ITV plc’s (LON:ITV) advertising revenues held up better than expected in the first half, helped by a record-breaking run for its wildly popular reality TV show, Love Island.
An average of 5.5mln people – most of whom fall into the spendthrift 16-34 age range that advertisers love – have been tuning into ITV2 to watch the show every night for the past six weeks.
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The Chase and Good Morning Britain also grew their viewing figures in the first half, with both now boasting their highest ever market share.
Total viewing figures were down 5% versus the first six months of 2018, although last year’s numbers were flattered by the World Cup.
Chief executive Carolyn McCall described it as “another good viewing performance”, which meant ad revenues weren’t quite as bad as previously feared.
Ad decline not as bad as feared
Bosses had previously guided for a 6% decline in first-half advertising revenue, but the actual drop in the six months ended 30 June was 5%.
ITV said companies are still reluctant to commit to expensive TV campaigns given the current political uncertainty.
But advertisers are increasingly looking to promote their clients through the ITV Hub, with online ad revenues soaring 18%, despite the tough comparatives.
Online advertising is cheaper for the companies and offers a short-term impact, although research has routinely shown it to be less effective than TV ads.
But profits still tumble
Overall, total external revenue fell 7% to £1.48bn (H1 18: £1.59bn) in the six-month period.
Within that, ITV Studios revenue was down 6% year-on-year to £758mln (H1 18: £803mln), although that will pick up in the second half when big-name shows such as I’m A Celebrity… and the latest series of Vera return.
For the year as a whole, ITV Studios is still expected to grow its top line by at least 5%.
Still, the drop in advertising and Studios revenue hit the bottom line, with underlying profits (adjusted) falling by 13% to £327mln (H1 18: £375mln).
On track to deliver full-year targets
Looking ahead, ITV remains confident it will deliver on its full-year guidance.
The broadcaster has upped its cost savings programme and is now targeting £20mln this year (was £15mln), plus an extra £15mln over the next three years. By 2022, it wants to have reduced its cost base by £55-60mln.
“While the macro environment continues to impact ITV, it delivered a robust performance in the first half of 2019, with the financial results modestly better than expected,” the company told investors.
“We are delivering in all areas of the business we control and are making good progress investing in our strategic priorities and in particular, enhancing the ITV Hub and our technology capabilities and platforms to continue our digital transformation internally and externally.”
ITV shares opened 5.9% higher at 112.6p on Wednesday morning. Over the past year, the stock has lost a third of its value.