Digital One, a GCap subsidiary, has been given notice by BT Movio that it is terminating its contract for data capacity on Digital One on June 9 2008. BT Movio is a strategic partner in the second national digital multiplex to be launched next year by 4 Digital Group, the consortium led by Channel 4.
GCap said the additional cost reductions would take place over the next two years, without providing details of how they would be achieved.
The move will sustain speculation that the company is readying itself to be taken over or merged with another radio group such as Emap or new Chrysalis owner Global Radio.
GCap hopes the reductions, combined with the assumption that ad revenues will improve, will put its operating profit margin at between 12% and 14% by March 2009.
It recently achieved a margin of 8.2%, according to its results for the year ended March 31 2007. In the previous year, its margin was 12.3%.
GCap claimed the total savings it will have achieved since the merger of GWR and Capital Radio in mid-2005 will be £35m a year, equating to 20% of the cost base at the time of the merger.
The company claims to see improvement in ad revenues, though it did not say whether April-June ad revenues had grown, only that like-for-like total revenues were up 2% year on year while online revenues were up 38% year on year. The like-for-like revenues exclude the two Century stations it sold last autumn.
It expects July-September total revenue growth to top 2%, thanks in part to comparison with the mini-depression in advertising around last July's World Cup.
Ralph Bernard, chief executive of GCap Media, said: "Encouragingly, we are beginning to see signs of improvement in advertising revenues, despite an uncertain outlook for consumer confidence."
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