Market Report: ITV a picture of bad news as ad revenues plunge

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You don't have to be a media executive to know that advertising revenues are falling through the floor. Investors waiting for a turnaround might have to stomach more bad news before things improve if the broker Investec is to be believed. The Anglo-South African bank believes advertising revenue at the commercial broadcasting group ITV could fall by as much as 20 per cent in October alone, leading to a 12 per cent decline in full-year earnings, towards the bottom end of forecasts.

Although the broker retains its "hold" stance on ITV shares, most of the support comes from corporate activity rather than the performance of the underlying business. With the group poised to appoint a new chief executive and a possible bid target, Investec believes there are enough catalysts to make it worth hanging on to the shares. However, whoever takes the reins from Charles Allen has their work cut out to reverse declining viewing figures and advertising revenues, and any honeymoon period is likely to be as short as discussions over commissioning another series of Love Island should be. Shares in ITV led the blue-chip fallers with a 2.25p decline to 98.75p.

Strong telecoms stocks offset more profit taking in the mining sector yesterday as the FTSE 100 closed 40.7 firmer at 5,891.5. BT Group and Vodafone were in demand after confirming a fixed-line wholesale agreement on Monday, adding 4.75p to 258p and 2.75p to 117.5p respectively. Confirmation that Telecom Italia will break up also encouraged buying interest.

The inter-dealer broker Icap added 5.25p to close at 474.75p as the broker Citigroup initiated coverage of the stock with a "buy" recommendation and a 585p price target. According to the investment banking giant, Icap offers good earnings growth and could become involved in more merger and acquisition action.

GCAP Media, the operator of Classic FM and Capital Radio, was marked lower on the back of the Investec note on ITV. Last week, the broker Merrill Lynch warned that GCAP could breach its banking covenants if trading does not improve and the ITV note did nothing to improve investors' confidence. The shares topped the list of FTSE-250 fallers, down 7p to 186p.

A strong overnight outlook statement from the electronics giant Texas Instruments boosted CSR and Wolfson Microelectronics. Both stocks have been volatile in recent weeks, attracting their fair share of profit takers, but yesterday's news encouraged buyers, sending Wolfson 20p better to 491p and CSR up 51p to 1,171p.

Although trading in Aer Lingus, the Irish airline, is not due to start until 2 October, spread-betters were getting in on the act early, with IG Index reporting strong interest in the grey market. The shares are due to be priced between €2.10 and €2.70 (£1.42 to £1.83), and by the close of trade yesterday the price was showing at €2.44.

It looks like an offer will be made for Morgan Crucible sooner rather than later. The rumour in the market is that its German rival SGL Carbon, thought to be behind an earlier offer for Morgan Crucible, will bid 320p for the 150-year old furnace and foundry maker, valuing the group at just over £1bn, including £110m of debt. Shares in Morgan Crucible were the best performers in the mid-cap index, closing 19p better at 297p.

Although Misys, the information technology group, confirmed that bid talks have not resulted in any bid proposals worth putting to shareholders, the chat late in the day was that an offer worth more than 250p per share will still come later this week. The group first indicated it was in offer talks in June, and the long delay in confirming an offer led to many observers concluding that the talks would come to nothing. The shares fell 19.5p to close at 231.25p.

Commoditrade has carried on attracting buyers since breaking through resistance at 22p. Traders said that the commodities trading group is conducting a significant proportion of the business that goes through the London Metal Exchange; according to one executive at a metal trading group, up to 80 per cent of all transactions are going through Commoditrade. The shares added another 1.5p to close at 26.75p yesterday as more than 2 million shares changed hands.

Rumours of a very large seller in Sterling Energy sent the stock 2p worse to 16.5p. Market makers said the seller had grown impatient with efforts to place a line of stock and was "becoming more aggressive". Almost 36 million shares changed hands, about 18 times more than the average daily volume.

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