It has made its Win The Ads feature one of the must-see moments on the weekend family television schedule, but it is Ant & Dec’s Saturday Night Takeaway itself, not the adverts it celebrates, that has given ITV the chance to lay claim to being the most profitable television production company outside America.
The broadcaster has doubled the size of its ITV Studios division over the past five years by scooping up dozens of small independent production companies. That bet has paid off, with its production unit’s sales breaking through the £1 billion mark last year.
The broadcaster said that revenue for 2015 rose 15 per cent to almost £3 billion as sales at ITV Studios, which is behind hit shows including Saturday Night Takeaway,Aquarius and Mr Selfridge, rose by a third to £1.3 billion.
That outstripped growth in advertising sales of 6 per cent and, when factoring in online and interactive revenue, ITV now derives almost half of its revenue from sources other than its always-volatile advertising.
Yet the FTSE 100 company remains beholden to trends in the market. It warned that advertising revenue was flat in the first quarter, compared with the 12 per cent growth it reported last time. With big advertisers holding fire on spending ahead of this summer’s European football championship, which will feature a strong line-up of games featuring England, Wales, Northern Ireland and the Republic of Ireland, ITV said it was confident that it would outperform the wider market in 2016, despite the first-quarter dip.
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The warning knocked the shares, which fell 3 per cent, or 8½p, to 241p. The broadcaster, which has been tipped as a takeover target, has drifted from the all-time high of 280p it reached last summer, when its market value hit £10 billion.
Pre-tax profit at ITV rose by 18 per cent last year to £843 million, or £666 million on an adjusted basis, which triggered a higher dividend payment than analysts had expected. The total dividend for the year was raised by 28 per cent to 6p a share, ahead of previous guidance.
It also will pay a special one-off dividend of 10p a share, equivalent to £400 million of its cash. ITV has now paid back almost £1 billion in special dividends since Adam Crozier took over as chief executive in 2010.
There has been a changing of the guard after a number of high-profile executive departures. Archie Norman, the chairman, is leaving this year to be replaced by Sir Peter Bazalgette, while Peter Fincham, the director of television, has also on his way and will be replaced by Kevin Lygo. Mr Lygo’s first task will be to sign a new deal with Simon Cowell to ensure that The X Factor, which has struggled for ratings in the past two years, and Britain’s Got Talent stay on ITV’s screens. ITV is understood to be confident that a deal will be signed imminently.
Speculation has risen that ITV could be on BT’s menu after the telecoms company closed its £12.5 billion takeover of EE. Paolo Pescatore, an analyst with CCS Insight, said: “The move makes perfect sense and would be a key part of BT’s growing aspirations in television. More so, in its quest to knock Sky off its perch, BT has made a huge investment in sport, but it still has an inferior content position compared to Sky beyond sport.”
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Mr Crozier said, however, that the broadcaster had ambitions of its own. “As we look to 2016 and beyond we see further significant opportunities for growth across the company organically and through acquisitions and partnerships,” he said.
Ant and Dec and ITV Studios top the bill at the moment, but will make way for Wayne Rooney and England this summer
Analysis
Few would quibble with the financial performance of ITV under the stewardship of Adam Crozier, but behind the scenes there is a drama brewing. The broadcaster has struggled to find a new sure-fire hit to replace Downton Abbey and reinvigorate ITV1.
In effect, last year was a ratings disaster for ITV. Its main channel’s share of viewing dropped to an all-time low of 15 per cent during the year, down from 15.6 per cent. Across the stable of ITV channels, its share of viewing for the family audience dipped to 21.2 per cent.
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With Champions League football heading to BT last year and stalwarts such as Lewis grinding to a halt, the success of its ITV Studios production unit is clashing with the downward trend in its viewing figures.
New shows including the Stars in Their Eyes reboot, The Wonder of Britainand the appropriately named Get Your Act Togetherall ensured that ITV suffered its worst January on record in 2015, as all were culled. It has high hopes of turning that around this year for Doctor Thorne, the Julian Fellowes version of the Anthony Trollope novel, andMaigret, starring Rowan Atkinson.
A bigger issue is ITV’s strategy in the market for talent shows. The X Factor looks more like a misnomer each year as ratings dwindle. Britain’s Got Talent remains a banker and the company is in talks with Simon Cowell to renew both shows, but also has to accommodate The Voice, which ITV has poached from the BBC.
Striking a good balance between those three titles could be crucial to ITV’s ratings prospects this year, particularly if England’s footballers follow the example of its rugby team and return home early from the European championship this summer.