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| Version 1 | Version 2 |
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| Love Island is awful – but ITV's prospects are better | Love Island is awful – but ITV's prospects are better |
| (6 months later) | |
| First-half ad revenues fell 8% as expected, but things are expected to improve – and the Netflix revolution has been overstated | |
| Thu 27 Jul 2017 10.34 BST | |
| First published on Wed 26 Jul 2017 19.48 BST | |
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| Bad, but it could be worse. No, that’s not a review of the depressing and soulless Love Island. It’s the state of play in the advertising market from ITV’s perspective. First-half ad revenues fell 8%, as expected, but the negative read-outs are becoming less negative. Minus 4% is predicted for the July-to-September quarter. | Bad, but it could be worse. No, that’s not a review of the depressing and soulless Love Island. It’s the state of play in the advertising market from ITV’s perspective. First-half ad revenues fell 8%, as expected, but the negative read-outs are becoming less negative. Minus 4% is predicted for the July-to-September quarter. |
| It was enough to improve ITV’s share price, after a long losing run, by 2.5%. One can understand why. In a TV land that is supposedly in the early stages of revolution – consider the investment buzz around Netflix, now valued at a colossal $78bn (£60bn) – ITV’s 16% slump in interim pre-tax profits to £259m carried a hint that the storm outside is not intensifying. | It was enough to improve ITV’s share price, after a long losing run, by 2.5%. One can understand why. In a TV land that is supposedly in the early stages of revolution – consider the investment buzz around Netflix, now valued at a colossal $78bn (£60bn) – ITV’s 16% slump in interim pre-tax profits to £259m carried a hint that the storm outside is not intensifying. |
| ITV Studios, the production business where former chief executive Adam Crozier concentrated spending to reduce reliance on ad revenues, is predicted to achieve same-again top-line profits this year. So it should, it might be argued, since ITV has been buying production houses at a rate of knots. But the US side of the operation, armed with cheap ’n’ cheerful formats that keep returning, looks increasingly like a sound investment. | ITV Studios, the production business where former chief executive Adam Crozier concentrated spending to reduce reliance on ad revenues, is predicted to achieve same-again top-line profits this year. So it should, it might be argued, since ITV has been buying production houses at a rate of knots. But the US side of the operation, armed with cheap ’n’ cheerful formats that keep returning, looks increasingly like a sound investment. |
| After a wobble last year, ITV Studios’ revenues from the US rose by a third or a half to £143m, depending on whether you prefer an “organic” or actual measure. A English-language broadcaster trying to carve out a niche in the largest English-speaking market? It’s not the wildest strategy in the world. | After a wobble last year, ITV Studios’ revenues from the US rose by a third or a half to £143m, depending on whether you prefer an “organic” or actual measure. A English-language broadcaster trying to carve out a niche in the largest English-speaking market? It’s not the wildest strategy in the world. |
| What about the Netflix threat? Chairman Peter Bazalgette, when he wasn’t crowing about Love Island (please stop), offered an interesting statistic: Netflix’s share of viewing in Britain is about 4%, which roughly equates to that of a successful digital channel. | What about the Netflix threat? Chairman Peter Bazalgette, when he wasn’t crowing about Love Island (please stop), offered an interesting statistic: Netflix’s share of viewing in Britain is about 4%, which roughly equates to that of a successful digital channel. |
| The figure understates Netflix’s cultural impact. Its audiences will also probably continue to grow and fuel the shift towards targeted digital advertising, where ITV has been slow out of the blocks. Even so, live TV is still reckoned to account for 80% of overall viewing. That should mean that ITV’s virtual monopoly on primetime ad slots in Britain should remain a valuable asset for a while yet. | The figure understates Netflix’s cultural impact. Its audiences will also probably continue to grow and fuel the shift towards targeted digital advertising, where ITV has been slow out of the blocks. Even so, live TV is still reckoned to account for 80% of overall viewing. That should mean that ITV’s virtual monopoly on primetime ad slots in Britain should remain a valuable asset for a while yet. |
