ITV: light at the end of ad revenue tunnel?

ITV’s latest financial results signals there is some light at the end of the ad revenue tunnel, though critics continue to question the broadcaster’s longer-term business strategy.

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The broadcaster has today (August 6) reported a 15% drop in ad revenue in the first half of the year but it managed to out perform the market, which fell 17%.

Further, it is forecasting that third quarter ad revenue will be down 12%, while in September it will fall by 7%.

The fact that it is predicting a slowing in decline during such a key month when people head back to work is reassuring many analysts.

It has also delivered £57m of the £155m of cost savings announced in March, signalling that its cost-cutting programme is under control.

But as Andy Viner BDO Stoy Hayward head of media points out, the bottom line is the company has lost £105m.

It also took a substantial hit from the sale of its social networking site Friends Reunited which it has sold to Brightsolid, part of publishing company DC Thomson, for £25m. ITV paid a whopping £175 million to acquire the social networking brand in 2005.

Viner says: “ITV still has a high level of net debt (£738m) which has remained broadly unchanged and its pension deficit has increased from £178m to £538m.

“Both of these will continue to put pressure on ITV’s cash position so it is unsurprising it has suspended its interim dividend.”

He adds that what ITV desperately needs now is new blood, as it continues its hunt for a chief executive to replace executive chairman Michael Grade.

Those in the frame include candidates from both media and non-media backgrounds. Internal contenders, chief operating officer John Cresswell and MD of commercial and brand Rupert Howell, are now thought to be out of the frame.

Attention is instead being directed at ‘turn around man’ Simon Fox – chief executive of HMV. He is joined on the shortlist by head of Apple Europe Pascal Cagni and Guillaume de Posch former CEO and chairman of ProSiebenSat.1.

There continues to be debate about the background and media experience ITV’s new chief executive needs to help steer the broadcaster through the evolving media environment.

Alexander de Groote, Panmure Gordon media analyst, says whoever steps up, he or she will need to have sound experience dealing with regulators in order to effectively negotiate with media regulator Ofcom.

Despite all the diverging opinions, many do agree that what the new chief will need to do is have a firm and comprehensive action plan on how to move ITV from the traditional broadcast model to become a digitally-led commercial powerhouse.

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