Shares in GCap Media slumped more than 5 per cent this morning after the radio group revealed a 33 per cent fall in half-year pre-tax profits and warned of continuing gloom in the advertising market.
GCap, widely seen as a bellwether group for the radio sector in the UK, said: “The current advertising market remains very difficult and visibility poor. We anticipate tough trading conditions will persist over the next quarter.”
The downbeat outlook disappointed investors who had been looking for signs of an improving advertising market and for evidence of progress at GCap’s struggling flagship station, London’s Capital Radio.
Britain’s biggest commercial radio broadcaster said underlying pre-tax profits fell to £8.4 million for the six months to September 30, from £12.4 million a year earlier. Revenues fell to £102.2 million from £111.6 million. The numbers were broadly in line with analysts’ expectations.
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The shares fell 5.3 per cent, or 11.75p, to 210p in early deals. To track the stock click here.
Keith Bowman, equity analyst at Hargreaves Lansdown, the stockbroker, said: “While the actual numbers have met analysts’ forecasts, the downbeat outlook statement provides little or no inspiration.”
He added: “Furthermore, while the statement is peppered with references to potential growth and extending the reach of the group’s many brands, there is little comment in relation to any recovery or even the prospect of any recovery at the group’s core Capital Radio business.”
GCap has not been helped by confusion over when - or if - Karren Brady, the current managing director of Birmingham City Football Club, will be installed as new managing director of Capital Radio. It is understood that Ms Brady could be required to work her full 12 months notice by Birmingham City, which could make her available too late for Capital.
Today, the group said it expects group like-for-like revenues for October and November to decline by 8 per cent year-on-year, excluding Capital Radio, or 13 per cent in total.
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For September and October, GCap confirmed that its revenues were in line with the market. In a September trading update GCap said it had seen some improvement in recent trading.
In October, Steve Orchard, group operations director of GCap Media, said that Capital Radio “had really bottomed” and that the London station would see improvement in 2007.
Those comments came after Rajar results, the official radio listening figures, revealed that Capital’s share of the London audience had dropped below 5 per cent for the first time, falling from 5.1 per cent to 4.7 per cent in the past year.
The figures showed that Heart 106.2 FM, owned by Chrysalis, had replaced Emap’s Magic as London’s most popular commercial station with a 6.1 per cent share of the market. Magic’s share fell from 6.1 per cent to 5.3 per cent.
This morning, GCap said that its recovery plan was on track at Capital but admitted revenues for the station were down by £6.3 million year-on-year.
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The group said: “This drop is as a result of our planned changes to the inventory policy implemented in December of last year, anticipated reduced reach ahead of any marketing activity and ongoing difficulties in the advertising market.”
GCap kept its half-year dividend unchanged from a year earlier at 3.1p a share. It said it would “consider a more appropriate level of future dividend cover” as it reviews its options in the coming months.