In the last recession, radio advertising suffered an alarming fall because it was not well established in clients' media spending plans. Radio advertising is now much more robust as a medium, but even so, a hard landing in the economy would prove wounding. Some local newspaper groups, for example, are already seeing a softening in recruitment advertising.
This said, Capital Radio looks one of the most solid companies in the sector. Yesterday's full year profits of pounds 37.7m, up 8 per cent, were below some expectations but the company looks to be shrugging-off the disappointments of losing out in the bidding for Virgin Radio, which cost it almost pounds 1m in adviser's fees.
Capital has expanded its radio business with the acquisition of the Red Dragon and Xfm stations in May. Radio advertising is strong with big clients like Procter & Gamble signed to long-term contracts and there is no hint yet of the slowdown having an impact. Advertising revenues grew by six per cent and margins edged up from 36.9-38.2 per cent.
Capital's brand remains strong and its stations are market leaders in its regions. This should stand the group in good stead in a weakening economy and the battle for advertising spending intensifies.
The restaurants business, which has suffered from management problems at the old My Kinda Town business, improved profits to pounds 2.3m. The portfolio has been rationalised to concentrate on Capital's core broadcasting regions and going forward the division will concentrate on just two concepts, the Radio Cafes and Havana Latin American restaurants.
On Panmure, Gordon's current year profit forecasts of pounds 41m the shares - unchanged at 562.5p yesterday - trade on a forward multiple of 15. If the economy drifts towards a soft landing that could look good value. But even on more pessimistic forecasts the shares look a decent hold.