ITV Digital collapse and advertising slump push Granada into £169m loss

Granada plunged deep into the red yesterday in the wake of the collapse of the ITV Digital joint venture and as tough conditions in the advertising market continued to take their toll.

The ITV operator, which makes programmes such as Coronation Street, This Morning and Emmerdale, took a £104m hit to cover the closure of ITV Digital – a process Granada's chairman, Charles Allen, described as "very painful".

But the broadcaster, whose merger talks with the other main ITV player, Carlton Communications, collapsed earlier this year, said it still believed the creation of a single ITV company made sense in the longer term.

Furthermore, Granada's chief executive, Steve Morrison, left the door open for talks with Carlton to be resumed, implying its rival would do better to partner with a UK group rather than an overseas operation. "There are many more synergies in Neighbours than Home and Away," he said.

Mr Allen shrugged off speculation that heads would have to roll at Granada after the collapse of ITV Digital, saying: "Steve is the chief executive. He's managing the business ... that's how it will remain."

Granada saw net advertising revenue for the half year fall 12 per cent on a like-for-like basis, contributing to a 9 per cent drop in overall sales to £713m. Those factors helped push the company deeply into the red, to the tune of £169m, in the six months to 31 March, compared with a £12m pre-tax profit a year before.

"The global downturn in the advertising market continued during the first half and eroded the profit of UK commercial broadcasters, including Granada," Mr Allen said.

While he believed the outlook for the advertising market was still "unclear", he predicted net advertising revenue would be up around 14 per cent in May, boosted by the football World Cup, and forecast a 7 per cent rise in June and a 6 per cent rise in July.

Granada's shares ended down 2p at 227.5p although the City took heart from the financial figures, which were at the top end of forecasts.

"We are now putting all our energies into driving our core broadcasting and content business. The ITV fightback starts now," Mr Allen said.

Granada also said its cost saving programme was ahead of schedule. It had been targeting £60m of annual savings by September next year, said it was on course to hit £54m by September this year.