ITV says outperforming a tough advertising market

By Mark Potter

LONDON (Reuters) - ITV (ITV.L), Britain's biggest free-to-air commercial broadcaster, said on Thursday its turnaround plan was on track as it was outperforming a weak advertising market and increasing audience share.

The firm said first-quarter revenues rose 3 percent, helped by growth in its online businesses and production commissions from abroad, such as a Chinese version of "Saturday Night Takeaway" which is hosted by comedians Ant and December.

Net advertising revenue (NAR) was up 2 percent. But the group said NAR was likely to be flat over the first half, against a market expected to be down 1 percent.

It also said it had identified further cost savings to be delivered from 2009, but declined to say what these were or how much they might total.

ITV shares, which have halved in value over the past year on concerns a global economic downturn will hit advertising revenues, dipped 1 percent to 62.3 pence by 9:43 a.m., valuing the business at about 2.6 billion pounds.

"We continue to expect savings to be largely offset by lower production profits, a higher interest charge and advertising downgrades to reflect the growing probability of a full UK recession," UBS analysts wrote in a research note, keeping a "sell" rating on the shares.

The shares have underperformed the DJ Stoxx European media index .SXMP by more than a third over the past 12 months, suffering in part from an expected large sale of stock after regulators ruled that pay-TV group BSkyB (BSY.L) should sell down some of its 17.9 percent stake in the company.

HELL'S KITCHEN