ITV falls as free-to-air outlook darkens

ITV fell on Wednesday after Macquarie predicted that life for Europe’s free-to-air broadcasters was about to get tougher.

“Increasing demand for local and craft products diminishes the importance of TV’s most unique advantage: mass advertising,” Macquarie said. Consumer goods companies are choosing to tap niche markets and are using less capital-intensive strategies, as exemplified by direct-to-consumer brands such as Unilever’s Dollar Shave Club and Kiehl’s, L’Oréal’s chain of cosmetics stores.

And as more sales move online, advertisers will “shift marketing closer to the point of sale,” Macquarie said.

On ITV, Macquarie said a sharp drop in consumer sector advertising spend in the first half “suggests structural factors are adding to Brexit uncertainty”. And while the success of Love Island made ITV a plausible bid target for 10 per cent shareholder Liberty Global, the group’s Studios unit still only accounted for 30 per cent of operating profit and, based on trough multiples, the takeover valuation could be as low as 125p, it said.

ITV closed 1.7 per cent lower at 158.3p in a mixed wider market. The FTSE 100 lost 0.3 per cent, down 20.99 points to 7,379.70, as weaker metals prices and sterling’s one-year high against the dollar put the miners under pressure: Antofagasta fell 3.9 per cent to 969p and Anglo American faded 3.2 per cent to £13.49.

Retailers rallied after Dunelm said like-for-like sales in July and August had been positive. Dunelm bounced 8.4 per cent to 661p, also helped by a business-as-usual statement after the departure last month of chief executive John Browett, while Marks and Spencer added 0.5 per cent to 235.5p.

Builders’ merchant Travis Perkins lost 3.9 per cent to £14.21 after Bernstein started coverage with an “underperform” rating and £12.40 target. Consensus forecasts are too optimistic as the spending outlook is deteriorating, and a late IT upgrade has probably cost Travis market share, it said.

Esure fell 3 per cent to 256.1p on a downgrade to “sell” from UBS. The car insurer’s expansion plans require looser risk management that will drag on profit margins and capital generation, UBS said, adding: “Our growth and margin expectations do not leave Esure with sufficient capital generation to pay special dividends.”

Aim-listed IQE slipped 7 per cent to 136.8p to profit-taking. The sensor maker has jumped 260 per cent this year, giving it a market value of nearly £1bn, on hopes that Apple’s new iPhone would be the first smartphone to include depth-detecting cameras using a chip technology known as VCSEL, in which IQE is a leading supplier. Apple confirmed overnight that it will use VCSEL, but only for one lens in its top of the range iPhone X handset.

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