Advertising revenues at ITV are expected to show even sharper year on year declines in the second quarter than the first, according to estimates from media buyers compiled by ABN Amro.
The broker says that a 15% fall in Q2 is now on the cards – a deterioration on the 8% drop that was experienced in Q1. Across the year ITV ad revenue is now predicted to decline by 4.5%.
ABN says that the severity of the downturn is still surprising media buyers. The downturn is largely a result of the absence of dotcom marketing spend which boomed at this time last year. There are also fewer major sporting events this year and a general slowdown in the advertising market is currently being felt.
As a result ABN has cut its pre-digital earnings forecasts for Granada, Carlton and SMG by 7.1%, 7.3% and 7.1% respectively. This is the fourth advertising-related downgrade in the past nine months.
ABN is also reducing its valuation of ONdigital – the digital terrestrial broadcaster 50:50 owned by Carlton and Granada – and this, coupled with the ad revenue downturn, means that Carlton’s stock valuation has been reduced by 14.2% to 574p and Granada’s by 11.8% to 245p.
The latter half of the year is expected to show a return to better comparables and a resulting Q3 growth of 2.8%, rising to 4.0% in Q4. SMG is predicted to outperform the Network’s as a whole, showing a decline of just 3.2%; Carlton and Granada are expected to turn in ad revenue declines of 6.6% and 6.5% respectively for the year ending in September.
ABN has an Add recommendation on Granada and SMG and a Hold recommendation on Carlton. It says that the ITV companies are still a relatively positive investment given that ad growth rates return to normal in 2002, as anticipated.
By mid-afternoon today Carlton stock was up 9½p at 416½p; Granada was up 9¾p at 186¾p and SMG was unchanged at 196p.
