Picture supply: Getty Pictures
After a buying and selling replace revealed a 20% drop in Q3 income, ITV (LSE: ITV) shares fell 15% earlier this week. Is {that a} trigger for concern — or does the 8% dividend yield nonetheless make the shares engaging?
I’m taking a more in-depth look.
In a buying and selling replace launched Thursday (7 November), the broadcaster reported various monetary outcomes for the primary 9 months of 2024. Its ITV Studios arm noticed a 20% drop in income, impacted by the US writers’ and actors’ strike.
Group income was down 8% at £2.74bn in opposition to £2.97bn in 2023, with a decline in ITV Studios income offsetting progress in whole promoting income (TAR).
Nevertheless, the broadcaster says it’s nonetheless on monitor to realize document earnings by year-end. Chief govt Carolyn McCall mentioned: “Our cost-saving programme is progressing properly and in the present day we’re saying additional price financial savings along with the beforehand introduced £40 million of incremental price financial savings by restructuring, improved effectivity and simplifying methods of working.“
Against this, its ITVX streaming platform displayed strong progress, with streaming hours rising 14% and digital promoting income growing 15%. To additional improve profitability, the corporate has additionally outlined an extra £20m in price financial savings.
Enterprise developments
ITV Studios lately acquired a majority stake in distinguished UK drama producer Eagle Eye and secured the choice to adapt Philippa Gregory’s novel Wideacre for tv. Each developments needs to be good for enterprise.
It additionally lined up a spread of recent dramas for ITVX. Examples embrace the thriller Taking part in Good, with James Norton, plus the present crime drama Joan, and real-life thriller Till I Kill You.
Lengthy-time favourites like Dancing on Ice, Celeb Large Brother and Deal or No Deal proceed to enchantment to broad audiences throughout its primary ITV1 channel and ITVX
Dividend monitor document
One in every of my primary issues concerning ITV when it comes to dividends is a sketchy cost monitor document. When the economic system is sweet — like between 2011 and 2018 — dividends are dependable. However when it’s not, the broadcaster is fast to make cuts and reductions.
Following the 2008 disaster, dividends had been lower utterly for 2 years and in 2020 they had been lower once more. Whereas this doesn’t negate the respectable returns delivered in different years, it’s not precisely dependable when it comes to passive earnings.
Dividend cuts can scare off traders and harm the share worth, which might result in losses.
To keep away from cuts, it should efficiently seize streaming audiences and generate adequate income from digital content material. This could possibly be difficult, because it faces fierce competitors from main gamers like Netflix, Amazon Prime and Disney+.
My verdict
The autumn in income’s a priority however I believe a number of components make ITV nonetheless seem engaging. Not least of which is a low ahead price-to-earnings (P/E) ratio of seven.6. It additionally has a good internet revenue margin of 12.11% and a low debt-to-equity ratio of 39.5%.
Although my present shares are a bit down in the present day, I plan to make the most of this chance and purchase extra whereas they’re low-cost!
