Capital gives City listeners something to cheer at long last

Capital Radio shares soared 9 per cent yesterday after the company revealed an apparent recovery in advertising revenues.

Although the radio group reported an 18 per cent drop in pre-tax profits to £22.8m for the year to 30 September, and its recent audience figures have been poor, the market focused on the ad sales news. Capital said revenues were up 8 per cent in October, 4 per cent in November and indications for December were that it would also be in positive territory. That would mean six months of growth, starting in July.

David Mansfield, Capital's chief executive, said: "We've now had two successive quarters of growth. We're encouraged by that. Things are better than they were."

Capital Radio shares closed up 39p at 471p. The company did not make a forecast for 2004 but pointed to a prediction from Zenith, the media buying group, which sees growth of 5 per cent next year for the radio sector.

However, the company and analysts pointed out that Capital's figure for November in particular was up against a very weak comparative last year - which saw sales fall 14 per cent.

In the recent official listening figures for the third quarter, the company's flagship station, London's 95.8FM, showed a disastrous lurch down in performance, losing its market share lead in London for the first time, to rival Heart, which recorded more audience hours. Its lead in the absolute number of listeners, for which it is able to charge a premium advertising rate, was maintained, but is now just 3 per cent ahead of Heart, from a 12 per cent gap just three years ago.

Simon Mays-Smith, an analyst at CSFB, said: "The big issue is how much [ad] yields will come under pressure. If 95.8 loses its lead altogether, it becomes much more expensive to regain it."

Mr Mansfield said: "We've acknowledged the issues [with 95.8] and dealt with it."

It is thought that Capital Radio will complete its acquisition of London's Choice FM earlier than thought, in January, paying £17m.

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