28 November 2006
GCap Media plc
Interim Results for the six months to 30 September 2006
Underlying Group Results
* Revenue of £102.2m (2005: £111.6m)
* Profit before tax of £8.4m (2005: £12.4m)
* Net debt of £77.3m (2005: £68.5m) before £60m cash proceeds from disposals
in October 2006
* Basic earnings per share of 2.5p (2005: 4.5p)
Statutory Group Results
* Revenue of £102.2m (2005: £102.1m)
* Loss before tax of £7.8m (2005: £10.1m)
* Basic loss per share of 5.7p (2005: 3.5p)
* Interim dividend of 3.1p per share (2005: 3.1p per share).
Operational Highlights
* The One Network (excluding Capital): Reach, hours and share all up in RAJAR
W3 and W2:06
* Capital Radio: Results in line with expectations and recovery plan on track
with launch of marketing activity
* Classic FM: Successfully extending its brand across other platforms
* Planet Rock: Fully-owned following acquisition of remaining 75% stake
* BT Movio: Mobile TV and digital services, using Digital One spectrum, now
launched
Ralph Bernard, Chief Executive of GCap Media, commented:
"During the first half, we have achieved a series of key operational goals. We
have increased reach, share and hours across the One Network and entered the
next phase of our recovery plan for Capital Radio with the launch of a new
marketing campaign. The sale of the two Century stations has strengthened our
balance sheet and given us greater financial flexibility to develop our
portfolio of national brands, with two new stations set to go on air within the
next six months.
"Despite a very difficult advertising market, we are confident that we are
taking the right steps to align our business to a rapidly changing
environment."
Enquiries:
GCap Media plc 020 7054 8128
Ralph Bernard, Chief Executive
Wendy Pallot, Finance Director
Finsbury Group 020 7251 3801
Guy Lamming / 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 City Presentation Centre,
4 Chiswell Street, Finsbury Square, EC2.
Slides will be available following the presentation at http://www.gcapmedia.com
Underlying results are presented to provide a better indication of overall
financial performance. They exclude the amortisation and impairment of
intangible assets and separately disclosed items. The underlying profit before
tax of £8.4m for the six months to 30 September 2006 represents the results of
the Group before deducting the amortisation and impairment charge of £16.2m.
Applying this deduction to the underlying profit before tax produces the
statutory loss before tax for the period of £7.8m. The comparative figures
include the results of GWR and IRN for the whole period, rather than just from
the date of the merger, 9 May 2005.
GROUP OVERVIEW
During the first half, GCap Media has continued to deliver on the strategy
outlined last November. Our investment in our core stations alongside
programming changes has led to audience growth across the One Network in both
the last two RAJARs. Our Capital Radio recovery plan remains on track.
We have developed further our existing national brands Xfm and Core (targeting
Radio 1 listeners) and Classic FM and Planet Rock (targeting Radio 2 listeners)
to attract new audiences and to challenge the BBC, and we are extending these
brands across other platforms to generate additional revenue. We have taken
full control of Planet Rock, our national digital classic rock station, by
acquiring the remaining 75% of the station for £4.8 million from Arqiva. Two
new national brands are also in the pipeline. In December we will launch a new
digital jazz station, "theJazz", and this will be followed by the launch of a
contemporary and classic hits station within the next six months following the
merger of Capital Gold/Life.
Finally, we have taken decisive action to strengthen our financial position
through the sale of the two Century stations to GMG on 18 October 2006, which
has given us greater flexibility to invest in the business, and particularly to
develop our portfolio of national brands.
RAJAR Wave 3: 06
Following the latest RAJAR results, GCap Media remains the largest operator in
the commercial radio sector, with reach, hours and share up across the Group,
and London hours up by 2%. We attract 15.5 million listeners (This figure excludes
the two Century stations that GCap sold to GMG in October 2006. However, as we
have retained the sales contracts for both these stations, the Group continues
to trade off 16.4 million listeners (RAJAR W3:06) which includes the listener
figures for both stations)and command 14.5% market share. We also saw
encouraging growth at our digital stations, with digital hours at a record high
of 4.8 million. Furthermore, digital-only listening for the Group now accounts
for 1.1million listeners, up from 930,000 on a year-on-year (yoy) basis, with
hours up from 4.5 to 6.7 million yoy.
