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Radio Forecasts Downgraded As Ad Slowdown Squeezes Tighter

Radio Forecasts Downgraded As Ad Slowdown Squeezes Tighter

The continuing advertising deterioration which has severely hit the television sector, is also having an impact on the radio industry, according to broker ABN Amro. Analysts there have just cut their forecasts for radio, with the adjusted figures predicting an 8.6% decline in 2001 and growth of just 0.3% in 2002.

As radio revenue data are only released quarterly by the Radio Advertising Bureau (RAB), visibility for future trends is fairly limited. However, ABN says that the progress of television – for which monthly data is provided – serves as a good indicator of how radio is performing. For its part, TV advertising has continued to slow into Q3 and the outlook is now very uncertain (see Forecasts).

Television revenue fell by 2% in Q1, 13% in Q2 and is expected to be 12% down in Q3. The latest figures from the RAB, for Q2 2001, put revenue down 12.9% when compared to the second quarter of 2000. ABN has therefore revised its radio forecasts; the Q4 recovery anticipated in the last revision in August is now not expected until Q3 2002.

Radio industry quarterly advertising growth 
       
  2000  2001  2002 
Q1 16.4 1.5 -10.0
Q2 25.6 -14.5 -1.0
Q3 9.8 -9.0 4.5
Q4 10.9 -11.0 7.5
FY 15.4 -8.6 0.3
       
Source: ABN Amro, estimates, 21/09/01       

Following these revisions, forecasts for the performance of Capital Radio have also been cut by ABN – for the fourth time in twelve months. The 2001 pre-tax profit estimate of £30.2 million remains; the 2002 forecast, on the other hand, was based on an assumed return to growth in Q1, which is clearly now not the case.

First half revenue growth for Capital’s stations is expected to be -12%, with H2 coming in at 2.9%; over the full year, the broker expects Capital’s radio revenues to fall by 3.1%.

This downgrade will affect and reflect the performance at other major UK radio groups. By the close of trading on Friday most radio-related stocks were down, as shown below. Capital dropped by 12½p on the previous day to close at 482½p.

Radio companies’ share price performance 
             
   17-Sep  18-Sep  19-Sep  20-Sep  21-Sep  Actual change 
Capital Radio 537.5 517.5 502.5 495.0 482.5 -12.5
Chrysalis 165.0 164.0 161.5 155.0 150.0 -5.0
EMAP 596.0 567.0 540.0 510.0 480.0 -30.0
GWR Group 211.5 206.5 182.5 167.5 168.5 1.0
Jazz FM 117.0 115.5 115.5 115.5 111.5 -4.0
Scottish Radio 752.5 750.0 745.0 630.0 630.0 0.0
SMG 141.5 137.5 119.0 112.5 107.0 -5.5
             
Source: MediaTel Insight             

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