News story about the sudden exit from UK commercial radio owner GCap Media plc of chief executive David Mansfield and the subsequent confusion about the company's strategy voiced by City analysts, written by Grant Goddard in December 2005 for The Radio Magazine.

1. NEWS: CEO MANSFIELD'S
SUDDEN EXIT FROM GCAP
MEDIA PLC LEAVES CITY
ANALYSTS CONFUSED ABOUT
ITS STRATEGY
by
GRANT GODDARD
www.grantgoddard.co.uk
September 2005

2. The sudden departure of David Mansfield last week from the chief executive
post at GCap Media plc has left City analysts confused as to the commercial
radio company’s strategy, which will not be divulged until November, more
than six months after its formation from the merger of GWR Group and Capital
Radio. One analyst complained that GCap has made no presentations to the
City since the merger and added: "There has been an appalling lack of
communication. It's outrageous."
Peter Cawdron, the group’s newly appointed non-executive chairman,
explained that the original board structure, with both Mansfield and Ralph
Bernard as joint chief executives, was never supposed to be permanent. "We
said we could work it for a year," Cawdron said. "Then, if there is a need, you
can take a decision. But the advertising market was very bad. We decided we
couldn't go on like that. There could only be one boss. If we could grow and
expand the business, there would be room for manoeuvre. But in a difficult
environment, two people trying to do one job is difficult." Cawdron said that
Mansfield did not offer to resign, but the board decided that only one chief
executive was required: “I did expect a different situation, in which there would
be screaming and shouting, but there was not.”
The decision to lose Mansfield has not pleased some City analysts. One
institutional investor in GCap said: "I would question whether the right man
went. Bernard has made some questionable decisions in the past. He is
married to digital. I would not say he is delusional, but he has been banging
away on it for years."
Richard Marwood of Axa Investment Managers, a significant GCap
shareholder, said: "I don't know why the departure happened now. We had
requested meetings with the management on a couple of occasions post the
merger, but had not been offered any."
Investec analyst Malcolm Morgan said: "The people I've talked to thought it
was a curious arrangement, built as a way to show some level of compromise
instead of creating a working model to run the company. These mergers
usually end up as a takeover and, culturally, it's probably necessary."
After his selection as lone chief executive, Bernard commented: "You cannot
have a strategic review and not look at board structure. David and I had a
grown-up and amicable discussion about this. We agreed and went to the
board, which supported us. We had a different plan [originally] but time moves
on. You have to take cognisance of the needs of the business going forward."
Analysts are worried by GCap’s apparent lack of corporate strategy, after
having spent so much time and money creating the UK’s largest commercial
radio group. Audiences are falling sharply. Over the last two years alone, the
'Capital FM' Network has lost 22% of hours listened, the 'GWR Mix' Network
has lost 12%, the 'Century' Network has lost 23%, the 'Capital Gold' Network
has lost 20%, and the 'Classic Gold' Network has lost 39%.
News: CEO Mansfield's Sudden Exit From GCap Media plc Leaves City Analysts Confused About Its Strategy Page 2
©2005 Grant Goddard

3. Revenues too are declining. May revenues were down 14% year-on-year and
this week’s GCap trading statement for the third quarter is still likely to be bad.
The company’s promised 18.5p per share dividend seems unlikely to be
fulfilled. Marwood, of Axa Investment Managers, said: "If they were going to
cut the dividend, that could remove a key support for the current share price."
Another analyst commented: "It's an accident waiting to happen. If Bernard
disappoints on the trading update – if he thinks he can get away with splashing
the dividend on digital and not focusing on cutting costs – then his days are
numbered."
Asked about the dividend, GCap chairman Peter Cawdron said: "I can't
promise anything. It's not something we've considered in detail to the point of
making an announcement. We have every confidence in Ralph."
Any further fall in the GCap share price, which has already lost 86% of its
value since 2000 (compared to Capital Radio’s share price) is likely to make
the company an acquisition target. The Daily Mail & General Trust [DMGT]
newspaper group, which owns 15% of GCap, has already indicated that
eventually it will either sell its investment or buy the whole company.
Lorna Tilbian, analyst at Numis Securities, said in April: "I'd be very surprised if
DMGT don't end up owning it one day. They will just wait till the next downturn
and then top up their shareholding before launching an all-out bid."
A further possibility is that an overseas media company such as Clear
Channel, Viacom, Emmis, NRJ or Europe 1 could mount a takeover bid, if the
capitalisation of GCap continues to fall from its present value of £448m. The
challenge facing such a buyer is to turnaround the business and claw back the
substantial audiences and revenues that have been lost in recent years.
One city journalist, writing in 'The Times', referred to the merger as a “botch
job” and said “it remains unclear as to whether the fundamental logic behind
the GCap deal was sound”. He added: “Confrontation, rather than integration,
seems to have dominated the short life of GCap” and concluded that “any
advantage that could have come as a result of a merger may have
disappeared up the swannee while GCap was busy with its in-fighting.”
In an unfortunate coincidence of timing, the annual report of Deloitte & Touch,
published last week, chose to highlight the work it had done on the GCap
merger, which the report said had created “the most appropriate integration
infrastructure to deliver these objectives and detailed integration planning”.
[First published in 'The Radio Magazine' as 'Ralph Faces City Challenge', #703, 28 September 2005]
News: CEO Mansfield's Sudden Exit From GCap Media plc Leaves City Analysts Confused About Its Strategy Page 3
©2005 Grant Goddard

4. News: CEO Mansfield's Sudden Exit From GCap Media plc Leaves City Analysts Confused About Its Strategy Page 4
©2005 Grant Goddard
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