Final Results
November 14 2002 - 2:02AM
UK Regulatory
RNS Number:7803D
Capital Radio PLC
14 November 2002
14 November 2002
CAPITAL RADIO PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2002
Capital Radio plc, the UK's leading commercial radio group, today announces
preliminary results for the year to 30 September 2002.
Financial Highlights
* Group revenue from continuing operations of #120.0m (-2% like for
like)
* Group underlying profit of #27.8m (-8%)
* Strong cash generation: 109% of underlying operating profit
converted into cash
* Strong balance sheet: net debt reduced by 12% to #29m, interest
cover of 19x (based on operating profit from continuing operations)
* Underlying EPS of 23.5p (-10%)
* Total dividend maintained at 18.5p
Operating Highlights
* Improving performance from development stations: Century profitable,
Beat breakeven, reduced losses from Xfm
* Business reorganisation completed, brand focus will drive future growth
* Operational savings of #2m to be invested in additional marketing spend
for 2003
* Strategic partnerships with Capital Disney and Nokia
David Mansfield, Chief Executive, commenting on the year's performance, said:
"Despite a tough advertising market, Capital has improved its performance
relative to the sector. In June we actively decided to reshape our business and
continue to invest for the long term. Our renewed focus and balance sheet
strength leaves us well placed to benefit from the consolidation opportunities
promised by the new Communications Bill. We have made important progress across
the Group and finished the year in a strengthened position for long term
growth."
Enquiries:
Capital Radio plc
David Mansfield, Chief Executive 020-7766-6240
Peter Harris, Finance Director 020-7766-6257
Finsbury Group
Rupert Younger 020-7251-3801
James Leviton
This document is available via the Internet at http://www.capitalradiogroup.com.
BUSINESS OVERVIEW
Introduction
Advertising market conditions were difficult for a second year but we achieved
an improved revenue performance relative to the industry helped by innovative
marketing to our national advertisers. Profitability remained robust due to
increased focus on cost control and cash generation was strong.
We have focused on investing in our business ahead of regulatory change. Our
previous structure of individually managed stations has been transformed into
four highly focused brands: Capital FM Network, Century Network, Capital Gold
Network, and Xfm Network. This framework is more efficient and will assimilate
acquisitions more easily in the future.
Programming is being improved by new format launches, new DJ hires and stronger
production teams. Over the next twelve months we will be increasing marketing
spend selectively by #2m, in order to publicise these changes. We are confident
that these moves will help unlock a new level of performance from the Group over
the longer term.
Current Trading and Prospects
We have had a testing start to our new financial year, with revenue across
October and November likely to be down by around 8% year on year. Trading is
still very short term and therefore we remain cautious on the outlook for
advertising for the financial year. We will continue to run the business on the
basis that there is no material improvement in trading conditions.
Nevertheless, we are confident that sustained growth will return to the market
over time. There are clear factors favouring the long-term growth of Radio as
an advertising medium and, as the leading commercial radio group in the UK,
Capital is well placed to benefit. We have market leading brands and an
experienced management team with a strategy focused on radio. Our national
position is significant and our core 15-44 year old audience is very attractive
to advertisers.
In addition, we have the financial capacity to continue investing in our
business and the changes contemplated by the Communications Bill will give rise
to even greater opportunities.
Financial Results
Total revenue of #120.0m was down 2% on the previous year on a like for like
basis, but showed an improving trend versus the industry; we are now moving in
line with the sector which was also down 2% for the year to September.
Underlying Group profit before tax was #27.8m, a decrease of 8%. The tax charge
on our underlying profitability for the year was 30.4% (2001: 28.5%) and our
underlying earnings per share was 23.5p, 10% less than last year.
Revenue from our established stations was #101m, down 5%, which resulted in the
operating profit from our established stations being #33.9m, compared to #39.6m
in 2001. During the year, we continued to manage the cost base rigorously which
enabled us to limit the decline in the operating margin for our established
stations. Operating margin in 2002 was 34% compared to 37% in 2001.
Our development stations (Xfm, the Century Group and Beat) achieved strong like
for like revenue growth of 19% increasing to #18.2m, and benefiting from being
represented by our Group sales operation. Century moved into profit, Beat broke
even and Xfm reduced losses. Total operating losses for these stations were
#0.5m compared to #3.0m in the previous financial year.
We incurred #3.6m of exceptional costs in relation to the reorganising of the
business along brand lines. These were largely cash costs related to
redundancies and consultant fees. The re-organisation will directly generate
ongoing savings of approximately #2m per annum, which we have chosen to reinvest
behind the brands.
