ITV upgraded ‘big’


11-11-2009



The British ad-market is recovering. The long-awaited ‘green shoots’ of recovery are talked about in most of the financial pages, and there’s an optimistic air about the pre-Christmas retail opportunities in the UK. These sentiments, plus a positive newsflow, have helped investment bankers Morgan Stanley take a fresh look at UK broadcaster ITV.

Their news is equally positive. The bankers, in a note to investors, follow up ITV’s own recent numbers saying: “The apparent pace of improvement in the advertising environment is such that ITV has twice surprised the market with positive trading news in the space of three weeks. ITV now expects ITV Family advertising to be flat in Q4 with the growth of 4% in December the first positive month since June 2008. The advertising improvement is widely spread amongst industry categories.”


Morgan Stanley highlight points on ITV:


“Advertising in Q4 has seen a further improvement, even relative to the last statement just three weeks ago.
“ITV expects ITV Family advertising to be flat in Q4 with October down 3%, November down 1% and December up 4% (versus -15% in 2008). ITV had previously indicated that ITV advertising was down 3% in October and November.
“Over the full year total UK TV advertising is now forecast by 12% with ITV likely to outperform. Given H1 was down 15% and Q3 down 12%, the implied ITV Family NAR is around 10% down for 2009.
“This implies a substantial upgrade to our ITV Family revenue forecast for 2009. Previously we were on -13.5% for 2009. The pace of improvement suggests that ITV will now reach -10% for ITV Family in 2009.
“Each point of ITV Family Net Advertising Revenue is worth £14m, implying a £40m plus upgrade to our 2009 revenues, most of which flows through to the bottom line.
“Our EBITA forecast for the Broadcast division in 2009 is thus raised from £65m to £107m, an increase of £42m, demonstrating how sensitive ITV is to relatively small moves in the advertising environment.”

The bank also commented on BSkyB’s stake in ITV: “There was a recent hearing at the Court of Appeal in which BSkyB presented its case to oppose the reduction in its 17.9% stake to below 10%. The Court of Appeal has two options (i) to deny Sky’s appeal in which case the process of the sale would kick in unless Sky decided to appeal to the House of Lords or (ii) the court agrees with Sky in which case the sale process goes back to the Competition Commission to rerun its investigation. A decision is not on this basis likely within the next few months.