News story about the response of chief executive Ralph Bernard to questions about potential acquisition offers for UK commercial radio owner GCap Media plc following publication of dismal interim results, written by Grant Goddard in November 2005 for The Radio Magazine.

1. NEWS: CEO BERNARD SHRUGS
OFF POTENTIAL ACQUISITION
BIDS FOR GCAP MEDIA PLC
AFTER DISMAL INTERIM
RESULTS
by
GRANT GODDARD
www.grantgoddard.co.uk
November 2005

2. "Do I look bothered?," responded GCap Media plc chief executive Ralph
Bernard, when asked about the possibility of a takeover bid for his company.
"The speculation I read is just that – speculation. It's having zero effect. We
have not had any approach."
Asked about shareholders’ responses to the company announcements,
Bernard said: "We have not had any shareholder reaction. Our institutional
shareholders are a pretty stable bunch and will not be bounced into any
reaction."
GCap’s largest shareholder, Daily Mail & General Trust [DMGT], was a
longtime investor in GWR Group plc and an ardent supporter of Bernard’s
management strategies. It is now faced with three options: to continue
supporting Bernard’s plans to turnaround the company; to accept a buyout
offer from an international media group or private equity group; or to counter
with its own offer to buy out the remainder of GCap. DMGT has been
extremely successful in the Australasian radio market and could decide it is
now time to implement its own strategies to revive GCap’s fortunes.
The City had mixed reactions to this week's GCap announcements. Broker
Teather & Greenwood described it as “a bold and risky strategy” and added:
“Management believe that reducing the amount of advertising will attract more
listeners and that the value of fewer advertising slots will increase, but no other
commercial radio station has reduced advertising minutes in this way, and it is
as yet unproven how media buyers will react.”
Anthony de Larrinaga, analyst at Société Générale, said: "GCap faces an
extremely uncertain next six months."
Lehman Brothers warned that the company's plan to reduce the number of
adverts on its 'Capital FM' station was a very risky strategy.
Bridgewell Securities' Patrick Yau said that the new advertising policy would
have a “significant profit impact” and could allow rival stations to extend their
lead over Capital in the competitive London market.
Paul Richards, media analyst at Numis, said: "the big shock and surprise today
is halving the ad minutage. It is a very, very audacious move. What impact will
it have on the rest of the industry? Will Chrysalis now try it at 'Heart' and EMAP
at 'Magic'? It has thrown a big rock into the pond of radio advertising. From an
advertiser's point of view, they pay the same for a spot with less clutter and
listeners go from six or seven ads to two in each break ... In terms of listeners
and advertisers, there is no doubt it will go down well. But the question is – the
impact on revenue and profits and the ability to claw back revenue? It's a very
brave move. It is a gamble and it's a very tough one. It reminds me of a
newspaper price war, which usually lasts longer and costs more than
expected."
Howard Bareham, head of radio at agency Mindshare, said: "I have to
congratulate them on being bold, but whether it succeeds or not is a different
News: CEO Bernard Shrugs Off Potential Acquisition Bids For GCap Media plc After Dismal Interim Results Page 2
©2005 Grant Goddard

3. News: CEO Bernard Shrugs Off Potential Acquisition Bids For GCap Media plc After Dismal Interim Results Page 3
©2005 Grant Goddard
matter. They need to differentiate themselves in a cluttered London market,
and less minutage will mean less commercial and less clutter. But the question
is, will it be more effective? Research needs to be carried out. Being no more
than 60 seconds away from music is good for listeners, and two ads in one
break is good for advertisers, but is the station the right one for advertisers to
use in the first place? They need to get the audience up to deliver what
advertisers want. The jury's out on whether they are going to get the listeners,
and therefore the advertisers, back. It won't matter, however many ad breaks
they've got, if listeners aren't tuning in or they aren't the right listeners."
[First published in 'The Radio Magazine' as 'Do I Look Bothered?', #712, 30 November 2005]
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
http://www.grantgoddard.co.uk