Allen to raise ITV stakes with promise of increased cost saving

Click to follow
The Independent Online

Carlton and Granada are expected to make increased cost savings the centrepiece of their last financial results presentation today, ahead of merging the two companies.

The deal, which will create a single ITV company for the first time, had originally targeted cost savings of £55m a year. However, many City analysts and industry figures believe that much more is achievable.

Charles Allen, Granada's chairman and the chief executive-elect of the enlarged company, is expected to agree that ITV can wring significantly more from the merger. It is unclear whether he will commit to a new figure but he will come under intense pressure to be specific.

The consensus in the City is that £70m to £75m is achievable while Investec Securities yesterday suggested that £80m "could ultimately be nearer the mark".

Granada, which is separately facing strike action by staff in a pay dispute, is the senior partner in the merger. While the finance directors of Granada and Carlton will separately present full-year figures for each company, the bulk of today's full-year results presentation in the City will be taken up by a presentation on the future ITV by Mr Allen.

Michael Green, who is still Carlton's chairman but has been prevented by shareholders from taking up the same position at the combined group, is not expected to play any part in his company's last-ever results presentation today.

Shareholders believe that the combined companies must go for more aggressive synergy targets than have so far been outlined. There has been speculation that Granada agreed to this as the price for not being hit by the shareholder revolt seen at Carlton last month.

Cost savings are very much seen as a shareholder agenda, and the emphasis that will be placed on this goal today will add to concerns in some quarters that quality of programming may suffer.

Kingsley Wilson, an analyst at Investec, said: "The market is already discounting the stated cost savings so they will need to come up with something bigger to keep the City happy."

Individually, both Granada and Carlton have already over-shot the internal level of cost savings that were targeted by each company ahead of the merger.

Job losses form a large part of the merger synergies. Last week, 175 jobs had gone at Granada's Meridian franchise and hundreds more are expected to go in integrating the two companies.

Mr Allen is still expected to be cautious on any new savings target, still leaving room for ITV to over-achieve. Also, he will not want to be seen to be making a nonsense of the £55m figure given to the Competition Commission when it was considering the deal.

Separately, there is also the issue of "revenue synergies" available from the merger - a figure blanked out in the Competition Commission report on the deal when it was released to the public.

In addition, the City will be looking for guidance on possible disposals and the advertising environment. Unlike radio, TV is yet to see a marked bounce-back from a three-year advertising recession.

Before exceptional items, the City is looking for a pre-tax profit of about £160m for Granada and £69m for Carlton.

Separately, it was announced that David Connolly, a former vice-chairman of the media buying group Starcom Motive, was appointed to a new position to adjudicate in disputes between ITV and advertisers.

COUNTDOWN TO LONG-AWAITED MERGER

7 October: DTI approves the merger of Carlton and Granada, subject only to behavioural remedy

21 October: Carlton's Michael Green forced to quit his role as chairman-elect of the combined group

7 November: OFT agrees the terms of the behavioural conditions attached to the merger clearance

10 November: Granada's Graham Duff named to head up the merged sales operation of ITV

14 November: DTI gives final clearance to deal

20 November: 175 jobs axed at Granada's Meridian franchise

25 November: David Connolly appointed as the adjudicator of the behavioural remedy

26 November: Granada and Carlton present separate financial results for the last time

Early Dec: Merger documents will be posted to shareholders

Mid-January 2004: EGMs at Carlton and Granada to approve the merger

End January: Merger completes

Comments