We invested #3.3m (2001: #3.0m) in our digital radio operations - predominantly
transmission costs - as more of our digital licences started broadcasting. Our
interactive business incurred an operating loss of #2.1m (2001: #3.6m). Both
were in line with our previously stated expectations.
During the new financial year we have planned the
following investment in these areas:
2002 2003
#'m #'m
Digital radio 3.3 4.0
Interactive 2.1 1.0
5.4 5.0
Our associated companies, principally Wildstar and IRN, contributed #1.1m (2001:
#2.6m) to the Group's profitability. Wildstar's core artist is Craig David who
sold over six million of his first album worldwide. This benefited the
associated companies' profitability in 2001. His second album was released
globally on 11th November 2002, and we hope that it will repeat this success.
We have continued to be highly cash generative with the conversion of more than
100% of our operating profit into cash. The net cash inflow from operating
activities was #30.1m. After dividend payments of #15.2m, tax payments of #6.1m
and net cash outflows of #4.8m relating to investment activity, our net debt was
reduced by #3.9m to #29.0m. With interest cover on our continuing radio
business of 19x, we are well placed financially to take advantage of any
appropriate investment opportunities.
Dividend
Our healthy cashflow position allows us to maintain our dividend level despite
tough operating conditions. The Directors are, therefore, recommending a final
dividend of 12.5p per share to be paid on 28 January 2003 to shareholders on the
register on 29 November 2002 (ex dividend date 27 November 2002). Including the
interim dividend of 6.0p, our total dividend for 2002 is unchanged year on year
at 18.5p per share.
Operating Review
Analogue Radio - Audiences
Capital Radio Group
In the latest RAJAR audience data for the three months to September 2002,
Capital Radio's 20 analogue stations achieved a combined reach of 28% and
audiences of 7.9 million adults aged 15 and over, who listened for a total of
73.4 million hours a week.
Capital FM Network
Our stations outside London: BRMB, Red Dragon, Invicta and Southern all
performed well. Results from 95.8 Capital FM have been under pressure as
competition in London has increased. Over the year, we have made improvements
to programming by introducing new formats and production teams, and we are
continuing to innovate. Our Breakfast Show reaches 48% more adults than our next
commercial competitor. We will be re-launching a new look show featuring Chris
Tarrant in January 2003.
Century FM Network
The network continues to hold its strong position in a competitive marketplace,
with a reach of 16% across all four stations. Market share was stable at 6.2%
and listeners remain loyal, tuning in for an average of eight hours per week.
106 Century FM has increased its reach in the East Midlands and 100-102 Century
FM has grown its share in the North East.
Capital Gold Network
Despite increasing competition in each of its markets, the Gold network audience
has been stable at around 1.6m listeners. The AM licence acquired in Manchester
and re-branded as Capital Gold has increased audience almost five fold to nearly
100,000 in just a year.
Xfm Network
Xfm is enjoying record audience figures of over 500,000 listeners. Christian
O'Connell's Breakfast Show is performing well and now has approximately 300,000
listeners. The station line up has been strengthened further with Zoe Ball
joining as host of "Drivetime" Monday to Thursday.
Complementary position in London
The Group's stations outside of London are growing in importance and now account
for 57% of our adult listeners and approximately 50% of revenues, although
London still remains our single most important market. We offer advertisers a
strong complementary package in the London area: 95.8 Capital FM caters for
15-44s, Capital Gold reaches 35-54s, Xfm targets male 15-34s and we have
recently started selling airtime for Choice FM, our associate, which
particularly appeals to female 15-34s.
Investing in our business
We are reinvesting operational savings back into the business. Over the last
year, we have improved our presenter line up and worked to position the brands
more clearly to listeners and advertisers. A budget of up to #2 million has
been set aside to promote these changes with selective increases in marketing
spend over the coming year. We will continue to build value around our four
brands and approach the recovery from a position of strength.
Analogue Radio - Revenue
2002 was characterised by falling advertising budgets, an increasingly
fragmented media market place and one off events such as the Jubilee and the
World Cup, which distorted normal spending patterns. In addition, advertisers
faced pressure on profitability and postponed new product launches, preferring
to concentrate on promoting existing core brands.
Within this context, the Capital Group performed well. Our total radio revenues
have shown an improving trend versus the radio industry as a whole and are
moving in line with the sector. During the last year, Capital's sales team has
been working hard to combat the downturn in advertising revenues by creating new
ideas to market to our customers. We have focused on higher yielding national
advertisers and increased national advertising brand count at our development
stations: Beat 106, Xfm, and the three Century stations.
