ITV plc (LON:ITV) has announced its Full Year results for the twelve months ending 31 December 2023.
● Significant progress against ITV’s three strategic pillars
● ITV Studios delivered record revenues and profits
● ITVX delivered strong growth in digital viewing and revenues
● 2026 KPI targets on track
Carolyn McCall, ITV Chief Executive, said:
“In 2023 we saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth. Our Studios business recorded the highest ever revenues and profits and in its first year ITVX delivered strong growth in viewing and digital revenue with investment on plan. This growth in production and streaming substantially offset the challenging linear TV advertising market conditions.
“We remain confident in delivering our KPI targets, and are making good progress towards these – most notably ITV Studios organic revenue growth of 5% on average per annum between 2021 and 2026 at a margin of 13 to 15% and to deliver at least £750 million of digital revenues by 2026.
“We remain firmly committed to creating shareholder value and applying a disciplined approach to capital allocation. As announced on 1 March 2024, we will return the entire net proceeds of the sale of BritBox International through a share buyback of £235 million and the Board has proposed a final dividend of 3.3p giving an ordinary dividend of 5.0p per share or c.£200 million, for the full year.
“Our existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. We are on track to deliver the full £150 million by 2025 – one year early. In addition, we are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. By the end of 2024 we expect the programme to have delivered incremental annualised gross savings of at least £50 million per year, giving a £30 million in year gross benefit in 2024. The ongoing programme is designed to deliver further material incremental savings over a number of years.
“2023 was the year of peak investment for Streaming, which together with the successful execution of our strategy and the efficiencies delivered to date have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth Streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.”
Robust financial performance, with good growth in ITV Studios and M&E digital revenues
● Total revenue was down 2% and total external revenue was down 3% at £3,624 million, with record revenues in ITV Studios, up 4%, and 19% growth in digital revenues substantially offsetting a 15% decline in linear advertising due to a challenging advertising market
● Group adjusted EBITA[1] was down 32% at £489 million which reflects the decline in linear advertising revenue and the previously guided investment in ITVX. Adjusted EPS1 was down 41% at 7.8p
● EBITA[2] was £404 million (31 December 2022: £668 million). Statutory profit before tax was £193 million (31 December 2022: £501 million) and statutory EPS was 5.2p (31 December 2022: 10.7p)
● Strong cash generation with 102% profit to cash conversion[3] and robust balance sheet, with net debt of £553 million (31 December 2022: £623 million) and net debt to adjusted EBITDA leverage of 1.0x (31 December 2022: 0.8x)
● In line with ITV’s dividend policy, the Board has declared a final dividend of 3.3p (2022: 3.3p), giving an ordinary dividend of 5.0p per share for the full year 2023 (2022: 5.0p)
● On 1 March 2024 we announced that ITV had sold its 50% holding of BritBox International to the BBC for a total consideration of £255 million. The Board intends to return the entire net proceeds to shareholders through a £235 million share buyback, which is expected to commence today.
Strong operating performance
ITV Studios – delivered record revenues and profits
● Total revenue grew 4%, with growth remaining ahead of the market. Adjusted EBITA1 grew 10% with an industry-leading adjusted EBITA margin of 13.2%, restored to within our target range. Total organic revenue grew 3%, again ahead of the market
● ITV Studios delivered a good performance against its KPIs in 2023 with outstanding creative deliveries including;
○ Mr Bates vs The Post Office (ITV’s biggest new drama in over a decade)
○ Fool Me Once (one of Netflix’s all time top 10 English language dramas)
○ Squid Game: The Challenge (one of Netflix’s most-watched unscripted originals in 2023)
○ Love Island (format sold to 27 countries) and
○ My Mum, Your Dad (new format already sold to 10 countries)
● Since 2018, ITV Studios total revenue (excluding acquisitions) has grown by c.5% CAGR, faster than the market CAGR of c.4% CAGR[4]
Media & Entertainment (M&E) – ITVX driving significant growth in digital viewing and revenues
● Media & Entertainment (M&E) revenue was down 7% at £2,090 million, with total advertising revenue (TAR) down 8% as guided and outperforming the TV ad market
● ITVX’s strong performance has continued. Monthly active users were up 19%, and total streaming hours increased by 26%, which drove 19% growth in digital revenues[5] to £490 million
● Planet V is seeing growing demand for data-driven, targeted advertising benefitting from the increased scale of online inventory on ITVX driving digital advertising revenue up 21%
● We have maintained our unique position in linear television through the quality and breadth of our schedule as we continue to deliver mass simultaneous reach and innovative commercial and creative partnerships
● M&E adjusted EBITA[6] was £205 million, reflecting the decline in linear television advertising and the planned investment in ITVX (2022: £464 million)
Restructuring and efficiency programme
Our existing cost saving programme targeting £150 million between 2019 and 2026, has delivered £130 million of annualised savings to date. We are on track to deliver the full £150 million by 2025 – one year early.
