Franchise costs force HTV to slash budget

HTV GROUP, the Independent Television broadcaster in Wales and the West of England, yesterday became the first successful bidder for an ITV franchise to run into problems because of the large size of its bid.

The group yesterday announced a draconian cost-cutting package - including a wage freeze, the cancellation of bonus payments and substantial job cuts - designed to shave pounds 10m a year from HTV's overheads. HTV's staffing levels have already been halved to 460.

The measures, which Louis Sherwood, HTV's chairman, said were essential to secure the future of the company, have already prompted the departure of one HTV director, Emyr Daniel, the head of HTV Wales, who objected to a merger of the group's two programming sides.

The cost-cutting was revealed as the group announced a loss of pounds 5m in the six months to 30 June and cancelled its interim dividend. HTV's shares fell a third to 27p on the news, valuing the company at just pounds 18.6m. The group's debts currently stand at pounds 25.7m.

By contrast Central Independent TV, which won back its franchise with a bid of just pounds 2,000 a year, announced a 344 per cent increase in pre-tax profits to pounds 15.1m in the same period. Central's earnings per share rose similarly to 34.7p and the interim dividend is 10p, up a third. Its shares rose 70p to 1445p.

HTV's loss came despite a cut in the exchequer levy, the amount ITV companies pay to the Government to be allowed to broadcast, from pounds 3m in the first half of last year to just pounds 500,000.

HTV bid pounds 20.5m a year to retain its franchise, which means that, even allowing for beneficial factors like the change in the way Channel 4 is funded, HTV's losses under the regime to be introduced next year would, on a like-for-like basis, have exceeded pounds 10m.

Charles Romaine, HTV's chief executive, said that the group had suffered a drop in the share of network advertising revenue (NAR) from 6.2 per cent to 5.8 per cent in the half-year. 'Our share has eroded more than we expected but we believe we have stabilised at this level,' he said.

HTV had suffered because a survey indicated that the impact of programmes broadcast by HTV had fallen by nearly a quarter. This meant that HTV was losing out as advertisers congregated towards the more successful regions, a trend shown by Central's NAR, which increased from 14 per cent to 14.8 per cent.

HTV's problems have led to speculation that its days as an independent company may be numbered. Under the Broadcasting Act HTV is designated as a large company and the Act prevents any of the other eight large companies taking it over.

However Central is among the ITV companies lobbying for a change in the Act. Leslie Hill, Central's chairman, said the group would be interested in deals that would enable Central to grow as a broadcaster in the UK.

(Photographs omitted)

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