ITV starting to regain the X Factor?

Things seem to be looking up at ITV as ad revenues rebound - it's even planning to pay its first divi since 2009...

by Emma Haslett
Last Updated: 23 Aug 2011
Two years ago, some were ready to call time on ITV, as it struggled with a massive downturn in advertising revenue. Now, though, the channel has just revealed some impressive results for 2010: pre-tax profits rose from £25m in 2009 to £286m last year, while revenues jumped by 10% to £2bn. Ad revenues are looking good again after a tough couple of years - but as long as it's still so reliant on a few big shows, things could change very quickly...

ITV puts its swift recovery down to crowd-pleasers like Downton Abbey, the X-Factor and I’m a Celebrity, which helped to push up ad revenues by a market-busting 16%. The company says that after those tough couple of years, ad revenues are now going from strength to strength. And it reckons they'll continue doing so: it's predicting a 12% rise during the current quarter, and another 8-12% in April. So impressive has this rebound been, in fact, that the company says it was able to reduce its net debt from £612m to a relatively modest £188m.

It hasn’t all been plain sailing, though. Profits at its production arm ITV Studios fell from £91m to £81m, which ITV says emphasises the need for ‘creative renewal’ (some of which might come from product placement, which has just been legalised and should go some way to boosting revenue). And CEO Adam Crozier admitted Daybreak, the morning programme that replaced GMTV, hasn’t quite been the hoped-for hit: ‘clearly it has had a difficult introduction, but the numbers have settled down’. And the company might find this year a little tougher: he added that one of the biggest contributors to its revenues was last year's football World Cup, which (thankfully) won't be happening again this year.

Nevertheless, shares were up by 3.9% this morning - helped by the announcement of ITV's first dividend since 2009. Crozier, who only joined the company in the summer, wouldn’t say whether this will be a regular thing (as opposed to a one-off thank-you to shareholders who have stuck with it through the recession). ‘We’ve been through a very volatile couple of years,’ he said. 'Obviously, we want it to be sustainable.'

The alternative is that ITV concentrates on paying down more of those debts (it's also planning to make an extra £15m in cost savings this year) and investing in new technology as part of its drive to exploit its content ‘across multiple platforms’.  Since ITV still relies on TV ads for 75% of its revenue - and since the X-Factor may lose its lustre if Simon Cowell takes himself off the panel - this might be better for shareholders in the long term.

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