GCAP Media PLC
24 May 2006
24 May 2006
GCap Media plc
Preliminary Results for the 12 months to 31 March 2006
Underlying Pro-forma Group Results *
• Revenue down 12.7% at £220.2m (2005: £252.3m)
• Profit before tax of £22.2m (2005: £37.3m)
• Basic earnings per share of 7.8p (2005: 14.1p)
• Net debt of £76m (2005: £79m) with EBITDA interest cover of 8x
Statutory Group Results
• Revenue of £210.7m (six months ended 31 March 2005: £58.5m)
• Loss before tax of £47.9m (six months ended 31 March 2005: profit £6.5m)
after intangible amortisation of £42.8m and a charge for separately
disclosed items** of £27.8m (six months ended 31 March 2005: £3.3m)
• Basic loss per share of 23.3p (six months ended 31 March 2005: basic
earnings per share 4.9p)
• Full year dividend of 9.25p per share (six months ended 31 March 2005:
6p per share).
Positioning the business for growth
• Merger savings: annual savings increased to £27m
• Capital Radio: ad effectiveness up 38% and relaunch on track
• Xfm: national network launched
• Classic FM: highest revenues since 2002
• Planet Rock: record digital audience results
GCap Media Chief Executive, Ralph Bernard commented:
'In the past year we have created the UK's leading commercial radio operator,
carrying the cost of significant change against the background of a difficult
advertising environment and audience declines at many of our stations. We have
identified significantly higher cost savings than initially envisaged and
realised them earlier than originally forecast.
Media markets are changing fast and at GCap, we are creating the strategy to
deliver improved profitability by developing strong national networks and
increasing audiences in the most commercially important demographics. Capital
Radio is the leading London station in the key 15-44 segment and the changes we
are making to programming and advertising inventory position us well for future
growth. Xfm and Choice audiences continue to grow, our digital station Planet
Rock has achieved record reach and share and Classic FM remains at the forefront
of our strategy to challenge the BBC.'
Enquiries:
GCap Media plc 020 7054 8128
Ralph Bernard, Chief Executive
Wendy Pallot, Finance Director
Jane Wilson, Communications Director
Finsbury Group 020 7251 3801
Rupert Younger / Don Hunter
This document is available via the Internet at http://www.gcapmedia.com.
There will be a presentation to analysts at 9.30am at The London Stock Exchange,
Paternoster Square, London. Slides will be available following the presentation
at http://www.gcapmedia.com
*Underlying pro forma results are presented to provide a better indication of
overall financial performance. They include the results of GWR and IRN as if the
merger occurred on 1 April 2004, rather than just from the date of the merger, 9
May 2005. They exclude the amortisation of intangible assets, merger
restructuring costs and other separately disclosed items.
** Separately disclosed items consist mainly of merger restructuring costs,
goodwill impairment and the profit on disposal of Century 106.
These are the first annual results of the Group to be prepared under
International Financial Reporting Standards (IFRS) and have been prepared in
accordance with the accounting policies set out in the IFRS restatement issued
by the Company on 13 September 2005.
OVERVIEW
As we highlighted in our March Trading update, the Group's financial performance
was affected by several factors including:-
• Weak advertising conditions: 86% of GCap Media's revenues are from
advertising and weak market conditions during 2005/06 have been well
documented, with industry radio revenues down 4.2% during the 2005 calendar
year. (Source: RAB/Ofcom)
• Audience declines at our core heritage stations: During the period that
affected revenues for 2005/06, total listening hours for GCap stations fell
on average by 7.4% year on year, mainly at Capital Radio and other key One
Network stations. Although total listening hours are an indicator for
revenues, other audience statistics, such as share and demographic mix are
also very relevant and we are now starting to see gains among the most
commercially attractive 15-44 year olds.
• Post-merger integration disruption: There was significant disruption in
the business following the merger. Reorganisation of key departments took
place quickly, with the two national sales teams being merged and brought
into the same building by July 2005. Following the management reorganisation
at the end of September, estimated synergies rose from £7.5 million per
annum to £25 million per annum and this resulted in additional redundancies.
These processes entailed a further period of uncertainty as positions were
confirmed and a new team was formed.
• Short-term effects of our inventory reduction policy at Capital Radio:
Capital's total revenues in 2005/06 were £26.6 million, making it the second
biggest revenue generating brand for the Group behind Classic FM. The new
inventory reduction policy at Capital Radio reduced revenues by £2.4 million
in the last quarter of the financial year.
As a result, underlying pro-forma Group revenues were down 12.7% year on year at
£220.2 million and underlying pro-forma Group profit before tax was down 40% at
£22.2 million. On a statutory basis, revenues, which only include GWR Group from
the date of merger, 9 May 2005, were £210.7 million. The statutory loss before
tax of £47.9 million includes intangible amortisation of £42.8 million and a
charge for separately disclosed items of £27.8 million, which include merger
reorganisation costs, goodwill impairment and the profit on the sale of Century
106.
Against the background of these tough market conditions, the management team has
been focused on delivering on our strategic aims and putting the Group in the
best position for future growth. We have identified significantly higher cost
synergies than initially anticipated and brought forward additional savings into
this financial year. At the time of the merger, we estimated annual cost
synergies of £7.5 million to be achievable in the year to March 2008. We have
now identified annual cost synergies of £27 million achievable in full in the
year to March 2007.
As announced in November, we have also restructured the Group around eight
commercially attractive regions and created a new operational structure to
reflect this.
Media markets are changing fast and we are creating the strategy to deliver
improved profitability by developing strong national networks and increasing
audiences in the most commercially important demographics. In November, we
outlined our new strategy and have already started to implement it. The first
stage of this was the phased relaunch of Capital Radio. In December, we
introduced a new advertising inventory policy of never playing more than two ads
in a row. Independent research has demonstrated that advertising on Capital
Radio is now 38% more effective. We are also repositioning Capital Radio to
appeal to a target audience of 15-44 year olds. Capital Radio is now more
appealing to this target market than any of its competitors and listener
feedback since the relaunch has been extremely positive. In addition, we have
announced the appointment of a new Programming Director, Scott Muller who will
join us this summer from leading Australian station, Nova.
Although it represents only around 12% of Group revenues, Capital Radio remains
the station with the most potential for recovery to high profit growth.
Therefore going forward, we have isolated Capital Radio to give it the
management focus and investment it needs to build audiences and grow revenue.
With 90% of the population listening to radio almost 24 hours a week, radio is
as strong as ever. Developing strong, complementary networks on analogue and
digital is central to our strategy of attracting listeners, particularly from
key BBC Radio stations. Classic FM remains the UK's largest commercial radio
station with a record number of commercially attractive ABC1 listeners. This
year, the station also saw its highest revenue since 2002 and was the biggest
revenue contributor for the Group. On DAB digital radio, Sony Gold Award winning
Planet Rock achieved record reach and share with almost half a million
listeners.
In March we completed the creation of the new national Xfm network with the
launch of Xfm Manchester, after the rebranding of Beat 106 to Xfm Scotland. The
brand is now represented by a network of analogue and digital stations across
the UK broadcasting to commercially attractive, but traditionally difficult to
reach, 15-34 year old males and we have already seen positive feedback from
advertisers. Elsewhere, we are starting to deliver audience growth at key
networks including Choice FM and the Century FM Network.
