Video setback knocks Carlton shares
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Your support makes all the difference.A downturn in profits at Carlton Communications' video division and worries over the costs and uncertainties of digital television sent shares in the media group sharply lower yesterday. But, as Cathy Newman reports, Carlton does not share the City's scepticism and is confident it will be granted a licence for British Digital Broadcasting (BDB), its digital TV joint venture with Granada, by Christmas.
Carlton's shares shed 17.5p to close at 465.5p after its video business suffered from the strength of sterling and an absence of blockbuster titles. Operating profit in the division for the year to the end of September was 8 per cent lower at pounds 67.7m.
However, Michael Green, chairman, said that although the performance of the video market had been disappointing, next year should pick up. "For the first two months of this year, prospects in the video division are looking up," he said.
Neil Blackley, media analyst at Merrill Lynch, shaved his profits forecast for next year by pounds 15m to pounds 330m, mainly because of higher-than-expected launch costs at BDB. Mr Blackley said Carlton had indicated that its share of BDB's losses would amount to pounds 25m next year.
Despite analysts' scepticism, Carlton appeared enthusiastic about BDB, although the company admitted it had expected the licence to have been granted by now. Mr Green suggested yesterday that the European Commission, which is investigating the joint venture, would clear BDB by Christmas in time for a launch in the fourth quarter of next year.
In order to satisfy the commission, some changes are certain to be made. These are expected to include a stipulation that Gerry Robinson, chairman of both Granada and BSkyB, cannot sit on the board of BDB. BSkyB's seven- year programme supply contract is also likely to be cut to five years, although Carlton denied such a move would entitle the satellite broadcaster to additional financial compensation. BSkyB was paid pounds 75m after the competition authorities forced it to drop its equity stake in BDB.
Carlton confirmed it had taken a pounds 10.4m hit from its television interests in Singapore and India. The company made a pounds 6.4m provision after writing down its investment in Home TV, an Indian satellite channel. It also sustained a pounds 4m charge from the closure of Channel KTV, a karaoke music television business based in Singapore.
For the year to the end of September, Carlton reported profits before tax and losses on the two overseas channels of pounds 326.7m, 10 per cent higher than the year before.
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