Adam Crozier, it could be said, is leaving ITV at a good moment for him. The business has been reinvented from its basket-case status in 2010 but now faces a tougher advertising market and the march of Netflix, Amazon and whoever comes next. Up to a point, that’s correct. ITV’s advertising revenues fell last year for the first time since 2009 and the US arrivals have deep pockets and grand ambitions. But there’s another way to view the screen: ITV has overcome bigger hurdles.
Back in 2010, the company carried so much debt it couldn’t afford to pay a dividend. It made few programmes that sold abroad and Sky and YouTube were the existential threats of the day. The City despaired. It thought a rescue rights issue was inevitable and analysts promoted the drastic remedy of ditching programme making and becoming a pure broadcaster that would buy in all its content.
Crozier and former chairman Archie Norman rightly resisted quick cures. They thought a properly managed ITV could live without fresh capital and they have proved their point in spades: since 2011 ITV has paid a total of 55p per share in dividends, which equates to the share price when Crozier arrived. These days ITV is accused of having too little debt, not too much.
Crozier has also been vindicated in his belief that making popular programmes is not as hard as old ITV, during the wilderness years under Lord Grade, made it seem. Spare cash has been spent on buying interesting production houses – a majority stake in World Productions, producer of Line of Duty, was acquired this week, for example. The net result is a business where advertising and non-advertising revenues are in balance, a transformation from a decade ago. Content is sold around the globe and a serious US production business created. In short, ITV has become the company it was meant to be after the merger of Carlton and Granada in 2004.
The picture could change again, of course, or Liberty Media could decide this is the moment to make the much-rumoured bid. Yet more of the same is a perfectly credible script. ITV generates lots of cash and UK advertisers – even in the current weak market – can’t ignore its virtual monopoly on commercial prime-time TV audiences. Meanwhile, Netflix et al are also buyers of content, including from ITV, as Crozier often points out.
The process that led to his appointment seven years ago was tortuous – better drama than on the screen, it was said. This time new chairman Sir Peter Bazalgette can expect a stampede of credible applicants.
Argos a bright spot for Sainsbury’s
Mike Coupe, the chief executive of Sainsbury’s, likes to take a long view. Two years ago, he said the UK market was “changing faster than at any time in the past 30 years”. And now? The past year has been “one of the most interesting and challenging and volatile years in my working lifetime”. Translation: the retailing weather for supermarkets continues to be horrible.
Even the purchase of Argos could not prevent Sainsbury’s profits falling for a third year in a row, down 1% on an underlying basis to £581m. Coupe, to be fair, can also legitimately claim significant progress beneath the surface. The Argos deal now looks smart. The store-in-store formats are working and it is possible to believe that, over time, Sainsbury’s could double or even triple Argos’s contribution to profits.
It’s just that the entire grocery industry now knows its old profit margins aren’t coming back. Sainsbury’s, even with like-for-like sales down 0.6% in the supermarkets last year, just has to keep plugging away. It has a sensible dividend strategy that distributes half the earnings to investors every year. Life could be worse. Just ask Tesco shareholders. They survive on thinner dividends and a supposed recovery has seen Tesco shares fall 13% so far this year. Sainsbury’s shares are at least marginally higher.
McDonald leaps out of the saddle at Halfords
Good luck to Jill McDonald, the latest person to try to invigorate Marks & Spencer’s clothing and home business. The survival period for M&S clothing bosses who fail to make their mark is about two years, so she’s taking a career risk, even if the incentive package is juicy. But isn’t there also something indecent about the haste with which she’s pedalling out of Halfords?
McDonald became chief executive at the bikes and car parts retailer two years ago and is only halfway through a three-year strategic plan. She’s suffered bad luck, in the form of a sterling devaluation that is unhelpful if you buy most of your bicycles from the Far East, but is still abandoning a job half-done. That doesn’t look good in the public company world. Halfords is holding her to her six-month notice period – so it should.
