Rebalanced ITV delivers continued good growth Interim Results 2016 27 July 2016
Agenda Key Messages and H1 Highlights Adam Crozier Half Year Financial Results Ian Griffiths Strategic Outlook Adam Crozier Q&A 2
Key Messages and H1 Highlights Adam Crozier 3 3
Key messages Rebalanced business driving another strong performance • Continuing to execute against a clear strategy • Over the full year on track to deliver • double-digit revenue growth in Online, Pay & Interactive ▶ double-digit revenue and profit growth in ITV Studios ▶ ITV NAR forecasted to be down around 1% in first 9 months • Will outperform TV ad market in 2016 • Post Brexit plan in place • targeting £25m of overhead cost savings for 2017 ▶ Strong balance sheet • flexibility and capacity to invest across the business, and ▶ delivering returns to shareholders in line with our policy ▶ Continue to see clear opportunities to invest behind the strategy in the UK and internationally • 4
H1 Highlights H1 2016 Highlights: Rebalanced business driving double-digit • profit growth Revenue External revenue growth driven by • External revenue £1,503m 11% continued growth in Non-NAR - NAR £838m Flat Broadcast fundamentals remain robust, not • Non-NAR £874m 26% least improved viewing performance Continued strong growth in Online, Pay & Earnings • Interactive Broadcast & Online EBITA £317m 1% Studios delivering 31% total revenue • ITV Studios EBITA £121m 42% growth, driven primarily by acquisitions Group EBITA £438m 10% Acquisitions coming through as planned • Adjusted PBT £425m 9% Dividend, delivering increasing returns to • shareholders as previously committed Adjusted EPS 8.5p 10% Shareholder returns Ordinary dividend 2.4p 26% 5 Note: EBITA is adjusted for production tax credits
Half Year Financial Results Ian Griffiths 6
Strong growth from new revenue Financial Highlights streams and acquired businesses External revenues up 11%, with 2016 (£m) 2015 (£m) Change • Non-NAR up 26% Broadcast & Online 1,061 1,035 3% Online, Pay & Interactive revenue • ITV Studios 651 496 31% up 26% Total revenue 1,712 1,531 12% ITV Studios total revenue up 31% • driven primarily by acquisitions Internal supply (209) (175) 19% Double-digit growth in adjusted • Total external revenue 1,503 1,356 11% EBITA and EPS Group EBITA margin maintained Broadcast & Online 317 315 1% • at 29% ITV Studios 121 85 42% Increasing dividend, up 26% in • Group EBITA 438 400 10% line with policy Group EBITA margin 29% 29% - Strong cash generation, £269m of • free cash flow Adjusted EPS 8.5p 7.7p 10% Statutory profit again impacted • by accounting for prior year Statutory EPS 6.1p 6.4p (5)% acquisitions, predominantly Talpa Ordinary dividend 2.4p 1.9p 26% 7 Note: Revenues and profits from continuing operations; EBITA is adjusted for production tax credits
Profit growth even with higher on Broadcast & Online screen investment and flat advertising 2016 (£m) 2015 (£m) Change Total revenue up 3% • ITV Family NAR flat, ahead of the TV ITV NAR 838 838 - • ad market Online, Pay & Interactive revenue 107 85 26% Continued strong growth in high • SDN external revenue 33 31 6% margin VOD and Pay revenues Other commercial income 83 81 2% Timing of big sporting events • Non-NAR revenue 223 197 13% impacts NPB phasing Tight control of costs particularly • Total revenue 1,061 1,035 3% transmission costs Schedule costs (547) (507) (8)% Profit margin maintained at 30% • Other costs (197) (213) 8% Acquisition of UTV and subsequent • Broadcast & Online EBITA 317 315 1% disposal of loss making UTV Ireland EBITA margin 30% 30% 8 Note: Excludes revenue and losses of UTV Ireland which is a discontinued activity
