HTV prepares to argue for a big cut in pounds 24m licence fee

Louis Sherwood, chairman of HTV, yesterday confirmed this week's report in The Independent that he was seeking a review of the company's licence terms as he disclosed that its annual pounds 24m licence fee swallowed up almost 25 per cent of last year's advertising and broadcast revenue.

He said the company was talking to the ITC over the terms of a review which could take effect in 1999, and which would be four years before the 10-year contract was due to expire.

Mr Sherwood and Christopher Rowlands, chief executive, hope for a "significant reduction" to reflect the vastly increased competition from other television channels. They are reluctant to put a figure on it, but some analysts think the cut could be as much as 50 per cent.

HTV will have to argue its case hard, but the company is already exceeding its commitments to local programmes.

The remarks about the licence review accompanied HTV's annual results which, despite optimistic noises on prospects from Mr Sherwood, disappointed investors and sent the company's shares down by 10p to 350.5p.

Turnover last year edged up by 3 per cent to pounds 139.3m, operating profit was almost unchanged at pounds 12.2m and the cost of bringing in digital technology resulted in pounds 2.1m of exceptional charges. Pre-tax profits plunged 18 per cent to pounds 9.9m.

Earnings per share slipped by 2p to 8.5p. The dividend, however, goes up 11 per cent to 4.15p.

HTV has not experienced a surge in advertising revenues, unlike other ITV regions, particularly London. Revenue rose just 2 per cent to pounds 96.8m, and its share of the national cake fell from 6.01 per cent to 5.84 per cent. The telecom advertising war which has brought in rich pickings in the capital has yet to reach Wales. Mr Sherwood, however, believes that HTV's new four-year deal with its airtime sales agent, TSMS, will bring improved results.

The Harvest Entertainment programme sales division continued to prosper, pushing profits up 24 per cent to pounds 5.6m on turnover up only 5 per cent to pounds 32m. Its contribution to group profits shot up from 36 per cent to 44 per cent and could be over 50 per cent this year, boosted by an alliance with Warner Brothers. The first joint production, a 26-part animation series, Zorro, will be shown in the autumn.