ITV plunges to new depths as profit falls

Advertising market decline cited for turmoil

LONDON -- ITV shares sank to a historic low of 41 pence (81 cents) Wednesday after the commercial broadcaster announced a 1.6 billion pound ($3.1 billion) write-down in the value of its broadcasting assets.

ITV blamed a declining ad market, then depressed the stock further by cutting growth targets for the year ahead.

Half-year net profits fell 28% to 91 million pounds ($178 million) (excluding a noncash goodwill 1.6 billion pound impairment charge). Revenue rose 3% to 1 billion pounds ($1.9 billion).

ITV executive chairman Michael Grade, who said the write-down went hand in hand with lowered consumer confidence, turned his fire on regulators, saying that ITV is taking a 300 million pound ($586 million) hit every year hit from "outdated" regulatory constraints.

"The empirical evidence is that actions need to be taken to relieve us of a burden of 300 million pounds a year," Grade said, warning that ITV will drop some of its regional commitments "one way or another" in order to achieve cost cuts and protect its programming budget.

Grade said that advertising forecasts for September were down 20% from last year and warned that a volatile future will not steady "until consumers start spending again."

Operationally, Grade stressed that net advertising revenue for ITV's family of channels was up 1% and viewing share up 2.5% and that the digital channels and international production divisions were performing well. He has committed an extra 20 million pounds ($39 million) to the programming budget in a bid to maintain quality.

ITV Global Content, the division led by former Fox Broadcasting exec Lee Bartlett, delivered a 30% increase in revenue and has a 150 million pound ($293 million) war chest to finance acquisitions like its recent purchase of a 10% stake in Electric Farm Entertainment.

But ITV's board has halved the broadcaster's dividend payment and rewritten overall growth forecasts. Global Content's target of doubling revenue to 1.2 billion pounds ($2.3 billion) by the end of 2012 has been scaled back to 1 billion pounds. ITV Online's target of 150 million pounds in online revenue by 2010 has been pushed back to 2012.

Following the news, analysts downgraded ITV's prospects over the next 18 months. In an investment note, UBS analyst Daniel Kerven predicted a 7.2% drop in full-year revenue in 2008, widening to an 8.9% fall in 2009.
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