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FTSE in-depth: ITV plunges on ad growth fear

By Geoff Foster for MailOnline
Updated: 04:31 EDT, 25 March 2011

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It's almost as if tracker funds piled into ITV ahead of the Downton Abbey broadcaster's re-entry into the Footsie on Monday, bought too many shares and then had to unload a few million.

Foster: The Footsie jumped to a higher level than before the disaster in Japan.

They have collapsed from a 52-week high of 95.85p and were sold down further to 80p on Wednesday amid additional concerns that advertising growth could go into reverse in May for the first time in 18 months.

Yesterday, a general consensus that the fall had been overdone sparked a rally which left the close 2.15p better at 82.475p on hefty volume of 32m.

Broker Liberum Capital believes recent weakness provides investors with a perfect buying opportunity. It has a target price of 150p. It says the feedback it has received from media buyers suggests that ITV1 advertising is up more than 5% for May, after a strong April.

ITV is benefiting from the shift of advertising spending from print to television, and the shift with television from number two/three players (Channel 4/Five) to ITV, the market leader.

The latest Advertising Association/Warc Expenditure Report points out the UK advertising market brushed off fears about the health of the UK economy to register a 6.9% rise to £15.5bn in 2010. The rise made 2010 the strongest year for advertising spend growth since the dotcom boom of 2000.

The report expects ad spend growth to dip to 2.9% in 2011, before recovering to 5.5% in 2012. The economy and advertising are expected to revive in 2012 with the latter boosted by spend associated with the London Olympic Games.

A favourable media response to Wednesday's Budget and pleasing results from High Street groups Kingfisher, 17.6p up at 261.35p, and Next, 78p to the good at 2043.5p, helped dealers shrug off news of Portugal's bailout.

The Footsie jumped 84.99 points to 5,880.87, to a higher level than before the disastrous earthquake and tsunami in Japan.

Wall Street rose 90 points in the early stages following news that US unemployment claims dropped to the lowest level in more than two years in February.

The Budget's imposition of a carbon tax sparked hefty selling of power station group Drax, 20.3p lower at 371.95p. Broker JP Morgan Cazenove reckons the carbon tax would reduce its 2013 earnings forecast by 12.9% with the eventual cost rising to over £100m by 2020.

Part nationalised Lloyds Banking Group edged up 0.11p to 60.355p after Evolution Group reiterated its Top Conviction Buy recommendation and target price of 106p. The broker thinks that Lloyds is only the bank in Europe where investors have a realistic chance of doubling their money, not on a 12-month view, but on an 18-24 month view.

Barclays rose 3.65p to 290.925p after Morgan Stanley advised clients to get stuck in ahead of the first-quarter trading statement on April 27. The broker believes the market may be underestimating banks' ability to generate acceptable returns over the next two years, as legacy portfolio issues unwind, cost controls kick in and the impact of regulatory change has yet to pass through.

News that National Express has failed to qualify for the Greater Anglia franchise despite being incumbent, left its shares unmoved at 241.65p. But Charles Stanley Securities is bearish, believing the group's prospects in UK rail now look pretty grim.

Plastic packaging group RPC soared 35.8p or 15% to 279p after a bullish pre-close trading update. The company said profits for the year to end-March are ahead of expectations. Broker Panmure Gordon lifted its target price to 476p from 336p on the news.

Afren added 5p at 159p after announcing the purchase of a 74% interest in the Tanga license in Tanzania which encompasses a potentially highly prospective region both onshore and offshore. Morgan Stanley is a buyer and says Afren is the cheapest company in the sector its covers. Full year results are due on Tuesday.

Shanta Gold glistened at 31.63p, up 0.38p, after announcing it has broken new ground at the New Luika Gold Mine in Tanzania. Clearance has started and the site is now being prepared for mining and for construction of the new gold processing plant.

Broker Fairfax expects the new Luika Gold Mine to ramp up production through the fourthquarter of 2011 towards 75 tons per hour. Gold production could rise to around 40,000 ounces per annum from the 28,000 forecast in last year's scoping study.

Endace, the world leader in network monitoring and high speed network security, climbed 21p to 396p on hearing it has been selected by Betfair (20.5p up at 937.75p) to supply a global monitoring system that will be used to help protect Betfair's network from cyber-attack.

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