There have now been three million DAB digital radio sets sold in the UK. It took
five years to sell the first million sets, 11 months to sell the next million
and just five months to sell the third million. By 2009, more than 40% of homes
in the UK are expected to own a digital radio. GCap is well placed to take
advantage of this growth, having the necessary content and distribution network
to attract listeners and grow revenues. The national commercial multiplex that
GCap controls through Digital One, together with our network of digital stations
including Xfm, Choice FM and Planet Rock, put us in a strong position to compete
against the BBC. We have also stated our intentions to participate in the
application for the second national digital multiplex as part of an industry
consortium.
Delivering improved cost synergies
In September 2004, we announced that we expected synergies from the merger to be
at least £7.5 million per annum, achievable in full in 2007/08. Following the
management reorganisation in September 2005, we announced that these synergy
savings would be £25 million per annum, achievable in the first full year after
the merger, 2006/07, with £9 million being delivered in 2005/06. In fact we have
managed to achieve £13 million of savings in 2005/06. As well as accelerating
the realisation of synergies, we have also increased the total synergies to £27
million per annum achievable in the first full year of the merger 2006/07.
In November we announced that the costs of delivering the synergies identified
at that date would be £19.7 million. We are now in the process of moving all
staff in London into one building, which will save an additional £0.7 million
per annum. The one-off cost relating to this annual saving is approximately £5
million, because, in accordance with accounting regulations, we have provided
for the full cost of lease payments for the empty building to the end of its
lease term. Some of this cost would be reversed in future should the property be
sub-let. In addition there have been other savings of £1.3 million per annum
from further redundancies and operating contract renegotiations and further
one-off cash costs of £4 million. Total one-off cash costs, including the
accrual for future lease payments, of £29 million, represent 107% of annual
synergy savings, compared to the 147% ratio implicit in the announcement of the
merger in September 2004. In addition, there are non-cash costs of approximately
£2 million relating to asset write downs and the share element of merger related
incentives.
Successfully integrating the business
One of the greatest challenges in the past year has been business integration
following the merger. Over the past year, we have focused on integrating
management and staff, technology, commercial sales, finance and property of the
two companies. By September, all key decisions in these areas had been taken.
Over the summer of 2005, we merged our two contemporary hit radio FM networks to
create the One Network. We are currently finalising the implementation of
group-wide technology systems. In March we moved Classic FM to our studios in
London's Leicester Square alongside our other London and national digital
stations and our commercial sales teams. We are on schedule to relocate Digital
One and Planet Rock to Leicester Square later this year.
Integrating the commercial sales team has also been a priority. In July 2005, we
moved the newly-created national sales team into one location at our Leicester
Square offices. In subsequent months we have concentrated on creating a new team
culture and integrating the technology, systems and sales process which we
believe will enhance customer service levels.
Disposals
At the time of our merger, we announced the sale of our East Midlands station,
106 Century FM to Chrysalis for a cash consideration of £29.5 million. This
disposal was required by the undertakings given to the Office of Fair Trading
('OFT') on 8 March 2005 in relation to its clearance of the merger between
Capital Radio plc and GWR Group plc.
In November 2005, the Group sold its wholly owned subsidiary in Bulgaria, Balkan
Broadcasting OOD. The company was sold for a total cash consideration of £1.5
million resulting in a net gain on disposal of £0.9 million.
As part of our focus on repositioning the portfolio, we identified nine analogue
stations for disposal because they fell outside our key geographic regions. We
received several offers for these stations. The Board did not feel that it would
be in the best interests of shareholders to sell at the level of offers received
having taken into account the likely post tax proceeds and the dilution to
earnings per share of the disposal. Accordingly, the sale process was terminated
and the stations were retained as an integral part of the Group. These stations
remain attractive assets which are now being managed as part of the existing
structure.
It had been the Company's intention to distribute the majority of the
anticipated cash proceeds from these disposals by way of a special dividend. In
view of the termination of the sales process, we announced in March that these
special dividends would not be paid.
Dividend
At the time of the merger we stated that we expected to maintain the total
annual dividend of 18.5 pence per share with cover being grown over time. The
Board reviewed this policy in November in the light of the very significant
changes that occurred in the radio advertising market during 2005, the audience
declines in the GCap portfolio, the current trading outlook at that time and the
anticipated long term effect on earnings of the strategic steps that we intended
to take to enhance the long-term value of the business. It proposed a new level
of dividend which would form the basis for a progressive dividend policy once
the financial benefits of the strategic repositioning of the Group flow through.
The interim dividend was set at 3.1 pence per share and paid in January 2006.
The Board is proposing a final dividend of 6.15 pence per share making a total
of 9.25 pence for the year.
Board
In the Group's interim statement the Board signalled its intention to streamline
its composition by reducing its non-executive membership. In March 2006 the
Group announced that Stella Pirie, Tim Mason and Peter Mitchell would be
standing down from the Board of Directors with effect from 31 March 2006. The
Board now comprises three Executive Directors and seven Non-Executive Directors.
Current trading and outlook
Group revenues for April and May 2006 are forecast to be down 4% year on year
for the same period on a like for like basis, but down 1% excluding Capital
Radio, which is forecast to be down by 26% year on year due to the new
advertising inventory policy. Current booking levels indicate no improvement on
this trend in June. However, as a result of the strategic initiatives we are
undertaking, the Board is broadly comfortable with where consensus revenue
forecasts are for the Group for the current year.
STRATEGY
Delivering on our strategic aims
We outlined our growth strategy in November 2005 focusing on three clear
priority areas for the business:
- Investing in our core stations; focus on Capital Radio
- Repositioning our portfolio of stations within commercially attractive
markets and developing strong national networks to challenge the BBC
- Developing non-traditional revenue opportunities
1. Capital Radio
Addressing the decline in audience numbers at our analogue stations has been our
immediate objective and in November we announced that we would prioritise
London's Capital FM (which in January, we relaunched as Capital Radio). Our aims
for the station were twofold:
- To create a better commercial environment for our customers
maintaining our price premium and delivering greater advertising effectiveness.
- To create a better listener environment in order to grow reach and
share of listening.
In December 2005, we launched a new advertising inventory policy for the station
reducing advertising minutage by up to half during the working day and have
delivered a promise of 'never more than two ads in a row'. This strategy has
delivered more programme content and fewer adverts with less intrusion from
commercial messages, making listeners less likely to 'tune out' during
commercial breaks. It has also benefited advertisers by reducing clutter and
increasing impact. Early feedback from our customers has been extremely
encouraging and we have achieved our initial objective of maintaining our
pricing premium relative to our radio competitors. Advertisers recognise that
advertising on Capital Radio has significantly more value than on our competitor
stations.
After implementing the new inventory policy, GCap consulted with the largest
media agency groups to develop research to investigate whether a commercial
played out in a two ad break is more likely to be recalled by listeners than the
same commercial played out in a five ad break.
The results of this independent research (carried out by Ipsos ASI) showed that
a commercial is 38% more likely to be recalled in Capital Radio's two ad break
than in a five ad break, demonstrating tangible benefits for advertisers from
our new inventory policy. Given that some competitors are running up to nine
commercials in certain breaks, this research demonstrates that Capital Radio has
considerably improved the effectiveness of the advertising environment on the
station against its key commercial competitors.
