ITV Gains on Sales Rise Driven by Studio, Digital Businesses

  • Ad sales flat in run-up to Brexit vote; cost cuts planned
  • Shares rise most in two years as Euro 2016 boosts revenue

ITV Plc rose the most in two years after the U.K. broadcaster known for “Downton Abbey” posted a 11 percent gain in first-half sales, aided by the Euro 2016 soccer tournament and its growing studio production business.

Revenue, adjusted for internal sales, of 1.5 billion pounds ($1.98 billion) in the period through June 30 met analysts’ forecasts. ITV said in a statement Wednesday that while advertising was flat in the run-up to the U.K. vote to leave the European Union, it is targeting about 25 million pounds in expense reductions, including job cuts, in 2017, given the uncertainties ahead.

ITV has been working to reduce its reliance on advertising, posting 31 percent revenue growth at its production and distribution arm, ITV Studios, and a 26 percent increase at its online businesses in the first half. Non-advertising revenue now accounts for more than half of the London-based company’s sales, helping to offset any potential drop-off in companies’ marketing budgets as the U.K’s exit from the EU begins to bite.

"The whole point of what we’ve done is to rebalance the company, make it more robust, make it less reliant on one source of revenue, and less reliant on the U.K.,” Chief Executive Officer Adam Crozier said on a call. “It’s all about trying to build these new revenue streams outside of advertising.”

The stock rose as much as 8.1 percent in London, the steepest intraday advance since July 17, 2014, and was up 5.6 percent to 195.1 pence at 8:48 a.m. ITV shares have declined 16 percent since the June 23 Brexit vote, compared with a gain of 4.7 percent for members of the FTSE 100 Index.

Adjusted earnings before interest, taxes and amortization rose 10 percent in the first half to 438 million pounds, ITV said.

In July, the company agreed to sell Dublin-based UTV Ireland to Virgin media just five months after acquiring it. The operation will remain in the EU, while ITV will keep its sister network in Northern Ireland, which will leave along with the rest of the U.K.

Net advertising revenue was little changed at 838 million pounds, including UTV, the company said. The results were aided by the Euro soccer championships, ITV said. Supermarket advertising declined, while other retail categories including cars and cosmetics rose 4 percent in the first half. Finance also fell, with traditional banking decreasing ad spending.

The company said it expects net advertising revenue to decline about 1 percent for the first nine months of 2016.

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