ITV broadcasts confidence with bumper payout and special dividend
As its strongest advertising performance in five years helped ITV beat full-year forecasts, the broadcaster and producer is so confident of growth from all parts of the business this year it has lifted the annual dividend 34% and proposed an extra 6.25p special payout.
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A sore point in 2014 was that the share of viewing (SOV) of the ITV Family of channels was down 5%, after 4% growth 2013, which chief executive Adam Crozier said remained a "key area of focus" for 2015.
Nevertheless, with up and coming new dramas that include Richard E Grant in Jekyll & Hyde as well as the return of Downton Abbey and Thunderbirds Are Go plus rights to the Rugby World Cup being held in the UK this autumn, Crozier was confident of a bounce back.
He said the company was now a more balanced business with strong underlying cash flows, with ITV Studios now a global player of scale thanks to three new international acquisitions in 2014 - not to mention current talks to buy Talpa Media.
Crozier is confident of further growth in all parts of the business, with ITV studios expected to deliver upside from its acquisitions and return to organic growth from continued investment in talent.
Broadcast is expected to outperform the TV advertising market, with ITV Family net advertising revenue (NAR) predicted to be up 11% in the first quarter and up 4-7% in April, while online, pay-TV and interactive should continue to grow at pace.
For 2014, earnings before interest, tax, depreciation, amortisation and exceptional items rose 18% to £730m, above market expectations for nearer £700m, on external revenue up 8% to £2.59bn. Adjusted profit before tax rose 23% to £712m and earnings per share by 23% to 13.8p.
With net NAR outperforming the market with a 6% advance to £1.6bn, this helped broadcast and online revenue increase 7% to £2.02bn, while ITV Studios rose 9% to £0.93bn as the fast-growing production arm more than doubled in size in the last two years.
Non-advertising revenues rose 10% to £1.3bn, driven by a 30% increase in online, pay-TV and interactive.
In light of this confidence, management have reiterated their commitment to grow the full-year ordinary dividend by at least 20% per annum for three years to 2016 and proposed a final dividend for 2014 of 3.3p, which equates to a 34% increase in the full-year dividend to 4.7p, well above consensus estimates.
This was then eclipsed by a £250m return to shareholders proposed by way of the special dividend rising 56% to 6.25p from the 4.0p returned to shareholders over the last two years.
Broker Numis hailed the very strong final results, with EPS well ahead of consensus expectations of 13.2p and the dividend likewise. Although advertising is up strongly in the first quarter, analysts noted that it will be impacted by the tough FIFA World Cup comparative and disruption from the election in the second, though exclusive rights to show the Rugby World Cup will boost the second half. It has raised 2015 NAR estimates to 3% from 1%, which adds £25m to PBT and was part of EPS forecasts being lifted by a penny to 14.8p.
Elsewhere, Westhouse was pleased by the strong performance and positive outlook comments, but said the recent period of strong share price performance had taken the group’s valuation to a fair level relative to its underlying attractions. It noted recent media reports that cost cutting at BBC would lead to a talent exodus to ITV and others.