LBTYA Liberty Global Ltd

(Rewrites, adds detail.)

By Simon Zekaria

LONDON--ITV PLC (ITV.LN) on Wednesday recorded a rise in yearly profit and is paying a special dividend worth hundreds of millions of dollars, but shares in the U.K.'s biggest over-the-air commercial broadcaster dipped after it flagged falling viewing figures and warned about its advertising revenue.

ITV said its net profit in the year to Dec. 31 increased to 495 million pounds ($692 million) from GBP466 million in 2014. Revenue from external sources rose 15% year-over-year to GBP2.97 billion. Revenue at ITV Studios, its production arm, jumped 33% to GBP1.24 billion.

Advertising revenue was up 6% at GBP1.72 billion in 2015. However, it said the European soccer tournament, Euro 2016, is expected to alter advertising revenue this year: The first quarter, before the tournament begins, is expected to be "flat" and "marginally behind the market," while the second quarter is seen as "positive" because advertising will rise during the soccer championships.

The share of viewers for ITV's main channels was down 3% over the year, with some shows not performing as well as had been expected, it said. ITV said it still expects to outperform the television advertising market in 2016, boosted by audiences of its shows and live sport, including soccer and rugby.

It proposes a final dividend of 4.1 pence per share, making a full-year dividend of 6 pence per share--up from 4.7 pence last year--and ahead of its guidance. It is also proposing a special dividend of 10 pence. Last year, it paid out a dividend of 6.25 pence.

"ITV delivered another strong year as we continue to grow and strengthen the business in the U.K. and internationally," said Chief Executive Adam Crozier.

At 1251 GMT, shares fell 3.9% to 240 pence, valuing the company at GBP10.1 billion.

Numis analyst Paul Richards said the results are strong and ahead of expectations, but added investors may be disappointed by the advertising outlook, even if the share price reaction is "rather harsh".

Mr. Crozier told reporters said it is "pretty normal" that advertising money will "shift around" during the period of a major soccer tournament, but said the expanded competition and participation of countries in the British Isles will boost the broadcaster.

ITV has been growing its production business and raising its international profile as it lowers its reliance on advertising revenue and revenue from the U.K.. ITV Studios has doubled its revenue over the last six years and now more than half of ITV's income is from outside the U.K.

It has also boosted ITV Studios with bolt-on acquisitions to grow its reach.

Analysts said ITV is an acquisition target in the fast-consolidating media industry. U.S. cable giant Liberty Global PLC (LBTYA) has taken a 9.9% stake in ITV for hundreds of million of dollars.

And CCS Insight analyst Paolo Pescatore said U.K. telecommunications group BT Group PLC (BT.A.LN), which is building up its sports channels, also may show interest.

"We still firmly believe that ITV remains a takeover target, especially from the likes of BT. The move makes perfect sense and would be a key part of BT's growing aspirations in television."

Liberty Global wasn't immediately available for comment. BT declined to comment.

Mr. Crozier rejected talk that ITV is a target.

"I do not think of us as a takeover target at all," he said. "If anything, we are a consolidator of companies," Mr. Crozier added, saying the company is focused on growing the business.

 
--Write to Simon Zekaria at simon.zekaria@wsj.com 
 

(END) Dow Jones Newswires

March 02, 2016 08:23 ET (13:23 GMT)

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