ITV chief urged to splash out on more programmes

ITV chief executive Adam Crozier is coming under increasing pressure to “splash the cash” by snapping up other production companies and investing in its own programmes.
Olympic gymnast Beth Tweddle was crowned winner of ITV's Dancing On Ice earlier this year. Picture: ContributedOlympic gymnast Beth Tweddle was crowned winner of ITV's Dancing On Ice earlier this year. Picture: Contributed
Olympic gymnast Beth Tweddle was crowned winner of ITV's Dancing On Ice earlier this year. Picture: Contributed

City analysts want Crozier, who took over at ITV in 2010 after seven years in charge of Royal Mail, to make more television series to reduce its reliance on advertising.

Last month the Channel Three operator shelled out 
£18 million for The Garden, the production company behind documentary series including 24 Hours In A&E and Inside Claridge’s.

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ITV Studios – the company’s in-house production arm, which makes shows including Ant & Dec’s Saturday Night Takeaway, Dancing On Ice and I’m A Celebrity Get Me Out Of Here – is also expanding, having grown its revenues by £100m in 2012 to £712m, contributing to a group-wide rise of 3 per cent to £2.2 billion.

The broadcaster, which will deliver a first-quarter trading update on Wednesday at its annual general meeting, had £206m of cash on its balance sheet at 31 December, leaving room for further mergers and acquisitions (M&A), although its pension deficit stood at just over £550m.

Steve Liechti, an analyst at Investec Securities, said: “Cash generation is still attractive with upside for potentially higher returns, but we believe ITV also needs reserves for any possible strategic M&A to re-orient further from advertising.”

Numis Securities analyst Paul Richards added: “We are supportive of ITV retaining balance sheet flexibility.

“Sensibly, the group remains cautious on the advertising outlook.”

ITV, which is chaired by former Asda chief executive and ex-Tory MP Archie Norman, increased its full-year dividend by 63 per cent to 
2.6p and unveiled a 4p special dividend worth £156m when it unveiled its results back in February.

But analysts think the time is right for the company to invest in its programmes, as well as looking for further acquisitions.

Numis’ Richards pointed out that ITV currently spends about £1bn a year on its shows, the same total as in 2009, although its income from advertising has risen to £1.5bn from £1.3bn.

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Richards added: “Given the challenges facing the BBC, C4 and Five combined with increased competition for talent from BSkyB, we believe ITV should now start to allow higher advertising revenues to feed through to increased programming spend across its family of channels to bolster its viewing share.”

ITV’s peers have also been investing in their production operations, so that they are less reliant on advertising.

Glasgow-based broadcaster STV last month hailed the success of its revival of classic game show Catchphrase for ITV. Previous hit series have included Celebrity Antiques Road Trip.

New entrant BT is also gearing up to create its own content, with stars including Lawrence Dallaglio, Rio Ferdinand and Martina Navratilova lined up to present programmes and commentate on its sports channel.