FINANCIAL REVIEW
Unless otherwise stated, figures below refer to underlying results which are
provided to present a better indication of overall financial performance. They
exclude the amortisation and impairment of other intangible assets and
Separately Disclosed Items. Prior year figures include the results of GWR and
IRN for the whole period, rather than just from the date of the merger, 9 May
2005.
Turnover
Excluding Capital Radio where, as anticipated, we have seen the impact of our
inventory reduction, like for like revenues for the six months ended 30
September 2006 declined 4% yoy. Total revenues for the six-month period were
£102.2 million, down 8.4% yoy. The months of June, and in particular July, saw
exceptional decreases mainly due to lower advertising spend around the World
Cup. For the rest of the period, monthly yoy performances improved but still
reflect very difficult advertising conditions and audience declines. Total
Group listening hours being sold during the half year were down 5.5% like for
like yoy.
On a statutory basis total revenues of £102.2 million were flat yoy. Although
broadcast brands generate almost 90% of total revenues, multiplex revenues make
up a growing proportion and have increased 48% yoy to £7.4 million.
Underlying profit before tax was £8.4 million (2005: £12.4 million). On a
statutory basis the loss before tax was £7.8 million (2005: loss £10.1 million)
and basic loss per share was 5.7p (2005: loss per share 3.5p).
During the half, the Group invested a net £3.6 million in digital operations
which principally comprised transmission costs. Digital investment will be one
of the areas that management will be looking at over the next few months as it
considers the strategic options for the portfolio. The Group remains on track
to deliver the £27 million merger synergy savings promised in May 2006.
In October the Group sold 105.4 Century FM (Manchester) and 100-102 Century FM
(Newcastle) stations for £60 million. The proceeds are being used to reduce
bank debt and to improve the financial position of the pension fund. This
disposal has given us greater flexibility to focus on growth opportunities for
our business and to develop our portfolio of national brands. We were able to
secure the retention of the national and regional sales contracts for both
stations, maintaining our attractive advertising proposition. (Note: Whilst the Century
disposal did not occur during the six month period ended 30 September, we have
transferred the assets being sold to Current Assets at their
fair value, comprising sales proceeds plus working capital adjustments. This
has resulted in a goodwill impairment charge of £7.1m reported in these
results.) Also in October, we purchased the remaining 75% of Planet Rock for £4.8m.
In line with our strategy of improving non-traditional revenues, the first
mobile phone with BT Movio's TV and digital radio services was launched in
September, broadcasting with Digital One's national spectrum. This will deliver
profits for the Group, from the launch, through our revenue share agreement
with BT. We expect it to have a positive impact on the development of digital
radio. The Group continues to focus on the development of non-traditional
revenues.
CURRENT TRADING
As forecast in our September trading statement, September and October revenues
for the Group excluding Capital Radio were in line with the market. Group
revenues for October and November 2006 are forecast to be down 8% yoy on a like
for like basis, excluding Capital, and down 13% in total, excluding the disposed
Century stations. The current advertising market remains very difficult and
visibility poor. We anticipate tough trading conditions will persist over the
next quarter.
DIVIDEND
As the Group reviews its strategic options over the next few months, the Board
will be considering a more appropriate level of future dividend cover to allow
for suitable investment in the business. Meanwhile the Board will be paying an
interim dividend of 3.1 pence per share (2005: 3.1 pence per share) in January
2007.
BOARD
On 11 August, GCap Media plc announced that Dame Patricia Hodgson, DBE had
stepped down from the Board of Directors due to other commitments. The current
Board now comprises three Executive and six non-Executive Directors.
OPERATIONAL REVIEW
Positioning GCap for Growth
In August we appointed Will Harding as Group Strategy and Development Director
to leverage our portfolio of local and national brands across new platforms.
Non-traditional advertising revenues currently account for 16% of our total
revenues and we aim to substantially increase this proportion by using the
strong relationships we have with our 15.5 million weekly listeners in new
ways.
