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ITV slumps as third quarter ad revenue remains under pressure amid Brexit uncertainty

ITV expects net advertising revenue to fall 5% for the year as Brexit uncertainty continues to hurt business confidence
ITV shares were on the back foot after its third quarter trading update

ITV PLC (LON:VOD) slumped as the broadcaster reported a decline in third quarter net advertising revenue that was worse than analysts had expected.

The company said its net advertising revenue for its family of channels dropped 4%, compared to an 8% drop in the first half. ITV had already guided towards a 4% fall for the quarter in July but analysts had expected a 3.5% dip.

READ: ITV upgraded to 'buy' from 'hold' by HSBC

Vodafone sees a return to ad revenue growth in the fourth quarter but a 5% decrease for the full year.

In the nine months to 30 September, total external revenue edged down 1% to £2.13bn from £2.15bn, as a 7% decline net ad revenue offset 8% growth in non-advertising revenue.

ITV’s online and pay business revenue slipped 4% while the ITV Studios division achieved a 9% increase in revenue.

"ITV's performance in the first nine months of 2017 is very much as we anticipated,” said chairman Peter Bazalgette.

“We've seen improving trends in all our key revenue lines in the quarter and we're on track to deliver on the commitments we set out at the start of the year.” 

Brexit weighs on business confidence

He said ITV is seeing a return to TV advertising from some fast-moving consumer goods companies and grocers but business confidence remains weighed down by worries about the implications of Brexit.

ITV Studios is expected to report "good organic revenue growth with profit broadly in line with last year” for the year while online and pay will “deliver good revenue growth”.

“We will enter 2018 in good shape with a strong operating performance underpinned by a robust balance sheet, and we look forward to the arrival of our new chief executive, Carolyn McCall, early in the New Year,” Bazalgette said.

Shares fell 2.60% to 150p in afternoon trading. 

Rivals Netflix and Amazon add pressure on ITV

“Despite the steady rise of the Studios business, ITV remains highly dependent on selling its advertising space," said George Salmon, equity analyst at Hargreaves Lansdown.

"Ad spending tends to rise and fall with the economic tide, and with concerns over Brexit and the UK economy high up on the agenda in many boardrooms, we’re in a bit of a lull at the moment."

He added: "In normal circumstances this wouldn’t be a great issue, however one has to wonder whether changes to how and when we watch content mean ITV will no longer be top dog when confidence comes back. "ITV’s own interactive services are growing, but bigger rivals like Netflix and Amazon are putting the pressure on in a big way.”

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