GCap profits hit by sharp downturn in ad market

by Sarah Woods, Brand Republic 24-May-06, 08:50

LONDON - Radio operator GCap Media posted a slump in underlying pre-tax profits of 40% to £22.2m for the year ending March 31, following a decline in the advertising market and the revamping of Capital FM.

Revenue decreased 12.7% to £220.2m from £252.3m in 2005, while the firm recorded a net debt of £76m, compared with £79m for the same period last year.

The group says the performance was affected by several factors, including weak advertising conditions, audience declines at heritage stations, mainly at Capital before its revamp, and the merger between Capital and GWR.

In addition, GCap said that group revenues in April and May are expected to be down 4%, with Capital Radio suffering a loss of £2.4m following the company's move to reduce the amount of commercials the station runs.

According to the group, Capital Radio remains the station with the most potential for recovery to high profit growth. Therefore, Capital has been highlighted to be given the focus and investment it needs to build audiences and grow revenue.

In March, GCap completed the creation of the new national Xfm network with the launch of Xfm Manchester, after the rebranding of Beat 106 to Xfm Scotland.

Classic FM remains strong and the station saw its highest revenue since 2002 and was the biggest contributor for the group.

Ralph Bernard, GCap media chief executive, said: "In the past year, we have created the UK's leading commercial radio operator, carrying the cost of significant change against the background of a difficult advertising environment and audience declines at many of our stations.

"We have identified significantly higher cost savings than initially envisaged and realised them earlier than originally forecast.

"Capital Radio is the leading London station in the key 15-44 segment and the changes we are making to programming and advertising inventory position us well for future growth."

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