Broadcaster ITV (ITV) reaffirmed its confidence in its underlying business alongside first half results on Wednesday. By upping its interim dividend 5% to 2.52p the company clearly hopes the optimism will be catching.

So far, so good, shares in ITV are up 3% at 181.2p in early trading.

This despite a modest £15m decline in overall revenue and bigger falls in profits, with both its Broadcast & Online and Studios divisions posting high single-digit operating profit slides.

Group pre-tax profit fell 10% to £381m, although this is not as bad as some market watchers feared.

Panmure Gordon anticipated just £350m of pre-tax profits, for example. Analyst Johnathan Helliwell is also upbeat about apparently robust viewing figures for popular reality TV show Love Island.

ADVERTISING STILL UNDER PRESSURE

In the third quarter of this year, ITV expects advertising revenue to decline 4% as wider economic uncertainty hits, which is worse than the analyst’s expectations of a 3% fall.

Helliwell believes that this will represents the low point for this ‘cyclical headwind.’

‘With scope for full numbers to nudge up, Love Island providing reassurance on structural issues and a new CEO due to arrive in January 2018, we see scope for a relief bounce in the shares from current levels,’ says Helliwell.

ITV graph

Panmure's Helliwell anticipates pre-tax profit will rise to £840.1m in the year to 31 December 2018, after an expected decline thius year to £803.7m. ITV reported £847m in 2016.

REASONS TO BE DOUBTFUL

Yet doubts remain and not everyone is optimistic. Numis analyst Paul Richards is concerned about lower advertising forecasts. That's prompted him to cut his 2017 pre-tax profit estimates from £805m to £770m.

He's also slashed £70m off his 2018 estimate, from £860m to £790m.

Unsurprisingly, that translates to reduced earnings per share (EPS) expectations. Richards now expects 15.4p and 15.8p in 2017 and 2018, leaving ITV shares trading on a 2018 price to earnings multiple of 11.5.

EasyJet (EZJ) chief executive officer Carolyn McCall announced she was leaving for ITV earlier this month. We outlined how McCall is expected to make an impact here.

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Issue Date: 26 Jul 2017