ITV fights back as advertising rebounds

Revenues up by 11 per cent, but Crozier posts cautious outlook for 2011

ITV finally gave investors some positive news yesterday as the country's biggest commercial broadcaster, bolstered by shows such as The X Factor and Downton Abbey, posted higher revenues on the back of a strong rebound in advertising.

Revenues rose by 11 per cent to £1.46bn in the nine months to September, comfortably above the £1.31bn booked for the same period last year. Despite the upbeat results, however, management remained wary of the uncertain economic outlook and struck a note of caution.

The gains were spurred on by a 16 per cent increase in television-advertising revenues in the three months to September, a period which coincided with part of the football World Cup. ITV expects the figure to ease to 10 per cent in the final quarter.

The update comes against the backdrop of a string of successes which promise to underpin the business during the three months to December.

The X Factor has been an evident hit: the price of a 30-second advertising slot on the network during the show's final weekend are reported to be running at up to £250,000. The broadcaster also drew audiences of 10 million for the finale of Downton Abbey, the period-drama series created by the Oscar-winning scriptwriter Julian Fellowes.

Adam Crozier, who took over as ITV's chief executive after joining from Royal Mail earlier this year, was, however, careful to put the figures in perspective.

"The television-advertising market has continued to recover strongly," he said. "However this does not disguise the significant challenges ITV faces and we remain focused on delivering the five-year transformation plan."

That plan is Mr Crozier's prescription for overhauling the broadcaster. It was announced during the summer and the strategy includes entering the pay-TV market to generate around half of the company's revenues from sources beyond advertising.

"It is pretty obvious to me that being so reliant on one extremely volatile and declining source of income is not a healthy place for us to be in the long run," Mr Crozier said in August. Yesterday, he signalled progress with the transformation drive.

"We have launched HD [high definition] versions of ITV2, ITV3 and ITV4 on the Sky platform, we have agreed a new three-year deal for both The X Factor and Britain's Got Talent, and we have completed the sale of Screenvision," he said.

He also highlighted the clouded economic picture, telling investors that "the economic outlook for 2011 is uncertain and we continue to plan on a cautious basis".

UBS analysts welcomed the chief executive's tone, arguing that it "will ward off complacency". Credit Suisse turned its attention to the challenges in the medium term, commending management for setting out a "credible long-term plan", but giving warning that investors may have to wait until the first half of 2012 before the strategy starts to bear fruit.

"In 2011, the UK Government austerity measures... will make it much more difficult to sustain the positive momentum in advertising revenues," the broker said, adding that, until the company's next formal update in March, "ad hoc updates from media buyers on trading in the UK TV advertising market will be important catalysts" for the shares.

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