ITV increases its cash returns to £500m

ITV, the UK's largest commercial broadcaster, raised its cash return target for the current year as it revealed a sharp decline…

ITV, the UK's largest commercial broadcaster, raised its cash return target for the current year as it revealed a sharp decline in television advertising revenues in the first half of 2006.

In a trading statement, ITV said it now planned to give back £500 million to investors this year, some £200 million more than it announced in March, and would continue to evaluate its cash returns policy as its capital structure allowed.

The broadcaster has been under pressure to raise returns after seeing its share price drop around 30 per cent since the board earlier this year turned down a 130 pence per share bid tabled by a consortium of private equity groups, including Goldman Sachs.

The shares rose a penny to 103-1/2 pence by 9.57am, as news of the cash return outweighed another batch of bleak trading news at its flagship ITV1 channel.

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ITV said total net advertising revenue for the first half likely fell 4.6 per cent to £750 million, pressurised by the on-going decline of ITV1.

However, growth in its online business - notably from the Friends Reunited website it bought last year - means that group revenues for the first half will be some 2 per cent higher than in 2005.

The group also unveiled further cost-cutting and efficiency measures aimed at reducing annual overheads by a further £100 million by the of 2008. ITV claims to have cut its cost base by £120 million since its creation through the merger of Carlton and Granada in 2004.

ITV1, once the bedrock of the company, is in terminal decline as viewers continue to migrate to digital channels ahead of the final switch-off of the analogue signal in 2012.

That has forced ITV to launch its own digital channels, and seek out alternate revenue streams, primarily on the internet. This morning it raised its forecast for non-ITV1 revenues to £1.465 billion by the end of 2010, compared to £1.265 billion previously.

The group also said it expects to achieve a 38.5 per cent share of commercial impacts - advertisers' preferred measure of a commercial TV station's audience share - at the final switch-off of the analogue signal.

Agencies