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ITV wants to slash costs by £25 million to ward off Brexit shockwaves
ITV
ITV plans to cut costs by £25 million ($32.8 million) by 2017 to protect itself from the economic shockwaves of Brexit that have flattened the UK advertising market.
The UK commercial broadcaster’s earnings for the first six months of 2016 showed that its external revenues hit £1.5 billion ($1.9 billion), which was an increase of 11% on the £1.35 billion ($1.7 billion) recorded over the same period last year.
But it was ITV Studios, ITV’s global production arm, which accounted for much of this growth (ITV reports "external revenues" because ITV Studios also generates revenue by supplying programmes to ITV). ITV said net advertising revenues were flat at £838 million ($1 billion) in the first half of the year because of uncertainty "driven by the EU referendum."
ITV expects its ad turnover to fall by around 1% in the nine months to the the end of September. As well as the Brexit shockwaves, ITV will not be helped by the BBC’s coverage of the Olympics, which will mean it loses audience share.
On a media conference call for the earnings, ITV chief executive Adam Crozier said the £25 million of savings will come from "right across the business" and "may involve" job cuts. He stressed, however, that "by and large" the savings are in line with costs stripped out of the business in the past six years.
Business Insider revealed last week that ITV has introduced an informal recruitment freeze and ban on pay rises in an effort to cut costs. The broadcaster also plans to close its defined pension benefits scheme, which will result in substantial savings.
Crozier said uncertainty in the ad market kicked in this February when the referendum was called. He added that there has not been a "second gear" in the uncertainty since Britain voted to leave the EU in June.
"The result hasn’t changed anything," Crozier said, but he warned that the country is still in unchartered waters and "it’s too early" to say what the full impact will be on the ad market.
In a statement accompanying the earnings, he added: “Against a backdrop of wider economic uncertainty following the EU referendum we have put in place a robust plan to allow us to meet the opportunities and challenges ahead.”
Analysts at Liberum said in a note on Wednesday that concerns over the impact of the referendum had been “overdone,” adding that ITV has “enough cost-levers to keep margins up even in a weaker advertising environment.”
Analysts at Numis remarked that the broadcaster’s results were “strong.”
ITV’s adjusted earnings before interest, taxes, and amortization were up 10% to £438 million ($574 million) on the back of the revenues of £1.5 billion. ITV Studios’ turnover rose 11% to £651 million ($854 million) in the first six months of the year.
The production arm was buoyed by recent acquisitions including “The Voice” creator Talpa Media and Mammoth Screen, which is currently making a lavish biopic on Queen Victoria, titled “Victoria.”
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