ITV plc (LON:ITV) has warned of a challenging first half in the advertising market after the broadcaster’s revenue fell 3% in the first three months of the year to £731mln.
Shares declined 1.99% to 196.80p in afternoon trading.
In a trading update, the group posted a 9% drop in net advertising revenue to £393mln in the first quarter.
ITV said it sees another fall in ad revenue of between 15-20% in the second quarter due to a lack of international football tournament this summer. Overall net advertising is expected to fall between 8- 9% for the first six months of 2017.
Chief executive, Adam Crozier, who is standing down next month after seven years in the role, said while the economic environment “remains uncertain” ITV’s guidance for the full year remains unchanged and the first quarter was in line with its expectations.
“We expect to grow our share of broadcast and will continue to deliver good growth in Online, Pay & Interactive driven by strong demand for online advertising,” he said.
“We are confident that ITV Studios will report good organic revenue growth for 2017 and we have already secured over 75% of the expected full year's revenue.”
ITV Studios keeps group afloat...
ITV Studios delivered a 7% increase in revenue in the first quarter to £343mln, driven by growth in its American business, helping to offset declines in ad revenue.
The Online, Pay & Interactive business achieved a 12% increase in revenue with 22% growth in online ad revenue.
Crozier added ITV was on track to deliver £25mln overhead savings and a £25mln reduction in its programme budget to mitigate the absence of a major sporting event.
“We remain committed to our strategy of rebalancing and strengthening ITV,” he said. “We see clear opportunities to invest for further growth across the business and our robust balance sheet and strong underlying cash flows allow us to continue to do so."
A search for a new chief executive is under way after Crozier announced his departure last week.
Consumers switching to online TV viewing....
George Salmon, equity analyst at Hargreaves Lansdown, said consumers are changing how they watch TV so it is important that ITV responds to the trend.
"We can now choose how, where and when we watch our favourite shows. The growth in on-demand services means the challenge for his successor will be to mould ITV into a more interactive organisation to compete with Amazon and Netflix. The development of the ITV Hub will surely be a priority.”
On the company's drop in ad revenue, Salmon said:“Advertising makes up a sizeable chunk of ITV’s top line and the clouds hanging over the economy mean ad budgets are being cut, which is weighing on the shares. However, if it were not for outgoing CEO Adam Crozier, one can’t help but feel that the near 10% decline in the share price since Brexit would have been much worse."