For Broadcast January 16, 2008

If RDF Media thought it could put the Queengate bloodletting behind it in 2008, it has had to think again.

A profit warning on 20 December was the beginning of a slide that, post-Christmas, has become a plummet. This week, the stock is hovering around 138p, some 27% below its price only a month ago and 40% lower than it was six months ago. The stock is now even below the 144p that it floated at in May 2005.

One explanation is that the market hadn't digested the company's pre-Christmas profits warning. Brokerage Altium issued a "sell" note on 4 January, forecasting a 39% reduction in RDF earnings for FY2008 (which really is last year, as RDF's financial year ends on 31 January) and a 34% fall in forecast FY2009 earnings (the upcoming calendar year).

RDF's house brokerage Investec issued its own second earnings reduction since the profits warning, moving the shares from "buy" to "hold" on 15 January (Tuesday). Its new target share price is 140p.

Remember that RDF Television, the group's flagship producer, is still blacklisted for commissions from the BBC and the picture grows darker. RDF has also invested up to £3.5m to ramp up its children's, digital and US businesses, which may produce rewards later but has hit the bottom line hard. The current numbers look pretty grim: Investec forecasts £5.7m pre-tax profit on turnover of £125.5m for the year about to close, down from £7.7m on £99.3m income for the previous year.

There is, however, better news coming. Investec forecasts £7.2m pre-tax profit on £140.2m for FY2009, and RDF has some lucrative productions under way, such as ITV1's 120-minute episode of Dickinson's Real Deal.

But the bigger picture is still the state of the market, which is trying to factor in a possible recession and which has little sympathy for any company that misses targets.

Will RDF become a takeover target, perhaps for one of its biggest investors, the investment fund part controlled by John de Mol? Hard to say, but any non-agreed approach would be difficult given that about 50% of RDF shares are held by its employees.

What has Sky's stake got to do with ITV's share price slide?

The slew of downgrades that hit ITV last week from analysts at four of the City's investment banks continued a market pummelling that has been in process since September 2007. But the fall has picked up speed and last week ITV's share price fell below 70p, its lowest point since Carlton and Granada merged their businesses to create ITV Plc in February 2004.

The banks were downgrading their ITV forecasts over concerns about advertising growth and ITV1's audience share. Deutsche Bank (DB) put a "sell" sign on ITV shares, saying that ITV's exposure to volatile UK ad spend sectors such as retail, finance and media was of concern in an expected UK economic/consumer slowdown.

But DB and several other analysts are also concerned that the decision by the Competition Commission that BSkyB be made to divest more than 10% of its 17.9% stake in ITV will flood the market with ITV shares and further depress the price.

A forced sale of Sky's stake would be expensive for Sky (Sky spent £940m when it bought the stake in November 2006 for 135p per share; at 69p Sky's ITV stake is worth a bit more than half the original investment) which is why Sky is considering legal action if the CC ruling is upheld by the business secretary John Hutton later this month.

Hutton's ruling on whether the Sky stake is indeed anti-competitive is due on the 29 January. Until the Sky stake is sorted out, anyone looking to buy ITV shares is going to wait - and well they should.

Kate Bulkley has been a print and TV journalist for 16 years, including a seven-year spell at CNBC. She regularly moderates industry events and is a former chairman of the Broadcasting Press Guild.