ITV posted a 7% fall in first-quarter total external revenue to £694 million.
The studio division, which has traditionally performed well, saw revenue fall by 11%. Advertising revenue ticked up by 2%, and the online unit outperformed as it registered revenue growth of 26%. It is encouraging to see the company is keeping up with the trends, as online revenue is where the growth will be in the years ahead.
Advertising decline could stymie ITV share price
The total viewing numbers were respectable as they increased by 2%, while online viewing surged by 75%. The pandemic prompted companies to pull their advertising campaigns, and ITV confirmed that advertising demand dropped by 42% in April. The fact the company didn’t mention any sort of a rebound in relation to advertising is concerning, as that revenue stream in very important to the group. The ITV share price has enjoyed a recovery in the past six weeks, but it might struggle to push on from here while advertising demand is weak.
The group intends to cut costs by £60 million - £30 million was previously been mapped out - and a further £30 million has been earmarked. Between cash and access to credit, the group has a strong liquidity position. No second-quarter guidance was issued due to the "uncertain" environment.
ITV share price reaches lowest level since 2011
The ITV share price has been in a general downtrend since December, and in late March it fell to its lowest level since September 2011. The broadcaster is dependent on advertising revenue, and the suspension of major sporting events is likely to hurt the company, hence the bearish move in the share price.
ITV has been finding it tough in recent years, as many companies are now using the likes of Google for advertising purposes rather than traditional mediums such as TV. WPP is a well-established advertising company, and they have seen revenue fall in recent years too. Conversely, tech giants like Facebook and Google have been gaining ground in terms of advertising revenue.
In early March, the ITV share price took a fall on the back of the full-year figures being reported. Total external revenue ticked up by 3% to £3.03 billion, but ITV total advertising slipped by 1.5% - which was better than previously guided. ITV studios was the outperformer of the group, and the unit posted a 9% rise in total organic revenue. The group posted a mixed outlook, as it expected total first-quarter revenue to increase by 2%, but it also cautioned that total advertising revenue will fall by 10% in April. The company stated it intends to pay another full-year dividend of 8p for 2020.
Productions paused and dividend scrapped
ITV updated the market again in late March, and it confirmed that it had to pause a significant number of productions on account of the coronavirus. These days the competition for content is tough, so it is likely to be a big setback. Viewers have so many options available these days when it comes to TV shows and movies, and ITV doesn’t have as an extensive library as Netflix for example. On the bright side, ITV studio costs are largely variable so outgoings can be reduced. In a bid to keep an eye on its cash position, the dividend was scrapped. No guidance was offered on account of the current economic climate.
Last month the firm announced more cost-cutting plans, with senior management taking a reduction in pay. In addition to that, a hiring and pay freeze for the entire group was announced.
The ITV share price has been has rebounding since late March, and if it can hold above the 66p mark, the positive move is likely to continue.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.