City analysts do not share the optimism of senior executives at Carlton and Granada and have downgraded the ITV companies following the release of their full-year results this week.
The media research team at Morgan Stanley marked down the stocks from “equal weight” to “underweight”, essentially a recommendation to sell shares in the two companies. This decision was based on downbeat revenue forecasts for the new year.
In a research note, the bank said: “The overall growth trend that ITV had seen from May to December came to a halt in December. Meanwhile, visibility remains poor for advertising in 2003. Indications from a major buyer of TV airtime are that January will be negative for ITV.”
Despite announcing losses of £156 million, Carlton bosses were encouraged by the 2% increase in ad revenues in the second half of the year (see Carlton Sees Improving Ad Trading As Loss Hits £156m). However, chairman Michael Green said that the expected the market to be “challenging” in the forthcoming months.
Charles Allen, executive chairman of Granada, said that ad revenues for October had increased 10% year on year but growth had slowed in November and revenues are expected to be down 8% next month (see Granada Unbowed Despite Fall In Profits). ABN Amro retained its ‘hold’ recommendation on Granada stock but has downgraded its 2003 forecasts by 5% and is now predicting pre-tax profits of £146 million. Nonetheless, it believes that the promised extra investment in programming will enable ITV to stem the decline in its audience share.
Carlton and Granada are currently striving to clear the regulatory hurdles that stand in the way of their proposed merger (see Carlton And Granada To Appeal To Regulators Over Merger). At the close of trading today, shares in the two companies stood firm at 170.5p and 95.5p respectively.
