The sum of ITV’s Studio and Broadcast businesses is valued at more than double ITV’s current market cap, according to a manager at long-term value investors Temple Bar Investment Trust.
Speaking at the UK Investor Magazine’s recent Investment Trust Conference, Nick Purves, Fund Manager at Temple Bar Investment Trust, discussed the value locked away in ITV’s Studio business, highlighting that when the Studios and Broadcast businesses are valued separately, the sum of their parts totals around £6bn, more than double ITV’s current £2.9bn market cap.
Operating in 13 key content markets across the world, ITV’s world-renowned studios arm has produced hit shows such as Love Island and The Voice, and generates around half of ITV’s group revenues.
“That is a good business,” Nick Purves said.
“ITV Studios is the number two independent production company in the world. ITV Studios’ business generated around £250m of operating profit last year. That is probably on its own, worth £3.5bn.”
Purves continued to explain that ITV’s Broadcast business generated a similar amount of profit during the period, making it equally attractive on a valuation basis. He does, however, point to challenges in the advertising world, which are by no means unique to ITV.
While Purves believes ITV shares are significantly undervalued, he also believes management is doing a good job in difficult circumstances. He is not pushing for a breakup of the business.
That said, Purves suggested that he wouldn’t be surprised if he walked in one morning to see an M&A announcement from ITV. The Temple Bar team had such an experience recently with one of their other portfolio holdings, Johnson Matthey, whose shares surged on the sale of its Catalyst Technologies business to Honeywell.
At the end of last year, Sky News reported that a number of parties were eyeing ITV for a takeover, with some looking at the opportunity to break the company up and separate ITV’s Studios business and Broadcasting arm.