ITV Advertising Forecasts From Lehman Brothers

Earlier this year, ITV companies were told to anticipate flat revenues for the full year to September (see ITV Advertising And Merger Outlook From Lehman Brothers) but the situation has deteriorated over the summer. TV and the total advertising market have performed below expectations but better than ITV, which saw revenues down by around a fifth in June because of difficult comparisons with last year’s World Cup (see Merrill Lynch Cuts ITV 2003 Airtime Revenue Forecasts).

The slump has continued into the fourth quarter with the ITV companies making estimates of -9% for July and -23% for August. A further decline of 5% is expected in September, prompting Lehman Brothers to revise down its Q4 forecast from -3.5% to -9% and its full year prediction from -2% to -3.3%. This aligns the broker with Morgan Stanley which has already downgraded its forecasts for the remainder of the year (see Morgan Stanley Downgrades ITV Forecasts).

Lehman concludes that ITV must be “suffering from disadvantageous advertising share deals with agencies in January 2003, as well as some weakness in big new campaigns.” Audience figures are starting to improve but growth is expected to be flat in the early part of 2004 with better trading not forthcoming until the second half of the year. The FY forecast has been duly cut from 4% to 2.5%.

The latest prognosis is a body blow to the ITV broadcasters with the 2003 downgrade translating to a 5.5% decrease in earnings per share (EPS) for Carlton and a 12.8% decline for Carlton.

ITV Advertising Revenue Forecasts
	Revenue (£m)	YoY Change (%)
Q1	469.4	4.5
Q2	366.9	-4.7
Q3	427.7	-4.8
Q4	356.9	-9.0
FY2003	1620.9	-3.3
Q1	469.4	0.0
Q2	367.6	0.2
Q3	449.1	5.0
Q4	374.7	5.0
FY2004	1660.9	2.5
Source: Lehman Brothers, July 2003