Granada Financial Results – Reaction
Stock in Granada ended yesterday’s trading flat at 167p following the group’s financial results (see Continued Ad Revenue Woe At Granada, But Results Are Top End Of Predictions), but started to fall again this morning over continued worries that there is no visible end to the current advertising downturn. By 10:30am stock was down 6¼p at 160¾p.
The Financial Times asks whether the downturn of ad revenues at Granada might be more than cyclical. It says that advertisers are fed up with ITV’s high prices and are forcing Granada to take what it can get: prices dropped by 20% year on year in April, says the paper. At BSkyB, meanwhile, prices remain healthy and stable.
The FT also that ITV increasingly attracts an older audience, whilst the target for advertisers is often the 16-34 year olds. Add to this the fact that ITV Digital is not expected to break even until 2004 when it achieves 1.7 million customers (Sky already has 5 million plus) and Granada’s premium of 15 times earnings starts to look unjustified, says the paper.
The Times says that Granada faces two major problems: the threat to revenues from the ad slowdown and the rising costs associated with the development of ITV Digital. The paper also says that Granada’s credibility has been “done no favours by the thought of how much it paid to increase its exposure to ITV by buying Anglia and Meridian from United News & Media.” It paid £1.75 billion.
The ad slump could alleviate quicker than expected, says the Times, given that prices were pushed uncompetitively high over the last couple of years and are now coming back ‘into kilter’. The paper says it is also worth remembering that ITV remains the most popular television broadcaster with 38% of peak-time viewing and that its operations are not entirely based on advertising revenue – it is also a major programme production force in the UK.
ABN Amro: Add Lehman Brothers: Market underperform The Times: Hold
