ITV shares dipped on Thursday after the broadcaster and media group announced Q1 trading and an overall drop in total revenue as their advertising-focused media business experienced a slowdown.
The group’s total revenue fell 1% in the first quarter while the total external revenue rose 4%.
ITV Studios has long been ITV’s bright spot, demonstrated by the 1% increase in revenue during the first quarter, as streaming services boost their spending on ITV’s content.
“ITV put in a solid showing over the first quarter, with strong sales of content to the likes of Netflix and Amazon Prime Video helping to offset a tough comparable period for advertising revenue,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“The Studios business returned to growth after shrugging off the after-effects of the US writers’ and actors’ strike, and it’s expecting to grow revenue ahead of the broader content market, with performance weighted to the second half.”
However, it’s ITV’s traditional advertising and media business that is dragging on performance. Despite online revenue surging 15% during the period, total advertising revenue declined 2%.
“The Media & Entertainment (M&E) side of the business saw revenues decline slightly, with comparable numbers set to get worse next quarter as last year’s figures benefited massively from the men’s Euro’s 2024,” Chiekrie explained.
“Compared to 2023, first-half total advertising revenues are expected to be broadly flat. Within M&E, ITVX continued its stellar run, with an uptick in monthly active users and total streaming hours growing at double-digit rates. With more eyeballs on ITV’s screens, advertising revenues are flowing in, and the group remains hopeful of delivering at least £750mn on digital revenue by 2026.”
ITV’s wariness about the outlook for its revenue and profit was underscored by its decision to include £30m cost savings in the financial highlights of the announcement made on Thursday.
ITV shares were down 2% at the time of writing. Probably a stock to buy on any weakness to trade the range.