Our new inventory policy has delivered not only more standout for advertisers
but a less cluttered station for our listeners with more emphasis on the music
and other creative content. Research conducted before the policy was implemented
had shown that listeners wanted fewer ads. Alongside this reduction in
advertising minutage, we are making major changes to the on-air content of
Capital Radio to meet our listeners' preferences.
In January 2006, we began the phased relaunch of the station with a new music
position, branding, news output, features and schedule. We have also started the
process of giving the station a more local, London focus which will run through
every aspect from on-air discussion topics to events. Since launch, we have
continued to conduct extensive listener research through focus groups and early
feedback has been extremely encouraging. There is much work to be done during
the next two phases of the relaunch strategy - further programme improvements
and strong marketing. Despite the heavy marketing of rival stations in London,
Capital Radio continues to hold the number two position by audience totals with
no advertising support. Johnny Vaughan's breakfast show remains London's number
one commercial breakfast show. The strength of the Group has enabled us to take
a considered view of Capital Radio over an extended period going forward in
order to position the station at its strongest before we launch a marketing
campaign to attract new and lapsed listeners. We do not anticipate audience
growth until the planned marketing push has had time to impact.
We have also strengthened the operational management of Capital Radio by
appointing Scott Muller as Capital's new Programme Director. Scott will join the
station from Nova 969 in Sydney, where as Programme Director he has been
responsible for the successful launch of the station, which secured the leading
position in a competitive metropolitan market with a similar format and
advertising inventory policy to Capital Radio. Scott will join the Group later
this year and will apply the specific skills and experience he gained at Nova to
attract new listeners. Reversing the long-term decline in audience and revenues
at Capital Radio is a long-term project but we are confident that the measures
we have put in place will deliver audience and profit growth over time.
Revenue impact
In the short term Capital Radio advertising revenue has fallen due to the
reduction in available inventory. Revenues were down by £2.4 million in the last
quarter of 2005/06 due to the new policy. We estimate that revenues in 2006/07
will fall by around £7 million year on year, in line with the guidance we gave
in November, as a result of both the new inventory policy and last year's
audience reductions. As expected, this revenue is benefiting our London
commercial competitors. However, as the benefits of our strategic repositioning
flow through, we anticipate that our portfolio of leading stations will regain
revenue share over time.
2. Repositioning our portfolio and challenging the BBC
In November, we outlined our plans to restructure our portfolio of radio
stations to maximise the potential of the merged Group. Our portfolio strategy
has two primary and complementary objectives. Firstly, we said that we would
concentrate our resources in the eight geographic regions which are most highly
demanded by advertisers and in which we already have a significant presence.
These are: London, South East, Midlands, North West, Anglia, Wales & West, North
East and Scotland. In light of our decision not to sell the nine stations
previously identified for disposal, we now also operate a South West region.
Following the restructuring, we now have regional Managing Directors outside
London who have responsibility for all the brands in their region. These
regional MDs work closely with local sales teams, programmers and the national
sales team to maximise all commercial opportunities in their area and to ensure
that stations are complementary and cross-promote where appropriate.
Creating strong national networks
The second objective of our portfolio strategy is to develop national brands to
attract new audiences, primarily from the BBC. These priority formats are: Xfm
and Core (targeting Radio 1) and Classic FM, Planet Rock and a combined Capital
Gold/Capital Life format (targeting Radio 2).
Classic FM
Classic FM is the UK's largest commercial radio station. With a presence on the
national digital multiplex, Digital One and an existing listener base of 5.7
million listeners, it is the cornerstone of our strategy to develop our national
portfolio. This year, the station was the biggest revenue contributor for the
Group.
Planet Rock
On DAB digital radio, Sony Gold Award winning Planet Rock achieved record reach
and share with almost half a million listeners with little marketing to date but
a strong focus on content and knowledgeable presenters.
Xfm: Creating a national network
Previously, Xfm broadcast in analogue in London, on DAB digital radio in the
South East, the North, South Wales, West Midlands and Scotland and across the
country on Sky. In November, we announced our intention to create a new national
Xfm network of digital and analogue stations to exploit its appeal to the
commercially attractive audience of young males and to give a stronger national
proposition for advertisers.
We said that in the first quarter of 2006, we would complete plans for the
national network by achieving the following:
- Xfm would replace The Storm in DAB areas where it does not broadcast,
increasing Xfm's DAB coverage to over 35 million people.
- Beat 106, our analogue station in Central Scotland (Glasgow and Edinburgh),
would be relaunched as Xfm
- Xfm would be launched in Manchester, following the successful bid for this
analogue licence earlier in 2005.
We completed this project in March with the successful launch of Xfm Manchester
following the January launch of Xfm Scotland. Advertiser reaction to the new
network has been extremely positive and in the last RAJAR results (Q1:06), the
Xfm network reached over a million listeners. This number does not yet include
Xfm Manchester.
Life/Capital Gold
As previously announced, we are now developing a combined classic hits / speech
mix format aimed at part of Radio 2's audience.
3. Non-traditional revenues
A key area of our strategy is developing non-traditional revenues. Non
advertising revenues currently account for 14% of our total revenues and we aim
to increase this proportion in the future, lessening our reliance on radio
advertising. Classic FM, where the sale of CDs and box office incomes comprise
17% of total revenues, is an excellent example of how such a strategy can
monetise a brand. We believe that similar opportunities are available elsewhere
within the Group's brands.
In our new media activities, Microsoft XP sponsored all the audio and visual
players on our websites across 2005 in the Group's biggest interactive deal. New
technologies have formed an important part of new initiatives with innovative
campaigns including SMS and podcasting, of particular note being the
award-winning UIP Hustle & Flow film promotion; Choice FM ran a bespoke podcast
linked with a 6 week radio promotion which mimicked Hustle & Flow's plot.
OPERATIONAL REVIEW
1. Audiences
The latest set of RAJAR audience figures (Q1:06) showed that over the last 12
months, while overall listener numbers (reach) for the Group were down around
5.3% from 17.1 million (Q1:05) to 16.2 million (Q1:06), GCap Media remains the
UK's leading commercial radio group with almost five million listeners more than
our nearest commercial competitor. The Group's total listening hours decreased
by 6.6% year on year (RAJAR Q1:06 compared to Q1:05).
Classic FM
Classic FM is the UK's largest commercial radio station with 5.7 million
listeners and the leading commercial breakfast show with 2.9 million listeners.
Reach has remained broadly flat across the year at 12%. Importantly, Classic FM
has maintained a high proportion of commercially attractive ABC1 listeners which
in Q1:06 accounted for a record 68.7% of the station's listeners. Classic FM
accounts for just under 30% of Group listening hours and is an important element
of the Group's strategy to challenge the BBC, particularly on the digital
platform. Latest figures from RAJAR on listening by platform suggest that almost
10% of all listening to Classic FM is non-analogue with DAB digital radio
accounting for more than half of that figure.
The One Network
The One Network, which is the UK's biggest commercial network opportunity for
advertisers, saw reach decline by 8.5% year on year from 8.1 million listeners
(Q1:05) to 7.4 million listeners (Q1:06) on a like for like basis excluding Beat
106 in Scotland. The commercially attractive 15-44 demographic makes up 70% of
the One Network audience with reach of 5.2 million listeners. At this year's
Sony's, One Network station, Coast FM won the Station of the Year award in the
under 300,000 potential audience category.
