ITV Furloughs Staff With Hit Shows on Hold and Ads Slumping

(Bloomberg) -- ITV Plc is counting the cost of a virus lockdown that's blown a hole in its summer schedule and sent advertising, which normally accounts for about half of the company's revenue, tumbling.

Ad revenue dropped 42% in April, swamping a 2% gain in the first quarter, due to the impact of COVID-19, ITV said in a results statement Wednesday; the company won't give guidance for the second quarter given the uncertainty created by the pandemic.
The company said it will furlough 800 staff, representing about 15% of its workforce, mostly from production arm ITV Studios. It has also “taken action” on board and management pay.

Key Insights

Total viewing rose 2% and online viewing jumped 75% in the first quarter, even as Britain's biggest free-to-air commercial broadcaster continues to deal with viewers turning to Netflix Inc. and other streaming platforms.
Though the arrival of Covid-19 has left ITV's fightback plans in disarray, forcing it to abandon its revenue outlook and cancel its 2019 dividend to conserve cash, ITV nevertheless saw good growth in free trial starts and subscriptions for streaming service BritBox, a key plank in Chief Executive Officer Carolyn McCall's strategy to rely less on ads.
ITV Studios revenue fell 11% in the quarter, with the company blaming phased deliveries of shows and the disruption to projects from social distancing and lockdowns -- the most notable of these is “Love Island,” which it won't produce this year, a decision Mirabaud Securities called a “big set-back.”
ITV said it's planning a “phased approach” to the return to the office and is working on a protocol to restart production; in the meantime fresh episodes of soap operas “Coronation Street” and “Emmerdale,” the core of its prime-time offering, will run out in coming weeks and key summer sporting fixtures are off the cards. Repeats of old shows are one option for filling the schedules but risk turning off viewers.

Market Context

The company's performance had been improving under McCall, but the impact of coronavirus means ITV shares have now lost half their value on her watch.