Brexit uncertainty to blame for advert income fall, ITV says
Broadcasting giant ITV has blamed Brexit vote uncertainty for its first drop in full-year advertising revenues since 2009 and warned over further falls as ad spend remains under pressure.
The group, home to shows such as The X Factor and Broadchurch, said net advertising revenues dropped 3% to £1.67 billion amid "political and economic uncertainty" and cautioned it expects declines of around 6% in the first four months of 2017.
But the group held underlying pre-tax profits largely firm at £847 million in 2016 against £843 million in 2015 as its push into content helped offset the television advertising woes.
ITV said ongoing economic uncertainty is set to see net ad revenues fall by 5% in January, 7% in February and as much as 15% in March due to the timing of Easter, before recovering in April, with the group forecasting a 5% rise.
Chief executive Adam Crozier said the group performed better than a depressed wider television advertising market, but insisted TV was in "rude health".
He said: "TV generally is in good shape. The fall in advertising revenues over the course of last year was more to do with short-term uncertainty."
He added that alongside Brexit caution, ad spend has also been hit as supermarkets and consumer goods firms have instead been investing heavily in price cuts over the past year.
Results showed that on a bottom-line basis, pre-tax profits fell 14% to £553 million, due largely to costs of closing its final salary pension scheme and a previously announced restructuring effort to deliver annual savings of £25 million.
ITV also announced a special dividend payout for investors worth just over £200 million.
The group said that with more than half - 53% - of its revenues now coming from outside advertising sales, it has been able to weather the decline in TV ad spend.
Mr Crozier said: "The continued growth in revenue and adjusted profit, despite a 3% decline in spot advertising revenues resulting from wider political and economic uncertainty, is clear evidence that our strategy is working and remains the right one for ITV."
The group said it expects further good growth in non-TV ad sales in 2017 and predicted a solid performance from its television production business and online operations.
The group is also pencilling in a £10 million profit boost from the weak pound over the year ahead.
Shares in ITV rose 2% after the results.
ITV said its production arm, ITV Studios, notched up an 18% rise in underlying earnings to £243 million last year, while its broadcast and online division saw earnings fall 3% to £642 million.
Online and interactive revenues rose 23% to £231 million over 2016, it added.
George Salmon, equity analyst at Hargreaves Lansdown, said while the slowdown in TV ad spend was likely to be a short-term trend given Brexit uncertainty, there are challenges ahead for ITV.
He said: "L onger-term viewing habits are clearly moving towards a more on-demand set up.
"This brings the group into competition with Amazon and Netflix, two pretty bruising rivals with deep pockets.
"While continuing to provide entertaining content is obviously essential, building a slick online platform could be just as important."