Capital Radio
Capital Radio reach was down by 18% year on year with 1.7 million listeners
accounting for 16% reach. Share of listening declined from 6.1% (Q1:05) to 5.5%,
representing a decrease in total hours of 13% year on year.
Capital Radio is the number one station in London for the important 15-44
market, beating both all BBC and all commercial rivals. This demographic
accounts for 72% of the total Capital Radio audience, with reach of 21% while
share is 8.3%. The station is now targeting women in this age group. Capital
Radio remains the number one station for females aged 15-44 with share of
listening now 10.8%.
At breakfast, Johnny Vaughan remains London's leading commercial breakfast show
presenter. Since the relaunch the format of his show has been refined to make it
more appealing to women who now account for 57% of all listening to his show.
Xfm Network
The creation of a national Xfm Network to challenge Radio 1 is at the heart of
the portfolio strategy we announced in November 2005. Xfm now broadcasts on
analogue in London, central Scotland and Manchester and on digital in areas
across the UK. Xfm now reaches over 1 million listeners with total hours of 6.6
million, making it an extremely attractive proposition for advertisers. In
London, Lauren Laverne took over the breakfast show from Christian O'Connell in
2005 and in her first full RAJAR period increased the show's reach by 19% to
340,000 listeners. At the 2006 Sony Radio Awards, Xfm's 'Rock School' won a gold
award for the best competition.
Choice FM
Choice FM broadcasts on analogue in London and across the UK on DAB digital
radio, Sky digital television and online. Recent RAJAR figures saw Choice
achieve its highest ever national reach with 657,000 listeners and highest ever
total listening hours of 6 million. The station now attracts 533,000 listeners
in London with a further 124,000 outside the analogue transmission area. Choice
FM has continued to strengthen its line-up with key presenters including Richard
Blackwood and Angie Le Mar increasing their reach at weekends.
Century FM Network
The Century FM network comprises three stations in the North East, North West
and South coast and complements the One Network's offering to advertisers.
Following the sale of the Midlands station in May 2005, the network continues to
see a steady performance with like for like reach maintained at 18%.
Capital Gold Network
Capital Gold is part of the Group's strategy to target the BBC and will benefit
from the move to digital in conjunction with Capital Life. The network, which
broadcasts on analogue on Medium Wave, saw slight audience declines over the
year with reach down from 1.3 million (Q1:05) to 1.2 million listeners.
GCap Digital Stations
Recent RAJAR results showed encouraging growth at our digital stations,
particularly the Sony Digital Station of the Year Planet Rock, which reached a
record 461,000 listeners in Q1:06. This represents more listeners than either
BBC 1Xtra or 6 Music, which have both had extensive marketing support. Our focus
in the past year has been on programming and high-profile presenters such as
Rick Wakeman and Nicky Horne are proving popular with listeners.
2. Commercial
The Group's post-merger integration issues have been played out against the
backdrop of a difficult trading environment over the last 12 months. The
integration of the commercial sales team has been a priority in the past year.
Much of the systems integration is now complete and we are confident that we
have the right team in place in national commercial sales.
Customers in Entertainment, Motors, Finance and Business all increased their
advertising spend with GCap in the past year. Government and Political spend
increased by the highest percentage in the year with the COI seeing its highest
ever monthly spend in March. Retail, which had been the number one category in
2004/05, saw spend reduce by around 20% in the year, reflecting weak trading on
the high street. Telecoms and Travel were also down in the year.
In the area of sponsorship and promotion, some new long term partnerships
were formed.
Sky extended their partnership with Capital Gold breakfast and stepped up their
promotional activity to cover all GCap London stations. Egg became the first
client to run a cross-network promotion with a two-week campaign across 60
stations in the autumn that yielded revenue not previously earmarked for radio.
This was followed by an extensive campaign with the Department of Health.
British Airways and O2, two of our most valued and long term partners, continued
their presence across our portfolio of stations.
Additional Financial Information
The consolidated income statement includes a column headed Separately Disclosed
Items, which is mainly made up of:
(a) The total merger related business restructuring costs of £27 million, being
this year's tranche of the £31 million, outlined above.
(b) £12.8 million impairment of goodwill.
(c) £10.6 million profit on the sale of Century 106, a regional licence in the
East Midlands, which was sold in May 2005, to satisfy a condition of the Office
of Fair Trading's approval of the Merger. The consideration, after a working
capital adjustment, was cash of £29.3 million.
(d) £0.9 million profit on the sale of our Bulgarian interests in November 2005,
for which the consideration was cash of £1.5 million.
The Group had debt of £75.9 million at 31 March 2006 (Pro forma 31 March 2005:
£79.0 million). During the year, the cash effect of the separately disclosed
items was a net outflow of £0.3 million. Working capital has improved
significantly during the year. Although this is partly due to a lower run-rate
for turnover, there has also been a steady improvement in debtor days during the
year from 41 at the date of merger down to 36 at 31 March 2006. This is the
result of ensuring that GCap combines best practice in credit control from both
Capital Radio and GWR Group, from structures and training to collection policies
and customer communication.
Underlying cost control and synergy achievement have been excellent, enabling us
to invest where the business needs it most. In November 2005 we announced our
intention to invest some of the merger synergies back into the business. These
investments, which will be made during 2006/07, are £2.5 million in marketing
and staff and £1.2 million in internet and CRM initiatives.
During 2005/06 GCap was awarded a new licence for Manchester, which launched in
March 2006 as Xfm Manchester. Initial set-up costs of £0.4 million were incurred
in 2005/06 for this station and we expect it to incur costs of £2.4 million in
2006/07, with a net loss of £1.1 million.
During 2005/06 our net investment in digital radio was £9.9 million (year ended
March 2005: £10.9 million), including £1.7 million of revenues from digital
broadcasting. Annual net digital investment peaked for the Group in 2004/05. We
are currently forecasting breakeven in 2010, although this is very dependent on
the penetration of digital radio and the success of the BT Movio project, the
datacasting venture with BT to broadcast TV and DAB digital radio content to
mobile phones and handheld devices.
Unaudited GCap Media plc pro-forma financial information
On 9 May 2005, the merger ('Merger') was completed between Capital Radio plc
('Capital Radio'), renamed GCap Media plc ('GCap Media'), and GWR Group plc
('GWR Group'). The consolidated income statement for GCap Media is set out on
page 13, and only includes the results of GWR Group from the date of
acquisition. The comparative information in this consolidated income statement
reflects the results of Capital Radio only for the six month period to 31 March
2005. In order to demonstrate the underlying historic trends in the combined
business, additional unaudited pro-forma financial information is provided below
along with notes setting out the basis of preparation:-
Year ended Year ended
31 March 2006 31 March 2005
£'000 £'000
Revenue 220,214 252,259
Underlying operating profit before financing costs 25,819 42,508
Finance income 1,749 1,703
Finance expenses (6,042) (6,962)
Net financing costs (4,293) (5,259)
Share of profit of associates 681 24
Underlying profit before tax 22,207 37,273
Taxation (7,241) (11,904)
Underlying profit for the period 14,966 25,369
Attributable to:
Equity holders of the parent 13,038 23,062
Minority interest 1,928 2,307
Underlying profit for the period 14,966 25,369
Underlying basic earnings per share 7.8p 14.1p
Notes
1. Basis of preparation
The above unaudited pro-forma financial information is prepared on the same
basis as the consolidated income statement except for the following adjustments:
• The pro-forma financial information includes the results of GWR Group
and Independent Radio News Limited (IRN) as if the Merger had taken place on 1
April 2004 rather than 9 May 2005. IRN was previously accounted for as an
associate but became a subsidiary as a result of the Merger.
