Carlton and Granada shares drop as analysts cut revenue forecasts

The share prices of Carlton and Granada yesterday fell 17 and 10 per cent respectively as analysts slashed already- reduced earnings forecasts in response to expected further declines in advertising volumes through 2002. The cuts follow last week's terror attacks in the US that are expected to weigh heavily on the global economy.

ABN Amro, the investment bank, cut its forecast for 2001 ITV network advertising sales to a fall of 15 per cent from 2000 compared with earlier estimates of a 10 per cent drop. The broker also pushed back the timing of a recovery to 2003, forecasting advertising sales next year would slide 5.6 per cent instead of making an anticipated 2.0 per cent rebound.

ABN said: "Earnings downgrades coupled with ongoing digital investment will result in significant cash outflows for both companies until 2003." The broker also noted that Carlton, the smaller of the two main ITV companies, could face financial constraints after 2002, should ITV revenues decline further than its forecasts.

That coincided with renewed hostilities between the companies, which co-own ITV Digital, the digital terrestrial platform, and BSkyB over terms to distribute the former's channels on the pay-TV giant's satellite platform. ITV wants to launch satellite distribution by 2002 and is close to leasing transponder capacity from Astra, the satellite group, rather than use BSkyB.

Carlton shares slid 37p to 178p on volume of 29 million – putting the share price at 10- year lows. Granada fell 10.5p to 91p on volume of 90 million shares, making it the market's second heaviest traded issue.

Evidence emerged of heavy institutional stock sales. UBS Warburg handled a placing of Granada stock, while Carlton, which slid throughout yesterday's trading, lost further ground after one seller dumped 12.8 million shares.

BSkyB shares fell 27.5p to 622p after Credit Suisse First Boston cut fiscal year to June 2002 and 2003 cash flow forecasts by 13 per cent.