ITV had some good news for incoming CEO Adam Crozier today: last year it made a profit of £25m, a big improvement on the previous year’s whopping loss of £2.7bn, thanks partly to a successful round of cost-cuts by interim boss John Cresswell. There are even signs that the advertising market – so crucial to ITV’s fortunes – is starting to come back, after a lacklustre 2009. Although with Crozier not due to start until the end of April, he might be slightly miffed that Cresswell has stolen some of his thunder…
On the face of it, ITV certainly looks in much better shape than it did this time last year, when a massive write-down in the value of its broadcasting assets sent it lurching deep into the red – as well as finishing 2009 in the black, it also cut costs by £169m and reduced its debt pile by more than 15% to £612m. However, you don’t have to look too closely to see what a tough year it was. Total turnover was down 7% to £1.88bn, due in no small part to a 9% fall in ad revenues – and if you strip out the impact of those write-downs, this year’s profits were actually 4% lower.
But there are some reasons for optimism. Last year’s big decline in advertising was smaller than the 11% drop across the market as a whole – so ITV has out-performed its rivals. What’s more, things have picked up again in recent months: Cresswell is predicting a 7% improvement in the first three months of 2010, and early forecasts suggest the April figures could be as much as 20% higher, thanks to an upturn in retail and food advertising (two of the more resilient areas of spending lately).
Although ITV was playing it cool, warning that things might get trickier later this year (when comparatives will be tougher and there’s a chance of a post-election spending squeeze), these are positive signs – particularly with the football World Cup to come in June. And importantly, it’s also maintained its share of the viewing audience, thanks to the continued success of shows like The X-Factor and Britain’s Got Talent. We imagine Simon Cowell will be one of Crozier’s first phone calls…
Speaking of the new boss, what will he make of today’s results? Well, he’ll be glad that ITV is showing some signs of life – though he might have liked to be able to announce this himself (it’s always nice for a new CEO to report some quick early wins, as his old chum Allan Leighton always says). But he still faces a massive challenge: chairman Archie Norman wants ITV ‘to become a very different business over the next five years’, reducing its dependence on free-to-air TV. So that’s a complete strategic overhaul, while continuing to cut costs at the same time. If he pulls that off, he might well deserve his £16m pay package. If he doesn't, Norman might wish he'd tried harder to keep Cresswell.
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