In addition, we are now in the early stages of a new strategic restructuring and efficiency programme across the Group to reshape the cost base, enhance profitability, and support the growth drivers of Studios and Streaming. We are building on the foundations we have established in digital and data and the significant progress we have made in transforming ITV from a linear broadcaster to a multi-platform broadcaster and streamer.
Savings will come mainly from technology and operational efficiencies, organisational redesign across Group functions, M&E and Studios and permanent reductions in discretionary spend across the Group.
By the end of 2024 we expect the programme to have delivered incremental annualised savings of at least £50 million gross per year, giving a £30 million in year gross benefit in 2024. There will be c.£50 million of one-off costs to deliver these savings. The ongoing programme is designed to deliver further incremental material savings over a number of years which will further build ITV’s resilience. We will provide further information as the programme progresses.
Outlook
We have made great progress towards our 2026 KPIs. 2023 was the year of peak investment for Streaming, which together with the successful execution of our strategy and the efficiencies delivered to date, have made ITV more robust. ITV has a leading, scaled, global Studios business, a high growth Streaming service and a cash generative linear advertising business. This ensures that we are well placed to grow profits from here as we continue to drive material efficiencies, invest behind our strategic priorities and deliver returns to shareholders.
ITV Studios:
● ITV Studios is on track to deliver total organic revenue growth of 5% on average per annum from 2021 to 2026 – ahead of the market, and at a margin of 13 to 15%
● Going forward we expect to see growth in key segments in which we operate – content licensing, demand from streaming platforms for unscripted content and cost effective premium scripted content which we are well positioned to take advantage of
● We are confident that we will continue to grow our market share to 2026 driven by our scale; our diversification by customer, geography and genre; a strong track record of high-quality content; a very strong slate for 2024 and beyond; and our leading creative talent
● As previously guided, 2024 will be impacted by the 2023 US writers and actors strikes, which will delay around £80 million of revenue from 2024 to 2025 as well as weaker demand from free-to-air broadcasters in Europe who are holding back spend until they see more certainty in the advertising market
Media & Entertainment:
● We remain on track to deliver at least £750 million of digital revenues by 2026
● We have had a good start to 2024 and will build on ITVX’s successful launch year through continuous improvements in content, product, distribution and marketing
● ITVX’s strong performance in 2023 has shown us that we can grow viewing significantly with slightly lower overall content spend. Therefore we expect to marginally reduce our content cost in 2024 to around £1,275 million as we further optimise linear, evolve our windowing strategy and improve personalisation. At the same time we will increase our marketing spend by £15 million to drive both streaming and linear viewing
● Non-TAR M&E revenues will come down year on year in 2024. This will reflect lower partnership revenues following our decision to revise our partnership agreements to improve the viewer proposition and our monetisation. In addition subscription revenue will be broadly flat as we simplify our paid streaming proposition and migrate subscribers from BritBox UK onto ITVX Premium
● Compared to the same period in 2023, TAR is expected to be up 3% in Q1, with continued strong growth in digital advertising revenues.
Virtual Results presentation webcast and Q&A:
ITV’s virtual results presentation and Q&A session will be held for investors and analysts at 9.00am today via the following link: https://www.investis-live.com/itv/65ae9816bacfa60c00b892a8/wopwp. You are now able to pre-register to join.
If you would like to ask a question, you will be able to do so via the following Conference Call details:
o United Kingdom (Toll-free): +44 800 358 1035
o United Kingdom (Local): +44 20 3936 2999
o All other locations please refer to: https://www.netroadshow.com/events/global-numbers?confId=60300
o Participant access code: 631126 – Participants will be greeted by an operator who will register their details.
