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(Sharecast News) - ITV reported lower annual profits on Thursday due to tougher economic conditions and the investment made in its ITVX streaming service.
Adjusted operating profit to fell 12% £717m, while total revenue grew 7% to £4.3bn. Free cash flow fell to £280m from £407m and net debt rose to £623m from £414m.
"While in the short term the advertising outlook is challenging, we expect linear advertising revenues to remain resilient and continue to be highly cash generative. This underpins our continued growth investment in ITVX and Studios, which power ITV," the company said.
Sales growth was driven by ITV's studios business which posted a record fourth quarter, while its media & entertainment (M&E) operation fell 1%, driven by a 1% decline in total advertising revenue (TAR).
The company said it expected TAR to drop around 11% over the first quarter of 2023.
Total digital revenues rose by 18% to £411m, with total viewing hours and UK subscribers also on the increase.
Since launch, ITVX attracted 1.5 million new registrations for total subscriptions of 37 million, while total streaming hours grew by 69%, compared to the same period a year ago when users were on its ITVHub platform.
"Early reports on ITVX since its December launch continue to be positive and you can see a slight gap in the market for a free platform given many people are cutting back on streaming subscriptions thanks to cost-of-living pressures," said AJ Bell investment director Russ Mould.
"ITV still needs the content to attract sufficient eyeballs to drive advertising spend to the platform and it cannot afford to spend the kind of sums Netflix, Amazon and Apple do on programming."
"Perhaps with judicious use of its back catalogue and smart acquisitions the company can establish itself as a real presence in the streaming market. The strong showing for its ITV Studios production business at least shows it knows how to make good TV."
Reporting by Frank Prenesti for Sharecast.com
