Advertising slowdown hits ITV profits

Broadcaster ITV said today that underlying profits for the half year to June 30 slumped 28% as it battled an advertising slowdown.

The group's adjusted pre-tax profits came in at £91 million for the six- month period, compared with £127 million a year ago.

ITV - headed by industry veteran Michael Grade - said its total net advertising revenue (NAR) was flat in the eight months to August compared with a year earlier. However, September's NAR is expected to be down 20% because of a weaker market and the impact of last year's Rugby World Cup on the figure.

The broadcaster also said it was slashing its interim dividend in half, and targeting an extra £35 million of cost savings by the end of 2010.

Mr Grade, who is spearheading a turnaround plan for the company, said: "As a result of the recent slowdown in the television advertising market, the board has taken some tough decisions which are reported here today."

ITV said that, as a result of reduced advertising forecasts for this year and next, it has been forced to write off £1.6 billion of goodwill associated with acquisitions made in 2000 and 2004.

The accounting hit created a statutory pre-tax loss of £1.54 billion for the six months to June 30, compared with £105 million of profits a year ago.

Mr Grade, who is ITV's executive chairman, said UK television advertising held up relatively well over the first half of the year and through the summer.

"However, on current estimates, the television advertising market has weakened significantly in September," he said.

Mr Grade is forecasting the total advertising market in the third quarter to fall by around 9 per cent.

He added: "2008 is proving a tougher first year for the five-year turnaround strategy than anyone could have predicted a year ago.

"Given the proportion of total group revenues accounted for by advertising, weakness in TV advertising clearly impacts on growth for the business as a whole."

ITV - whose flagship programmes include Ant & Dec's Saturday Night Takeaway and Britain's Got Talent - said it expected to outperform the total TV advertising market over the whole year.

The broadcaster said advertising revenues for the ITV family - including digital channels - were up 1 per cent during the first half, with the viewing share up 2.5 per cent.

But the ITV family's share of commercial impacts - which measures how many people are viewing adverts and is a measure scrutinised by advertisers - was flat at 41.4 per cent, with impacts for flagship channel ITV1 down 5.1 per cent.

Overall revenues were 3 per cent up to £1.03 billion thanks to growth in its global content and online arms.

Mr Grade said he would be maintaining investment in programming, but "given the market uncertainty" cutting back revenue targets for the global content and online arms.

The broadcaster has already announced £41 million of cost savings through to the end of this year.

The new £35 million round of cost savings reportedly involves job cuts, estimated in some quarters at as much as 10 per cent of the group's 6,000 staff.