Shares in free-to-air broadcaster ITV (ITV) are trading at levels last seen in the early part of the 2010s when the company was starting its turnaround under former CEO Adam Crozier.

This price weakness creates a good opportunity to buy a unique business which will be closely tied to a recovery from the coronavirus crisis when it comes.

According to UBS estimates the company is now trading on a price-to-earnings ratio for 2020 of nine times compared with 11 times in January – and that’s despite significant cuts to the earnings per share forecasts in the interim.

These cuts reflect an extremely challenging picture for ITV with TV advertising revenue collapsing and the production business basically on hiatus due to measures taken to contain the pandemic.

However, there is one silver lining to this cloud for ITV as people are watching more TV during the lockdown.

Sky recently published figures showing the highest ever TV viewing among its customers at an extra 72 minutes per day, with younger age groups in particular returning to a medium which they had been abandoning prior to the pandemic.

People’s interest in current affairs has surged, with ITV News’ audience figures up more than 50%. This increase in viewership should help reinforce the credentials of the medium as a way for advertisers to reach a broad spread of the UK population.

TV advertising could be an important medium for businesses once they believe the time is right to encourage consumers to spend money on their products and services as we emerge from the current period of economic stasis.

A 27 April article in The Guardian cited ITV’s commercial boss Kelly Williams as saying there were signs some companies were already starting to spend again on advertising.

Given the lack of near-term visibility, there are undoubtedly risks associated with investing in ITV.

Advertising rates are likely to be lower than normal. You also have to consider the risk that many companies cannot produce new commercials under lockdown conditions and existing advertisements are unsuitable if they show people in crowds.

Having put dividends on hold, ITV is in a better financial position to weather the storm. The company has £150m of unrestricted cash, a £630m credit facility expiring in 2023 (of which £100m is currently drawn) and an additional undrawn £300m facility. It has no bond repayments until September 2022 and no covenants on its existing facilities.

The next news from ITV is likely to be a first quarter trading update on 6 May.

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