The FTSE 100-listed media group said at the end of July that first-half revenue was increasing in both the broadcasting division and the studios, responsible for making programmes such as Downton Abbey. The company said that it was on target to achieve cost savings of about £15m for the full year, £5m ahead of target and, when combined with the rising revenue, this helped first half pre-tax profits to rise 16pc to £312m.
Questor thinks that while the bid rumours provide useful support to the shares any deal could be a long time in coming. Applying current industry takeover multiples to this year’s earnings forecasts implies a share price of between 215p and 245p, according to Investec.
Market consensus is for pre-tax profits to jump by 53pc in the current year to £666m, on revenue up by about 8pc to £2.6bn.
ITV is well placed to drive profits from increased advertising revenue as it has been cutting costs.
The company also made sensible use of spare cash last year, restructuring the debt, and making pension contributions.
The shares have risen 15pc since Questor said “shares in ITV are looking cheap” last year (Buy, 181.25p, September 12). But with much of the bid premium now in the price we downgrade to a hold.
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