GCAP plans to bulk up online presence

GCap has unveiled an ambitious investment plan to bulk up its online presence and breathe life into its Capital Radio station in London to prepare the company for growth after a tough 2007.

Shares in GCap fell more than 14 per cent to 222.5p yesterday after the company revealed that its latest recovery plan would cost £5.6m and would impact profit growth over the next two years.

The company said it would fund the investment by cutting a further £5.5m out of its cost base and reported a 9 per cent fall in revenue and a 35 per cent decline in pre-tax profit in the year to March. It cut its dividend to 4.4p from 7.8p the year before.

Ralph Bernard, the chief executive of GCap, said that the company is positioning itself for an anticipated boom in digital radio listening. "In three years' time, 50 per cent of households in the UK will have a digital radio. That will be a big moment for us," he said.

GCap has decided to cut its investment in digital stations that did not resonate with digital and online radio listeners and will instead focus its investment on strengthening its Classic FM, Xfm, Planet Rock and Jazz stations, while also launching a new classic hits network.

In addition, the company will launch a major advertising campaign to promote its Capital Radio station.

Fru Hazlitt, who was previously head of Virgin Radio, has been appointed as the head of GCap London and will be in charge of reviving Capital's fortunes in London. Yet after spending two years as head of Yahoo! Europe, she will also drive GCap's ambition to capitalise on its 1 million internet radio listeners.

She said GCap can offer advertisers the chance to target both radio and internet users with one marketing campaign, while the company can use the revamped sites to sell CDs and concert tickets.

"We really see an opportunity here," she said. Ms Hazlitt said that despite some dire predictions over the future of the industry, radio listening has risen over the past decade, driven predominantly by younger listeners.

However, many analysts were frustrated that despite signs of an improvement in advertising revenue over the past few months, GCap remains a "jam tomorrow" story.

Lorna Tilbian, an analyst at Numis Securities, said: "The group should cut its coat to match its cloth and we cannot see the justification for such significant investment in digital-only jazz stations, websites and concert ticket/CD sales when the core business is under considerable pressure."