ITV’s fortunes increasingly resemble the plot of a Northern soap opera, whose embattled characters struggle through one adversity after another. So it is that, just as the stock market had adjusted to the collapse of television advertising revenues (expected to be down 9 per cent over Christmas), the free-to-air broadcaster has added a new twist: its online businesses are slowing up too.

This is especially troubling because there were signs that ITV had finally managed to get its website in order, helped by the popularity of The X Factor. More than 12 million videos were played in October, with 600,000 views of the first live X Factor episode. Another 650,000 watched three alternative endings to a murder plotline in Coronation Street, demonstrating the keen appetite of viewers to watch all manner of content online.

Yet, despite that emerging audience, online revenues are stalling. Growth was only 6 per cent in the first nine months, with revenues hitting £25 million – or just 1.7 per cent of the total. The online take will be “impacted” in the rest of the year, because, the broadcaster says, the economy is slowing and there are so many other online advertising opportunities.

ITV has already had to push back online revenue targets by two years because Kangaroo, its online video joint venture with the BBC and Channel 4, is being examined by the competition authorities.

Now, it says, it is struggling for online growth, although it is hard to imagine that the problems ITV is facing are shared by Google and other digital media companies. No wonder, then, that ITV yesterday disclosed that it is reintegrating its online arm into the core broadcasting business, gently shedding the boss, Jeff Henry, in the process.

If ITV has a hope of making long-term progress in digital media, it is not through online bingo, or Friends Reunited, but by feeding that growing demand to watch its programmes and their spin-offs online. It’s good telly, and not late-night phone-ins, that will turn ITV around. Even so, the company has a worryingly long way to go before it turns the viewers it has into a meaningful advertising revenue.

The conundrum for investors is that the shares, at 31½p, or 14 times next year’s earnings, are no cheaper than they were at the start of the year – indicating that neither the recovery rating nor the persistent bid premium has leached out of the stock. The pension deficit may have narrowed since the half-year stage – to about £121 million on Cazenove’s calculations – but that gain could easily reverse.

Meanwhile, the ultimate fate of BSkyB’s 17.9 per cent stake is no clearer, interest costs remain high, earnings forecast are falling and the halving of the interim dividend means that the same fate must be expected for the final payout. All of which suggests that it is still too early to buy.

Pace

A stronger US dollar might be benefiting vast swaths of the stock market, but not Pace, the maker of TV set-top boxes.

Like many consumer electronics groups, Pace bears most of its costs in dollars, the currency in which components are priced. However, its dollar revenues are proportionately less – a mismatch that has increased since the purchase this year of the set-top box business of the rival Philips, which has doubled its sales. That discrepancy has caused Pace’s shares to halve over the past month as a surging dollar prompted investors to assume hefty downgrades to next year’s profits.

The relief from yesterday’s trading update must lie less with management’s acknowledgment of that hit than its confirmation that underlying demand for its products remains strong. Given increased competition from telecoms carriers, pay TV operators – Pace’s customers – have been spending heavily on technology to retain subscribers. Meanwhile, the structural changes that have been driving the set-top box market – the worldwide shift from analog to digital and the take-up of high-definition TV and personal video recorders – continue apace.

Pace remains highly vulnerable to currency swings but has net cash and, pending its ability to maintain above-average margins by getting products to market first, should continue to grow profits. At 42p, or eight times next year’s earnings, Pace is a “speculative buy”.

Findel

If a high dividend yield is a dangerous yield, then Findel sits at the white-knuckle end of the stock market. At the start of last week, shares in the home shopping and educational supplies specialist had fallen 94 per cent this year to yield a prospective 67 per cent – as certain a portent of doom as an investor is likely to receive.

However, Findel has nearly trebled since then, and yesterday provided signs that financial distress is not certain. Net debt remains eye-wateringly high – a forecast £360 million by its March 31 year-end – but the company remains well within its covenants, its peak funding requirements have passed, and the company’s strong cash generation and tighter management of stock should reduce that burden. Further, bad debts in home shopping are much as expected.

That four fifths of Findel’s profits are drawn from the more defensive niches of education and healthcare must reassure. So, too, should the company’s adoption of more onerous credit-scoring measures and an expected fall in interest costs. The dividend is still more than twice covered by forecast earnings, so there is a good chance that Findel’s 22.2p-a-share payout will be preserved. But the risk that weakening consumer spending will trigger further cuts to estimates means that Findel, at 93p, or two times earnings, is best avoided.

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