ITV still struggling

Chris Forrester

UK commercial broadcaster ITV is still stuck in the financial doldrums, suffering from the continued collapse of ad revenues. ITV is also dumping its social networking site Friends Reunited. It bought Friends Reunited for £170m in 2006 – but is selling it for a bargain basement £25m. Publisher DC Thomson is the buyer.

UK television advertising suffered its worst year-on-year decline on record over the first half, with net television advertising revenues (“NAR”) falling by £277m or 17% for the overall market. ITV outperformed the market, with ITV NAR down £108m or 15%. ITV reported a pre-tax loss of £105m in the first six months of 2009 as revenues fell 12pc to £909m.

The rate of market decline has eased slightly in the second half and ITV continues to outperform the market. ITV NAR is currently forecast to be down 12% for the third quarter and down 7% for September. ITV is implementing the plan detailed in March to mitigate the impact of market weakness. With substantial cost savings offsetting NAR decline, operating EBITA declined by £75m to £46m. Notwithstanding the reduction in earnings, through working capital improvements and capex reductions, operating cash flows were increased by £51m to £168m.

ITV is still looking for a CEO, and a statement is expected within the next few days. The prospects for future trading, however, are good. ITV has trimmed staff, cut costs and waste, and is likely to be the first port of call for advertisers when the recession softens. For example, pre-bookings for September are lower than last year, but better than the rest of the year (7% down, compared to a 12% decline generally).