Carlton profits rise as signs of ad recovery sighted
LONDON - ITV company Carlton Communications has posted a 76% rise in pre-tax profits and says that it is seeing signs of an improvement in the advertising market, pushing Carlton's shares higher in early trading.
Pre-tax profits for the full year rose to £53.3m from £30.2m in 2001 on the back of cost savings of £54.2m. Carlton's shares were up sharply by 7.09% or 9.5p at 8:45am to 143.5p as the City took in the upbeat news.
Carlton said that even with advertising revenues being down 6%, or £35.7m, on the year, revenues were up 2% in the second half. Carlton saw its flagship channel ITV1 lose ground as its total UK television advertising revenues for the year fell to 54% from 57% in 2001.
Looking ahead into 2003, Carlton said it was expecting first-quarter ad revenues to be 2% higher year-on-year, but it remained cautious saying it expected the advertising marketplace to be challenging in the months ahead.
As it moves ahead with its £2.6bn merger with ITV partner Granada, Carlton said that it remained convinced that the merger is the right move at the right time, which will ultimately benefit viewers, advertisers and shareholders alike.
It said that a strong commercial public service broadcaster leading the industry will be good for British television and it would be urging the regulators to look at the wider competitive landscape when considering its merger proposals.
Carlton chairman Michael Green said: "The advertising recession endured for a second year, competition from pay television intensified and a resurgent BBC, backed by increased funding, tried to challenge ITV's lead in peak time. ITV has started the year well. Advertising revenues in the first quarter of 2003 are expected to be up 2% year-on-year. However, like other broadcasters and advertiser-supported businesses, we expect the marketplace to be challenging in the months ahead. A strong ITV schedule, improved ratings and our proposed merger put Carlton in the best possible position to benefit as advertising demand starts to recover."
Turnover from continuing operations was £964.6m, compared with a restated £1.04bn in 2001. Carlton attributed the decline in turnover primarily to a reduction of £35.7m in advertising revenues.
Carlton said that after a difficult first six months, year-on-year advertising growth resumed in May. For the year as a whole, Carlton's net advertising revenue was £660m, compared with £695m in 2001, including a full year of HTV, which was acquired at the end of October 2000.
ITV's advertising performance continued to be influenced by the growth of multichannel television and exposure to global brands that were affected by the worldwide economic climate.
Despite revenues in many sectors being lower than 2001, automotive, cosmetics, pharmaceuticals and home entertainment were all up.
Carlton said that its cinema advertising operation, Carlton Screen Advertising, had its best year to date with turnover for the year up to £60.1m from last year's £57.4m on the back of a string of blockbuster films.
CSA retained its UCI Cinema advertising contract, accounting for 386 screens across the UK and Ireland and, in spite of losing its contract with UGC, it won National Amusements/Showcase giving CSA a total of more than 1,800 screens and 63% of the market.
Carlton's share of ITV Digital's and ITV Sport Channel's pre-closure losses was £98.6m. An exceptional charge of £99.1m was taken as a result of the decision to place ITV Digital in administration. This was made up of a £34.6m balance sheet write-off and a £64m provision for Carlton's share of closure costs. No further charges are expected in the future.
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