In the six months to September 30, revenues have dropped 11% year on year to £111.6m while operating profits have dropped 27% to £14.7m. The merged Capital and GWR has been hit by continuing difficult advertising conditions, according to chief executive Ralph Bernard.
GCap has decided its priority is to bring listeners back to 95.8 Capital FM by paring back saturated ad breaks and making programming more appealing. The new Capital policy, with effect from December 12, is radical and it will see the station play just two ads at a time. Listeners currently get five to seven ads in a row, Bernard said.
This will reduce the amount of inventory Capital has to offer by nearly half. Bernard assured analysts that advertisers and agencies had been notified and were behind the change. GCap hinted that the ad reduction remedy could be extended to other key stations, including BMRB, if successful.
The market reacted by sending GCap's share price down 16.79%, a fall of 57.25p to 283.75p. The last time it was so low was near the end of September, before speculation of interest from private equity groups began to push it up to around yesterday's close of 340p. Bernard this morning said he had not heard from any bidders.
Market analysts at Numis Securities said the plan was bold, but involved "considerable risk", particularly the element of halving advertising minutage in London.
Following this change, the station will relaunch on January 3, calling itself simply Capital Radio, with a new music position and schedule. Bernard would not be drawn on whether individual DJs faced the axe.
However, GCap confirmed that it will dispose of nine analogue stations as part of a new national strategy to tighten its focus on to eight regions that advertisers want most. Five of the stations on the auction block are in the South West, including Plymouth Sound, and four are in the North West and Wales, including Coast FM.
The remaining brands will be reorganised explicitly to go up against BBC radio. Xfm and Core will target Radio 1 listeners, while Planet Rock, Classic FM, Capital Gold and digital station Life will target Radio 2 listeners.
Xfm will take over digital station The Storm and analogue station Beat 106 in Glasgow and Edinburgh, giving it quasi-national coverage on the back of its London and future Manchester FM broadcasts and regional DAB coverage.
The future for AM service Capital Gold will see it come progressively closer to national digital station Life, with both to be rebranded as one national station years down the line, with timing depending on the evolution of digital take-up.
A further part to the new strategy is investment in new revenue streams such as CD compilations, book deals, ringtones and tickets, facilitated by database marketing.
In addition operations director Steve Orchard's power has been increased by his appointment to the executive board. In addition, the number of non-executive directors will be reduced later in the year.
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