Top UK Radio Group Mimics Clear Channel Ad Strategy

28 November 2005

Britain's largest commercial radio company GCap Media is to follow the trail blazed in November last year by US radio giant Clear Channel Communications when it pursued a bold strategy to boost ad revenues by cutting the number and length of commercials and charging higher margins.

GCap, formed in May by the £711m merger between Capital Radio and GWR, on Friday reported an 11% revenue drop to £112 million ($192.14m; €163.88m) on a pro forma basis for the six months to September 30. Underlying pre-tax profit fell from £17.3m to £12.4m.

To compound the problems faced by the company, GCap's market capitalization last week languished £183m below its merger valuation.

In a bid to reverse the downward spiral, chairman/ceo Ralph Bernard announced last week that GCap too will halve the number of ads aired on its flagship London station, Capital FM. He argues this will win back listeners from the BBC and boost flagging revenues - actions that will "revitalise GCap, particularly Capital Radio, and return it to growth".

Bernard also revealed that the board's intends to halve the shareholder dividend and dispose of nine local radio stations - neither move likely to boost investor confidence.

Moreover, GCap stockholders and analysts are aware that Clear Channel's US strategy remains unproven and looks decidedly shaky [WAMN: 26-Oct-05].

Little surprise then that GCap's stock plunged a further 20% on Friday, while analysts cut profit forecasts by up to 40% after learning that the company's costs are set to exceed market expectations.

GCap is now bid-vulnerable, although Bernard played this down. "If somebody wants to make a bid, then let's hear it," said he. "Otherwise I'm not interested."

Data sourced from; additional content by WARC staff