ITV suffers £150m loss on Friends Reunited sale

Author: By Nick Clark

The group announced yesterday it had agreed to sell Friends Reunited for £25m to the Dundee-based media group DC Thomson. Chris van der Kuyl, the chief executive of DC subsidiary Brightsolid, said: “We see the acquisition of Friends Reunited Group as an exciting opportunity to provide new focus for, and build on, the iconic status of the Friends Reunited brands.”

This marks a punishing return for ITV. The broadcaster’s acquisition of Friends Reunited for £120m in 2005 was a cornerstone of its online strategy, with its executive chairman Michael Grade describing it two years later as one of the “great unsung jewels in the crown”. This year it paid a further £55m after the site hit certain targets.

The site was launched in 2000 by husband and wife team Steve and Julie Pankhurst in their spare room. Mr van der Kuyl labelled it the “original social network,” but following ITV’s acquisition under the stewardship of Charles Allen it foundered on its subscription model, and was overtaken by younger and trendier rivals including MySpace, Bebo and Facebook.

Mr Grade said yesterday: “No one likes to lose money. Hindsight is a wonderful thing.” He was quick to talk up, with record online users and video views, but he admitted that while the online activities’ revenues were up at £18m, the site was still loss-making and the only indication of timing to send it into profit was “as soon as possible”.

ITV posted a £105m loss in the first half of 2009 amid the worst UK television advertising slump in history. This compared favourably with a £1.5bn loss last year, but that was due to a one-off £1.6bn charge. Revenue at the broadcaster fell from £1bn in the first half of 2008 to £909m this year. As a consequence, the board ditched its interim dividend.

Andy Viner, at BDO Stoy Hayward, said ITV faced a number of significant challenges. “It remains a fairly traditional business model which is heavily reliant on the UK advertising market. The way in which consumers are consuming media is changing rapidly… ITV’s results are short on how it will explore this changing landscape.”

TV advertising revenues have fallen £277m, or 17 per cent, this year, although ITV has performed slightly better. The broadcaster unveiled a cost-cutting plan in March, and has delivered £57m of savings through its programming budget and off-screen cuts. “ITV is on course to deliver at least £155m of total savings,” the group said. This will rise to £215m next year and £285m in 2011.

Mr Grade said little on the search for his successor, only that the board was “making good progress”. Rumours emerged this week that Simon Fox, the chief executive of HMV was the front-runner and an appointment is expected by the end of the year.

The group’s pension deficit has also ballooned in the past six months. The hole in its defined benefit fund stood at £538m at the end of June, up from £178m at the end of the year.

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