VOD advertising, up 55% in H1 compared to the same period in 2020, even after double digit growth over the full year 2020
– Viewing:
Total ITV viewing was down 6% in H1 against tough comparatives and the easing of lockdown restrictions but we saw strong ratings from programmes including Unforgotten, Saturday Night TakeAway, The Masked Singer, Euro 2020 and the start of Love Island
Hub viewing was up 6%, in spite of tough comparatives of Winter Love Island in 2020. Dwell time was up 4% and simulcast viewing was up 20%
Registered users for the ITV Hub were up 7% at 34.6 million and monthly active users (MAU) were up 7%
ITV main channel share of viewing (SOV) was up from 16.9% to 17.4%; ITV Family SOV was up from 22.6% to 22.7%
Driving positive change through our Social purpose priorities
ITV's multiple campaigns continue to raise awareness and drive positive change, including Eat Them To Defeat Them, Britain Get Talking and the launch of our ITV2 partnership with CALM aimed specifically at mental wellness for younger people
1 On a like-for-like basis reflecting the reallocation of gaming, live events and merchandising revenue from M&E to ITV Studios in 2021
2 Reconciliation between adjusted and statutory results is provided in the APM section
3 Statutory operating profit before interest, tax, amortisation and exceptional items
ITV's emissions reduction targets to become a Net Zero Carbon business by 2030 have been signed off by the Science Based Targets Initiative
ITV's Diversity Acceleration Plan Report demonstrated the progress made across our commitments, including improving representation on-screen and career progression opportunities
ITV continues to make significant progress in delivering its More Than TV Strategy
ITV Studios: further growing and diversifying ITV Studios internationally
– We have a strong scripted pipeline including Vera; The Bay; Noughts and Crosses series 2; Holding; Snowpiercer; Balthazar; Romulus series 2; and Gomorrah
– We are globalising our formats with seven programmes in three or more countries including Love Island in 21, The Chase format in 17 and Let Love Rule in 6 countries
– We are on track to double our revenues from streaming platforms in 2021 compared to 2020
– We have further strengthened our creative talent with three new labels
Cattleya Producciones in Spain, Windlight Pictures in Germany and Rollercoaster Television in UK
M&E: the restructure of M&E is now fully operational
– Linear broadcast continues to deliver mass audiences with 93% of all commercial audiences over 5 million
– We are accelerating our Hub strategy to drive AVOD
Increasing the depth and strength of content with more series drops and expanding the library
We have an AVOD-led commissioning strategy for ITV2, ITVBe and CITV to increase appeal to younger and lighter viewers and drive AVOD
We are further improving the design and functionality of the Hub across platforms with around 70% of our MAUs now viewing through the redesigned Hub, with increased personalisation and curatable content rails
– We continue to successfully roll out Planet V to a very positive response from agencies and advertisers
65% of all campaigns are now self served by agencies with 650 people fully trained
– We continue to build strong relationships in the UK and internationally and have successfully renewed our deal with Sky
– We have over three million global subscriptions, up over 15%
BritBox UK continues to grow with around 555,000 subscriptions, up over 10%, and an exciting pipeline of original content in H2 and 2022 including Spitting Image 2, Magpie Murders, Crime and Wedding of the Century
BritBox International is performing strongly in the US, Canada and Australia with two million total subscriptions, up around 18%. South Africa will launch in August and further rollout to other countries will follow
Hub+ has 452,000 subscribers, up 10%
Financial position remains robust
Reported net debt of £467 million (31 December 2020: £545 million) is before the final earnout payment for Talpa of €298 million (c. £256 million) which will be paid in August 2021
Reported net debt to adjusted EBITDA leverage on a 12-month rolling basis of 0.6x (31 December 2020: 0.9x). On a pro-forma basis including the Talpa earnout payment, net debt to adjusted EBITDA would be 0.9x
Profit to cash conversion on a 12-month rolling basis of 72%, reflecting the unwind of the favourable working capital position in 2020 as expected. Taking 2020 and 2021 together we continue to expect profit to cash conversion of 80 to 85% over the two years
Total liquidity of £1,482 million, comprising total cash of £704 million (includes restricted cash of £50 million) and committed undrawn facilities of £778 million
Outlook
ITV Studios is performing strongly as it successfully manages the challenges presented by COVID-19 and UK isolation policies
The comparatives are tougher in H2 but we are encouraged by the advertising outlook with July expected to be up 68% and August up 17% to 20% compared to the same period in 2020. It is too early to give a range for September given the current uncertainty but we expect it to be positive
We are on track to deliver our £30 million permanent cost savings target over the full year
The Board recognises the importance of the ordinary dividend for ITV shareholders. Given the current uncertainty the Board will not declare an interim dividend in respect of the current year. However, assuming the economy continues to recover, the Board intends to propose a final dividend of 3.3p for the full year 2021, based on two thirds of a notional full year dividend of 5p. The Board intends to grow the ordinary dividend over time whilst balancing further investment behind our strategy and our commitment to investment grade metrics
With the significant strategic progress we have made, we are now entering the next phase of our More Than TV Strategy
– We will further strengthen and diversify ITV Studios by genre and customer to take advantage of the strong demand for global content
– In M&E we will have one content budget allowing us to optimise our windowing strategy to create the best experience for viewers and the best value for advertisers and ITV. This will balance our ability to deliver mass audiences and increase on-demand viewing. Our streaming strategy will be AVOD led with a very compelling subscription video on demand proposition. Therefore positioning us well to respond to the evolving viewing and advertising environment
– We will continue to invest in data, tech and analytics to enable further platform integration and a more seamless viewer experience
– We will hold two investor seminars in the Autumn provide a deeper dive into ITV Studios and M&E