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ITV profits up as Crozier hails production turnaround

Growth in studio businesses and digital in 2011, but chief admits The X Factor and I’m a Celebrity… underperformed

ITV has reported a 14% increase in pre-tax profits to £327m in 2011 as chief executive Adam Crozier hailed a turnaround in its TV production business but admitted that The X Factor and I’m a Celebrity… underperformed.

ITV, which reported adjusted pre-tax profits up 24% to £398m – comfortably ahead of analysts’ expectations – said that total revenues increased 4% to £2.1bn in 2011.

The broadcaster said that it managed to increase TV ad revenue by 1% to £1.5bn while online income, from digital advertising and services provided via the ITV Player, grew 21% to £34m.

Crozier said that ITV’s strategy of moving away from its almost complete dependence on TV advertising is starting to pay dividends.

He pointed to a £93m year-on-year increase in non-advertising revenue – an 11% year-on-year boost to £922m – which he attributed mainly to growth from its UK and international studio businesses.

“The increase in non-advertising revenues of £93m, driven by our studios and online businesses, is clear evidence of progress in rebalancing the company and our ability to grow new revenue streams,” said Crozier.

Total revenues at ITV Studios grew 10% to £612m, fuelled by international production which included 45 new commissions and 26 recommissions. External revenues were up up 9% to £320m.

ITV Studios’ work in 2011 included the UK/Hungary/Canada co-production of Downton Abbey writer Julian Fellowes’s mini-series about the sinking of the Titanic.

UK commissions for ITV1 include SWAGS, a six-part drama series about service wives and girlfriends, and historical drama Mr Selfridge.

Crozier said that “in time” ITV might look to grow its studio operation by making acquisitions. However he made it clear organic growth is the focus and he scotched any suggestion of a move for Big Brother producer Endemol, or that ITV might have received any potential takeover approach.

Crozier admitted that key shows such as The X Factor and I’m a Celebrity… “did not perform as well” as they had in 2010, despite the Simon Cowell show being the biggest entertainment ratings winner of 2011.

“They remain very important brands for us as they still drive large, diverse audiences, which appeal greatly to advertisers,” said Crozier. “We remain committed to these programmes and continually look at ways of refreshing them to improve their on-screen performance.”

ITV1′s share of viewing was down 2%, despite benefiting from the launch of ITV1+1, with Crozier saying he was a “bit disappointed” with the fourth quarter audience performance in particular. Share of viewing across digital channels grew 10% year on year.

Crozier said that ITV’s fledgling strategy to develop new digital pay revenue streams is gathering pace following content deals with Netflix, Lovefilm and Sky, while the “slightly delayed” launch of a micro-payment system on the ITV Player will see trials begin in June.

Video views on the ITV Player have increased 44% to 376m, thanks to rolling out the service to platforms such as Android and Apple devices. Crozier, who said that ITV intends to launch a news website in the next few weeks, said that ITV has pushed the cost per thousand rate on its digital advertising up 4% in 2011 to £25.

ITV has earmarked £25m in 2012 for furthering its strategy to diversify beyond TV advertising.

Crozier said that ITV was in the “early day of scoping some ideas for potential channels” to launch international markets. He also said that there was scope as the ITV Player develops to deliver “over the top” TV services into some international territories.

“It is early days scoping what we might do,” he said. “At its heart it is about making the best use of viewer content. We will make decisions on a territory-by-territory basis.”

Crozier said that the year has started better than expected, although TV advertising for the first quarter will be down 2% year on year due to tough comparatives with a strong first three months in 2010. ITV said that TV advertising in April was “broadly flat”.

ITV said it plans to make cost savings of £20m this year – none of which will include job cuts. The programming budget will remain at about £1bn this year.

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