Capital Stock Recovers Despite Expected Profits Warning
The predicted profits warning from Capital Radio (see Insight Analysis: Radio Shares Take A Dive) was confirmed today as the group released its interim financial results, with the message that the advertising market has deteriorated further since its first warning in March.
The group said that in the April to June period last year radio revenues grew by 25.4%, largely due to the dotcom marketing boom. During April and May this year revenues were down by 15%. Underlying profit before tax came in at £18.3 million, down 18%, but better than consensus forecasts of £16.5 million. Like for like turnover was up 2%, of which spot advertising was up 1%.
| Like for like | Like for like | |||
| Spot advertising | Year on year | |||
| Year on year | Growth | |||
| Growth | ||||
| Capital Radio | Radio industry | |||
| Jan-Mar 1999 | 14.10% | 16.20% | ||
| Apr-Jun 1999 | -4.10% | 0.40% | ||
| Jul-Sep 1999 | 13.80% | 18.50% | ||
| Oct-Dec 1999 | 13.80% | 11.00% | ||
| Jan-Mar 2000 | 16.40% | 16.40% | ||
| Apr-Jun 2000 | 25.40% | 25.60% | ||
| Jul-Sep 2000 | 2.90% | 9.80% | ||
| Oct-Dec 2000 | 2.80% | 10.90% | ||
| Jan-Mar 2001 | -1.00% | 1.50% |
Capital stock sunk yesterday as the Financial Times pre-empted the profits warning of this morning. However, in trading today the shares have recovered and were up 47½p at 737½p by late morning.
David Mansfield, chief executive of Capital Radio, remained upbeat: “Although it has been a difficult six months for the media sector as a whole and the outlook remains uncertain, we are encouraged that commercial radio has outperformed other broadcast media during this period.
“We believe that national advertisers will increasingly turn to radio to reach their target audiences cost-effectively. With a national presence, increased audiences and a 29% share of national radio advertising revenue Capital Radio is in a strong position to benefit from this growth in the future.”
ABN Amro was disappointed by the 20% fall in radio operating profit and had predicted a drop of 19%. The broker says that further downgrades are now not out of the question. It also thinks that Capital’s stock is too expensive, at 27 times earnings, and, given the continued risk of downgrades, has a Reduce stance on the group.
ABN Amro: Reduce Merrill Lynch: Neutral Schroder Salomon: Neutral UBS Warburg: Hold SG Securities: Hold
