ITV's profits surge despite audience fall

ITV esterday failed to alleviate City concerns about its shrinking audiences despite reporting a 42 per cent rise in profits, increasing its cost-cutting target and confirming plans for a disposal of non-core assets.

ITV esterday failed to alleviate City concerns about its shrinking audiences despite reporting a 42 per cent rise in profits, increasing its cost-cutting target and confirming plans for a disposal of non-core assets.

The commercial television group also provided a launch date for its ITV3 digital channel. However, the station will initially be available only on the Freeview digital terrestrial service, as BSkyB, the satellite group, has said it cannot put the channel on its system for now. Sky, which is obliged to carry the stations of all broadcasters, has told ITV the delay is for technical and administrative reasons, ITV's chief executive, Charles Allen, said.

"We'd be happy to be on Sky but they say that it would be difficult to take any new channel for six months," Mr Allen said.

Analysts said that ITV's half-year figures and the accompanying news had been largely anticipated, while the City continues to worry about the performance of the broadcaster's programmes.

ITV, reporting its first financial results since the merger earlier this year of Carlton and Granada, raised its merger cost-savings target from £100m to £120m. However, this figure had already been leaked to the press. The company's shares closed down 3 per cent at 102p.

So far this year, the main ITV1 station's share of the commercial television audience has dropped 6.3 per cent to 39 per cent. It is estimated that unless this trend is reversed ITV will lose £100m in advertising revenues next year, as advertisers follow viewers to other stations.

Nick Bell, an analyst at Bear Stearns, said: "We continue to believe that the autumn schedule is critical for ITV1. For 2005, we are currently forecasting 1 per cent growth at the top line. However, without a strong autumn schedule performance in a potentially less favourable macro environment for the UK, our forecasts risk being too optimistic."

ITV tried to provide reassurance that it could make up the lost ground. Mr Allen said the combined effect of a growing advertising market and the contribution of ITV's digital channels could counter the impact of the viewing fall on the main ITV1 channel. "I can see how you can get to levels of direct comparison with last year," he said.

ITV group reported underlying profit growth of 32 per cent to £123m for the six months to the end of June. ITV1's ad sales were up 4 per cent while the digital channels, ITV2 and ITV News, enjoyed a 68 per cent jump in ad revenues.