• Amortisation of intangible assets and associated deferred tax has
been excluded from the pro-forma financial information for all periods to
provide more comparable information. In accordance with IFRS the directors
identified £321.4 million of separable intangible assets acquired as a result of
the Merger. These include licences, brands and customer relationships and are
being amortised over their estimated useful lives of between one and twenty years.
• The pro-forma financial information relates solely to ongoing
operations and therefore excludes separately disclosed items, which are detailed
in note 4 to the statutory results. These include the costs of merging Capital
Radio and GWR Group, some impairment of goodwill, the profit on sale of Balkan
Broadcasting OOD, the profit on sale of Century 106 Limited and its trading
results for both periods.
The pro-forma financial information for the year ended 31 March 2005 has been
prepared on the basis of previously published accounts which cover that period
for GWR Group and Capital Radio, after IFRS adjustments to ensure consistency
with the accounting policies applied for periods starting after 1 October 2004,
the IFRS transition date.
2. Unaudited underlying basic earnings per share
Underlying basic earnings per share have been calculated using the pro-forma
underlying profit for the period and weighted average number of ordinary shares
calculated as if the Merger took place on 1 April 2004.
A reconciliation of the basic loss per share for the financial year to
underlying basic earnings per share is shown below:
Year ended
31 March 2006
£'000 P
Basic loss (note 19) (36,662) (23.3)
Impact of pro-forma Merger date on weighted average
number of shares - 0.9
Separately disclosed items 27,778 16.9
Intangible amortisation 42,843 26.1
Tax effect of the above (20,476) (12.5)
Loss for pre acquisition period (445) (0.3)
Underlying basic earnings 13,038 7.8
Consolidated income statement
Year ended Six months ended
31 March 2006 31 March 2005
Trading Separately Total Total
disclosed
items*
Notes £'000 £'000 £'000 £'000
Revenue 2 210,749 - 210,749 58,497
Direct costs (32,791) - (32,791) (6,987)
Personnel costs (66,553) (15,875) (82,428) (16,974)*
Operating costs (78,552) (11,103) (89,655) (25,503)*
Depreciation 7 (7,107) - (7,107) (1,492)
Amortisation and impairment 8 (42,843) (12,791) (55,634) -
Disposal of investment 189 - 189 -
Operating (loss)/profit 2 (16,908) (39,769) (56,677) 7,541
Gain on sale of business and
property, plant and equipment 4 - 11,991 11,991 -
(Loss)/profit before
financing costs (16,908) (27,778) (44,686) 7,541
Finance income 1,739 - 1,739 474
Finance expenses (5,800) - (5,800) (1,522)
Net financing costs 5 (4,061) - (4,061) (1,048)
Share of profit/(loss) of 879 - 879 (42)*
associates
(Loss)/profit before taxation (20,090) (27,778) (47,868) 6,451
Taxation 6 5,495 7,622 13,117 (2,338)*
(Loss)/profit for the period (14,595) (20,156) (34,751) 4,113
Attributable to:
Equity holders of the parent (16,506) (20,156) (36,662) 4,113
Minority interest 1,911 - 1,911 -
(Loss)/profit for (14,595) (20,156) (34,751) 4,113
the period
Dividends paid (9.1p per share, 18 14,922 10,572
2005:12.5p per share)
Dividends proposed 18 10,086 5,079
(6.15p per share,2005: 6.0p per
share)
Basic (loss)/earnings per share 19 (23.3p) 4.9p
Diluted (loss)/earnings per 19 (23.3p) 4.9p
share
The consolidated income statement for GCap Media set out above includes the
results of GWR Group and IRN only from the date of the Merger, 9 May 2005. The
comparative information reflects the results of Capital Radio only.
* Separately disclosed items include the costs associated with the Merger, the
gain on sale of businesses and property, plant and equipment and impairment of
goodwill. Included within the 2005 profit for the period was £2.7 million of
separately disclosed items. Further details are provided in note 4.
Consolidated statement of recognised income and expense
Year ended Six months ended
31 March 31 March
2006 2005
£'000 £'000
Actuarial gains and losses on defined benefit
pension schemes net of tax (624) (267)
Change in fair value of equity securities
available-for-sale (499) -
Net income and expense recognised directly in (1,123) (267)
equity
(Loss)/profit for the period (34,751) 4,113
Total recognised income and expense for the period (35,874) 3,846
Attributable to:
Equity holders of the parent (37,785) 3,846
Minority interest 1,911 -
Total recognised income and expense for the period (35,874) 3,846
Consolidated balance sheet
As at 31 March
2006 2005
Notes £'000 £'000
Non-current assets
Property, plant and equipment 7 31,251 15,399
Goodwill 8 210,075 159,849
Other intangible assets 8 278,541 -
Financial assets 115 -
Investments in associates 1,174 2,074
Other investments 1,369 17
Other receivables 10 848 716
Deferred tax assets 9 - 1,706
Total non-current assets 523,373 179,761
Current assets
Trade and other receivables 10 38,913 22,792
Cash and cash equivalents 11 6,079 285
Taxation receivable 1,380 -
Total current assets 46,372 23,077
Total assets 569,745 202,838
Current liabilities
Bank overdraft 11 - 13,356
Interest-bearing loans and borrowings 12 - 20,000
Trade and other payables 13 39,466 24,215
Taxation payable - 3,095
Total current liabilities 39,466 60,666
Non-current liabilities
Interest-bearing loans and borrowings 12 82,000 -
Other payables 13 1,215 -
Employee benefits 14 8,485 5,359
Provisions 15 4,967 563
Deferred tax liabilities 9 81,268 -
Total non-current liabilities 177,935 5,922
Total liabilities 217,401 66,588
Net assets 352,344 136,250
Equity
Issued capital 16 4,121 2,138
Share premium and reserves 17 348,876 116,138
Retained earnings 17 (2,384) 17,974
Total equity attributable to shareholders 350,613 136,250
Minority interest 17 1,731 -
Total equity 352,344 136,250
Consolidated statement of cash flows
Year ended Six months ended
31 March 31 March
2006 2005
Note £'000 £'000
Cash flows from operating activities:
(Loss)/profit for the financial period (34,751) 4,113
Adjustments for:
Amortisation and impairment 55,634 -
Depreciation 7,107 1,492
Investment income (1,739) (474)
Interest expense 5,800 1,522
Share of (profit)/loss of associates (879) 42
Loss on sale of property, plant and equipment 669 1
Gain on sale of businesses and property (11,991) -
Equity-settled share-based payment expense 2,435 593
Taxation (credit)/expense (13,117) 2,338
Operating profit before changes in working 9,168 9,627
capital and provisions
Decrease/(increase) in trade and other receivables 10,591 (2,459)
(Decrease)/increase in trade and other payables (6,995) 68
Cash generated from operations 12,764 7,236
Interest paid (3,858) (986)
Taxation paid (6,613) (2,910)
Taxation recovered 841 -
Net cash inflow from operating activities 3,134 3,340
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 1,279 -
Proceeds from sale of investments 1,863 -
Interest received 560 24
Dividends received 300 485
Disposal of subsidiary, net of cash disposed 28,813 -
Acquisition of subsidiary, net of cash acquired (7,532) -
Acquisition of property, plant and equipment (5,889) (1,270)
Net cash inflow/(outflow) from investing activities 19,394 (761)
Cash flows from financing activities:
Proceeds from the issue of share capital - 480
Repayment of borrowings (69,020) (107)
Receipt of new borrowings 82,000 -
Dividends paid (16,358) (10,572)
Net cash outflow from financing activities (3,378) (10,199)
Net increase/(decrease) in cash and cash equivalents 19,150 (7,620)
Cash and cash equivalents at start of period (13,071) (5,451)
Cash and cash equivalents at end of period 11 6,079 (13,071)
1 Basis of preparation
The Group's financial statements consolidate those of GCap Media plc and its
subsidiaries (together referred to as the 'Group') and the Group's interest in
associates and jointly controlled entities.