Our strong national brands such as Classic FM, Planet Rock, and Xfm are already
broadcast across a variety of platforms: analogue and DAB digital radio, cable/
satellite TV and online.
Because these brands serve clearly defined audiences with common interests and
distinct demographic niches, they are particularly suitable for extension into
new areas such as on-air promotions, events, sampling, website activity and
podcasts. These are deepening the relationships with our listeners and
generating new revenue.
Our websites play a crucial part in maintaining the loyalty of our listeners,
one million of whom listen online. By the end of the financial year, we aim to
have all Group websites upgraded and all One Network sites re-launched. We have
also developed our own streaming platform which provides all our station
websites with industry-leading, online, output quality. Over time, more
user-generated content such as blogs from DJs and listeners will be added to
the sites, along with new online radio players with enhanced features and
content.
We have also made significant progress towards our goal of developing an active
database of two million listeners by 2008. This database will enable us to
drive revenue directly from our listeners, by selling and promoting targeted
items such as CDs and tickets and help us design innovative multimedia
advertising packages for our customers. A total of 860,000 people have already
signed up through our station websites and we hope to exceed our target of
signing 900,000 listeners by the end of this financial year.
One Network - Investing in our Core Stations
We have continued to strengthen our core local stations, which are important
profit drivers of the business. Our key priorities have been to strengthen
management at the station level and to make news, traffic, travel and music
scheduling more locally focused. Improvements to the One Network's programming
are delivering results, with audience figures improving into the last two
consecutive RAJARs.
Including Capital, The One Network remains the UK's biggest commercial network
advertising opportunity with 7.4 million adult listeners each week and 24%
share of all commercial listening. Highlights for the network in the RAJAR Wave
3:06 results include 96 Trent FM, which overtook both Radio 1 and Radio 2 in
share and hours and is the leading radio station in its TSA (Total Survey Area -
the area within which a station's audience is measured) and Invicta FM,
which achieved its best market share in more than 18 months, increasing quarter
on quarter from 12.4% to 13.6%.
Capital Radio - Recovery on track
Revenues for the station are down by £6.3 million yoy. This drop is as a result
of our planned changes to the inventory policy implemented in December of last
year, anticipated reduced reach ahead of any marketing activity and ongoing
difficulties in the advertising market.
Nonetheless our recovery plans remain on track and enhancing the station's
performance a priority. We have implemented a series of programming
improvements since Scott Muller joined the station as Programme Director in
late August and listeners now benefit from more London-specific content, more
current chart hits in the playlist and a tighter structure for each programme.
Following these programming changes, we decided in September that the time was
right to begin marketing Capital Radio for the first time in eighteen months.
This activity was aimed at shifting brand perceptions of the station and
positioning it as contemporary and relevant to everyday life in London. Built
around a simple on-air competition, the innovative `Who's Doing Who' campaign
featured lipstick on mirrors and 500,000 `hand-written' notes distributed
around London.
`Who's Doing Who' was designed to create a sense of intrigue and to give
listeners a reason to come back and try the station. It is the first phase of
an ongoing programme of activity which will involve traditional media
supplemented by innovative marketing initiatives. We expect the impact of this
activity to be evident in listener figures over the course of 2007.
Classic FM
Classic FM is the UK's largest commercial radio station and GCap Media's
leading station in terms of revenue generation. With an existing base of nearly
6 million listeners and a presence on the national digital multiplex, Digital
One, it provides the blueprint of our strategy to develop our national
portfolio.
We have introduced a number of changes at the station including a new autumn
schedule, with an all-new Easier Breakfast and brand new one-hour show design
to showcase contemporary classic composers. In September we also successfully
relaunched the station's website. This now has one of the largest online
listener clubs in the UK with over 400,000 members and an average sign up rate
of around 1,200 new members a week. Since October, visitors to the site have
also been able to subscribe to a paid-for music download service. Operated in
conjunction with e-Music, the service gives listeners access to thousands of
classical tracks and has already generated sizeable revenues since its launch.
We anticipate that it will deliver £70,000 of incremental revenue by the end of
the financial year.
