Licence could put Chrysalis in red

A return to profits announced yesterday by Chrysalis Group may be shortlived if the music and media group succeeds in its attempt to win one of two licences being advertised this year.

Chrysalis yesterday confirmed it would apply for the North-west and North- east regional licences. However, a new radio franchise would require up to pounds 3m in start-up costs and would prevent Chrysalis fulfilling its promise to break even in 1998.

Chris Wright, chairman, said he was positive about the company's future. Group trading for the six months to the end of February yielded pre-tax profits of pounds 1.5m. However, while the profit appeared to be a big recovery compared with the pounds 2.9m of losses incurred in the corresponding period last year, the results were artificially inflated by gains of pounds 3.2m from disposals.

Mr Wright said the company would expand further into European TV production through its joint venture with the Dutch publisher VNU and a deal with a Scandinavian production company was nearing completion.

Chrysalis is taking a cautious approach to digital audio broadcasting (DAB). Richard Huntingford, chief executive of the radio division, said DAB "was not going to impact until 2007".

He said: "We're looking closely at DAB because it would provide an opportunity to roll Heart and Galaxy [Chrysalis' two radio stations] out on a national basis. But we're happy to see other groups go out and be money-spenders."