ITV Family NAR again ahead of the NAR TV ad market 2016 Monthly ITV Family NAR Normal month to month volatility but • down around 1% over first 9 months 25% 15% The Referendum vote clearly impacted • spend in early Q2 5% -5% Strong performance in June, up 19% • around Euro Championships -15% Jan Feb Mar Apr May Jun Jul Aug Sept (E) Supermarkets and Finance, driven by • Monthly Change Moving Annual Total traditional banks, continue to be down Category H1 2016 (£m) YOY % change Retail excluding supermarkets up 4% • Retail 145 (4) Good performance in other key Finance 88 (5) • categories in H1 Entertainment & Leisure 78 10 Food 70 (11) Too early to gauge post Brexit • Cosmetics & Toiletries 58 12 behaviour Cars and Car Dealers 55 10 Expect to outperform TV ad market Airlines, Travel and Holidays • 52 4 again over the full year Publishing and Broadcasting 38 12 Pharmaceuticals 33 23 Telecommunications 32 (11) Others 189 2 Total 838 - 9 Note: Monthly ITV NAR figures and category data based on total ITV Family advertising
Strong growth in high margin Broadcast & Online Revenue Non-NAR revenues Growth in Online, Pay & YOY Broadcast Revenue Tracker (£m) Interactive Revenue (£m) 5 2 8 11 1,061 365% 1,035 107 H1 2015 Online & On Demand Pay & Distribution SDN Other Broadcast Non- H1 2016 NAR More balanced business delivers revenue and profit growth even with • flat advertising High demand for VOD advertising with strong online viewing across key • demographics - total consumption up 50% 23 Pay revenues growing with new deals and strong demand for our content • SDN revenue increase from launch of an extra stream • H1 2009 H1 2016 10
Strong growth primarily driven by ITV Studios acquisitions, especially Talpa 2016 (£m) 2015 (£m) Change Studios UK: healthy revenue growth on • and off ITV driven by scripted content Studios UK 292 208 40% Good organic growth and benefit of • ITV America 96 145 (34%) Twofour and Mammoth acquisitions ITV America: deliveries impacted by Studios RoW 184 72 156% • timing and prior year dramas Global Entertainment 79 71 11% Studios ROW: benefiting from full 6 • Total Studios revenue 651 496 31% months of Talpa Demand for Talpa formats remains Total Studios costs (530) (411) (29)% • strong, new 4 year deal in China ITV Studios EBITA 121 85 42% Distribution growth from strong slate • of programmes EBITA margin 19% 17% Significant profit growth up 42% • Internal – ITVS to ITV Network 209 175 19% Increased margin reflecting revenue • mix in first half External revenue 442 321 38% £14m revenue and £3m EBITA benefit • Total revenue 651 496 31% from FX 11 EBITA is adjusted for production tax credits
Creating a scaled international ITV Studios business YOY Studios Revenue Tracker (£m) Shape of the business 14 159 39% 2009 651 32 H1 61% 4 496 54 H1 2015 Studios UK ITV America ROW Productions & GE Acquisitions FX H1 2016 Total Revenue £296m £159m of growth from acquisitions, with full six months of Talpa making a • significant contribution Organic revenues down 4%, impacted by US timing of deliveries and prior • year drama 2016 50% 50% Rest of Studios continues to deliver good organic growth H1 • As usual underlying growth in production business continues to be lumpy • 50% of H1 revenue generated outside UK • Total Revenue On track to deliver double digit revenue and profit growth over full year • £651m Acquisitions continuing to deliver returns in excess of our cost of capital • UK International 12
Profit to cash conversion Continued strong cash flow 2016 (£m) 2015 (£m) Net Debt Movements (£m) 269 Adjusted EBITA 438 400 Working capital movement (60) (8) (319) Share based costs 7 8 (796) Capex (23) (25) Depreciation 15 13 (566) (97) (20) Adjusted cash flow 377 388 (63) Profit to cash ratio Dec-15 Adjusted cash Dividends Acquisition of Purchase of Other Jun-16 86% 97% Net Debt flow subsidiaries, shares for EBT including FX Net Debt 6 months to 30 June net of cash on Bond acquired Profit to cash ratio 86% 92% 12 months rolling Significant working capital outflow as a result of strong • NAR in June, investing in content and Voice of China deal Adjusted cash flow 377 388 Continued investment in scripted, £64m in H1 • Net cash interest paid (6) (8) Focus on working capital continues to be a priority • Cash tax paid (55) (68) Continued strong profit to cash conversion of 86% • Pension funding (47) (66) Strong free cash flow up £23m, 9% to £269m • Net debt of £796m, after special dividend Free cash flow 269 246 • 13
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