At last: Signs of recovery in advertising market

Signs of a tentative recovery in advertising were provided yesterday by the broadcasters Granada and Capital Radio.

Granada revealed that advertising revenue for May looked set for a 9 per cent increase on the month last year – making it the first positive month since December 2000.

Kingsley Wilson, at Investec Henderson Crosthwaite, said: "This is a big time surprise. We were looking for May to be down 6 per cent. This could be the catalyst for a second-half recovery."

Granada, however, cautioned against seeing May as the beginning of a trend, as forward visibility of earnings remained very limited.

"Whilst this [May] is positive, it may reflect a combination of a low comparator last year and advertisers investing in advance of the football World Cup in June, as has happened in the run-up to the last two such contests," Mr Allen said.

For the six months to March, Granada will see advertising down 12 per cent on the previous year. The worst months last year saw advertising down 20 per cent or more.

At Capital Radio, advertising revenue for the January to March quarter will be down 5 per cent, compared with a 9 per cent decline in the previous three months. The negative figures for Capital set in during April last year, meaning that comparatives from April 2002 will be easier and possibly in positive territory.

Peter Harris, Capital's finance director, said: "The situation is definitely better than it was three months ago and we think this is bit of a trend. The signs of optimism from TV are important to us as they have longer lead times [on advert bookings]."

Granada also said it would re-open merger talks with Carlton, aimed at creating a single ITV company, amid suggestions that the pair believe they are nearing a new football content deal for their ITV Digital joint venture. The current £315m deal with the Football League is crippling the service and its sister channel, ITV Sport. Once ITV Digital is restructured, ITV merger discussions could re-open.

Charles Allen, Granada's chairman, told the company's annual general meeting that negotiations were being held with all key ITV Digital suppliers. He added that having one ITV company would save £50m a year.

"Looking forward, we believe the focus must move from restructuring Granada to restructuring ITV, and that this process both logically and inevitably leads towards a single ITV company when legislation and regulation permits," he said.