ITV’s first-quarter revenue rose by 1% to £766mn, driven by 4% growth in Studios which benefitted from helpful timing of content deliveries to global streaming platforms. This was partly offset by a 2% decline in Media & Entertainment (M&E).
Within M&E, digital advertising revenue grew by 14%, helped by strong growth in ITVX’s total streaming hours. Non-advertising revenue was down 8%.
Net debt rose by £26mn to £592mn over the quarter.
In the second quarter, M&E total advertising revenue is expected to rise by around 10%, helped by the Men’s Football World Cup. Studios is expected to deliver “good revenue growth” over the full year.
ITV remains in active discussions with Sky regarding the possible sale of its M&E business.
The shares rose 1.9% in early trading.
Our view
ITV delivered a good first-quarter update, with advertising revenues coming in a touch better than expected. The Men’s Football World Cup should boost performance this year, against some fairly easy comparables, leading the group to reiterate its full-year outlook.
Talks with Sky regarding the potential sale of its Media & Entertainment (M&E) business remain ongoing. This would include ITV’s free-to-air TV channels, as well as ITX, which has been a big growth driver for the group in recent times. While nothing is confirmed yet, the £1.6bn figure being discussed looks like a good price for ITV.
M&E performance has been weak of late due to a tough comparable period, but that’s set to get easier from here. M&E still makes up around half of the group’s revenue, so the sale raises questions about the long-term options for the rest of the group. It could leave the remaining Studios business open to bids from other buyers.
The Studios business is arguably ITV’s crown jewel. It makes and distributes shows in the UK and abroad. Some of these are sold back to ITV's M&E business, but other blockbusters like Line of Duty are made for others.
ITV relies on companies paying to advertise on its traditional television channels. Given the structural decline of broadcast advertising, moving ITV's top line in the right direction is very difficult.
The Middle East conflict isn’t expected to have a major impact on ITV, aside from slightly lower advertising spending from travel and leisure businesses. But this should get a helpful boost from the men’s football World Cup this year, as more matches are set to be shown on the group’s channel, creating prime-time advertising slots.
Another bright spot is digital advertising. ITVX continued its stellar run, with streaming hours continuing to grow at double-digit rates. With more eyeballs on ITV’s shows, digital advertising revenues are flowing in, giving management confidence that by the end of 2026, digital advertising revenues will exceed £750mn (2024: £482mn).
The balance sheet remains in good shape, providing a layer of operational flexibility. There’s also a generous 6.5% dividend yield on offer. But please remember, no shareholder return is ever guaranteed.
Given ITV's relatively modest valuation, it’s no surprise to see interest from potential buyers. Progress on the deal is likely to be the main driver of sentiment in the near term, and failure to agree terms would likely weigh on the valuation, perhaps presenting an opportunity for investors. But given the structural decline in broadcasting advertising, other parts of the business need to work harder, making it difficult to accurately plot the group’s growth trajectory.
Environmental, social and governance (ESG) risk
The media industry’s ESG risk is relatively low. Product governance is the key risk driver, alongside business ethics, labour relations and data privacy & security.
According to Sustainalytics, ITV’s management of ESG risk is strong. Its environmental policy is adequate and executive remuneration is explicitly linked to sustainability performance targets. However, its overall ESG reporting falls short of best practice.
ITV key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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