ITV expects 9% fall in ad revenues

ITV warned on Wednesday that advertising revenues would fall by 9 per cent in the fourth quarter, as it reported flat sales in the first nine months of the year.

John Cresswell, chief operating officer, said that the broadcaster was maintaining its share of UK television advertising “for the first time in 25 years”, and that the outlook remained in line with expectations set at August’s interim results.

“Inevitably we are feeling the impact of the wider economic conditions and a weaker advertising market,” he said, but ITV was making “good operational progress in a very difficult trading environment”.

Mr Cresswell sought to position ITV’s forecast of 9 per cent fall in net advertising revenue in the fourth quarter as an out-performance against a total television market down 9.4 per cent.

“So far this year, nine of the top 10 programmes on any channel were on ITV,” he said. “We are delivering more impacts for our advertisers… Advertisers are getting an increasingly better deal.”

ITV’s broadcasting revenues fell 5 per cent to £1.2bn in the nine months to September 30, against a broader market decline of 3 per cent in the same period. Sales of ITV’s own content to other broadcasters grew 35 per cent to £206m. Overall, revenues fell 1 per cent to £1.47bn in the first nine months.

Online revenues, which contributed just £25m in revenues in the first nine months, grew 6 per cent. But Mr Cresswell warned that online would also be affected by the slowdown, though mainly in “white-space” advertising due to the “huge amount of supply of page impressions” in the display market. Video advertising was “still pretty robust”, with 8.2m programmes viewed online at ITV.com in October and 80m in the first nine months.

Online profitability will be hit by the continuing investment into Project Kangaroo, the online TV joint venture between ITV, Channel 4 and BBC Worldwide, which is has been delayed by a Competition Commission investigation. But Mr Cresswell made no further changes to the target of achieving £150m in online revenues from sites such as ITV.com and Friends Reunited by 2012.

Analysts at Numis Securities said the fall in advertising was in line with their 2008 estimates but lowered their advertising forecasts for the ITV famliy of channels. They now expect advertising revenues to fall by 8 per cent in 2009 and 6 per cent in 2010.

Due to an additional interest charge of £16m in 2008 relating to a £125m finance facility, Numis cut its earnings forecasts by 13 per cent for 2008.

ITV is integrating its Online and Broadcast divisions to allow “closer co-operation”, editorially and commercially. Mr Cresswell said that there may be some synergy savings but did not put a figure on job losses. ITV is already cutting 1,000 jobs across the business, though 400 planned redundancies in regional services are still awaiting clearance by Ofcom, the regulator.

Downgrades to ITV’s debt since the interims will add £8m to interest charges in 2009. Moody’s rates ITV’s debt at Ba1, while Fitch and Standard & Poor’s rate it BB+.

“[TV advertising] is absolutely where we thought it would be,” said Mr Cresswell. “We always anticipated that the fourth quarter would be down.” He maintained guidance of advertising revenues to fall buy 4.5 to 5 per cent for the full year.

“I think the next six months [of next year] are going to be fairly tough for us,” he added.

A report by Billetts Media Monitoring this week forecast TV advertising revenues to fall by 6 per cent in 2009, with a 5 per cent fall this year, as TV advertising rates fall to their lowest level since 1992. Billetts estimated that ITV’s revenues would fall by £100m, or 7 per cent, next year, compared with 6 per cent declines at Channel 4 and Five.

ITV shares were little changed, dipping 0.07p to 30½p in afternoon trading.