The Investment Column: Capital shares power ahead

Shares in Capital Radio jumped 18p to 542.5p yesterday in busy trade that saw more than a million change hands after the company's annual meeting helped reverse a relentless slide over the past year. "Our radio revenues continue to grow ahead of the radio market as a whole, the radio industry took a record 4.6 per cent of the UK's display advertising market in the year to September 1996 and independent forecasters predict that this share will continue to grow," was its encouraging, if terse, message.

The statement was designed to help offset the adverse impact of the award of London's new FM radio licence to rival XFM and the deep scepticism of the City's investment community after Capital Radio took over the ailing restaurant chain My Kinda Town last year and handed its management the task of running the Capital Radio Cafe in London's Leicester Square.

If so, it was successful only to a limited extent. Brokers were not entirely surprised that Capital, Britain's biggest commercial radio outfit, with stations in Birmingham, Kent and the South Coast, failed to win the new FM licence, which would have greatly improved its ability to deliver quality music programmes.

Analysts, who had also expressed their surprise both at the direction of the diversification and the choice of company to pursue it with, remained sceptical yesterday and none seems willing to adjust forecasts of about pounds 37m pre-tax profit this year on the basis of the limited amount of hard information in yesterday's statement.

The shares are currently nearly 30 per cent below last year's high point, but the yield is barely 3 per cent and the shares are still trading on 18 times historic earnings and 16 times the prospective figure. Until it becomes clearer whether Capital Radio Cafe's popularity can be translated to other venues and whether the restaurant business is anything more than a distraction, the shares will remain dull.

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