UBS is not expecting great things from ITV PLC’s (LON:ITV) third-quarter trading update, due on November 7.
The Swiss bank expects ITV to report third-quarter revenues of £670mln, little changed from last year.
READ: ITV could fetch £245mln for sale of London south bank headquarters
It is forecasting broadcast and online revenues of £461mln, down 0.5% year-on-year, and ITV Studios revenue of £209mln, up 2.5% year-on-year.
It has predicted third-quarter advertising revenues will fall by 1% year-on-year, in contrast to the company’s guidance of flat advertising revenues.
UBS’s pessimism is prompted by “weak TV viewing trends in September (ITV Family viewing minutes down -8%) and a bearish tone from Media Buyers”.
The Swiss bank has trimmed its price target for the terrestrial TV operator to 160p from 165p while leaving its rating at ‘neutral’.
The company is often touted as a player in industry consolidation – either as predator or prey – but UBS reckons widespread merger & acquisition activity is unlikely in Europe, because of a lack of visible synergies.
READ: Mid-summer mergers: ITV in play after Crozier gets written out of the series
In general, industry trends for old-school broadcasters are not encouraging, in UBS’s view.
Linear TV viewing – which presumably refers to watching a show at the time it is broadcast – continues to fall and was down 5% year-on-year in the UK in the first nine months of the year.
“In the UK, France and Spain, viewing declines have accelerated to -7-8% in Aug-Sept, post sports events,” UBS noted.
On the plus side, ITV has seen its ratings rise by 1.9 percentage points in the first nine months of the year and based on UBS’s research, media buyers expect advertising spending on ITV’s network to increase by 0%-2% this year from 2017; UBS is tipping a 0.5% increase.
UBS thinks any cyclical recovery could be hiding “structural cracks.
“The Broadcast sector has underperformed local markets by -15% YTD and trades on 10.3x FY19E EPS, below its long-term average (15x), fairly reflecting structural concerns. A sector dividend yield of 8% is attractive but is not without risk if structural headwinds accelerate and cyclical headwinds emerge,” it opined.
Piers papoose challenge alert ⚠️
Judge Rinder and Louise Redknapp have said they will donate £2000 to charity if Piers wears a papoose. But will he accept? Find out after 8am.@JudgeRinderTV | @LouiseRedknapp | @piersmorgan pic.twitter.com/nWvtSWO1fe
— Good Morning Britain (@GMB) October 17, 2018