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ITV reports much improved ad trends but revenues and production still lagging

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ITV PLC (LON:ITV) has reported much-improved advertising trends in the third quarter, but revenues remain down and costs are higher due to the coronavirus (COVID-19) pandemic.

Advertising spend was down 7% in the three months to end-September 2020, compared to the 43% in the second quarter, and boss Carolyn McCall said the final quarter is expected to be up 6% year-on-year.

July spend was down 23%, August up 3%, September down 2% and October down 1% compared to the same periods last year, with September and October boosted in 2019 by the Rugby World Cup.

Total external revenue of £1.86bn was down 16% year on year, with broadcast revenue down 13% at £1.3bn and the production arm ITV Studios down 19% at £0.9bn. This compared to a 17% decline in the first half.

While 85% of Studios productions that were paused as a result of COVID-19 are back in production or have been delivered, McCall said social distancing and lockdown restrictions have added production costs and were making it challenging to bring productions back to full capacity.

The group is, however, on track to deliver the previously announced cost-saving target of £60m in 2020, though only £10mln is permanent.

McCall said the group remained focused on executing her More Than TV strategy to accelerate its digital transformation, including plans to improve the content and user experience of ITV Hub, however with powerful competition from across the Atlantic the difficulty of achieving results was shown in the number of registered users falling slightly during the quarter.

Online viewing fell 6% with no summer Love Island and fewer soap episodes, although total viewing was up 2%.

On the upside, online revenues increased by 2% in the quarter.

ITV shares were little moved at just over 90p on Thursday morning, still down 40% this year.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “With so many eyes due to be glued to the box over the long winter nights, it bodes well for advertising, with the company forecasting ad revenue for the fourth quarter to be up year on year.”

She added that the UK’s demand for news has continued unabated with the BBC proving a tough competitor, which ate into ITV’s family share of viewing once again.

“For long term growth, attracting new viewers overseas will be essential and the roll out of its joint BBC venture Britbox continues. Although it now has 1.5mln subscribers in the US, it’s still going to be tough competing with the might of Netlix and Amazon, with what some might view as a niche offering of particularly British content.”

  –Adds shares and broker comment–

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