Digital woes cost Granada jobs

Granada completes a tough year

Broadcaster Granada is to lay off 430 staff and restructure its loss-making digital media operations in a bid to claw its way back to profitability.

The announcement came as the company said profits before tax and one-off costs fell by 27% to £236m during the year to September, while losses at its ITV Digital joint venture soared by 26% to £234m.

Granada blamed the disappointing figures on a steep fall in advertising revenues, and pledged to cut costs across all operations.

The lay-offs will be carried out by the end of the year, and will be spread across the Granada transmission area.

"The global media market has been tough," said Granada executive chairman Charles Allen.

Granada mulling digital options

Mr Allen added that Granada and Carlton Communications, ITV Digital's other main backer, are weighing up a range of options for their digital media joint venture.

"The alternative being explored would reduce the likely funding requirement of the existing shareholders," Mr Allen said without giving further details.

ITV Digital, which feeds digital television through conventional aerials, has so far cost its investors £800m in cash.

Granada has contributed £394m of this, with Carlton providing the remainder.

Analysts said Mr Allen's comments suggest that the two companies may bring in a third partner to run ITV Digital, or even ditch it altogether.

"This suggests that something radical is going to happen to ITV Digital," said Kingsley Wilson, analyst at stockbrokers Investec.

Shareholder pressure

In June, it emerged that many of Granada's leading shareholders are putting the company under pressure to get rid of its ailing digital media arm.

The digital service, intended to compete with cable and satellite television services, has attracted about 1 million subscribers so far, but needs another 700,000 to break even.

Mr Allen said Granada's loss-making digital arm has already introduced measures designed to cut costs by £145m next year.

A separate efficiency drive is expected to shave another £60m off the parent company's costs.

Investors gave the cost-cutting plans a cautious welcome, pushing Granada's share price 1.25 pence higher to 148.75p in mid-morning trade in London.

Difficult year

The results published on Wednesday complete a difficult year for Granada.

The company slumped deep into the red during the nine months to June, having made a record £289m profit one year previously.

Granada blamed heavy digital media investment costs and a 10% decline in advertising sales.

According to Granada chief executive Steve Morrison, the latest round of cost-cutting has put the company on track to recovery.

"We will emerge from the current advertising downturn leaner and more competitive," he said.