ITV PLC (LSE:ITV) impressed the market with its latest update showing a strong bounce back from the Coronavirus (COVID-19) pandemic.
Total advertising revenue (TAR) for the full year 2021 is expected to be the highest in the broadcaster's history, up around 24%, lifted by the re-opening of the economy and ITV’s strategy in reaching viewers among multiple platforms.
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Profit to cash conversion is expected to be around 60% in 2021, up from previous guidance of 30%, due to the stronger than expected TAR performance. The group will reach its £30mln cost savings target this year.
ITV Studios is performing strongly and remains on plan for the year, helped by strong global demand for content, while the digital transformation of Media & Entertainment (M&E) continues at pace, driving streaming viewing and revenues.
The FTSE 100 firm plans to invest £1.1bn in its programming content next year, which will include the FIFA World Cup, the FA Cup and dramas such as Gomorrah and Django in Italy, Let The Right One In, Snowpiercer season 4 and Physical season 2 in the US, The Outlaws and A Spy Among Friends in the UK.
Next year will also see new seasons of popular unscripted programmes such as I'm A Celebrity in the UK, Rat in the Kitchen, My Mom Your Dad and Hells Kitchen in the US, Let Love Rule in The Netherlands and Love Island Australia.
In the nine months to 30 September, total external revenue surged 28% to £2.3bn, with ITV Studios and M&E up 32% and 26% respectively.
BritBox UK continues to perform well and on plan and has recently launched on Xbox, while the international arm is delivering strong growth in subscriptions across the US, Canada and Australia and launched in South Africa in August. More new markets are expected in 2022.
Analysts noted that, while the performance was notable, there are still long-term doubts about traditional broadcasters when competing with giants such as Netflix, Apple and Walt Disney.
Neil Wilson at Markets.com stressed that ITV is reliant on “cyclical ad revenues”, while Keith Bowman at interactive investor was concerned about tough advertising comparatives going forward and a potential junk food prime time advertising ban from the start of 2023.
However, he noted that shares are at a big discount to the big streamers and the dividend payment restarts soon.
“While ITV is a small player compared to the global giants, its strengths and pedigree are unlikely to be completely overlooked. As such and with analysts’ currently estimating a fair value price per share of around 139p, consensus opinion currently points towards a buy.”
Shares climbed 10% to 120.25p on Wednesday morning.