Television broadcaster ITV yesterday posted a £2.7bn loss, suspended its dividend and announced further cost- cutting plans amid the "horror" of an advertising downturn.
The company's shares, which have plummeted 80% in the last two years, slipped 0.25p, or 1.1%, to 23.5p on the news, although the company maintained that its business model remained sound.
ITV revenues fell 3% to just over £2bn in 2008, it reported yesterday, but a £2.7bn impairment charge thanks largely to the downturn in the advertising market sent it to a reported loss before tax of £2.7bn. Adjusted for one-off items, as well as factors such as amortisation, underlying profit fell 41% to £167m last year.
Executive chairman Sir Michael Grade described advertising markets as a "short-term horror".
"Current conditions in the advertising market are the most challenging I have ever experienced in over 30 years in broadcasting," he added.
ITV held its share of British TV audience at around 23% and its share of national TV ad sales at 44%.
The group said net advertising revenue for its channels was down 4% in 2008. It is expected to be down around 17% in the first quarter of 2009.
The company said yesterday that it was seeing falling advertising from almost every sector.
But Grade maintained its business model was still sound and that regulatory burdens, which includes the need to provide a certain level of regional news programming, was obscuring the health of the company: "To make a judgement on a whole business model in the middle of a very deep recession would be dangerous. The model is working fine. The problem is we cannot get a return at the moment due to the downturn and the regulatory burdens we suffer which are beginning to unravel."
Comments from Grade suggest that the company could yet launch a share issue to raise more money. It has net debt of £730m as well as a £178m pension deficit.
"We are in a very volatile market," he said. "Naturally the board will keep a very close eye on all options that might strengthen and improve our balance sheet."
The group had been thought to be looking at raising as much as £300m as it attempts to remain within its banking covenants.
The company launched a raft of cost-cutting measures yesterday. It now plans to cut £245m from its costs by 2011, of which £75m had already been announced. This will see £65m sliced from its £1bn programmes budget this year.
It is planning to axe 600 jobs from its 5200 workforce.
ITV also confirmed that it has been negotiating with the Football Association south of the border to seek a "smoothing" of its payments for coverage rights, although it insisted it was not seeking to reduce payments.
In order to reduce the debt further, the company has put its Friends Reunited website, which links up former schoolfriends, up for sale. It bought the site for £175m in 2005 but although it contributes half its online revenues, the site's popularity has been overtaken by the success of rival social networking sites and analysts think it could sell for as little as £20m to £50m.
Also potentially up for sale is Freeview operator SDM, for which ITV paid £134m in 2005. The group said yesterday it is "considering options" for the business.
Despite the cuts to the programming budget, Grade indicated that ITV is to focus on improving its peak time midweek TV schedule.
Grade said: "I think there has been a dearth of entertainment in the midweek timetable."
But Grade confirmed that a merger between ITV and Channels 4 and Five was not likely. He said a slide suggesting such a merger presented to a government communications review was a "debating wheeze".
"We have not proposed it, we are not going to propose it, it is not going to happen."
Grade's pay, including pension and other benefits, fell by £1m to £1,934,000 last year, the company's annual accounts revealed after he received no cash bonus. The company's remuneration committee opted to pay bonuses in shares rather than cash and Grade was given share options worth 28.5% of his salary.
Executive directors' pay for 2009 was frozen and the board said it intended to pay any bonus for 2009 in the form of shares.