ITV’s profits plummeted in the first half of the financial year as the commercial broadcaster battles a difficult advertising landscape.
The business saw its profit before tax fall to £45m, a 79% drop from last year’s £219m for the same period. Earnings before interest, taxes and amortisation (EBITDA) also plummeted to £133m, a significant drop from £295m in the same period last year.
Total revenues dropped by a lesser 2%, helped by growth in ITV’s digital advertising business. The broadcaster’s streaming service ITX helped create a “step change” in digital advertising, the business said, which saw its revenues grow by 24% to £179m in the first half. However, total advertising revenue dropped by 11% to £811m.
ITV pre-empted the fall in March when it warned of declining ad revenues. At the time it said it expected its total ad revenue to be down 10% to 15%, with the 11% drop reported today on the more positive end of the estimate.
“There’s no feeling that advertising is really not going to be okay, but it’s really impossible to tell,” Carolyn McCall, chief executive at ITV said this morning (27 July) during a call with investors.
“People will sometimes say [it will be], and then that might not materialise. So the good news for us, I think, is that there are lots of campaign conversations going on,” she added.
McCall made no assertion to how ITV is overcoming the reputational crisis it found itself in earlier this year following presenter Phillip Schofield’s departure from the channel. At the time, it was suggested the business would lose millions in sponsorship deals in the aftermath of the scandal, however ITV said this was “untrue” in a statement.
ITVX, which launched in December 2022, saw its user numbers grow 29% to 12.5 million. Streaming hours also increased by 33% to 737 million, contributing significantly to digital revenue growth. ITV Studios also benefited, with its revenue up 8% to £1bn, driven by the UK market.
“The continued momentum behind ITV’s strategic transformation delivered strong growth in Studios and Digital revenues in the first half of the year, largely offsetting the expected weakness in the UK advertising market,” said McCall.
In April, Marketing Week reported ITVX had overtaken Disney+ and All 4 as the UK’s fourth most considered streaming service, according to figures from YouGov’s BrandIndex. Recent figures on the service’s performance, and ITV more widely, are not currently available on BrandIndex.
ITV’s first half results are largely in step with wider industry challenges. Advertising Association (AA) and WARC’s UK advertising spend projection reported a drop in advertising spend in traditional channels while digital, notably search, online display and broadcast video on demand, saw growth in the first quarter.
ITV is anticipating a stronger second half for its advertising revenue, as larger streaming and linear audiences are expected to tune in for the Women’s World Cup this summer, as well as both the Rugby World Cup and the “eagerly anticipated” return of Big Brother in the autumn.
ITV to raise media spend by 50% in 2023 to grab ‘big opportunity’ for ITVXMcCall said the business is currently facing the “worst advertising recession since the global financial crisis”, however, she said the broadcast business continues to perform in line with expectations.
“Q3 is definitely showing a more positive advertising market,” said McCall, who added it’s currently hard to have visibility on Q4. “If you asked anybody in any section of the market, they’d say the same thing – including agencies: I think there are very positive conversations going on.”
She added the business has all its sponsorship deals sold for Q3 and Q4.
“We remain on track to achieve all our KPI targets which gives us confidence we will deliver at least £750m of digital revenue by 2026. As we said at the full-year results in March, 2023 is the year of peak net investment in our streaming business and we expect profit to grow from here,” McCall said.