Private Investor: Bottom-fishers beware: net ITV at your peril...
Saturday 09 August 2008
I don't remember the last time I watched a programme on ITV. I think it would have been some forced consumption of Coronation Street, upon finding myself in the same room as an addict, of which I agree there are plenty. Actually, come to think of it, I did catch News at Ten the other night, and was pleasantly surprised. That, I think, is as far as my exposure to the channel goes.
Probably the most depressing thing about ITV, and this is true for shareholders as much as viewers, is the dreadful bingo and quiz programmes they put on late at night, and which I glance at when I'm channel-hopping. They seem to suggest that this is the only way the channel can make money at that hour of night, and it's a fairly desperate ploy. ITV's results last week suggested that all the action in the company under boss Michael Grade is focused on cost-cutting and attempting to escape its public-service obligations, which it says cost it too much money.
Actually, apart from Sir Trevor and a few bits of regional news, I haven't noticed much in the way of public-service broadcasting on channel three for some time, or much other "quality programming". Over on ITV 3 or ITV 4, I can't recall which, you can occasionally see glimpses of ITV's glorious past – reruns of Upstairs, Downstairs or The Sweeney or even The Professionals. I happen to think that there is no necessary reason why such a level of excellence cannot be aimed at again by ITV, and am slightly surprised that so far Michael Grade hasn't come up with the entertainment.
My point here is that the company doesn't seem to be focusing very much on driving forward a programme-led recovery, which is surely the only sustainable future for ITV.
That's the long-term problem, especially in the new, threatening world of multi-channel digital viewing, which is effectively here already, years before the Government thought.
The short-term problem is the advertising slump, in turn linked to the economic slowdown, but the analysts say that ITV is performing relatively well here compared to its competitors, so maybe that's not such a big concern if you're thinking about buying the shares.
I did own some ITV shares during a previous share-price slump, but sold out shortly after Sky took their 17 per cent stake. The price then, not much more than a year ago, was 100p; now ITV stands at less than half that. So is it now a bargain, even with its short- and long-term problems?
Maybe, because clearly it is a takeover target. When the Sky shares go back into play, so will the company. Over the years it has been linked to a variety of more or less unlikely suitors, including interest from private equity. Conditions are obviously not so good for that band of capitalist buccaneers these days, but one day they will be back.
Meanwhile, the usual media world suspects such as Endemol stay in the frame, with some quite substantial-sounding rumours about their ambitions to swallow ITV.
So at least, in the short term, the bid speculation should make ITV an interesting little punt, and provide some sort of floor for the share price, even as the dividend is slashed and may be slashed again. And people are still watching Coronation Street.
Yet I like my shares to have some positives for the long term as well, if only because, very often, supposedly inevitable takeovers take an extremely long time to turn up. And, as I say, I'd be a lot happier about that if I could see any signs that ITV was planning to end what seems to me an unhealthy reliance on Corrie.
In any case, like many punters, I'm finding it more and more difficult to take advantage of any weakness in share prices because I find myself being hit by the credit crunch and the commodities crunch. If you're lucky enough to have plenty of cash lying around, now must be the time to go bottom-fishing.
ITV might or might not be on your list – it probably wouldn't be on mine for the reasons I've given – but most of the beleaguered banks should be, and the airlines too.
When the credit crunch finally plays itself out there will be a few survivors, even in the toughest of business environments such as travel and finance. Picking a few of the stronger brethren now should pay off handsomely. If you've got the cash, that is.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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