Capital Radio benefits from royalties cut

ADVERTISING revenues stagnated at Capital Radio in the six months to 31 March, but the independent London broadcaster lifted underlying profits by sharply cutting royalty payments to music publishers, writes Patrick Hosking.

After stripping out the prior-year profit from the sale of the Duke of York's Theatre, Capital lifted pre-tax profits by 13 per cent to pounds 4.6m. The flat dividend of 1.75p was paid early to beat Budget tax changes.

The royalties bill was slashed from pounds 1.61m to pounds 1.07m. Prior-year provisions were written back in the wake of the ruling by the Copyright Tribunal in February on rates payable by commercial stations to Phonographic Performance Ltd. This meant a fall in the effective royalty rate.

The results were struck before the completion of the pounds 17.7m offer for Midlands Radio, which was financed by pounds 11.1m in cash and 3.36 million new Capital shares.

Ian Irvine, chairman, was cautious about the immediate prospects for advertising revenue, which was volatile. Total turnover slipped by 1 per cent to pounds 16.1m in the half-year, depressed by falling sales at Capital Group Studios, the television studio. The wages bill was cut from pounds 3.59m to pounds 3.38m as staff levels fell and the Monaco-based Riviera Radio was sold.

Associate companies, which include Metro Radio and Fox FM, lifted their contribution from pounds 122,000 to pounds 133,000.

Patrick Taylor, finance director, said Capital was considering bidding for the mid-Scotland radio franchise, which comes up for auction shortly.