City welcomes troubled ITV's upbeat advertising forecasts

Published on Thursday 5 November 2009 20:34

ITV yesterday raised hopes of a recovery in the shattered television advertising market, forecasting a 4 per cent increase in ad revenue for December.

The announcement, which prompted ITV shares to soar 10 per cent, helped divert attention from tortured negotiations over the successors to outgoing executive chairman Michael Grade.

Bob Wigley, the former head of Merrill Lynch in Europe, yesterday emerged as one of the front-runners for the chairman role, after the previous leading candidates, Sir Crispin Davis and Sir Michael Bishop, turned the job down. It is understood they viewed the turnaround required at ITV as too challenging.

The group has also struggled to find a chief executive after the former Sky boss Tony Ball walked away from talks in September amid disagreements over pay and who would work alongside him as chairman.

Analysts yesterday hailed the advertising figures as "encouraging", but they warned that ITV urgently needed to resolve its leadership crisis.

Alex de Groote, media analyst at Panmure Gordon, said: "It has been going on and on. It really needs to be sorted."

ITV said it now expected net advertising revenues for the final three months of the year to be flat, despite the expected rise in December. Ad income for the full year is forecast to be down 12 per cent.

Paul Richards, an analyst at Numis Securities, yesterday raised his full-year profit forecasts from 80 million to 150m. He also predicted a better-than-expected advertising performance next year.

Richards said: "We forecast that the UK TV advertising market will be flat in 2010, aided by the World Cup, and, given ITV's strong recent relative performance, we now expect it to perform in line with the market."

Numis had previously pencilled in a 5 per cent advertising slump at ITV in 2010.

But Sam Hart, an analyst at Charles Stanley, warned investors not to get carried away with the figures. He said next month would be compared against one of the worst months on record in December 2008, when the advertising market was "almost in complete meltdown".

Hart said: "It's encouraging, but I wouldn't get overly excited. Visibility going into 2012 is still extremely poor."

Hart said it was no surprise that ITV was struggling to find suitable replacements for Grade, given the "massive" structural problems the industry faces, including the migration of audiences away from traditional channels to the internet.

Hart said: "In many ways the ITV job is a poisoned chalice. It's an extremely challenging job to take on."

The City expects the new management, when appointed, to undertake a dramatic financial restructuring, including launching a rights issue.