ITV warns of tough start to 2019 as annual earnings fall

Broadcasting giant ITV has posted a fall in annual earnings and warned that sales and profits will come under pressure amid Brexit uncertainty.

The group – home to hit reality show Love Island – booked a 4% drop in underlying earnings to £810 million for 2018.

It said Brexit woes are set to see total advertising fall 3% to 4% over the first four months of 2019, and down by as much as 17% in March.

Sales and profits are set to be hit in the half-year as it also comes up against tough comparatives from last year’s Football World Cup boost.

Shares fell 5% after the results.

The figures came as the company said it was in the “concluding phase” of discussions with the BBC over a new on-demand platform called BritBox to rival the likes of Netflix, and is working towards a formal agreement.

ITV will invest up to £25 million in the venture this year and around £40 million in 2020.

Chief executive Carolyn McCall said: “We have started 2019 with strong onscreen and online viewing.

“However, the economic and political headwinds for the UK will have an effect on the advertising market and, while ITV is increasingly diversified, we remain sensitive to this.

“We continue to be very focused on delivering in the areas we can control and actively mitigating the factors outside the company’s control.”

On a statutory basis, ITV reported a 13% rise in pre-tax profits to £567 million for 2018.

ITV said profits will also be held back in the first half of 2019 by hefty investments, including in BritBox, as well as around £40 million of “essential” previously announced investment this year.

But it reiterated plans to slash costs by £15 million in 2019, and by up to £40 million in 2020, to fund its plans.

The results showed ITV’s revenues lifted 3% to £3.21 billion in 2018.

Full-year advertising revenue edged 1% higher, which was better than the company’s guidance for a flat performance, and it said studios revenue and underlying earnings increased 6% and 5% respectively.

On plans for BritBox, Ms McCall said: “This will provide an unrivalled collection of British boxsets and original series in one place.

“We have agreed a joint vision for the service and are now working on a formal agreement.

“We anticipate that other partners will be added to BritBox and we will both speak to regulators and the wider industry about our proposals.”

George Salmon, an equity analyst at Hargreaves Lansdown, said the BritBox venture may help ITV “modernise”.

“There’s no getting away from the fact the world is changing fast and the group’s core business is facing a battle to stay relevant. That’s a significant challenge,” he said.