Capital Radio warns advertising looks grim as profits dive 23%

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The Independent Online

The radio station operator Capital Radio warned yesterday that the advertising market looked grim for the foreseeable future as it reported a 23 per cent fall in first-half profits.

"The forward outlook is not encouraging and we don't see any pick-up in advertising revenues before the end of our financial year in September," David Mansfield, the chief executive, said.

Capital Radio said it expected revenues in April and May would be flat on the same months last year and said June was seeing "weak demand".

Mr Mansfield said: "The TV guys are saying June will be down 15 per cent to 20 per cent and they're saying July will be down around 10 per cent. I don't think the radio market will be as poor as that as they're suffering from the year-on-year effects of the World Cup which, for us, was less of an incremental gain."

The grim outlook came as Capital reported sales fell 5 per cent to £56.9m – in line with previous guidance. On an underlying basis, stripping out about £4.8m of exceptional items and goodwill, pre-tax profits slumped 15 per cent to £12m in the first half.

The figures come just a week after the Radio Joint Audience Research (Rajar) survey showed Capital's flagship 95.8FM station in London saw its market share drop to 8.1 per cent in January, February and March from 8.8 per cent a quarter before.

That, analysts fretted, could put pressure on pricing. Analysts at Altium Capital said they were factoring in a 10 per cent pricing cut for the company's London advertising. Mr Mansfield insisted, however, that was not the case. "We said to the market this morning that we're not making any material change in our expectations of revenue over the next few months," he said.

Nevertheless, analysts at Dresdner Kleinwort Wasserstein downgraded their profit forecasts for the current year for Capital Radio by £2.1m to £22.8m and by £2.8m to £25m for the year after.