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Carlton pre-tax profits drop to
£118m as ad revenues fall

LONDON - ITV company Carlton Communications said pre-tax profits fell to £118m from £193m last year as advertising revenues declined 12.7% year-on-year as a result of difficult trading conditions.

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However, turnover rose 5% to £1bn. The company blamed the reduction in internet-related and telecoms advertising for the initial drop in advertising this year, but said that this was compounded by a sharp decline in the consumer goods sector.

The company undertook a cost-cutting strategy in May, which has so far saved £45m, including savings on its ITV Digital joint venture with Granada. The terrestrial digital platform is shouldering a lot of the blame for both companies' dwindling profits.

Taking in the investment in ITV Digital and goodwill, the company saw pre-tax losses widen to £231.4m from £39.1m last year.

Carlton said it invested £164m in ITV Digital, compared with last year's contribution of £143m and Granada's investment this year of £194m.

Carlton confirmed that the digital terrestrial broadcaster remained on target to achieve its new controlled-growth plan to break even in 2003/2004 with 1.7m subscribers.

Carlton said the government's digital action plan has set out a timetable for strengthening ITV Digital's signal -- which has traditionally been weak in some areas -- in order that 72% of UK households can access all channels and 84% of households can access digital channels from the BBC, Channel 4 and ITV.

ITV Digital also plans to launch a digital TV publicity campaign to raise awareness among consumers and retailers. A digital TV team leader is to be appointed to spearhead the work on digital TV.

Carlton chief executive Gerry Murphy said: "While ITV Digital continues to develop operationally, a number of important regulatory and governmental issues have yet to be resolved. The government's confirmation of support in its draft Digital Action Plan is encouraging and should help ensure that digital terrestrial TV will become the principal means by which viewers will receive free digital TV channels."

Shares in Carlton rose 1.9% to 219p this morning. Yesterday, its stock was upgraded by investment bank Merrill Lynch after the company said it is to raise as much as £397m with a bond issue. The issue will effectively allow it to cash in shares in Thomson Multimedia -- the company to which it sold its Technicolor film processing unit at the end of last year -- four months early.

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