ITV revenues fall further as dividend cut
ITV, the largest commercial broadcaster in the UK, has halved its interim dividend, lowered online and production growth targets and will strip out another £35m a year in costs after sinking £1.5bn into the red in the first six months of 2008.
Shares in the company fell as much as 10 per cent following revelations that it expects advertising revenues to fall by 20 per cent in September, compared to a 17 per cent decline forecast for the TV market as a whole.
ITV chairman Michael Grade said the estimates were slightly skewed because the previous September was a exceptionally good month thanks to the Rugby World Cup in which England went all the way to the final.
On a like-for-like basis Grade said this would equate to a 14-15 per cent slump in ITV’s advertising revenues.
“This is incrementally far worse than media buyers had been suggesting and the market was expecting,” said Credit Suisse analysts in a note.
As a result, the broadcaster wrote down a non-cash goodwill impairment charge of £1.6bn. Excluding this charge, ITV posted a 28 per cent fall in pre-tax profits to £91m. To put the company back on track ITV will attempt to cut another £35m a year in costs out of the business by 2010, of which £27m will be made by 2009.
“Savings will come out of all areas of the business. We have to be more efficient,” said Grade. This comes on top of £41m worth of costs to be saved by the end of this year, and another £40m in regional programming by 2009, which could see more jobs cut.
City Views: Can ITV remain competitive despite sluggish advertising and pressure from digital channels?
Simon Gudgeon (K&L Gates): “I think it will be difficult for them. More and more things are coming through in other forms, like podcasts, which you can listen to whenever you want. These days you can watch everything on the internet or even your mobile phone and that seems to be the way of the future.”
Jamie Tyler (AIG): “People tend to overreact to bad figures like these. If ITV keeps showing programmes that people want to watch then that is the main thing. I don’t see why people will stop watching and in the long term I think they will be alright.”
Kat McPherson (Lloyd’s TSB): “I think for any TV channel it’s the quality of the programmes that matters most and everything else, including advertising, follows from that. I’d like to see more new comedy and drama programmes on ITV – that would get me watching more.”