Capital Radio Revenue Industry Radio Revenue
Oct 2001 - Mar 2002 -7% -6%
Apr 2002 - Sept 2002 +4% +3%
Oct 2001- Sept 2002 -2% -2%
Source: Capital Radio/ RAB
As a result of more relaxed regulation, our Sponsorship and Promotion revenues
have grown at a very encouraging rate, and the number of network sponsorship
deals has increased. Examples include: "Motorola Superstar DJs", "Bacardi
Entertainment Capital", Nationwide for all Sport across the Group, O2 for
Traffic and Travel, and Rimmel for "Party in the Park".
We have seen the following performance in revenues from our top 15 advertising
categories:
Category YOY %
growth of total
Retail -7.5% 16.5%
Motors 9.9% 14.5%
Entertainment and the Media -1.8% 12.1%
Business & Industrial -14.8% 11.2%
Gov/ Social/ Political Organisation 7.3% 8.2%
Travel & Transport 12.2% 7.9%
Entertainment -9.0% 6.1%
Food 18.7% 4.7%
Household Equipment 6.2% 4.2%
Finance -30.2% 3.3%
Pharmaceutical -13.6% 2.6%
Computers -50.0% 2.4%
Drink -45.0% 1.8%
Cosmetics & Toiletries -14.6% 1.1%
Household Supplies -4.2% 1.0%
Source: Capital Radio Advertising October 2001 - September 2002
Implementing our strategy for long term future growth
Our key long term objective remains to increase our exposure to the national
radio advertising market by growing our number of listeners and delivering
commercially attractive audiences.
We will achieve this goal by building trusted relationships, entertaining our
listeners and satisfying our advertisers through:
* Creating nationally recognised radio brands with strong local appeal
* Investing in our portfolio of complementary radio brands for targeted
audiences
* Exploring potential for value creating acquisitions
* Leveraging our radio brands onto new platforms to create new revenue
streams
* Exploiting new technologies such as digital radio
* Employing a highly skilled and efficient team
During the year we made important progress in a number of areas:
In June 2002, we reorganised our stations around four consistent brand networks:
Capital FM, Xfm, Century FM and Capital Gold, which are now more recognisable
both to our listeners and our advertisers through a clear proposition and focus.
Each brand encompasses all complementary activities surrounding its network:
analogue licences, digital licences, interactive platforms, CD compilations and
events.
The new structure allows our teams to work more effectively and respond to the
needs of agencies and advertisers, both on a national and a local level. It
enables us to create high quality network programming to enhance the local offer
and to refine our commercial expertise through a centralised sales effort.
Improved brand recognition will enable us to leverage the power of our eight
million listeners more effectively and to attract talent. This framework helps
us work more efficiently today, and importantly, it also allows easier
integration of any newly acquired stations in the future.
In London, our three analogue stations and digital stations are already
positioned to reach different target demographics. In November 2001, we acquired
a 19% interest in the London station Choice FM and should the Broadcasting rules
permit, taking full control would improve our position still further. In just
two years, we have moved from having no presence in Manchester to being able to
offer a package that includes 105.4 Century FM and Capital Gold on analogue as
well as digital brands Life, Xfm, Choice and Capital Disney. Over time, we aim
to replicate this complementary structure wherever we operate.
In order to improve our scale in key markets, we will continue to look for UK
radio licences that fit strategically with our portfolio of complementary radio
brands. Our balance sheet provides the flexibility to invest where terms are
affordable and where value can be created. The work we have done in
reorganising our business around four network brands will enable us to integrate
acquisitions more efficiently in future.
Opportunities are likely to arise as a result of the new Communications Bill,
which is expected to become law in mid to late 2003 enabling further industry
consolidation. The Government is expected to announce further details of the
proposals later today.
We are working to extend the Capital Radio brands in ways that develop our
listener relationships and produce new sources of revenue for the group. We are
the partner of choice for many well known names such as Nokia and O2. In
February 2002, we announced a groundbreaking strategic partnership with Disney,
creating Capital Disney for digital radio. This new interactive music brand is
targeted to appeal to the under-16s audience, which make up 19% of the UK
population.
The Capital Group was recently awarded the digital multiplex for Hampshire. The
Group now has a potential digital audience of nearly 40 million adults; this is
a market leading position. We continue to invest in our portfolio of digital
stations and will apply for appropriate new licences as they become available.
We consistently attract and retain some of the best commercial and creative
people in the industry. In September this year, Zoe Ball joined our team of top
talent including Capital FM's Neil Fox, Chris Tarrant and Steve Penk, Capital
Gold's Tony Blackburn, Century's Tony Horne and XFM's Christian O'Connell and
Ricky Gervais.
The financial information referred to herein does not constitute the company's
statutory accounts for the years ended 30 September 2002 or 2001 but is derived
from those accounts. Statutory accounts for 2001 have been delivered to the
registrar of companies, and those for 2002 will be delivered following the
company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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