ITV suffers torrid year

If you are writing on today’s results from ITV, please consider the following comment from Andy Viner, Head of Media, at accountants and business advisers BDO.

Andy Viner, Head of Media, at BDO says: “ITV has suffered a torrid year - it dropped out of the FTSE 100, experienced a reduction in advertising, saw its share price continue to fall, made cuts to jobs and programming, suffered a decrease in profit,  saw its debt levels continue to increase and has suspended its dividend for 2009.”

“Coupled with a bleak outlook for advertising revenue in 2009, life in the ITV camp is looking grim, particularly as there are less global sporting events for it to cover and it has lost the rights to cover the Formula 1 World Championship to rival broadcaster BBC,” Viner continues.

“Furthermore, the results are likely to provoke ITV and other advertising-funded media companies to make a renewed attempt to force the Government to urgently update its regulatory environment so they are better prepared to ride out an advertising downturn in the future,” he opines.

“Today’s job cuts will come as little surprise to those in the industry; however, the number may provoke a union backlash as unions had previously accused the company of focusing on shareholder value rather than tackling the downturn in advertising expenditure.”

“Shareholders will be unhappy with the lack of dividend and the uncertain economic outlook, with some analysts taking the same stance as the unions saying this is down to company mismanagement rather than a direct result of the credit crunch,” points out Viner.

"In light of the changing media landscape and its increasing debt burden, ITV has also made the decision to dispose of the social networking site in Friends Reunited in order to raise cash.  The company claims it does not fit into its new strategic focus on streamed video – despite its profitability.  Although once touted as one of the UK's most successful online businesses, the site's popularity has been heavily superseded by other social networking entities such as Facebook and Twitter, and can no longer reap the advertising and subscription revenues it had become accustomed to. Finding a buyer in the current climate could prove difficult however.  A rights issue to improve the balance sheet also remains a likely option to reduce the level of debt," continues Viner.

"Despite the gloom, there is a glimmer of positivity in the company's results: the online division reported a 9 per cent year-on-year revenue increase.  In addition, the company is experiencing good growth from its global business.  ITV has the potential to build on this growth - particularly in light of the current trend of consumers neglecting traditional paper media and consuming news and information from online sources - and claw back some advertising revenues.  Adapting to the rapid changes in the global media landscape will be key to ITV’s future," concludes Viner

ENDS

For more information, please contact Dee Crooks at BDO on 020 7893 2761 / 07815 172 051 or email dee.crooks@bdo.co.uk

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