Carlton sees sterling six-month earnings

Cost-cutting helps lift pre-tax profit by 88%

LONDON — Carlton, one of the big two shareholders in Blighty’s commercial web ITV announced Wednesday that six month earnings had climbed 50% to £42 million ($69 million) thanks to the removal of failed ITV Digital from its books and cost-cutting initiatives which saved the broadcaster $9.9 million.

Company has so far cut 84 staffers and expects to lay off a further 129 from its studio, online and interactive operations in the second half of this year, resulting in additional savings of $18 million.

Despite a slight dip in revenue to $837, down 3% on the same period a year ago, Carlton reported a 50% hike in earnings to $69 million and an 88% increase in pre-tax profit to $60.8 million. Company made a loss of $294 million in the same period a year earlier due to its involvement in ITV Digital, in which Carlton and Granada invested $1.64 billion. Company is currently carrying a statutory net debt of $817 million.

Revenue generated from content production and distribution fell 29% to $110 million in the first six months while income from broadcasting slipped slightly to $608 million, down 2%.

Despite a soft advertising market, Carlton’s share of ITV1 and ITV2 was up 1.2%. ITV1 advertising remained stable while ITV2’s ad income quadrupled. Although company said Iraq war had little impact on ad spend, its share of ITV advertising revenue is expected to decline 1% in the nine months to June 2003.

Company’s involvement in the cinema biz proved more lucrative. Revenue from its advertising operation Carlton Screen Advertising rose 15% to a record $60.8 million, thanks to bigger audiences at blockbuster pics such as “Harry Potter and the Chamber of Secrets,” “Lord of the Rings: The Two Towers” and the latest James Bond film “Die Another Day.”

Screenvision U.S., in which Carlton has a 50% stake, also saw revenue rise 72% to $44 million bringing the company into profit, while Screenvision Europe, also part owned by Carlton, reported revenue of $38 million.

Carlton’s shares rose 23.41 cents, or 13%, to $2.06 and traded at $1.92 on news of its financial performance.

Commenting on the results, Michael Green, chairman of Carlton, said, “Our profits are significantly ahead of last year. We’ve improved the performance of ITV. We’ve reduced costs throughout the business. Our merger with Granada is on schedule. We believe the merger has clear benefits for shareholders, advertisers and viewers.”

U.K regulators said this month they could force Carlton and Granada to sell off their advertising sales units if the merger is to be approved.

“On the face of it, that appears to be a worse position than what we’re in,” said Green. “We’ve explained to them that we’re dysfunctional because we’re two companies running one business. I think we’d be more dysfunctional [if forced to separate the advertising units].”

Carlton also announced that John McGrath is joining its board with immediate effect as a non-executive director. McGrath has spent the last five and a half years with pharmaceutical company Boots, where he was appointed a director in 1997 and became chairman in August 2000.

He has also held senior positions at Diageo, formed in 1997 when drinks companies GrandMet and Guinness merged, and International Distillers and Vintners.

Commenting on the appointment, Green said, “John understands brands. He has considerable experience of both U.K. and international business and is a significant addition to the board.”

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