Just when European TV broadcasters thought the advertising downturn was well and truly over, it seems there may be rocky times ahead. A report from investment bankers Morgan Stanley suggests that March ad-sales bookings were poor, and the forward inventory of sold ad-minutes looks increasingly shaky for some players.

“There has been little detail on why April/May has turned worse,” says the bank’s report. “There may be an impact from Easter’s timing or an overdue reaction from difficult economic conditions, while the comparables clearly toughen into Q2. The market has speculated on component shortages post the disasters in Japan affecting some categories or the start of a pull back in advertising from large packaged goods companies.”

The bank admits that it has remained cautious – except for the UK’s ITV – as far as advertising sales are concerned. “Start-of-the-year expectations seemed punchy and we believed valuation looked full. In addition, momentum has been deteriorating rapidly since the end of February, thereby creating material downside risk to FY11 forecasts. From peak levels achieved in early February, the shares of the EU broadcasters are down –22 per cent on average.”

Morgan Stanley says: “Expectations have therefore gone down materially while multiples have somewhat compressed from high levels. The time to look at these stocks with a more positive view could thus be approaching. However, we advise investors to remain cautious on that space until later in Q2 / early Q3.”

Until then, three elements create downside risk, in the view of the bank:
1: The downgrading process has only just started. We expect the Q1 results season to lead FY11 consensus to come down further for most names.

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