Volatile ad market impacts TF1

A volatile TV advertising market and worse than expected advertising revenue receipts in the first three months of the year have prompted analysts to downgrade forecasts for TF1.

The French commercial broadcaster recorded a 2.6% year-on-year decline in ad revenues in the first quarter of 2011 with management citing difficult pricing conditions. 

TF1’s weak first quarter was not helped by the performance of its sports broadcaster, Eurosport. Having recorded a very strong 2010, Eurosport posted a 2.2% decline in first quarter ad revenues. The sports channel operator did record a high profit for the quarter, but Morgan Stanley attributed this to one-off effects.

The investment bank noted that, despite the disappointing ad revenue performance, TF1 reported a marked growth in profitability across the group, with a 10% profit margin compared with a 7.3% margin in the same period a year earlier. However, this was achieved by cutting programming costs 8% to €205 million in the quarter and these costs are likely to return over the full financial year.
Management estimates overall programming spend of about €950 million this year and next and TF1’s operating expenditure remains higher than any of its western European peers, according to Morgan Stanley.

The investment bank downgrading profit and revenue forecasts for TF1. It expects the broadcaster to record full-year 2011 revenues of €2.663 billion and EBITDA profit of €312 million. TF1 recorded full-year 2010 revenues of €2.6 billion and EBITDA profit of €264 million.