The station has continued to successfully leverage its brands across multiple
platforms. Non-airtime revenues, including items such as websites, CDs and box
office income, account for 17% of Classic FM total revenue. Classic FM's CD
`Most Wanted' which launched in October entered at the top of the combined
classical chart and this month also saw the publication of The Classic FM
Friendly Guide to Music, a jargon-free overview of classical music.
Classic has also had positive regulatory results in the first half of this
year. In July, Ofcom announced reduced financial terms from £1.1 million to £50,000
for the annual licence fee, a reduction in the PQR from 14% to 6%, and a
four-year extension to the licence period. The GCap Media team worked hard on
making the case for these revised terms and we believe that Ofcom's decision
recognised the important role that Classic FM plays in offering wider listener
choice and increasing digital listening. These financial terms are effective
from the start of the extension period (1 October 2007) for the four year
period.
Xfm: Now a national network
By March of this year we had successfully rebranded Beat 106 in Glasgow to Xfm
Scotland and launched Xfm in Manchester, creating a new national network of
digital and analogue stations that give us a stronger national advertising
proposition appealing to a commercially attractive audience of 15-30 year old
males. In the last RAJAR results (Wave 3:06), the Xfm network reach rose 5% to
1.1 million listeners.
We have continued to develop our online offering for the station and recently
launched `X Plus' a members-only area of the site with an exclusive newsletter
and first choice on event tickets. The website is closely linked with key on
air features such as Rock School, a competition for would-be rock stars, where
bands can enter online by uploading their tracks and listeners can log in and
vote for their favourite band. These new facilities are already generating
additional revenue for the brand. Xbox recently booked Xfm's biggest online
sponsorship which included a `take-over' of the whole of the site and
sponsorship of the member's only newsletter, Rock School and the online
streaming facilities.
This month also saw the launch of Xfm's compilation album `This is Music' with
a playlist of quintessential Xfm artists such as Arctic Monkeys and The
Killers.
Planet Rock - opportunities for growth
On 16 October, the Group purchased the remaining 75% of the station that it did
not already own, for £4.8m from Arqiva, in accordance with its 1998 call
option. We believe that Planet Rock has very strong prospects, as demonstrated
by its performance in RAJAR Wave 3:06, and gaining full control of the station
will enable us to exploit its potential more fully.
Planet Rock's formula of classic rock presented by music experts is attracting
a loyal army of new listeners. Reach has grown by 24% to 422,000 yoy, while
total hours have increased by 74% to over 3 million yoy. Market share has
trebled in the last year with minimal marketing activity.
The strength of the Planet Rock brand means we are already able to attract top
talent to the station including legend Alice Cooper, who presents the Breakfast
Show, and Tony Iommi (Black Sabbath's bass guitarist) who joined in September
for a second series of Black Sunday.
``theJazz''
In September we announced the UK's first national jazz station, taking the
number of stations in our national digital portfolio to five and filling the
gap in the market for a jazz-only station. ``theJazz'' is to launch at 9.00am
on Christmas Day and will operate as a sister service to Classic FM. Targeting
the similar ABC1 audience, both stations will create numerous cross-promotion
and endorsement opportunities. Run by the same successful team as Classic FM,
the station will take advantage of the many strategic partnerships already in
place with a website, downloads and a listener club available from the offset
and concerts, CDs, books and magazines to follow within the first year.
Innovation Underpinning our Growth
Across the industry as a whole, there is increasing customer demand for more
sophisticated marketing that supplements spot advertising (radio's equivalent
of display). To meet this demand, GCap Media offers our customers the
opportunity to align their products with strong brands such as Classic FM,
Planet Rock, and Xfm. We also now offer an extended variety of creative
opportunities for our clients to engage with their prospective consumers such
as on-air promotions, events, sampling, website activity and podcasts. For
examples of the types of solutions we can offer customers, click here:
http://commercial.gcapmedia.com/innovation
To reflect this integrated operational approach to the business, on 3 October,
GCap Media's commercial team launched Spice, a division that offers clients
integrated and innovative solutions across our portfolio of brands and
platforms. The division brings together three teams previously variously
responsible for all marketing activities other than spot advertising.
