ITV plc (LON:ITV) shares dropped on Wednesday as although the broadcaster said its overall performance for the first nine months of the year was in line with its expectations, with a solid increase in revenue driven by online advertising growth and its studios business, the firm cautioned that it expects a softening in the fourth quarter.
In a trading update for the period to the end of September, the FTSE 100-listed firm saw its external revenues grow by 6% to £2.257bn, up from £2.139bn a year earlier, with continued growth across all parts of its business.
The firm said its total advertising revenue was up 2% in the nine months, driven by 43% growth in online revenues, and its total ITV Studios revenues increased by 10%.
The company said its total advertising is expected to be broadly flat over the full year with continued double-digit growth in online.
Carolyn McCall, ITV’s chief executive, commented: “We are seeing some softening in ITV Family NAR (national advertising revenue) in Q4 due to the increasingly uncertain economic environment and, as a result, we expect total advertising to be down around 3% in Q4 and broadly flat over the full year.”
She added: “Online advertising continues to deliver strong double-digit revenue growth.”
Strong on-screen and online viewing
The chief executive continued: "Our strong on screen and online viewing performance has continued with ITV total viewing, which measures our viewing across the ITV Family and the ITV Hub, up 5% driven by a 4% increase in total minutes viewed across the ITV Family and a 37% increase in the time spent viewing online on the ITV Hub.
“This supports our confidence in the robustness of the ITV integrated producer broadcaster model and also reflects the strength and breadth of our content.”
The ITV boss also noted that ITV Studios continues to have a strong pipeline of programmes which will be delivered in 2019 and beyond, with entertainment shows in new territories, including Love Island US and Sunday Night Takeaway in Australia, new dramas including World on Fire, Noughts and Crosses, Wild Bill, The Bay and Zero Zero Zero and returning dramas Gomorrah and Line of Duty.
McCall concluded: “We are making good progress with implementing the strategy - the investment and cost-saving programmes which we set out in July are on track, and as previously mentioned, we will update the market in February on our SVOD plans."
Content not so king
Commenting on the ITV numbers, Nicholas Hyett, equity analyst at Hargreaves Lansdown said: “Although overall performance is in line with management expectations, Q3 numbers still leave a bit of a bad taste in the mouth.”
He added; “Studio revenue growth is slowing, that’s partly explained by the fact it’s a lumpy business but it’s still not ideal. The bigger issue is a slowdown in advertising in the broadcast business, which still accounts for 57% of revenue.
“While ITV’s content is still getting bums on sofas, with viewing numbers up nicely, a gloomy economic outlook means the attention of the viewing public isn’t as attractive to advertisers as it once was.”
In late morning trading, ITV shares were 5.4% lower at 145.90p.
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