Another worrying set of results for ITV this morning: pre-tax profits were down £91m for the first six months of 2008, while the struggling broadcaster ended the period £1.54bn in the red (thanks to a £1.6bn write-down against the value of the businesses brought together to create ITV in 2000 and 2004). And with advertising revenues set to fall as buyers slash their budgets, the top programme on ITV’s schedule is now a £35m cost-cutting plan…
Chairman Michael Grade said this morning that ad revenues had actually held up rather better than expected in the first half. However, he thinks the worst is yet to come: he expects the year-to-date figure to be slightly down by the end of August, and a whopping 20% down by the end of September (without the Rugby World Cup to boost figures). The fact that ITV may end up outperforming this falling market won’t feel like much of a consolation.
Grade’s response has been to slash ITV’s dividend in half and rein in its growth targets: its £1.2bn target for content revenue by 2012 has been reduced by 20%, while he’s given the business an extra two years (to 2012) to hit its online revenue target of £150m. He’s also demanding another £35m in cost-savings, on top of the £81m cuts already planned over the next two years. But Grade faces an uphill task: ITV’s share price has now fallen by over 60% since he took charge last year (sinking to about 40p this morning – BSkyB won’t be pleased).
He admitted this morning that ITV was ‘not immune to wider economic pressures’, but he still sounds bullish about his turnaround plan. ‘We have made considerable operational progress,’ he insisted. ‘With more viewers watching more ITV programmes, we are delivering greater value for advertisers. We have out-performed the market in terms of advertising revenues and viewing share.’ And he did have some cause for celebration: ITV’s audience share was actually up 2.5%, thanks partly to its (albeit expensive) sports coverage, while revenues were also up slightly.
However, Grade had some typically forthright views on ITV’s future as a public service broadcaster. Unless Ofcom relaxes its outdated ‘nanny state regulation’, he told Radio 4’s Today programme this morning, it would just be too expensive for ITV to keep meeting its obligations - particularly in terms of regional programming. Since ITV now has to face competition from digital channels with no such obligations, Grade believes this is putting ITV at a major disadvantage, and even raised the prospect of the broadcaster losing its long-held public-service remit.
Then all he has to do is take ITV private and he might have some chance of a quiet life...
In today's bulletin:
More drama at ITV as profits slide
Can we really afford to cut stamp duty?
Company pension schemes lurch into the red
The true cost of the minimum wage
Pushy salespeople: a dying breed?