News Column

ITV back in profit and in favour with viewers: Profit for 2013 hits pounds 581m as recovery gathers pace Broadcaster rules out bid for Desmond's Channel 5

February 27, 2014

Jennifer Rankin and John Reynolds



The good times are back at ITV, after the broadcaster reported strong profit growth on the back of programming successes including Broadchurch and Mr Selfridge.

Britain's largest free-to air broadcaster ruled out a bid for Richard Desmond'sChannel 5, as it reported profits of pounds 581m for 2013, a rise of more than a quarter on the previous year.

Revenues from advertising sales increased, but it was a double-figure leap in income from its own ITV Studios - the programme-making and distribution hub behind hits such as Downton Abbey - that drove profits upwards.

Chief executive Adam Crozier hailed "a significant step forward" for ITV, which has struggled to find its feet since it was created by the merger of network heavyweights Granada and Carlton in 2004. Crozier, who was parachuted in from the Royal Mail in 2010 to rescue the business, said: "All parts of the business are progressing well as we continue to rebalance ITV."

The steep rise in profits beat City forecasts, confirming that ITV has escaped the debilitating problems of slumping advertising revenue and enormous debt that confronted Crozier when he first arrived.

Under his leadership, ITV has reversed the decline in domestic programming, by winning audiences and advertisers with mass market hits including Dancing on Ice and I'm a Celebrity Get Me Out Of Here!

Meanwhile, Downton Abbey and Broadchurch have restored a reputation for drama that had been obscured by the success of entertainment formats such as the X Factor and I'm a Celebrity.

Crozier said ITV's broadcast channels had enjoyed their best year of viewing, while the main ITV channel had seen Emmerdale compete effectively for audiences against the BBC's Eastenders.

The strategy of exporting formats has also paid off, with Mr Selfridge, Marple and Hell's Kitchen US sold to more than 150 countries, while eight of its formats have been sold to multiple countries, including I'm a Celebrity and Dancing on Ice. Almost 60% of ITV's content is made by ITV Studios.

Crozier ruled out a bid for Channel 5, saying an offer would have attracted regulatory scrutiny, given the combined power of the two channels in the advertising market. First-round bids for Channel 5, which is owned by Daily Express proprietor Richard Desmond, are due on Thursday, with BSkyB and the US-based Discovery Communications expected to make a joint bid.

But Crozier said ITV would continue to look at acquisitions, especially in the US and Britain. ITV is more than three-and-a-half years into a five-year turnaround plan, which includes cutting costs and buying production companies, as it attempts to shield its business from the deteriorating market for free-to-air advertising.

In a 12-month buying spree, ITV Studios acquired four production companies. It has bought The Garden and Big Talk in Britain, in deals aimed at boosting its factual entertainment and comedy formats, as well as Thinkfactory Media and High Noon Entertainment in the US.

These purchases helped ITV Studios increase its revenue by 20% to pounds 857m, although ITV said some of the growth was not due to acquisitions. The cost-cutting part of the turnaround plan is set to continue, albeit at a slower pace, with further cuts of pounds 10m pencilled in for 2014, after pounds 28m in cuts last year.

However, the announcement of a pounds 161m special dividend fell short of market expectations, causing ITV shares to slide 3.5% to 199p, with some analysts expecting a payout of at least pounds 200m.

Keith Bowman at Hargreaves Lansdown stockbrokers said Crozier's transformation plan was "clearly blossoming". But he warned that ITV faced ongoing pressure on revenues, with advertising sales likely to be increasingly volatile as companies demand slots for live TV events with guaranteed audiences.

Crozier said ITV, which is broadcasting this year's World Cup from Brazil, would be "always interested" in future sports rights despite losing the Champions League broadcast franchise to BT.

Captions:

Broadchurch

Alongside Downton Abbey it has restored ITV's reputation for drama

Mr Selfridge

The Edwardian sex and shopping drama has been exported to more than 150 countries, along with Marple and Hell's Kitchen, as part of a strategy brought in by Adam Crozier, formerly boss of Royal Mail Photograph: Patrick Redmond

Emmerdale

The soap has competed successfully for ratings with the BBC's EastEnders


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Source: Guardian (UK)


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