Analyst Lowers Ad Forecast for U.K. Broadcaster ITV

4:19 AM PDT 8/20/2012 by Georg Szalai

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"Disappointing" recent audience trends should improve in the fourth quarter, and lower ratings for the return of "X Factor" "may build" as the season continues, UBS says though.

LONDON - Third-quarter audience trends have been "disappointing" so far for U.K. commercial broadcaster ITV amid the BBC's strong ratings for its coverage of the Summer Olympics, UBS analyst Tamsin Garrity said Monday in lowering her full-year 2012 and 2013 advertising revenue forecast for the company.

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"Audience has been disappointing through the third quarter, though ITV has a strong programming slate for the fourth quarter," she said in a research report.

For 2012, the analyst lowered her advertising revenue estimate for ITV to growth of 0.5 percent, down from 2.5 percent previously, but still ahead of the consensus expectation for no change. For 2013, she expects no gain, down from her previous projection of 1.5 percent growth, "although this is offset by better interest and tax," which should help profitability, Garrity said.

The UBS analyst also said that ratings for ITV should improve in the fourth quarter, and lower ratings for this weekend's return of Simon Cowell's X Factor "may build" as the season continues.

"ITV management stated it is confident audience share will be stronger in the fourth quarter," Garrity wrote. "On the weekend, ITV proceeded with the return of the X Factor and a rejuvenated Red or Black; initial viewing was low at 8 million (last year 11 million), however this may build." And she highlighted that other returning shows over the near-term include Downton Abbey.

Jefferies analyst Will Smith said X Factor "is very visible, so people take note," even though most analysts don't spend much time on individual shows.

"It sounds like September is tracking a bit better than expected on ad spend," Smith said though.

Garrity echoed that. Announcing its latest results last month, ITV said that ad revenue in September will come in between unchanged from 2011 to down 5 percent, leaving the first nine months of 2012 unchanged. "Media buyers think this is slightly pessimistic," she said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai