Ad revenues slump at flagship ITV channel

TROUBLED broadcaster ITV lost 1.8 per cent from its share price after revealing it has been hit by a further drop in advertising revenues for the year.

Its key terrestrial channel, ITV1, saw ad income slump 12.5 per cent, while revenues at its morning flagship programme GMTV slipped by 3 per cent, although it was up 40 per cent for the digital channels.

The UK's biggest commercial television broadcaster in the country - home to The X Factor and Coronation Street - said it will match its 2006 programming budget next year as it seeks to reverse the result.

Chief executive John Cresswell said that, while airtime sales environment remains "challenging", its digital channels continue to "perform strongly".

The advertising revenue target is 150 million for the digital channels by 2007, he said, and he is looking to make 40m operational efficiency savings by 2008.

He added that it had managed to maintain its position as the UK's most popular peak-time channel, with an average peak-time share for adult viewers of 27.3 per cent, compared with BBC 1's 24.5 per cent.

The news comes just weeks after the group named former BBC chairman Michael Grade as its replacement for boss Charles Allen, who quit ITV in August. Grade takes up his new position on 8 January.

The future of the firm has been hanging in the balance amid rising competition from digital TV firms, low viewing figures and falling advertising revenues.

Analysts had speculated that the firm could become a takeover target and the group turned down a 4.7bn approach from cable operator NTL, whose biggest shareholder is entrepreneur Richard Branson. Last month, rival broadcaster BSkyB bought a 17.9 per cent stake in ITV for 940m.

Analysts at Numis said yesterday the programme investment pledge was encouraging as the 2006 budget had included the expensive task of covering the World Cup.

"We'd actually been expecting a modest reduction," it said in a research note.

But most analysts noted that the trading statement did not give many details of those costs and said it still awaited the first sign of impact from the arrival of Grade, which the market will now have to wait for in the company's next set of results on 7 March.

ITV has a budget for programme investment of around 1bn, but its critics say the broadcaster's problems - falling audiences and declining advertising - are linked to its choice of programmes and not the funding.