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UPDATE 3-ITV to cut jobs, dividend after downturn "horror"
March 4, 2009 / 7:26 AM / 9 years ago

UPDATE 3-ITV to cut jobs, dividend after downturn "horror"

* 2008 operating earnings down 32 percent

* 2008 loss 2.7 bln pounds after writedown

* Sees advertising down 17 pct in Q1 2009

* To sell social network site Friends Reunited

(Adds reaction, share price, details)

By Kate Holton

LONDON, March 4 (Reuters) - ITV, Britain’s largest free-to-air commercial broadcaster, suspended its final dividend, cut 600 jobs and announced plans to sell assets as it reported results hammered by the severe downturn in advertising.

ITV, which has seen it shares crash around 80 percent in the last two years, posted a loss of 2.7 billion pounds ($3.81 billion) due to a writedown.

The home to talent show X-Factor and soap opera Coronation Street also said it was scrapping revenue targets and would slice 65 million pounds off its programming budget after advertising revenues slumped almost 20 percent in the first quarter.

“Current conditions in the advertising market are the most challenging I have experienced in over 30 years in UK broadcasting,” said Executive Chairman Michael Grade, who described the downturn as a “short term horror”.

“Visibility on future revenues is limited and trading in 2009 remains uncertain.”

The group said net advertising revenue for the family of channels was down 4 percent in 2008. It is expected to be down around 17 percent in the first quarter of 2009 and the whole advertising market is expected to be down 20 percent in April.

ITV channels held their viewing share.

It said its 2012 revenue targets set in 2007 were no longer appropriate and it would now focus on its core business as a producer and broadcaster, reducing costs and increasing cash generation.

It pledged to deliver annual cost savings in 2011 of 245 million pounds against the 2008 outturn. Of this, 155 million pounds of annual savings will be delivered in 2009, rising by 20 million to 175 million in 2010.

It is seeking to dispose of the social network Friends Reunited, will close ITV Local and is considering its options for multiplex business SDN.

SHARES SLIDE

Analysts had expected ITV to cut assets, jobs and the dividend and they welcomed the new strategic update. Shares in the group were down 4 percent at 22.8 pence against an otherwise higher market.

”The numbers were weak but that was expected,“ Justin Diddams at RBS told Reuters. ”Strategic update was helpful, with higher cost savings.

“The downside was the asset writedowns, and advertising taking the shine off things because people expected April to be stronger. The management is making the right noises but it is tough out there.”

Operating earnings before interest, tax and amortisation (EBITA) in 2008 were down 32 percent at 211 million pounds, slightly below analyst forecasts of 217 million pounds, according to Reuters Estimates.

It reported a 2.7 billion pounds ($3.81 billion) loss after an impairment charge against broadcasting and online assets. Revenues were down 3 percent at 2.03 billion pounds, slightly ahead of a forecasted 2.01 billion.

“The Board is recommending the suspension of the final dividend,” Grade said. “This is not a decision taken lightly. The Board’s judgement is that it represents the prudent course in present conditions.”

Analysts at Numis said the cost savings largely mitigated the underlying deterioration in trading, limiting their 2009 downgrade to around 20 million pounds.

On a conference call with journalists, Finance Director Ian Griffiths said there was little appetite in the market for a pension buyout at the moment and said it would not appeal to ITV even if it was possible.

Asked whether the group would consider a rights issue, Grade said they would keep all options open but declined to comment any further.

Reporting by Kate Holton and Paul Sandle; Editing by David Cowell

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