ITV pays special dividend but ad revenue flutters

Ant and Dec. Picture: PA
Ant and Dec. Picture: PA
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Broadcaster ITV said it was on the hunt for acquisitions as it posted an increase in profit yesterday that will help fund another special dividend for shareholders.

In the fourth year of a five-year turnaround plan, chief executive Adam Crozier said the group had taken “another step forward” after profits rose 27 per cent to £581 million.

ITV will hand out £161m in a one-off payment of 4p a share. It also hiked its full-year dividend by 35 per cent, to 3.5p.

Much of the improvement came from its production arm, ITV Studios, which grew revenues by a fifth following the success of programmes such as Ant & Dec’s Saturday Night Takeaway and The Chase.

It has snapped up production companies behind programmes such as 24 Hours in A&E and the Graham Norton Show to build an arsenal of original content it can sell around the globe.

Mr Selfridge, Poirot and Hell’s Kitchen US were also sold to more than 150 countries, while eight of its formats have been sold in three or more countries, including I’m a Celebrity Get Me Out Of Here! and Dancing on Ice.

Crozier ruled out a bid for fellow free-to-air broadcaster Channel 5, but said ITV was continuing to look for acquisitions.

“We’re being very clear that if appropriate [acquisitions] come up and we think they add something to ITV Studios, then we will look at those key opportunities,” he said.

The two key markets in terms of creative content were the United States and the UK, said Crozier.

“If you look at where our acquisitions in the main have been, it’s been in those countries,” he said.

Revenue growth of 3 per cent in its core broadcast division was driven by a 16 per cent increase from online, pay and interactive services, although there was also 2 per cent growth in ITV net advertising revenues.

But the year saw significant fluctuations in revenue growth, driven by the timing of sporting events or programmes delivering large audiences. Revenues were down 3 per cent in the first half of the year but this recovered over the second half.

Some analysts were disappointed by the size of ITV’s special dividend, which had been widely expected following a similar payout last year. Others pointed to concerns over the increasing volatility of advertising revenues.

Keith Bowman, equity analyst at Hargreaves Lansdown, said: “For a second year running, management is underlining the success of its transformation plan and confidence in the outlook through the payment of a special dividend.

“A more balanced and robust business model remains the goal, with a drive to increase non-advertising revenues evidenced by a 17 per cent jump.

“On the downside, advertising revenues appear to be growing ever more volatile as the importance of live sporting events and their timing increases. In addition, and in the wake of a 70 per cent plus rise in the share price over the last year, questions over the valuation have begun to arise.”

Ian Whittaker, an analyst at Liberium Capital, said he was disappointed by ITV’s profit figures and had expected the special dividend to total at least £200m.

He said the culprit seems to have been a £20m shortfall in ad revenues.

“The better-than-expected fourth-quarter performance seen by newspapers does not seem to have fed into ITV,” he said.

But he said revenues looked set to pick up with the late Easter and ITV should benefit from the football World Cup this year.