As required by EU law (IAS Regulation EC1606/2002) the Group's accounts have
been prepared in accordance with International Financial Reporting Standards
adopted by the International Accounting Standards Board (IASB), and
interpretations issued by the International Reporting Interpretations Committee
of the IASB, as adopted by the EU. These are the Group's first consolidated
financial statements to be prepared under IFRS and IFRS 1 'First-time Adoption
of International Financial Reporting Standards' has been applied.
The accounts are principally prepared on the historical cost basis except where
other bases are applied under the Group's accounting policies (as set out in the
IFRS restatement dated 13 September 2005 which is available on the Group's
website www.gcapmedia.com).
The comparative information presented in these accounts has been restated and
represented under adopted IFRSs. In respect of financial instruments, the
Group's policy, as permitted under IFRS 1, has been to adopt IAS 32 (Financial
Instruments: Disclosure and Presentation) and IAS 39 (Financial Instruments:
Recognition and Measurement) from 1 October 2004. Comparatives have therefore
been restated to reflect the requirements of IAS 32 and IAS 39.
The financial information set out herein does not constitute the Company's
statutory report and accounts for the year ended 31 March 2006. Statutory
accounts for 2006 will be delivered to the Registrar of Companies following the
Company's annual general meeting. The auditor has reported on those accounts,
their report was unqualified and did not contain statements under 237(2) or (3)
of the Companies Act 1985. Copies of the 2006 Annual Report and Accounts will be
sent to all shareholders and copies will be available from the registered office
of the Company, 30 Leicester Square, London, WC2H 7LA.
2 Segmental information
Segment information is presented in respect of the Group's business segments and
is based on the Group's management and internal reporting structure.
Business segments
The Group comprises the following main business segments:
• Broadcast brands - 57 analogue and 61 digital radio licences, with
their associated businesses
• Multiplexes - the operation of the national commercial multiplex,
Digital One, and 18 other multiplexes
• Other - includes Independent Radio News (IRN), which provides a news
service to commercial radio stations.
Broadcast brands Multiplexes Other Consolidated
Year Six months Year Six months Year Six months Year Six months
ended ended ended ended ended ended ended ended
31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March
2006 2005 2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue from external sources:
National 116,134 39,430 - - 9,167 - 125,301 39,430
Local 54,973 13,418 - - - - 54,973 13,418
Other 20,406 3,254 10,069 2,385 - 10 30,475 5,649
Total revenue 191,513 56,102 10,069 2,385 9,167 10 210,749 58,497
Segment operating (22,628) 9,236 4,265 533 1,455 (10) (16,908) 9,759
(loss)/profit
before separately
disclosed items
Merger costs (26,978) (2,218) - - - - (26,978) (2,218)
Goodwill impairment (12,791) - - - - - (12,791) -
Gain on sale of 11,991 - - - - - 11,991 -
businesses and fixed assets
Segment result (50,406) 7,018 4,265 533 1,455 (10) (44,686) 7,541
Net financing costs (4,061) (1,048)
Share of profit/(loss) of 879 (42)
associates
Taxation 13,117 (2,338)
(Loss)/profit for the period (34,751) 4,113
Other information
Segment assets 453,667 159,849 34,949 - - - 488,616 159,849
Unallocated assets 79,955 40,915
Investment in associates 1,174 2,074
Total assets 569,745 202,838
Segment liabilities 77,443 - 6,120 - - - 83,563 -
Unallocated liabilities 133,838 66,588
Total liabilities 217,401 66,588
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis. Segment
assets represent goodwill and intangible assets; segment liabilities represent
the deferred tax associated with the intangible assets. Unallocated items
comprise mainly income earning assets, interest-bearing loans, borrowings and
expenses, and corporate assets and expenses. The Group has centralised functions
and other assets and liabilities are managed on a group wide basis, therefore it
is not possible to allocate any other assets and liabilities to individual
segments.
Substantially all of the Group's revenue is derived from the provision of
advertising services.
3 Acquisition of subsidiary
On 9 May 2005, as a result of the Merger, the Company acquired 100% of the
shares in GWR Group for £265.4 million in a High Court sanctioned share for
share exchange and it incurred £15.2 million of deal fees, giving a total
acquisition price of £280.6 million. 79,336,921 shares were issued by the
Company as a consequence of the transaction. The fair value of these shares was
based upon the published price of the shares at the date of acquisition of
334.5p. The transaction was to merge the interests of two similar sized UK radio
groups but has been accounted for in accordance with IFRS 3 as an acquisition by
Capital Radio of GWR Group. Capital Radio was renamed GCap Media plc on 9 May
2005.
As a result of the Merger IRN, which was previously accounted for as an
associate by the Company, became a subsidiary on 9 May 2005.
The Merger had the following effect on the Group's assets and liabilities:
GWR Group's net assets at Recognised Accounting Fair value Fair value
the acquisition date values policy alignments adjustments amounts
£'000 £'000 £'000 £'000
Property, plant and equipment 18,040 - - 18,040
Intangible assets recognised - - 321,384 321,384
upon acquisition
Investments 3,592 - (465) 3,127
Goodwill and intangible assets 92,468 (3,516) (88,952) -
Trade and other receivables 28,581 3,477 (2,016) 30,042
Interest-bearing loans and (50,005) - - (50,005)
borrowings
Trade and other payables (23,960) - - (23,960)
Pension deficit (2,426) - - (2,426)
Minority interest (533) - - (533)
Deferred taxation 85 - (96,416) (96,331)
Net identifiable assets and 65,842 (39) 133,535 199,338
liabilities
Goodwill on acquisition 81,270
Directly attributable costs (15,226)
Total consideration 265,382
The recognised values above are the net book values of the assets of GWR Group
as at the Merger date. The fair value amounts of these net assets in the books
of GCap Media at the date of Merger are the recognised values amended by the
accounting policy alignments and fair value adjustments, which comprise:
• the reversal of £89.0 million of goodwill in the books of GWR Group, as
required by IFRS;
• the write off of £3.5 million of intangible assets following the
alignment of the accounting policies of GWR Group with GCap Media;
• the identification of £321.4 million of intangible assets acquired as a
result of the Merger, with a related deferred tax liability of £96.4
million. These assets include licences, brands and customer relationships as
at the Merger date. They are being amortised over their estimated useful
lives with an income statement charge in the year to 31 March 2006 of £42.8
million; and
• the write down of investments and related receivables by £2.5 million.
