ITV won’t make a drama out of an advertising crisis, says Crozier

Britain’s biggest free-to-air broadcaster has declared a £200 million special dividend despite suffering its first fall in advertising revenues since the financial crisis and posting a slide in annual profits.

ITV, broadcaster of the Six Nations rugby and dramas such as Broadchurch, The Halcyon and Cold Feet, said that net advertising revenue fell by 3 per cent to £1.7 billion last year, its first fall since 2009, but that it had outperformed the wider television market.

The decline has continued since the turn of the year and advertising revenues are forecast to fall by about 6 per cent in the first four months, which ITV blamed on political and economic uncertainty.

Adam Crozier, who was appointed seven years ago to expand the production division after a collapse in advertising revenues and is battling against the rise of streaming services such as Amazon and Netflix, said that he was not sure how long the drop in earnings would last. He pledged, though, to beat the overall market this year.

The biggest hit came from food, retail and consumer goods advertisers who are struggling to cut prices amid rising inflation, Mr Crozier said. “I don’t think at all that it’s a structural thing with television,” he said, adding that the cost and impact of digital advertising was a short-term challenge.

Analysts at Liberum, which recommends the shares as a “buy”, forecast that advertising revenues would rise by 1.1 per cent this year, helped by an extra episode of Coronation Street.

“The TV advertising environment is the obvious unknown but the current economic outlook does not suggest that there should be a major advertising decline, which consensus 2017 forecasts seem to be suggesting,” they said.

Despite falling advertising revenues, the broadcaster increased other income streams.

Fifty-three per cent of total revenues came from sources outside traditional television advertising. Revenue from online, pay and interactive rose by 23 per cent to £231 million and income from ITV Studios, its production business, was 13 per cent higher at £1.4 billion. Stripping out acquisitions and currency movements, Studios’ revenue was down 3 per cent.

ITV has also been investing in its pay and distribution business and intends to launch BritBox US, a subscription joint venture with the BBC that will offer British television programmes from both broadcasters.

The mixed results left pre-tax profit down 14 per cent at £553 million.

ITV said that cash generation meant that it could pay a special dividend of 5p per share, half the amount of 2015. The special dividend is added to a full-year dividend of 7.2p, up from 6p.

The broadcaster is facing uncertainty over its future independence, amid previous speculation in the City about potential takeover interest. Liberty, the cable giant and ITV’s biggest shareholder, has been linked with a potential approach in the past. Mr Crozier said that British companies had become cheaper because of the fall in sterling but that ITV was a consolidator and that the best form of defence was attack.

Mr Crozier said that his company had no interest in pursuing a takeover of Entertainment One after it dropped a plan to buy the owner of Peppa Pig having failed to agree a price. ITV offered £1.1 billion for the distribution group but was rebuffed.

He also played down speculation over his departure, saying that succession planning was typical for a company of ITV’s size. Shares in ITV closed 7¾p higher at 210¼p.

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