The investment column: Scottish Radio

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The Independent Online
Scottish Radio

SCOTTISH RADIO HOLDINGS already has dominant positions in the mature Scottish and Irish commercial radio markets, yet it is confident it can achieve sales growth of at least 10 per cent. Fellow broadcasters GWR and Capital Radio are making the same claims. Rather than fighting each other for market share, commercial radio operators are enjoying the surge in radio's increasing share of total display advertising.

This helped SRH yesterday reveal underlying first-half broadcasting revenues up 12 per cent to pounds 16.5m, but rather than lie back and enjoy this almost- guaranteed earnings growth SRH is looking to grow the broadcasting business by acquisition.

The group believes its primary activity is not broadcasting, but shifting ads. Since March it has diversified into outdoor poster advertising. It promises double-digit, and largely organic, growth here. Indeed, two of SRH's recently-acquired poster units delivered double-digit sales growth in the year to December. Expansion opportunities are limited to buying out small independents.

Overall, the group lifted sales 15 per cent to pounds 24.5m and pre-tax profits 35 per cent to pounds 7.2m. On forecasts of around pounds 15.2m pre-tax profits and earnings of 38.7p per share for the full-year, the shares are on a forward p/e of 20. Considering the solid growth prospects of the radio assets, that's cheap compared to its peers. Despite the 52.5p rise to 780p yesterday, the shares are rather illiquid to attract institutional interest and the discount to GWR could be reduced if investors take profits there. The discount remains, so the shares are good value.

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