ITV’s first-half revenue fell by 1% to £1.6bn. Growth in ITV Studios was more than offset by a decline in total advertising revenue, which was largely due to last year’s numbers benefitting from the 2024 men’s Euros.
Underlying cash profit (EBITA) dropped 33% to £142mn. This reflects the lower advertising revenue, and weighting of higher-margin content sales to the second half this year.
On a 12 month view, free cash flow improved from an outflow of £19mn to an inflow of £43mn, due to favourable timing of cash payments and receipts. Net debt rose from £0.5bn to £0.6bn.
In the third quarter, total advertising revenue is expected to decline “marginally”. ITV Studios expects “good growth” in total revenue, ahead of the global content market, with margins in the 13-15% range.
An interim dividend of 1.7p per share was announced, in line with the prior year.
The shares rose 4.4% in early trading.
Our view
ITV was always going to have a tough start to the year, partly due to higher-margin content sales being weighted to the second half. But despite a sharp drop in first-half profits, numbers weren’t as bad as markets were forecasting, and the shares reacted positively on the day.
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. And due to the Men’s Euros 2024 boosting performance last year, the group came up against some tough comparable numbers over the first half.
One 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 2026, digital advertising revenues will exceed £750mn (2024: £482mn).
We’re pleased with the continued momentum, but it’s still relatively early days. The digital offerings don't yet have enough scale to carry the weight of weakness in the free-to-air side of things.
We must point out the sheer scale of competition in this sector – think Netflix or Amazon Prime Video. The competition has substantially deeper pockets to throw at growing market share. It’s an expensive arena to play in, and any future ramp-ups in production will likely weigh on cash flows.
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 Media & Entertainment business, but other blockbusters like Line of Duty are made for others. The sale of these programmes isn’t currently directly impacted by US tariffs.
Helped by the sale of its stake in BritBox International last year, the balance sheet remains in good shape, adding a layer of flexibility to operations. There’s also a generous 6.3% dividend yield on offer. But please remember, no shareholder return is ever guaranteed, especially when the outlook remains rocky for the group.
Given ITV's low valuation relative to many of its peers and the quality of the Studios business, there’s been plenty of speculation about takeover bids in recent times. That’s likely to remain the case in the near term and be the main driver of the share price until other parts of the business improve performance. But given the structural decline in broadcasting advertising, it’s not likely to be a swift turnaround.
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.
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