Profits collapse at Virgin Radio

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The Independent Online

SMG's Virgin Radio business experienced a collapse in profits last year, piling pressure on the company which is already resisting a buy-out attempt on its radio arm.

SMG's Virgin Radio business experienced a collapse in profits last year, piling pressure on the company which is already resisting a buy-out attempt on its radio arm.

However, SMG insisted that the £100m approach for Virgin Radio, from the private equity group 3i, which is working with the media entrepreneur Lord Alli, "significantly" undervalued the asset. SMG also pointed to an improvement in trading at Virgin this year, with advertising sales up 8 per cent in the first quarter.

"All of the analysts' valuations of Virgin Radio significantly exceed the Waheed Alli approach and ... unless he has something else to say, the matter is closed," said SMG's chief executive, Andrew Flanagan.

The media group said that its other businesses - cinema advertising, television and billboards, had performed well last year. Underlying group pre-tax profit was up 9 per cent at £17.5m.

At Virgin Radio profits fell 41 per cent to £4.3m. Turnover dropped to £20.1m, from £23.2m in 2003.

George Watt, SMG's finance director, said that Virgin Radio's performance had been hit by a "blip" in sales at the end of last year, as advertisers suddenly pulled back spending across the radio sector. The station was also affected by a steep fall in listener numbers.

"The key to Virgin is its huge potential ... We believe we can unlock that potential for our shareholders," Mr Watt said.

A spokesman for Lord Alli described Virgin's performance as "horrendous" and added that it was the only listed radio business which lost sales across 2004 as a whole.

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