Maybe ITV would do better without a chief exec
CRISIS? What crisis? That was the line that Michael Grade, the outgoing executive chairman of ITV, took when being questioned by a House of Lords committee yesterday. Hitting out at media coverage of the broadcaster’s bungled attempts to find a replacement chairman and chief executive, he said ITVwas a business in fine fettle.
In a way, he was right. ITV might be a headless chicken, but it seems to be doing rather well without a leader. Admittedly, the Grade succession plan is turning into a joke, with the remaining front-runner for chairman, Sir Michael Bishop, dropping out of the race earlier this week, hot on the heels of former favourite Sir Crispin Davis.
The search for a chief executive is, if anything, in even more trouble. Since former BSkyB boss TonyBall stormed off, the board has struggled to find another serious contender.
But put the leadership debacle to one side, and ITV’s fortunes seem to be improving. Earlier this week, it launched a successful convertible bond offer, which was ten times oversubscribed and raised £135m. In the short term, this removes the need for a massively dilutive rights issue, which is just as well: launching one with both top management positions unfilled would have been a nightmare.
Analysts also cheered ITV’s decision to hang on to its digital transmission business SDN, which is a great little earner. According to Morgan Stanley, it will pull in earnings of around £30m on sales of £40m in 2009 – the kind of margin that its broadcasting business can only dream of. It now plans to use the cash flow from the business to plug its ballooning £580m pension deficit.
More importantly, trading has improved remarkably in recent weeks. Advertising revenues across ITV’s stable of channels were down around three per cent in October, and the broadcaster expects a similar performance in November. It’s a welcome change from this time last year, when ad sales were in free fall, dropping 20 per cent every month.
The broadcaster is also getting its own back on clients that have been delaying their marketing spend. Many businesses slashed their budgets too severely when the slump hit and are now clamouring to book ads; ITV has responded by pushing up its late booking rates, a neat trick but one that can only be performed once.
So, ITV is without any real leadership and looks well-placed to capitalise on an upturn in the ad market. If you think that makes it sound like an acquisition target, you’re in good company. Several analysts I spoke to yesterday said RTL would be mulling a bid; if successful, it would probably sell or close its terribly-performing British channel, Five.
Perhaps ITV’s shareholders would be best-served if the firm remains rudderless – this is the best week of news from the broadcaster that we’ve had in months. email@example.com