First-half revenue rose 1% to £1.6bn (£1.6bn expected), with both its Studios and Media & Entertainment (M&E) businesses contributing evenly to growth.
Adjusted cash profit (EBITA) rose 2% to £145mn (£148mn expected). This was driven by double-digit profit growth in M&E due to strong advertising momentum, which more than offset a 9% decline in Studio profits due to an unfavourable revenue mix.
Free cash flow fell by £3mn to £40mn, and net debt rose by £0.1bn to £0.7bn over the first half.
In the third quarter, M&E total advertising revenue is expected to decline by around 5%. Studios is still expected to deliver “good” revenue growth over the full year, ahead of the broader market, with underlying cash profit margins at the lower end of its 13-15% target range.
The board announced a new £100mn share buyback programme and an interim dividend of 1.7p per share, in line with 2025.
The shares were broadly flat in early trading.
Our view
ITV’s first-half performance was broadly in line with expectations, with strong demand during the World Cup helping offset advertising restrictions on less healthy foods. Advertising guidance for the third quarter was a touch disappointing, but markets were content that the Studios business remains on track to outpace the broader market.
The sale of its Media & Entertainment (M&E) business to Sky for £1.6bn is pending regulatory approval, and if successful, is expected to complete in the second half of 2027. This includes ITV’s broadcast business and ITVX, the latter of which has been a major growth driver for the group in recent times.
M&E accounts for around half of the group’s revenue, so the sale also raises questions about the group's long-term options. A large cash inflow should provide a temporary boost to shareholder returns and could help fund growth in the remaining Studios business. But as a standalone entity, Studios is likely to become more appealing to other potential buyers, too.
The Studios business is arguably ITV’s crown jewel. It makes and distributes shows in the UK and abroad. That said, production businesses can be a bit more lumpy than advertising-funded broadcast revenues, with performance often depending on the timing of commissions, deliveries and hit shows. The addition of Love Productions should be a complementary fit, but it’s more of a bolt-on rather than transformational.
Until the deal is signed, sealed and delivered, investors should still consider the business in its entirety. M&E continues to rely on companies paying to advertise on its traditional television channels. Given the structural decline of broadcast advertising, that has made moving ITV's top line in the right direction very difficult. But there are clearly aspects that have appealed to Sky.
Within M&E, 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 6.7% dividend yield on offer, though not guaranteed.
The Sky deal could help the market put a cleaner valuation on ITV Studios as a standalone content business, helped by the £2.1bn content supply agreement with ITV M&E and Sky. But deal progress remains the main catalyst for now, and any setback would likely weigh on investor sentiment.
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 that yields are variable and not a reliable indicator of future income. Keep in mind that 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.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.