GODDARD February 2007

EMAP plc has issued its third profit warning in a year, alerting The City that the full-year profit figure will be £25m less than expected. The company’s statement noted that, “in consumer media, and radio in particular, recent market conditions have been weaker than anticipated.” Chief executive Tom Moloney said that EMAP was facing “structural” difficulties in its radio business: "The market had factored in a recovery next year, but we're not seeing any sign of that. The forecasts were too frothy." He admitted that the performance of EMAP’s radio division had fallen below expectations: "The only thing which is disappointing to me and a bit of a surprise to the market is radio. I really thought radio would start to see some sort of recovery.” A company-wide cost-cutting programme will be implemented to save £20m a year by 2008/9, but it will cost £30m to implement. Moloney dismissed speculation that EMAP would be interested in buying Chrysalis plc’s youth-targeted 'Galaxy' radio stations: "We've got no plans to acquire any further radio stations. We've got the best radio portfolio in the UK and have announced record RAJAR figures. My hope is that, over time, people will realise how effective radio is, because it works and we have a lot of very loyal advertisers. The facts are that, right now, a number of advertisers are taking spend targeting youth away from radio and moving it online." He added that radio revenues in December and January had been “disappointing”, and that the market remained “volatile”. Moloney explained: "Media markets are undergoing structural change, but a lot of what's happening is cyclical, particularly in radio. We've got the right strategy to deal with the structural change and we will see the benefit of any cyclical upturn." Analyst Lorna Tilbian at stockbroker Numis said: “EMAP has already been heavily de-rated, and we believe the group could now prove susceptible to an opportunistic private equity bid.” Iain Daley at Bridgewell Securities said that EMAP's profit warning fitted with his view that share prices of consumer facing media groups had risen prematurely “given that the underlying consumer advertising environment is likely to remain volatile in the current year.” Amid rumours that headhunters were already lining up candidates to replace Moloney, EMAP issued a statement asserting that “there is no plan to replace Moloney and headhunters have not been appointed” and that “some people were trying to destabilise Moloney, who had the full backing of the board.”

[First published in 'The Radio Magazine' as 'Emap Radio Performance "Disappointing"', #775, 14 February 2007]

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Grant Goddard is a media analyst / radio specialist / radio consultant with thirty years of experience in the broadcasting industry, having held senior management and consultancy roles within the commercial media sector in the United Kingdom, Europe and Asia. Details at

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