ITV Pays Special Dividend as Profit Rises on Content Sales

ITV Plc, owner of the U.K.’s biggest commercial TV station, plans to pay a special dividend of 156 million pounds ($236 million) after profit rose 8.1 percent last year as it sold more content.

Net income climbed to 267 million pounds from 247 million pounds, the London-based company said in a statement today. Revenue rose 2.6 percent to 2.2 billion pounds, compared with an average estimate of 2.21 billion pounds from analysts, according to data compiled by Bloomberg.

ITV, whose shows include “Downton Abbey” and “X Factor,” has been reducing its dependence on advertising by investing in content creation and by acquiring production assets. Non-advertising revenue rose 12 percent last year to more than 1 billion pounds and is expected to gain 5 percent in the first quarter of 2013, the broadcaster said.

The special dividend “should be seen as a good thing as it shows the management team is very shareholder-friendly,” Alex DeGroote, a media analyst at Panmure Gordon & Co., said in a telephone interview. “ITV has a very strong balance sheet and net cash of 200 million pounds and no debt. They don’t need the cash so they are giving it away.”

ITV proposed a final dividend of 1.8 pence a share, compared with 1.2 pence a year earlier, and a special dividend of 4 pence a share.

ITV shares rose as much as 2.9 percent and were up 2.3 percent at 122.90 pence as of 9:41 a.m. in London, giving the company a market value of 4.81 billion pounds.

Content Production

“In 2012 we achieved double-digit earnings growth for the third year running, in a broadly flat advertising market,” Chief Executive Officer Adam Crozier said in today’s statement. “We’re now building on our healthy creative pipeline with selective acquisitions in key and emerging creative markets.”

Revenue at content-production arm ITV Studios increased by 100 million pounds to 712 million pounds, Crozier said.

“With ITV Studios we have a much better line of sight of the future than with advertising and we see a healthy pipeline coming forward and expect to grow more this year,” Crozier said on a conference call today.

U.S. Success

Acquisitions for production toward the end of last year will help earnings in 2013, he said. Crozier said ITV won’t rule out other acquisitions.

“ITV is finally starting to see some traction from its investments into content businesses,” Mostyn Goodwin, a partner at OC&C Strategy Consultants Ltd., said in an emailed note today. The success of “Downton Abbey” in the U.S. “has given it a strong platform to build on, making it an obvious mergers-and-acquisitions target.”

Crozier said there has been no takeover offer for ITV.

The company has had a “positive start to 2013 with first-quarter advertising expected to be up 5 percent and continued strong demand for ITV Studios content,” it said.

The underlying TV advertising market “continues to be broadly flat” and the company remains cautious about the ad market this year, ITV said. The second quarter will probably be affected by difficult 2012 comparisons from Euro Championship soccer, it said.

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