BoAML: Analyst agrees with ITV’s cautious outlook

Bank of America Merill Lynch (BoAML) has responded conservatively to ITV’s latest figures:

“We continue to forecast a 0.6% decline for the full year (-2% in Q4) vs a prior consensus of c+1%. Importantly we believe (and media buyers suggest) the market would have been down 3-4% if it were not for sports events. Expectations of positive growth next year are unrealistic in our view and do not reflect the loss of sports events and weak underlying growth, and we forecast a decline of 4%.

“ITV expects its TV ad revenues to be broadly flat for the first 9m’s which would imply a 6-8% decline in Q3 following +3% in H1.

“ITV Studio growth of 34% was boosted by the front loaded delivery of a number of shows and the first time inclusion of ITV breakfast production. Excluding these items underlying studio revenue growth was c20%.”

The briefing note chimes with Raymond Snoddy’s conclusion in his Newsline column this week that “boosting production through acquisition is the one really transformational thing that is within ITV’s power. Increasing its role in pay and on-demand substantially, despite the belated arrival of YouView, will be a slow, difficult and perhaps even impossible task”.

BoAML’s summary on ITV’s immediate future is: “While a content led strategy is the right one we believe it is difficult to execute, as ITV has found for the past 15 years, particularly in an environment where broadcasters are seeking to cut costs. Production is hit driven and is very competitive with almost every broadcaster pursuing a similar strategy.”