ITV profits tumbled by 32% following a tricky 2023 but there were green shoots in a solid performance from the Studios production arm, as the broadcaster reveals it is in the early stages of a “strategic restructuring and efficiency programme.”
Delivering its full-year results this morning, the UK’s biggest commercial broadcaster said adjusted EBITDA for the group had fallen 32% to £489M ($622M), with margin at 13% – down 6 percentage points.
Adjusted profit before tax fell by a sharper 41% to £396M. The commissioning team, known as Media & Entertainment, saw EBITDA slide by a whopping 56% to £205M.
ITV said the profit woes are due to “the decline in linear television advertising” and planned investment in streamer ITVX of £464M. Growth in digital advertising “substantially offset” a 15% decline in linear advertising, according to ITV. Total advertising revenue was down 8% to £1.8B.
Group turnover fell a tad by 2% to £4.2B but there was a slight increase in total non-advertising revenue, which ITV hailed.
The results come amidst tricky economic headwinds, with the recession seriously beginning to bite and the U.S. labor strikes having had some impact. ITV has previously said that the writers and actors strikes will delay around £80M of turnover from 2024 to 2025 and it also pointed to “weaker demand from free-to-air broadcasters in Europe who are holding back spend until they see more certainty in the advertising market.”
Content spend will be “marginally reduced” in 2024 to around £1.3B as “ITVX’s strong performance in 2023 has shown us that we can grow viewing significantly with slightly lower overall content spend,” the results said.
Production arm ITV Studios posted record turnover of £2.2B and was the only business segment to see EBITDA increase, rising by 10% to £286M.
ITV flagged the likes of Mr Bates vs the Post Office – its most-watched drama since Downton Abbey – Netflix’s Fool Me Once and hit game show Squid Game: The Challenge as recent success stories.
By 2026, ITV wants to be a “leader in UK advertiser-funded streaming” via ITVX, expand the UK production business, supercharge streaming and optimize the broadcast business. One of its main targets is to grow ITV Studios by 5% per year for the next five years and boost the number of shows it is making for streaming services. The proportion of revenue from streamers rose by 10 percentage points last year to 32%, which is already ahead of its five-year plan target.
“Strategic restructuring”
ITV said it has delivered £130M of its £150M cost savings target by 2026 and will hit this figure a year early. It is also in the “early stages of a 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, ITV expects the latter programme to have delivered incremental annualised gross savings of at least £50M per year.
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, ITV said. It didn’t mention redundancies at this point but has already implemented a recruitment freeze.
CEO Carolyn McCall said 2023 “saw the benefit of the actions we have taken to reposition ITV towards higher sustainable growth,” citing how “production and streaming substantially offset the challenging linear TV advertising market conditions.”
“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,” she added. “ITV has a leading, scaled, global studios business, a high growth streaming service and a cash generative linear advertising business.”
McCall made no mention of the profit declines.
She did, however, the talk up of the success of streamer ITVX, which has been in the ether for more than a year now. Monthly active users to the service were up 19% and total streaming hours increased by 26%, which drove 19% growth in digital revenues to £490M, according to ITV.
The results come in the wake of ITV’s shock sale of its half of streamer BritBox International to BBC Studios for around £255M ($322M).
ITV said it is exiting to focus on the growth of ITVX and the production arm and will redirect efforts in that direction following the deal, which came relatively out the blue last Friday.
Meanwhile, rival Channel 4 is making 250 staff redundant including TV commissioners. There have been layoffs and closures across the UK production sector and two thirds of freelancers are out of work, according to broadcasting union Bectu.