US TV ad revenues up

Advertising rebound lifts Viacom
By Christopher Grimes in New York
Published: July 25 2002 15:15 | Last Updated: July 25 2002 15:15

Viacom, the US media group, said on Thursday that advertising rebounded at its television and radio units during the second quarter, prompting the owner of CBS, MTV and the Paramount film studio to declare it had seen the worst of the industry-wide slowdown.

Mel Karmazin, chief operating officer, said he expected advertising spending at the company's radio and television groups to continue to improve for the rest of the year. "All advertising signs are very strong for us," he said.

The outlook for a stronger second half of the year is based on optimism for the autumn TV season in the US. The CBS network sold $1.9bn of advertising against its autumn programming line-up during the so-called "upfront" sales season, a 46 per cent rise from a year ago.

The company also said it saw higher advertising at its radio division - the first increase since the fourth quarter of 2000. Revenue rose 2 per cent to $5.85bn in the second quarter. Net profits totalled $547m, or 31 cents per share, compared with $524m, or 29 cents per share, a year earlier. It beat Wall Street analysts' per share consensus estimate of 29 cents and generated over $1bn of free cash flow in the period.

The improvement in sales and profits was largely due to higher advertising at its cable networks, including MTV and Nickelodeon. Cable revenue rose 4 per cent to $1.1bn, while earnings before interest, taxes, depreciation and amortisation (ebitda) rose 9 per cent to $422m.

The company also pushed costs down 13 per cent in the quarter, a reflection of cutbacks at MTV and other divisions.

Christopher Dixon, an analyst at UBS Warburg, noted that Viacom has a much higher exposure to the advertising market than its peers, as about half its revenue is generated from advertising. This was a liability during the long advertising slump, which began in autumn of 2000.

"What was encouraging was that we saw the advertising market improve and the trends are very good for media companies with exposure to advertising and television," he said. Most significant was the rebound in the radio market, he added.

The broadcast television group, which includes CBS and UPN, also saw higher sales and ebitda. Paramount, the film division, and Infinity, the radio and billboard group, delivered results that were roughly flat with year-ago levels. Video sales were up 4 per cent.

Sumner Redstone, chairman and chief executive, said Viacom expected the improvement in advertising to accelerate in the second half. Viacom forecast double-digit earnings growth for the full year.

Mr Redstone said the company was buying back its own shares, which have fallen over 18 per cent this year. The shares were up 75 cents, or 2.18 per cent, to $35.19 in afternoon New York trading.