ITV And ProSieben Show Glimmers Of Hope

The group had lost 27,000 net customers, but said it had managed to extract record sums from its existing base.

European broadcasters ITV and ProSiebenSat.1 offered a glimmer of hope to the sector on Thursday, with the German firm cutting costs heavily and ITV finally seeing signs the advertising collapse was easing.

As both groups posted second-quarter and first-half results showing the full extent of the advertising downturn, British pay-TV group Virgin Media posted flat sales in the second quarter and said its outlook was strong.

The group had lost 27,000 net customers, but said it had managed to extract record sums from its existing base.

ITV, Britain's biggest commercial free-to-air broadcaster, said it expected the rate of advertising revenue decline to start easing in the second half after the UK TV market suffered its worst year-on-year decline on record.

Overall, the group said it mostly held its commercial audience through programmes such as Coronation Street and X-Factor, but that net advertising revenue was down 15 percent, slightly outperforming the wider market, which was down 17 percent.

First-half revenues were down 12 percent and underlying operating earnings before one-off items slumped over 60 percent, but it said this had been protected by its cost saving plan, which had already taken out 57 million pounds.

Shares in the group, which have slumped over 60 percent in the last two years over advertising and structural woes, rose almost 5 percent in early trading and were up 3.2 percent at 0929 GMT.

PROSIEBEN CUTS

German commercial broadcaster ProSiebenSat.1 also benefitted from cost cuts, posting a rise in second-quarter core profit despite lower sales, but it said the market environment was too hazy for a full-year outlook.

Its second-quarter revenue fell 9 percent but cost cuts allowed it to post a rise in core profit of 6.6 percent. The company expects to save up to 200 million euros ($287.8 million) in costs this year, twice as much as originally planned for this year.

"The market environment remains difficult particularly for us for whom the fourth quarter is crucial," Chief Executive Thomas Ebeling said in a statement on Thursday.

Its shares were down 3.5 percent, trailing the European media index which was flat.

Commercial free-to-air broadcasters such as ITV and ProSieben have been hammered by the advertising downturn, as corporate groups cut back on spending and also spend it on niche digital channels and online sites.

France's two leading commercial television broadcasters TF1 and M6 issued cautious outlooks at the end of July, with the smaller M6 saying there was still no sign of a recovery in the battered TV advertising market despite trends in July looking better.

"The UK television advertising market has suffered its worst decline on record, down 17 percent on last year," outgoing ITV Executive Chairman Michael Grade told reporters.

"What that means in cash is that 275 million pounds ($466.9 million) has disappeared from the whole market in the last six months. The job of management is to manage this business through this terrible recession and to do so without damaging the core business.

"With a lower cost base and high gearing to UK television advertising, ITV is well placed to capitalise on any stabilisation in the market."

UBS analyst Polo Tang welcomed the ProSieben results as being significantly ahead of forecasts due to the cost cuts and said the German market was seeing improved momentum.

He said the ITV figures were broadly in line with forecasts and the company's belief that its net advertising revenue would be down an improved 12 percent for the third quarter and down 7 percent for September was encouraging.

"After rising 20 percent in the past month, ITV shares should pause for breath," he said in a note to clients.

To protect the group against eroding advertising revenues, ITV's Grade has completed a bond exchange offer to reduce and smooth its debt repayment, sold assets and cut jobs.

He announced in April he planned to step back from the day-to-day running of the group, earlier than planned, and he said on Thursday the search for a new chief executive was progressing.