ITV's profit drops as the "challenging" advertising market bites

Courtney Goldsmith
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ITV faces advertising headwinds (Source: Getty)

ITV's profit fell in 2017 due to a "challenging" environment which hit the firm's advertising revenues.

The figures

The broadcaster's pre-tax profit fell six per cent to £800m in the year to the end of December, but its total external revenue rose two per cent to £3.13bn driven by double-digit growth in non-net advertising revenue.

Revenue from ITV Studios rose 13 per cent to £1.58bn while online, pay and interactive rose seven per cent to £284m.

As anticipated, ITV said family net advertising revenue fell by five per cent to £1.59bn.

The firm said it had started 2018 on a strong footing with advertising revenue expected to be positive in the first half, growing one per cent in the first quarter and up again in the second quarter due to the Fifa World Cup.

​The board proposed a full-year dividend of 7.8p, up eight per cent, reflecting its confidence in the business' underlying strength and the outlook for 2018.

Why it's interesting

Despite taking early action to reduce overhead costs, ITV said ongoing economic and political uncertainty has "undoubtedly" had an impact on the demand for TV advertising.

The firm's share price has risen more than 15 per cent from its November 2017 low point due to better prospects for advertising in 2018, but it fell nearly 5.5 per cent this morning to 163.8p.

Carolyn McCall, the newly appointed boss of ITV, said 2017's strong performance in a challenging environment gives the broadcaster a "solid foundation to build on for the next phase of ITV's development".

"We are very focused on our strategic refresh. This will enable us to define a clear strategy and priorities that will highlight the opportunities and address the challenges that we face in an increasingly competitive media landscape," McCall said.

George Salmon, equity analyst at Hargreaves Lansdown, said despite the drop in profit, there is not much ITV's new chief exec should be doing differently.

"The group is already investing to expand its online division, and the growth of the studios business has helped diversify away from the potentially volatile world of advertising. Continuing this shift seems sensible to us," he said.

Read more: Here's why shares in ITV are down this morning

What ITV said

McCall added that ITV has had a "great start" to 2018.

On-screen we have grown our viewing share and volume and online we have continued to deliver double digit growth in viewing. We expect ITV Family NAR to be positive in the first half, with Q1 up one per cent and growth in Q2 around the football.

ITV Studios is seeing increasing demand for its formats and dramas, particularly in the UK and US, and we have over 60 per cent of this year's expected revenue already booked.

Read more: McCall set for ITV debut as boost could come from Southgate’s Three Lions

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