Two of Europe's biggest commercial free-to-air television broadcasters, ITV and ProSiebenSat.1, said on Wednesday they had no idea when a downturn in advertising spending would end.
Both Britain's ITV and Germany's ProSiebenSat.1 beat market expectations with their interim results but their lack of ability to predict the future development of the advertising markets that are their lifeblood sent their shares tumbling.
ITV forecast a 20 percent drop in ad sales in September and a 17 percent drop for the market. Analysts said the prediction was worse than the steep drop they had already expected from last September, when Britain hosted rugby World Cup tournament games.
"We've seen a level of volatility in September that we haven't seen before," Executive Chairman Michael Grade told journalists on a conference call. "We have no visibility beyond September on the advertising market."
ProSiebenSat.1 initially cheered investors by sticking to its full-year target of broadly flat core earnings "despite difficulties in the German market". But Chief Executive Guillaume de Posch said: "Any long-term forecast for the TV advertising market must be tentative. We would like to emphasise that our profit target depends on trading conditions which are more than usually uncertain."
Media analysis firm Screen Digest has predicted that the global TV advertising outlook will improve only in 2010. "In particular, traditional forms of advertising will suffer as TV audiences fragment," it said in a report.
ITV makes and broadcasts some of Britain's most popular TV shows, including soap operas and reality-TV such as "I'm a Celebrity". ProSieben's core business is free TV in Germany but it owns dozens of TV and radio stations around Europe.
By 0855 GMT ITV shares were down 11 percent at 41.1 pence, having earlier fallen as low as 38.3 pence. ProSiebenSat.1 shares, which had risen in early trading, were down 2.3 percent to 6.05 euros, off a low of 5.85 euros. ITV was by far the worst performer in a flat European media index, while ProSiebenSat.1 was a leading decliner in Germany's mid-cap index, which was slightly up.
Credit Suisse cut its price target for ITV to 50 pence from 70 pence and kept its "neutral" rating, mentioning the lack of visibility as a key concern in a research note. ITV, Britain's biggest free-to-air commercial broadcaster, said it beat a 1 percent drop in the wider British TV ad market with flat net advertising revenues (NAR) in the first eight months, and said it would continue to outperform the market.
First-half group sales rose 3 percent to 1.031 billion pounds ($2.01 billion), ahead of the consensus of analysts' forecasts of 1.020 billion pounds, thanks to strong performances by its broadcasting, global content and online units. Earnings before interest, tax and amortisation fell 20 percent to 121 million pounds, due to heavy costs for sports operations, in particular the Euro 2008 soccer championship.
ITV targeted an extra 35 million pounds of cost savings by the end of 2010, halved its interim dividend to 0.675 pence and cut or deferred some mid-term goals, but said it would maintain investment to position itself for a future market recovery. The broadcaster also took a non-cash impairment charge of 1.6 billion pounds as a result of reduced advertising market forecasts for this year and next.
ProSieben's second-quarter earnings before interest, tax, depreciation and amortisation and one-offs were 203.7 million euros ($315.8 million), beating the average forecast of 180 million given in a Reuters poll analysts. Sales rose 45 percent to 801.9 million euros.
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