ITV profits fall as advertising revenue slips

ITV has reported a 14% fall in annual pre-tax profits to £553m as advertising revenues declined by 3%.

The UK's biggest commercial broadcaster said it continued to rebalance and strengthen the business and blamed "wider political and economic uncertainty" for advertising falls.

It hailed a 13% increase in revenue from the ITV Studios division.

Underlying pre-tax profit was up slightly on the year, from £843m to £847m.

Total viewing across its channels rose by 1% last year, with the share for the main ITV channel increasing from 15% to 15.4%.

The company said in its results statement that it was proposing a special dividend of 5p a share, causing its share price to open 1.5% higher.

Chief executive Adam Crozier said ITV had "delivered a good performance in 2016", pointing out that total external revenues were up 3%.

"The continued growth in revenue and adjusted profit, despite a 3% decline in spot advertising revenues resulting from wider political and economic uncertainty, is clear evidence that our strategy is working and remains the right one for ITV," he said.

Mr Crozier added that ITV - home to shows including Coronation Street, the X Factor and Broadchurch - maintained its "leading position" in the UK television advertising market.

"Whilst our net advertising revenues have declined, we again outperformed the UK television ad market as a whole," he said.

Shares, which have fallen by a fifth in the past 12 months, rose 2% to 206.7p in morning trading.

There has been speculation that ITV could be a takeover target by a foreign broadcaster.

George Salmon, a Hargreaves Lansdown analyst, said although the slowdown in advertising spending was likely to be a short-term trend given Brexit uncertainty, challenges remained for ITV.

"Longer-term viewing habits are clearly moving towards a more on-demand set up. This brings the group into competition with Amazon and Netflix, two pretty bruising rivals with deep pockets," he said.

"While continuing to provide entertaining content is obviously essential, building a slick online platform could be just as important."

Neil Wilson at ETX Capital said he expected the company to continue moving away from a reliance on advertising.

"Non-net advertising revenues now make up 53% of total revenues - a big change over the last few years," he said.

Mr Wilson added: "The UK economy's resilience has helped ITV's share price, but there are signs of cracks in the UK economy that are a concern for the broadcaster.

"This makes any meaningful upside dependent on a takeover, as organic growth looks trickier, some very smart production acquisitions notwithstanding."