Advertising downturn cuts 33% off SMG profits

Scottish Media Group yesterday reported a 33 per cent fall in interim pre-tax profit to £20m, becoming the latest broadcaster to suffer from the continuing advertising downturn. That led SMG to slash its interim dividend by one-third to 1.5p a share.

Most of the setback occurred at STV and Grampian TV, the main ITV franchises in Scotland, where earnings fell by £6.5m to £12.9m. Turnover for the group, headed by Andrew Flanagan, chief executive, for the six months to 30 June slid 9 per cent to £140m.

George Watt, SMG's finance director, offered few clues about when an upturn might materialise: "The advertising market is very short term at the moment. We believe we have reached the bottom and we are bumping along the bottom, but there is no sign of an upturn."

SMG shares fell to near five-year lows, losing 12.5p to 139p. Other broadcasting stocks also fell with Carlton Communications, likely to drop out of the FTSE 100, losing 20.5p to 236.5p, while Granada shed 13p to 113p.

The downturn was also felt at Virgin Radio where sales on a like-for-like basis fell 20 per cent. Actual sales for the half were £14.6m compared with £13.2m for four months during 2000 after SMG bought the station as part of its £225m acquisition of Ginger Media.

SMG's newspaper operations, principally The Herald based in Glasgow, grew advertising revenue by 3 per cent, but higher newsprint prices saw operating profit fall by £1.1m to £8m. Outdoor and cinema advertising bucked the overall trend with earnings up 40 per cent to £2.6m on a 15 per cent rise in turnover to £15.7m.