ITV is suffering its "worst trading conditions in recent memory", one of the channel's main operators has revealed, announcing job cuts and a freeze on managers' salaries.

Media giant SMG, which operates the Scottish and Grampian networks, has blamed a downturn in advertising for slicing one third off profits at its television unit in the first half of the year.

And the firm said it was one of the better-off ITV firms, reporting an 11% drop in airtime revenues compared with an average of 15% for the network as a whole.

The announcement follows continued concerns over the health of ITV, which advertising planning and buying house Zenith Media warned in July was set to suffer its worst ever ads slump.

"This is the toughest advertising market of recent times," SMG chief executive Andrew Flanagan.

Costs cut

Scottish-based SMG said it had been shielded from the worst of the ITV downturn by its non-TV interests, which include Virgin Radio and publications such as the Sunday Herald.

"ITV now represents less than 50% of the Group's activities," said chairman Don Cruickshank, the former telecoms regulators who also heads the London Stock Exchange.

The firm has also prioritised "early cost reduction" in an effort to stem losses, Mr Cruickshank added.

"Discretionary spend has been curtailed or postponed and recruitment, management salaries and capital expenditure have been frozen," he said.

"Due to the prolonged nature of the downturn, a deeper cost-cutting exercise has been initiated for the second half [of 2001]."

Market share

The firm, which axed TV staff last year, said it is seeking further job cuts within the unit.

But both Scottish and Grampian reported a 36% share of peak time audiences, ahead of the ITV average, and 11% more than that attracted by BBC1 Scotland.

"This robust audience delivery and reduced advertising demand has served to significantly reduce the price of ITV, re-establishing it as a cost effective medium for advertisers going forward," Mr Cruickshank said.

Radio 'heavily hit'

SMG's radio operations have also been "heavily hit", Mr Cruickshank said, with revenues down 20% year on year.

In the first half of last year, takings at the radio division, which includes Virgin and some other interests, rose by almost one third.

Virgin's audience figures, however, rose by 6%.

Among publishing operations, a rise in advertising takings was offset by an increase in newsprint costs.

Overall, SMG's underlying pre-tax profits fell by one third to �20.0m.

'Mixed signals'

The firm declined amid sector turmoil to make forecasts for the rest of the year.

"Even in mid-September it is difficult to give a view on prospects for the year," Mr Cruickshank.

"There are many mixed signals, both in the economy as a whole, and within the media sector specifically."

But SMG's shake-up leaves it "well placed to take advantage of the upturn when it comes", he added.

In the City, SMG shares closed down at 12.5p at 139p on Tuesday.