Virgin Radio outperforms as SMG profits plunge

LONDON - Virgin Radio owner SMG has posted a 30% fall in like-for-like profits in 2007 -- with some of the strongest performances in the business coming from the 'non-core assets' it is looking to sell.

In its end-of-year results, released this morning, the Scottish commercial media company said operating profit from continuing operations fell from £15.8m in 2006 to £11.1m last year. Like-for-like revenue fell 5.5% to £119m.

SMG's only radio asset, Virgin Radio, put in an impressive performance, with profit up 87% on 2006, rising from £2.3m to £4.4m. Revenues at the pop-rock station rose 9% to £24m.

The company has been looking to sell Virgin Radio since last April, but shelved plans for a stock market flotation of the station as uncertainty in financial markets grew, opting instead for a trade sale.

According to newspaper reports yesterday, Absolute Radio has been named by SMG as the preferred bidder for Virgin Radio, with UTV confirming yesterday afternoon that it was out of the race.

SMG said this morning that the disposal process of Virgin Radio was making "good progress" and it was pleased with the level of interest in the business.

"We are not in a forced seller position and we will only sell the business when it is appropriate to do so," the company said.

The other part of the SMG business that it is looking to offload -- cinema advertising division Pearl & Dean -- saw 2007 revenue rise from £20m to £22m, allowing the company to narrow its losses from £4.2m to £0.7m.

If the two disposals are successful, SMG will be left to focus on its television business, Grampian and STV, which form the bulk of the Scottish ITV licence.

SMG said its television division was on track to increase sponsorship revenues by 50% by 2010, maintain margins at 10% and grow revenues through exploiting the rights to its archived content. The broadcaster has also pledged to implement better cost control

SMG has spent the past year restructuring its business, with the disposal last October of outdoor advertising firm Primesight.

The group has managed to significantly chip away at its debts, which fell from £157m to £47m, helped in part by a rights issue which raised £95m. The group has also renegotiated the terms of a £90m loan facility from HBOS.

Richard Findlay, the SMG chairman, said: "2007 was a challenging year, but the result has been a substantial transformation of the company.

"Although the economic outlook is challenging, the business is now robustly positioned for profitable growth."

SMG shares were trading at 9am at 11.5p -- down 0.25p on yesterday’s closing price.

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