| Incoming chief executive Carolyn McCall, who will arrive in January, has arguably got lucky on timing. At 180p, as opposed to the 250p of 18 months ago, the share price is displaying investors’ long-term worries. Some of those fears will be realised – and next year’s ad market is still anybody’s guess. But ITV is generating cash and was paying special dividends as recently as last year. It is not defenceless. | Incoming chief executive Carolyn McCall, who will arrive in January, has arguably got lucky on timing. At 180p, as opposed to the 250p of 18 months ago, the share price is displaying investors’ long-term worries. Some of those fears will be realised – and next year’s ad market is still anybody’s guess. But ITV is generating cash and was paying special dividends as recently as last year. It is not defenceless. |
| Emma Walmsley seeks long-term health for GSK | Emma Walmsley seeks long-term health for GSK |
| All chief executives of GlaxoSmithKline, it seems, start their reigns by declaring they are on a mission to improve productivity in the pharmaceutical labs. Sir Andrew Witty created “discovery performance units” to get the scientists to work more efficiently. Now Emma Walmsley, his successor, is dishing out stiffer prescriptions. She is cutting 30 development programmes and declaring that 80% of the capital will be allocated to just four “priority” therapy areas, including respiratory and HIV/infectious diseases, where GSK is already big. | All chief executives of GlaxoSmithKline, it seems, start their reigns by declaring they are on a mission to improve productivity in the pharmaceutical labs. Sir Andrew Witty created “discovery performance units” to get the scientists to work more efficiently. Now Emma Walmsley, his successor, is dishing out stiffer prescriptions. She is cutting 30 development programmes and declaring that 80% of the capital will be allocated to just four “priority” therapy areas, including respiratory and HIV/infectious diseases, where GSK is already big. |
| The new policy makes sense. Drug companies must spread themselves thinly when they are pursuing original discoveries because they don’t know what they will find. But in the development stage, which is when the bills become huge, they cannot bet on everything. If you’re spending $4.5bn (£3.5bn) a year on R&D, taking a hard-headed commercial view of the best prospects sounds entirely fair. | The new policy makes sense. Drug companies must spread themselves thinly when they are pursuing original discoveries because they don’t know what they will find. But in the development stage, which is when the bills become huge, they cannot bet on everything. If you’re spending $4.5bn (£3.5bn) a year on R&D, taking a hard-headed commercial view of the best prospects sounds entirely fair. |
| Investors sounded bored, however. The share price fell 2.5%, which wasn’t solely caused by GSK’s slight trim to earnings estimates after choosing to accelerate the launch of an important HIV drug. | Investors sounded bored, however. The share price fell 2.5%, which wasn’t solely caused by GSK’s slight trim to earnings estimates after choosing to accelerate the launch of an important HIV drug. |
| Maybe a long-term story of self-improvement was bound to sound dull but, whatever the reason, Walmsley should not be deterred. She has committed to GSK’s current corporate structure, which houses complex pharmaceuticals, vaccines and consumer products under one roof. After generic competition for asthma drug Advair arrives (probably next year), GSK’s next big patent cliff isn’t until 2026. The same-again dividend is virtually guaranteed for this year and next. She can afford to take a long-term approach. | Maybe a long-term story of self-improvement was bound to sound dull but, whatever the reason, Walmsley should not be deterred. She has committed to GSK’s current corporate structure, which houses complex pharmaceuticals, vaccines and consumer products under one roof. After generic competition for asthma drug Advair arrives (probably next year), GSK’s next big patent cliff isn’t until 2026. The same-again dividend is virtually guaranteed for this year and next. She can afford to take a long-term approach. |
| Gin riot may be calming down | Gin riot may be calming down |
| You can’t blame Tim Warrillow, the chief executive and co-founder of Fever-Tree, for cashing in £29m-worth of shares. The tonic firm, which spotted complacency on the part of Schweppes and a gap in the market, is an investment sensation. But, when even Toby Fairbrother on the Archers is getting in on craft gin lark, the current gin-and-tonic bubble may be close to bursting. | You can’t blame Tim Warrillow, the chief executive and co-founder of Fever-Tree, for cashing in £29m-worth of shares. The tonic firm, which spotted complacency on the part of Schweppes and a gap in the market, is an investment sensation. But, when even Toby Fairbrother on the Archers is getting in on craft gin lark, the current gin-and-tonic bubble may be close to bursting. |
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