Wireless Group Offloads Wave 105 To Scottish Radio In Debt Clearance
The Wireless Group (TWG) is to finance the repayment of its remaining bank debt through the sale of Wave 105 FM to Scottish Radio Holdings (SRH) for £18.0 million. Following the disposal, TWG will be left with a cash balance of £1 million.
In the year ended 31 December 2000, Fareham-based Wave 105 reported a pre-tax loss of £0.6 million on turnover of £1.6 million. Advertising revenues for the nine months to September 2001 were up by 63% year on year. The sale price represents a multiple of historic revenue of approximately 11.5 times.
Commenting on the proposed acquisitions, SRH chief executive Richard Findlay, said: “Wave 105 is one of the most desirable of the UK regional licences. It covers the valuable south of England market, which is a rich mixture of wealthy rural, coastal towns and significant cities. It is an area historically popular with advertisers, and is therefore well placed to benefit from any lift in the advertising market.
SRH has today also acquired Wireless Group’s 24.5% stake in Kingdom FM, which broadcasts across Fife, for £1.0 million.
Comment Kelvin MacKenzie, chief executive at Wireless Group, went on a spending spree after he succeeded in buying Talk Radio in 1988. He bought the Radio Partnership in July 1999 and the Independent Radio Group, which included Scot FM, in October of the same year. These businesses were then combined under the umbrella name The Wireless Group. Talk Radio was subsequently repositioned and marketed as the UK’s first dedicated sport station, TalkSport.
This rapid expansion saw MacKenzie’s nascent radio business shoot up the ranks to become the UK’s fourth largest radio operator by early 2000.
However, the balance sheet began to show that the growth could not be sustained by the company’s cash-flow. In 2000, TWG made a loss of £34.2 million. To this end Scot FM was sold this year to ease debt. Whilst at the time of the sale MacKenzie said that the licence did not form part of the group’s ‘core strategy’, in fact Scot FM was one of TWG’s largest assets and one that the group had previously said it did not intend to sell.
In addition to today’s £18.5 million disposal of Wave 105 FM, Wireless Group has also withdrawn its membership of the Radio Advertising Bureau as a further cost-cutting measure.
Having to sell off businesses in order to keep afloat does not reflect too well on The Wireless Group’s business, as Mackenzie himself acknowledges: “We are not content to be sellers of assets but uncertain capital market conditions meant we had to take this action. TWG is now debt free, leaving us to concentrate on developing the business.”
