ITV share price: 5 things to watch out for in its 2018 results

ITV has had a challenging 12 months of trading, with consumers moving away from watching traditional TV in favour of online streaming platforms like Netflix, Amazon Prime and YouTube.

And where the consumers flock, advertising revenues will follow, which has led to a significant decline in revenues for ITV and other traditional British broadcasters.

An update on ITV’s new strategy

With British broadcasters all struggling to keep pace with streaming platforms, ITV’s CEO Carolyn McCall announced a new growth strategy mid-way through 2018, which aims to make the company ‘more than TV’.

When the plans were initially unveiled, McCall stressed that the strategy was more of a refresh of the broadcaster than a complete reboot, with the CEO stressing that company would maintain its share of the traditional TV market to ensure ad revenues remained stable and growth via the production of new content. ITV is also looking at creating new service that would be launched in partnership with other British broadcasters, including the BBC and Channel 4.

Weaker revenues after a soft end to 2018

ITV’s revenues increased by 6% in its third quarter, with total advertising sales up 2%, driven by 43% growth in online and a 10% rise in total ITV Studios sales.

But despite relatively strong sales growth in its previous trading update, the broadcaster has warned that a soft end to the fiscal year could put a dampener on its full-year results on Wednesday, with ITV anticipating a 3% decline in ad revenue in its final quarter of 2018, which would see its full-year revenues to come in flat.

Brexit uncertainty takes its toll on ITV ad revenues

The decline in ad revenues expected in its full-year 2018 results has been put down to ongoing Brexit uncertainty, which has seen advertisers delay new campaigns due to a lack of clarity on how Britain’s departure from the EU will impact trade.

Analysts have forecast revenue and operating profit at ITV to improve in its full-year results but are expecting a 6.6% decline in adjusted net income, according to a Bloomberg-compiled consensus. But some analysts may want to downgrade their forecast further, after British Prime Minister Theresa May has delayed a meaningful vote on her new Brexit deal, with one Tory minister hinting that the Article 50 deadline of March 29 could be pushed back.

Dividend for shareholders

Investors will be keen to see if ITV makes good on its pledge to payout a dividend of at least 8p per share over the 2018-2019 investment period.

The British broadcaster previously said that it intends to increase the size of the dividend in line with earnings over the medium-term, with the company targeting a profit-to-cash conversation rate of 85%, with this metric being one for investors to look out for in the results on Wednesday as an indicator for the size of shareholder payouts moving forward.

ITV Studios performance

The unit is responsible for producing content for ITV and third parties and is forecast to end the fiscal year on a high, with the business expected to deliver revenue growth of 3%, which is a slight downgrade, but still impressive nonetheless considering that several programmes had delayed releases and industry headwinds the company has had to contend with.

ITV Studios performance will be key for the broadcaster in the year ahead, with it looking to record overall revenue growth at a CAGR of 5% over the next three years with an EBITDA margin of between 14%-16%, as well as an increase total production to over 10,000 worth of programming.