U.K. broadcasting and production powerhouse ITV revealed plans Wednesday to slash £25 million ($32.8 million) in overhead costs for next year — including some jobs — in response to the uncertainty provoked by Britain’s decision to leave the European Union, or Brexit.
“Against a backdrop of wider economic uncertainty following the E.U. referendum, we have put in place a robust plan to allow us to meet the opportunities and challenges ahead. As part of this we are targeting a £25 million reduction in overheads for 2017,” Adam Crozier, chief executive of ITV, said in a statement accompanying the company’s interim results for the first half of 2016.
During a conference call Wednesday, Crozier explained that the cuts “will come right across the board…really targeting at taking out overheads,” but that it “doesn’t involve money that we spend on programs. It is taking genuine cost out of the business.” He acknowledged that there would be “some” job losses, but declined to give a number.
Crozier said it was “too early to say” what effect Brexit would have on advertising revenue. “There hasn’t been a second gear. It’s sort of stayed the way it was” before the June 23 referendum, he said. “I don’t think the result of the vote really changed anything actually so far….People are beginning to realize that actually nothing much is going to happen very soon, that it’s going to be a two-to-five-year process.”
He added that the fall in the value of the pound since the Brexit vote would actually lead to an increase in revenue and profit for ITV, mainly because of its substantial production and sales business in the U.S., which is in dollars. If the exchange rate stays at its current level, “over the full year the impact would be roughly £74 million [$97 million] more revenue and around £13 million [$17 million] more profit, and that’s because we are doing a lot in America,” he said.
The plummeting pound has made ITV a cheaper company to acquire for non-British companies, but Crozier said there had been no approaches from potential buyers, nor had he heard any rumors of bids being readied. “The exchange rate makes things more affordable, but it doesn’t make people do things they wouldn’t have otherwise done,” he said.
Crozier asserted that ITV’s strategy in recent years of moving away from a single source of revenue from one country — advertising in Britain — to a diversified portfolio with revenue from production for the global market, international distribution, pay TV and digital was paying off during this period of uncertainty.
“These results really start to show the benefit of that, that even in that flat market we’ve shown really good growth coming through. A lot of that revenue is coming from outside ITV. It’s programs that we are making for other broadcasters in the U.K. It’s programs we are making for broadcasters all over the world,” Crozier said.
ITV’s revenue in the first half of 2016 grew by 11% to £1.5 billion ($1.97 billion) compared to the same period last year. The rise was driven by non-advertising revenue, with revenue from its global production arm, ITV Studios, up 31% to £651 million ($854 million), primarily from the production companies it has acquired. Revenue from online, pay TV and interactive grew 26% to £107 million ($140 million).
“We are 40% of where I would like us to be, so we still have a long way to go on this,” Crozier said. “We are going to continue to invest in developing those areas and those other sources of revenue.”
He said the company would continue its buying spree of production companies and its investment in startup companies set up by creative talent and in joint ventures. The company would also invest in digital enterprises and would develop subscription video-on-demand ideas “over the next 12 to 18 months.”
“It is all about continuing to build these new revenue streams outside of advertising,” he said.