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Advertising slide weighs on ITV share price

An ITV London Studios sign

For most of this year the ITV share price has been struggling, largely over concerns about the sustainability of advertising revenues, as well as its streaming strategy, which comes across as somewhat disjointed given the many iterations we’ve seen over the past few years, in the form of ITV Hub, ITV Hub+ and BritBox.

In the last few weeks, we have seen a stabilisation, and a recovery in the share price after it hit a two-year low at the end of September. The main reason for the recovery is in part due to anticipation of the start of the men’s football World Cup in Qatar, which should deliver an advertising revenue boost during its final quarter, however today's Q3 and year-to-date update has seen the shares slide back.

While total revenue year to date saw a 6% rise from a year ago to £2.95bn, the advertising business has once again proved to be an Achilles heel. Advertising revenue this year has been up and down, with a strong Q1 performance followed by a drop of 5% total advertising revenue (TAR) in Q2, which wiped out some of the positive return delivered in H1. Nonetheless the 5% gain in H1 gave ITV a buffer for what turned out to be a poor Q3.   

The Q3 numbers were expected to be disappointing, and were, falling 2% for the year-to-date at £1.56bn, with July down 9%, August down 21% and September down 14% compared to the same period in 2021. TAR is expected to decline between 1% and 1.5% over the full year, with October down 9% and November expected to be up 3%, while December is expected to be 5% to 10% higher with the World Cup expected to offer a decent pick-me-up.

The underperformance in advertising was offset by the outperformance of ITV Studios, which saw a 6% increase in revenues to £1.39bn, offering encouragement as the production part of the business looks to generate almost 50% of total revenues. This is a welcome focus given how fickle advertising revenues can be, however ITV did point to inflation pressures when it said that EBITDA margin may well be at the lower end of 13% to 15% range in the short term.

ITV’s new ITVX ad-funded offering is expected to be rolled out on 8 December, in time for some of the World Cup tournament at least. Someone should tell them the World Cup starts on 18 November and will be three weeks in by then. Nit-picking aside, ITV says it hopes to deliver at least £750m in digital revenues by 2026.

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