GCap plots its route back to the top

The largest commercial radio company has halved its dividend to shareholders and admitted that revenue has dropped 9% to £200m. But these figures, published last week, refer to the last 12 months - a year that has seen GCap regain the number one breakfast slot for its flagship Capital, and secure the services of industry darling Fru Hazlitt, now managing director of GCap London, and ex-Capital chief executive Richard Eyre as non-executive chairman.

Coupled with commercial director Duncan George's resignation last week, the moves usher in a new era for the industry leader. Last week's announcements - including a renewed focus on digital with "significant" online development, £5.6m of investment in core brands and launches, the end of investment in Core and Life and the closure of Capital Disney, as revealed in Media Week - gave shape to that new era.

Public criticism

At the centre of it stands Hazlitt, who has already caused controversy with public criticism of the poor creative in radio advertising. According to former colleague Nick Hewat, sales director of Virgin Radio: "Fru is like an organised whirlwind. She goes into something, shakes it around and then puts everything back in a slightly better place."

Hewat believes Hazlitt's "brave decisions" are what set her apart, but acknowledges she lives by the saying "growth is a gamblers' game".

"She will take calculated risks, yes, but she will get GCap acting like a market leader again and get it back on the front foot," he adds.

According to the financial results, one of the key ways of achieving this will be to invest in station websites offering online radio, music-based content and access to "online communities, downloads and recommendations" - a concept being trialled on the Xfm website.

For Hazlitt, a traditional audience is just as valuable as an analogue one. Indeed, in 2006/7, the group's interactive division generated £1.6m of profits.

"If we were to double the online usage for Capital, that would be a hugely successful thing to do," she told Media Week. "It wouldn't be reflected in the Rajars, but (it would be) in the revenue we generate around the site, and any interaction with the Capital brand is great as far as I'm concerned."

She plans to bring success to the group's different platforms and monetise the most successful brands.

"In any business it is important to plant a lot of seeds and see which ones grow," she says. "We put our stakes in the ground and now see what's evolved and take the strong ones forward."

GCap's optimism is reflected across the industry, despite last week's results.

"GCap is in a strong position at the moment," says Amanda Barrett, radio specialist at Universal McCann. "It would be naive to think it can turn revenue around overnight, but it has put out a clear and strong vision for the future."

However, some experts remain sceptical. "They are not doing anything revolutionary," says Matthew Landeman, head of radio at Carat, who says the company is changing with the market, not ahead of it.

Strategic focus

Along with a promise to invest in digital-only stations such as Planet Rock and theJazz, the trading statement confirmed investment would cease on Core and Life, bluntly announcing that these "do not fit with our strategic focus or offer sufficient revenue potential".

There will be other tough decisions ahead for GCap as its new management structure beds down. Among oth er things, it must decide whether to continue with the controversial policy of limiting ads on Capital to two in a row and so losing millions of pounds.

But with so many other radio groups looking at an uncertain future, as Chrysalis and Virgin anticipate potential new ownership and Emap considers selling assets, GCap can at last retake its place at the front of the field.

GCAP MEDIA RESULTS

Like-for-like revenue down 7% to £193m, excluding results of Century stations sold to GMG in October 2006 (2006: £207.3m)

- Total revenue for the 12 months to 31 March 2007 down 9% to £200.1m (2006: £220.2m)

- Profit before tax £14.4m (2006: £22.2m)

- Basic earnings per share of 4.4p (2006: 7.8p)

- Net debt reduced to £27m thanks in part to the sale of Century (2006: £76m)

- Audience figures have stabilized across the group, increasing from 15 million to 15.2 million year on year. An online database of listeners, which aimed to have gathered 900,000 profiles by the end of the financial year 2006/7, has signed up one million people - halfway to the target set for March 2008

- 84% of revenue generated from radio advertising, down from 86% last year.