Media transformation costs Chrysalis dear

BY JOHN SHEPHERD

Chrysalis Group's move from the leisure to the media sector is proving more costly than planned.

The shares dipped 13p to 248p yesterday in reaction to a half-year loss of pounds 2.5m before tax, and a warning from Chris Wright, chairman, that the full-year operating deficit would be "significantly higher than originally anticipated".

Leading investors, which include Mercury Asset Management and Postel Investment Management, were briefed individually yesterday by Mr Wright on the company's position, which, he maintained, was not a cause for alarm.

"Despite the losses, the board has every reason to believe it is on course to deliver long-term shareholder value," he said.

The loss for the six months to 28 February compared with pounds 32,000 in the same period last year, and a pounds 3.39m deficit for the whole of 1993/94. Half-year turnover climbed from pounds 33.7m to pounds 47.1m.

The strategy is to turn Chrysalis into a predominantly copyright-based group, generating income from music publishing, running radio stations and making television programmes.

Start-up costs are high, however, with a songwriter commanding a pounds 100,000 advance before putting pen to paper.

Chrysalis has enlisted 100 active writers and has compiled a library of 25,000 titles, including the North American rights to "My Way", the song made famous by Frank Sinatra.

Chrysalis has had a net outlay of pounds 2.5m this year on advances to writers.

The life of a copyright varies from country to country, but generally remains valid until 50 years after the death of the author.

"If I didn't sign any more new writers then the music publishing company could have made a hefty profit this year. I think shareholders are aware of the underlying asset value of the company and understand the strategy," Mr Wright said.

So far, the policy has seen Chrysalis run up pounds 700,000 of operating losses at Heart 100.7, the FM radio station in the Midlands.

Additionally, Echo, the record company set up with backing from Japanese investors, has taken longer than expected to get its product into the marketplace due to delays in signing artists.

"I can't see how Echo can be profitable next year," said Mr Wright, who added that he "can't say whether the film side will be profitable either".

Chrysalis wants to acquire one of the four new local radio licences that are coming up for tender.

The company's eyes are focused on Yorkshire, but it will have to sell its stake in Metro Radio, which is based in the county, to clear ownership regulations.