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Strategic visions at Chrysalis

The Investment column
Chris Wright's Chrysalis is at a crucial point in its transformation from a music and television production company to an integrated media group. Given the lack of underlying operating profits in the past year, and the likelihood of at least one more year in the red, it is virtually impossible to predict how the stock will perform. The real questions are strategic and managerial.

Is the company right to move away from television facilities and aggressively into radio and film? Can it sustain the start-up costs of two new radio stations let alone finance bids for up to four new regional licences in the next year? And can the film business, where earnings can take years to generate, add value to Chrysalis's business mix?

The view in the City remains somewhat mixed, and certainly the results for the year to August gave conflicting signals. The television business is profitable, with a mix of independent production companies supplying programming to a range of UK broadcasters. Equally, the export market continues to be strong, representing pounds 28m of the company's pounds 87.7m turnover.

Music publishing is also performing well, but profits have been dragged down by the costs of developing Echo Records, the company's new label.

Overall, pre-tax profits topped pounds 1m in the year to August, helped by pounds 11.5m in extraordinary gains.

Radio has been a source of big costs: pounds 1.5m spent on the launch of the London Heart franchise alone. But radio is arguably the best strategic new road Chrysalis has ever taken. Radio's share of advertising has doubled to about 4 per cent in the past year, and the market is expected to grow by 15 per cent this year.

There are more doubts on the feature film side, but Chrysalis is in any event taking a very cautious approach. It is clearly intent on retaining its strong TV production franchise, and continuing to develop its library of music and televisual rights, even if it might take a bit of a flyer on film.

While future profits are hard to gauge, the current share price of 170p, down 2p on yesterday's results, looks quite attractive for those who believe in the strategic vision.