ITV posts £118m half-year pre-tax profit

ITV has posted an adjusted pre-tax profit of £118 million in the first half of 2010, buoyed by major growth in the TV advertising market around the World Cup.

In its results statement for the six months to June 30, the commercial broadcaster reported a significantly improved financial performance and unveiled ambitious plans for the future.

It recorded adjusted pre-tax profits of £118m in the first half of the year, up from a £25 profit in the whole of 2009. Group revenue rose from £909m to £987m.

ITV's earnings before interest, tax and amortisation (EBITDA) rose hugely in the first half of 2010 from £46m to £165m year-on-year.

The strong performance was made possible by an 18% year-on-year increase in ITV's television advertising revenue, beating a market average of 15%.

ITV predicts that the ad market recovery will continue into the third quarter of 2010, but the broadcaster is more hesitant about the prospects heading into next year.

"The good financial performance we have reported today has enabled us to reduce our debt significantly but does not disguise the underlying challenges we face. We are under no illusion that ITV needs to change substantially," said ITV chief executive Adam Crozier.

"For the past decade ITV has not faced up to the challenges presented by the rise of internet-based platforms, the continuing growth of pay-TV and subscription services and the globalisation of content.

"Re-shaping the economics of ITV will require changes not only to the strategy but also to ITV's management, culture and organisation and to deliver this we are today announcing a five year Transformation Plan."

Over the last three months, Crozier and ITV chairman Archie Norman have been conducting a strategic review of the broadcaster to create a firm transformation strategy.

Chief among their aims was unlocking more revenue streams away from traditional advertising, after ITV recently endured one of the worst ad market slumps in living memory.

Among the plan's four key points is the onus on ITV to "drive new revenue streams by exploiting our content across multiple platforms, free and pay".

The pledge has resulted in the confirmed launch of timeshift channel ITV1+1 in Q1 2011 and ITV's move into pay-TV with the launch of ITV2 HD, ITV3 HD and ITV4 HD on Sky.

ITV has also unveiled an investment pot of £75m which will be spent over the next three years on "operating investments online, in content and in our digital channels".

However, the broadcaster said that the programme budget for ITV1 would be kept below £800m in 2011 and 2012.

"Our priority for the next 18 months is to make ITV a creatively dynamic and fit for purpose organisation while maintaining strict financial controls," said Crozier.

"We have made swift progress in putting together a very strong management team fully focused on delivering a lean ITV that can create world class content, executed across multiple platforms and sold around the world.

"Over time we expect to move to a position whereby half of ITV's revenue base will be derived from non-television advertising sources and today we are announcing our move into pay television with the agreement to make HD versions of ITV 2, 3 and 4 pay channels on Sky."

Norman added: "Under Adam Crozier's leadership ITV has already established a totally realistic understanding of the challenges, a far reaching plan for transformation and a very strong top team that can deliver."

ITV also said that "drastic" cost cutting has reduced its net debt from £612m at the end of 2009 to £437m this year. The broadcaster's pension deficit now stands at £449m.

ITV Studios, which is now under the control of ex-Channel 4 director Kevin Lygo, posted an 8% year-on-year increase in EBITDA at £43m. Cost cutting helped offset a 25% year-on-year decline in external revenues at the division to £126m.

Revenues at ITV Online were up 20% to £12 million, but ITV accepts that its online business remains "subscale given the size of the online video market".

Average unique users to ITV.com were up 4% year-on-year over the first half of 2010 at 9.1m, but cumulative video views were actually down 14% at 100m.