Insight Analysis: Radio Shares Take A Dive
Stock in the radio sector is currently in freefall after Scottish Radio said it had ended merger discussions (see Scottish Radio Ends Takeover Talks As SMG Declines To Reveal Its Intentions) and a report in this morning’s Financial Times claimed that Capital Radio will tomorrow issue a profits warning.
Capital’s interim results are out tomorrow and the FT predicts that they will contain the group’s second profit warning in as many months. The downturn in the radio advertising market is being held to blame. Accordingly, Capital’s experience as one of the largest UK radio operators reflects on the likely performance of other radio groups.
Radio revenue growth is expected to be down by 7% points on last year at 7.9%, according to the latest estimates from Zenith Media (see Forecasts for more information). With falling ad revenue growth, brokers are downgrading their performance expectations for radio and television companies alike, compounding the affect on stock.
The main cause for the apparent fall-out of the advertising market is the difficult comparisons with the dotcom boom of last year. New web companies were then extravagantly spending money on marketing their businesses. Confidence in the commercial viability of many web enterprises has since diminished and so advertising budgets have fallen.