Capital Radio Shares Plummet As Profits And Revenues Dip

Capital says that October and November are expected to show an 8% decline in advertising levels and whilst October was already known to be weak, figures released this week by rival radio operator, EMAP, indicated that November had improved to a flat year on year performance (see EMAP Shows Good Results In Improving Markets). Accordingly, Capital seems to be underperforming here, says Merrill Lynch.

Capital describes these conditions as a ‘testing start’ to its new year, adding that visibility is still very poor and so the outlook on advertising for the financial year remains cautious. More optimistically, the group looked to the long term, saying: “There are clear factors favouring the long-term growth of radio as an advertising medium and, as the leading commercial radio group in the UK, Capital is well placed to benefit.”

Group revenues were down by 2% to £120 million, whilst underlying profit dropped by 8% to £27.8 million. Headline pre-tax profits fell by 7.3% to £27.8 million; debt was reduced by 12% to £29 million.

The group’s Century stations are profitable, the Beat station has reached breakeven and losses have been reduced at Xfm. However, Capital had a tough Q3 in the latest RAJAR figures and this has been negatively received by the City (see Capital Stock Hit By Poor RAJAR Figures).

Chief executive David Mansfield is going to have to convince investors at a presentation today that he has plans in place to redress Capital’s declining audiences. A £2 million rise in the group’s marketing budget was also announced today, which may help pacify investors a little over Capital’s efforts to retain, or build, its listener base.

Analysts at Merrill Lynch suggest that advertisers may move their budgets to rival groups following the poor Q3 RAJAR figures.

Shares in Capital Radio had slumped massively by late morning following the results, down by 62.5p to 502.5p.