ITV (LON:ITV) has updated the market on its six-month performance this morning.
**Highlights from ITV’s statement:**
We delivered another strong performance in the first half with double-digit revenue and adjusted EPS growth even with flat television advertising. Total external revenue increased 11% to £1,503 million driven by non-NAR revenues with total ITV Studios revenues up 31% at £651 million (2015: £496 million) and Online, Pay & Interactive up 26% to £107 million (2015: £85 million).
This revenue growth together with our continued focus on cash and costs, has delivered another period of double-digit profit growth with adjusted EBITA up 10% to £438 million (2015: £400 million) and we maintained our margin at 29%. Adjusted EPS rose 10% to 8.5p (2015: 7.7p).
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We have a strong balance sheet and the business remains highly cash generative. Profit to cash conversion over the first half was 86% and free cash flow was up 9% to £269 million. We ended the period with net debt of £796 million after acquisitions of £97 million, dividend payments of £566 million (including the 10p special dividend) and pension deficit contributions of £47 million. At 30 June 2016 our reported net debt to adjusted EBITDA was 0.9x.
Reflecting ITV’s fundamental strength the Board has proposed an interim dividend of 2.4p, up 26% (2015: 1.9p), in line with its policy of delivering dividend cover of 2 to 2.5x adjusted EPS.
ITV NAR is expected to be down around 1% in the nine months to the end of September and we again expect to outperform the television advertising market over the full year.
On screen we are performing well and we remain focused on delivering both mass audiences and the key demographics. However, we expect our viewing performance over the summer to be impacted by the Olympic Games on the BBC. We expect Online, Pay & Interactive to deliver double-digit revenue growth over the full year as it continues to perform strongly. ITV Studios is on track to deliver double-digit revenue and adjusted EBITA growth over the full year, driven by the acquisitions we have made. Over the medium term we are confident in delivering good growth in our global network of content creation and distribution, organically and through acquisitions, although the short term performance will continue to be lumpy.
Whilst the economic outlook remains uncertain we continue to see clear opportunities to invest across the business, both in the UK and Internationally. We are targeting £25 million of cost savings in 2017 to ensure we are well positioned to meet the opportunities and challenges ahead.
We have a clear strategy in place to rebalance and strengthen the business which remains the right one for ITV. We have a strong balance sheet and the capacity to continue to invest behind our strategy, while at the same time delivering returns to our shareholders.
Adam Crozier, ITV plc Chief Executive, said:
“Our strategy of rebalancing and strengthening ITV and building a global production business of scale continues to deliver with double-digit revenue and adjusted EBITA growth in the first half of the year.
Revenue grew by 11% to £1.5bn, driven by non-advertising revenue, with total ITV Studios up 31% to £651m, primarily from our acquisitions. Online, Pay & Interactive also continued to grow strongly up 26% to £107m. Adjusted EBITA in the period rose 10% to £438m.
On screen we’ve performed strongly with Share of Viewing on our main channel up 7% while at the same time long form video consumption increased by 50%.
Against a backdrop of wider economic uncertainty following the EU referendum we have put in place a robust plan to allow us to meet the opportunities and challenges ahead. As part of this we are targeting a £25 million reduction in overheads for 2017.
Looking forward to the full year, we expect to deliver double-digit revenue and EBITA growth in ITV Studios as the acquisitions continue to deliver and double digit revenue growth in Online, Pay & Interactive. We anticipate NAR to be down around 1% in the first nine months of the year and we again expect to outperform the UK television market over 2016 as a whole.
Our strategy of strengthening and rebalancing the business is clearly working and remains the right one for ITV. We have a strong balance sheet and the capacity to continue to invest behind our strategy, while at the same time delivering returns to our shareholders.
As of 07:26 BST, Wednesday, 27 July, ITV plc share price is 184.80p.