ITV (LON: ITV), the UK commercial television network and international productions business, saw total external revenues rise just 1% to £1,144m in the six months to 30 June 2013. As expected, advertising revenues fell 3% to £741m and non-advertising revenues rose 11% to £568m.
The online, pay & interactive revenues are still a comparatively small segment, but rose 19% to £56m. Overall, EBITA rose 11% to £291m, with broadcast & online contributing £228m, up 7%. Adjusted profit before tax increased 16% to £270m, with adjusted earnings per share up 15% to 5.3p.
During the first half of the year, ITV made acquisitions in the UK and US. In the UK, The Garden was acquired to develop factual entertainment formats, and in the US, Thinkfactory Media and High Noon Entertainment build on ITV's current base. The cost of these acquisitions could be as high as £174m depending upon performance.
In addition to expansion, ITV is focused on saving £20m in 2013 on top of the £90m saved between 2010 and 2012. These savings are reported to be on track and are earmarked to fund investment in ITV's creative pipeline, technology and online offerings.
One sour note is the level of net debt at £52m in comparison with net cash of £206m at the end of December 2012. The fall was precipitated by the initial cash consideration of the acquisitions mentioned above at £54m, plus the acquisition of a new London headquarters for £58m, the special dividend of £227m in addition to £100m in debt buyback and a pension deficit contribution of £80m. The board remains upbeat about the future performance declaring an interim dividend up 38% to 1.1p.
Adam Crozier, ITV Chief Executive, said:
"We're making good progress with our strategy of growing and rebalancing the business as we build new revenue streams and improve margins.
"In the first six months of the year ITV continued to increase group profits and revenues despite the expected fall in our H1 advertising revenues. Non-advertising revenues were up by 11% to £568m, driven by significant growth in Online, Pay & Interactive and in ITV Studios.
"As we anticipated, the shape of the television advertising market this year is very different to 2012. In spite of monthly volatility we expect ITV Family NAR to be broadly flat for the nine months to the end of September with Q3 up 9%. We expect both ITV Studios and Online, Pay & Interactive to deliver double digit revenue growth for the year as a whole as we continue to rebalance and strengthen ITV."
With forecasted flat advertising revenues and double digit growth in non-advertising revenues, the future looks bright for ITV. Investors will be watching carefully to see if the acquisitions are shrewd enough to convert into further strong growth for ITV.
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