Goodwill on acquisition of £81.3 million represents future economic benefits
arising from the assets that are not capable of being identified individually
and recognised separately; these include the employees and future synergies
arising from the Merger. The post acquisition revenue for GWR Group plc is
£105.6 million. It is not possible to obtain an accurate pre-tax result post
acquisition for GWR Group plc due to the set-up of the newly merged business
combination.
If the acquisition had taken place on 1 April 2005 the revenue of the combined
entity would have been £220.2 million and the loss before taxation would have
been £49.9 million (after separately disclosed items of £28.0 million and a full
year's amortisation charge of £44.1 million).
4 Separately disclosed items
Notes Year ended Six months
31 March ended
2006 31 March
2005
£'000 £'000
Redundancies (12,004) (1,522)
Commissions and bonuses (3,871) (485)
Personnel costs a (15,875) (2,007)
Integration costs (4,425) -
Property costs (5,210) -
Professional fees (1,468) (211)
Operating costs a (11,103) (211)
Total Merger costs a (26,978) (2,218)
Goodwill impairment b (12,791) -
Century 106 c 10,558 -
Balkan Broadcasting OOD d 898 -
Profit on sale of property 535 -
Gain on sale of businesses and 11,991 -
fixed assets
Wildstar writedown - (1,080)
(27,778) (3,298)
Tax 7,622 614
Total (20,156) (2,684)
a The costs of merging the two businesses
These are primarily redundancies as a result of the elimination of the
duplication of roles, merger related staff incentives, integration advisory
services and future lease costs of vacant premises created by the relocation of
merged activities.
b Impairment of goodwill
Following the fundamental review of the business that resulted in the
re-organisation announced in November 2005, the Group has reviewed the carrying
values of goodwill which has resulted in an impairment of goodwill of £12.8
million across a number of brands in the broadcast segment (see note 8).
c Profit on sale of Century 106
The disposal of this business, which was part of the Group's broadcast brands
segment, was a condition of the Office of Fair Trading's approval of the Merger.
Century 106 was sold on 18 May 2005 for a cash consideration of £29.5 million
less a working capital adjustment of £0.2 million. The profit on disposal was
£10.6 million after deducting associated goodwill of £18.3 million and costs of
£0.4 million.
Effect of the sale of Century 106 on the Group's individual assets and liabilities:
£'000
Property, plant and equipment 45
Goodwill and intangible assets 18,258
Trade and other receivables 90
Trade and other payables (138)
Net identifiable assets and liabilities 18,255
Consideration received, satisfied in cash 29,300
Costs associated with disposal (487)
Net cash inflow 28,813
4 Separately disclosed items (continued)
d Disposal of Balkan Broadcasting OOD
On 15 November 2005 the Group sold its wholly owned subsidiary in Bulgaria,
Balkan Broadcasting OOD. The company was sold for a total cash consideration of
£1.5 million resulting in a gain on disposal of £0.9 million after deducting the
intercompany receivable of £0.3 million and associated costs of £0.3 million.
5 Financing income and expense
Year ended Six months ended
31 March 31 March
2006 2005
£'000 £'000
Finance income
Bank interest 212 24
Interest on defined benefit pension schemes 1,169 450
Other interest 358 -
1,739 474
Finance expense
Bank loans and overdrafts (4,393) (968)
Interest on loan notes - (26)
Finance leases (13) -
Interest expense on defined benefit pension schemes (1,394) (528)
(5,800) (1,522)
Net financing costs (4,061) (1,048)
6 Taxation
Year ended Six months ended
31 March 31 March
2006 2005
£'000 £'000
Current tax:
Current 73 2,529
Over provision in respect of prior years (100) (125)
Total current tax (27) 2,404
Deferred tax:
Origination and reversal of temporary differences (13,097) (66)
Adjustments in respect of prior years 7 -
Total deferred tax (13,090) (66)
Total tax in income statement (13,117) 2,338
7 Property, plant and equipment
Land and Transmitters, Motor Total
buildings fixtures and vehicles
technical
equipment
£'000 £'000 £'000 £'000
Cost
At 1 April 2005 13,687 26,332 20 40,039
Acquisitions through business 9,322 30,332 164 39,818
combinations
Additions 1,258 4,857 64 6,179
Disposals (2,476) (5,889) (75) (8,440)
At 31 March 2006 21,791 55,632 173 77,596
Depreciation
At 1 April 2005 4,100 20,540 - 24,640
Acquisitions through business 3,678 17,811 139 21,628
combinations
Depreciation charge for the year 994 6,078 35 7,107
Disposals (1,248) (5,710) (72) (7,030)
At 31 March 2006 7,524 38,719 102 46,345
Net book value
At 1 April 2005 9,587 5,792 20 15,399
At 31 March 2006 14,267 16,913 71 31,251
8 Intangible fixed assets
Notes Licences,
Brands and
customer
Goodwill relationships Total
£'000 £'000 £'000
Cost
At 1 April 2005 210,182 - 210,182
Acquisitions through business 3 81,270 321,384 402,654
combinations
Disposals (21,578) - (21,578)
At 31 March 2006 269,874 321,384 591,258
Amortisation and impairment
At 1 April 2005 50,333 - 50,333
Amortisation charge for the year 3 - 42,843 42,843
Disposals (3,325) - (3,325)
Impairment 4 12,791 - 12,791
At 31 March 2006 59,799 42,843 102,642
Net book value
At 1 April 2005 159,849 - 159,849
At 31 March 2006 210,075 278,541 488,616
Impairment tests for cash-generating units containing goodwill
The following units have significant carrying amounts of goodwill:
31 March 31 March
2006 2005
£'000 £'000
Broadcast brands 195,525 159,849
Multiplexes 14,550 -
Total brands 210,075 159,849
8 Intangible fixed assets (continued)
The key assumptions and the approach to determining their value are as follows:
• The Group applies IAS36 'Impairment of Assets' under adopted IFRSs.
Under this the Group conducts a formal annual review to determine whether
the carrying value of the goodwill on the balance sheet can be justified.
The impairment review comprises a comparison of the carrying amount of the
goodwill with its recoverable amount (the higher of fair value less costs to
sell and value in use).
• The Group has calculated both fair value less costs to sell and value
in use for each cash generating unit (CGU) within broadcast brands.
Substantially all of the recoverable amount is based on fair value less costs to
sell. For multiplexes, value in use only has been used. The assumptions used to
calculate the values are consistent across all CGUs.
• Fair value less costs to sell has been determined by reference to the
revenue multiples of appropriate transactions in the industry in recent
years applied to the business's own internal estimates.
• The value in use calculations are based on cashflow projections over the
remaining useful life of the CGUs discounted at a post tax discount rate
(excluding inflation) of 7.75%. A post tax discount rate is used because
this is readily available in the financial markets. Calculating the
recoverable amount on a post tax basis using a post tax discount rate would
lead to substantially the same results as pre tax calculations. The
cashflows utilise the business's internal estimates for the next three years
with revenue and direct cost growth in subsequent years (the most sensitive
assumption) based on HM Treasury's neutral growth estimate for the UK of 2.5%.
