At the end of last week Zenith Media made further downgrades to its global advertising forecasts, cutting 2001 growth from -1.5% to -2.6% (see Forecasts). UK estimates were reduced from -0.5% to -0.3%.
News of a change in Zenith’s advertising forecasts tends to send ripples throughout the industry and today stock in media companies Granada and Carlton Communications were down in the morning’s trading. As groups such as these are very reliant on advertising volumes, such growth estimate cuts negatively impact on the ratings of the companies. Deutsche Bank and Merrill Lynch have both cut their estimates for the two ITV giants.
Analysts at ABN Amro meanwhile are currently revising their forecasts for this year and the next and further downgrades are certainly on the cards. UK growth has already been put back further from -3.7% to -5.4%. The table and graphs below show how ABN’s forecasts – many still to be revised – compare with Zenith’s latest figures.
| Ad growth forecasts: ABN Amro versus Zenith |
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2001 Zenith |
2001 ABN |
Difference |
2002 Zenith |
2002 ABN |
Difference |
| North America |
-4.2 |
n/a* |
n/a* |
0.1 |
n/a* |
n/a* |
| France |
0.8 |
-1.1 |
-1.9 |
3.6 |
3.5 |
-0.1 |
| Germany |
-4.0 |
-2.3 |
1.7 |
2.0 |
2.1 |
0.1 |
| Italy |
3.1 |
-1.3 |
-4.4 |
5.2 |
3.8 |
-1.4 |
| Spain |
-1.8 |
-6.0 |
-4.2 |
1.8 |
3.6 |
1.8 |
| UK |
-3.0 |
-5.4 |
-2.4 |
2.0 |
3.7 |
1.7 |
| Europe |
-1.8 |
-2.5 |
-0.7 |
2.7 |
3.1 |
0.4 |
| Japan |
1.5 |
0.0 |
-1.5 |
0.7 |
-0.1 |
-0.8 |
| 7-country total |
-2.6 |
-3.7 |
-1.1 |
0.8 |
2.4 |
1.6 |
| Total |
-1.6 |
-2.2 |
-0.6 |
1.8 |
3.2 |
1.4 |
| *US forecasts under review |
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| Source: Zenith 31/08/01, ABN Amro estimates, 03/09/01 |
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The marked differences in Zenith’s predictions for different countries is partly to do with the company’s own structure, say ABN analysts. The figures are compiled locally by its various offices and then aggregated centrally; different offices tend to make different assumptions of GDP and so on.
The figures from Zenith are based on low GDP growth assumptions; ABN’s are compiled on consensus GDP predictions. However, ABN is now warning that there is a likelihood of a ‘full blown consumer recession’, especially if Zenith’s assumptions are correct. If this were to take place – and the broker describes it is a ‘distinct possibility’ – then the forecasts for 2002 here would be overly optimistic. There would be a second year of negative advertising growth, probably at least -2.0%.