The key assumptions in determining the value in use calculations are:
Assumptions How determined
Advertising revenue Macro-economic outlook, industry forecasts and internal estimates
Audience performance Long term trends and internal estimates
The results of the review undertaken at 31 March 2006 indicated that an
impairment charge of £12.8 million was necessary in respect of goodwill held in
relation to broadcast brands (see note 4). This charge is included within the
amortisation and impairment caption in the income statement and has been
classified as part of separately disclosed items.
9 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net
31 March 31 March 31 March 31 March 31 March 31 March
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Property, plant and - - (178) (74) (178) (74)
equipment
Intangible assets - - (83,563) - (83,563) -
Employee benefits 2,877 1,608 - - 2,877 1,608
Provisions 205 157 - - 205 157
Tax value of loss
carry-forwards
recognised 261 15 - - 261 15
Held over gains - - (870) - (870) -
Net tax assets/(liabilities)3,343 1,780 (84,611) (74) (81,268) 1,706
10 Trade and other receivables
31 March 31 March
2006 2005
£'000 £'000
Amounts falling due within one year:
Trade receivables 27,293 13,785
Amounts due from associated undertakings 1,162 -
Other receivables 4,796 1,463
Prepayments 5,662 7,544
38,913 22,792
Amounts falling due after more than one year:
Other receivables 848 716
11 Cash and cash equivalents
31 March 31 March
2006 2005
£'000 £'000
Cash and cash equivalents per balance sheet 6,079 285
Bank overdrafts - (13,356)
Cash and cash equivalents in the statement of cash flow 6,079 (13,071)
12 Interest bearing loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
31 March 31 March
2006 2005
£'000 £'000
Non-current liabilities:
Unsecured bank loans 82,000 -
Current liabilities:
Unsecured bank loans - 20,000
The Group has unsecured borrowings totalling £82 million as at 31 March 2006.
Interest on the loans is calculated on a floating rate based on LIBOR plus
performance criteria as defined in the credit facilities financial covenant
clause. The current facilities expire in 2010. Interest rates swaps, in
Sterling, have been entered into in order to achieve a suitable mix of fixed and
floating rate exposure.
13 Trade and other payables
31 March 31 March
2006 2005
£'000 £'000
Current:
Trade payables 6,676 10,608
Other payables and accrued expenses 32,790 13,607
39,466 24,215
Non current:
Other payables 1,215 -
14 Employee benefits
The Group operates two defined benefit pension schemes - The Midlands Radio
Group Pension Scheme (MRGPS) and the Capital Radio Plc Pension and Assurance
Scheme (CRPPAS). Both schemes were closed to new employees from 31 March 1995.
2006 2005
MRGPS CRPPAS Total MRGPS CRPPAS Total
£'000 £'000 £'000 £'000 £'000
Present value of funded
defined benefit obligations (14,595) (16,055) (30,650) (14,357) (6,514) (20,871)
Fair value of plan assets 8,892 13,273 22,165 11,438 4,074 15,512
Recognised liability for
defined benefit obligations (5,703) (2,782) (8,485) (2,919) (2,440) (5,359)
15 Provisions
Property provision
£'000
As at 1 April 2005 563
Provisions made during the year 4,637
Provisions used during the year (233)
As at 31 March 2006 4,967
A provision of £0.6 million was made during the year ended 31 March 2005 in
respect of the Group's obligation to repair, decorate and reinstate alterations
made, and future liabilities in respect of vacant properties. Expenditure of
£0.2 million was charged against the provision brought forward. A further
provision of £0.2 million was made during the year ended 31 March 2006 in
respect of these properties and a provision of £4.4 million was made in respect
of future liabilities following the transfer of operations from Swallow Place.
Based on the current state of the property market the Group cannot assume that
the properties will be sublet before the end of the lease, however if the
properties are sublet the Group's liability will decrease.
Of the total amount, £4.4 million is recognised within Separately Disclosed
Items.
16 Called-up share capital
Authorised Allotted, called-up
and fully paid
Number £'000 Number £'000
Ordinary shares of 2.5p each
At 1 April 2005 100,000,000 2,500 85,512,086 2,138
Increase in authorised share 100,000,000 2,500
capital
Shares issued - - 79,336,921 1,983
At 31 March 2006 200,000,000 5,000 164,849,007 4,121
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
The Authorised share capital of the Company was increased to £5,000,000 by
ordinary resolution of the Company passed at an Extraordinary General Meeting of
the Company on 15 April 2005, following the creation of an additional
100,000,000 ordinary shares of 2.5p each.
17 Reserves
Share Merger Fair Share Retained
premium reserve value premium earnings
and
reserves
£'000 £'000 £'000 £'000 £'000
As at 1 April 2005 79,043 37,095 - 116,138 17,974
Issue of ordinary shares - 263,399 - 263,399 -
Total recognised income and expense - - (499) (499) (37,286)
Movements due to share - - - - 1,674
based compensation
Equity dividends - - - - (14,922)
Foreign exchange - - - - 14
differences
Transfer between reserves - (30,162) - (30,162) 30,162
As at 31 March 2006 79,043 270,332 (499) 348,876 (2,384)
Attributable to Minority Total
GCap Media interest equity
shareholders
£'000 £'000 £'000
As at 1 April 2005 136,250 - 136,250
Minority interest acquired - 1,292 1,292
Net movement in period 214,363 439 214,802
As at 31 March 2006 350,613 1,731 352,344
Merger reserve
This reserve comprises premiums arising on acquisitions where the consideration
was greater than 90% in shares. The addition in the year relates to the
acquisition of GWR Group plc (see note 3).
Fair value reserve
The fair value reserve includes the cumulative net change in the fair value of
available-for-sale investments until the investment is derecognised.
Reserves
The Company holds own shares of 581,066 (2005: 606,370). These have been
deducted from retained earnings.
18 Dividends
The following dividends were paid by the Company during the periods specified
below:
Year ended Six months ended
31 March 31 March
2006 2005
£'000 £'000
Final 12.5p per share paid 28 January 2005 - 10,572
Second interim 6.0p per share paid 8 July 2005 9,839 -
Interim 3.1p per share (2005: nil) paid 27 January 2006 5,083 -
Total 14,922 10,572
Subject to approval at the Company's AGM, to be held on 24 July 2006, the
proposed final dividend of 6.15p per share is payable on 28 July 2006 to all
shareholders on the register at the close of business on 7 July 2006
(ex-dividend date: 5 July 2006). This has not been included within creditors in
accordance with adopted IFRSs.
19 Earnings per share
The calculation of basic earnings per share for the twelve months ended 31 March
2006 is based on the loss attributable to ordinary shareholders of £36.7 million
(six months ended 31 March 2005: profit £4.1 million) and a weighted average
number of ordinary shares outstanding during the twelve months ended 31 March
2006 of 157,035,064 (six months ended 31 March 2005: 84,599,768). The inclusion
of 47,182 share options (2005: 74,896) increases the weighted average number of
shares to 157,082,246 (2005: 84,674,664). For the purposes of disclosures
required by IAS 33 (Earnings per share) none of the potential ordinary shares
are regarded as being dilutive as their conversion would reduce the basic loss
per share. Consequently the diluted loss per share is the same as the basic loss
per share.
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