Chief executive's review of operations

GMG Radio

GMG’s commercial radio division outperformed its peers in 2008/09 in a difficult market environment.

While the total radio advertising market dropped by more than 14% during the period, GMG Radio limited its advertising revenue decline to less than 5%.

This positive performance reflects the placement of the company’s national sales contract with GCap Media (now owned by Global Radio); the strength of the overall strategy to build national brands which are operated locally; and the progress made in transforming the acquired Saga Radio stations into rapidly growing Smooth Radio stations.

At the end of the financial year the division achieved record reach with 5.1 million adult listeners, but followed an industry trend with slightly reduced average listening hours.

Rapid progress was made in preparing the division for a multiplatform future with a redesign and rebuild of every station website, multimedia training across programming and sales, and a rapid increase in web traffic and revenue.

The recently created Sponsorship and Promotions team based in London increased revenue by 71%.

Despite these achievements, 2008/09 was a very challenging period for GMG Radio. Due to difficult trading conditions and continued brand investment the division moved into operating loss.

Operating loss before exceptionals and amortisation of acquired intangibles was £6.6 million (2008 £0.1 million profit) on turnover of £46.6 million (2008 £48.8 million). The statutory operating loss for the division was £14.8 million (2008 £31.9 million).

GMG Radio maintained a strong commitment to local and regional news, and in programming continued to innovate by commissioning a highly acclaimed series of documentary programmes with the backing of the Scott Trust. These high-quality productions helped to differentiate GMG Radio’s brands in a very competitive marketplace.

In spring 2009, the Real Radio network was further strengthened when the two Century Radio stations in the North East and North West were rebranded as Real, creating one of the biggest radio networks in the UK.

Smooth Radio continued its impressive growth, achieving 2.5 million listeners. The brand showed year-on-year growth – even after the exclusion of the North East station, which did not yet have RAJAR figures at the end of the last financial year. The launch of Smooth Radio North East was a major success, confirming audience appetite and appreciation for the brand.

Winning the last ever licence granted by Ofcom, for Mid and North Wales, will enable GMG Radio, when the appropriate deregulation occurs, to create a national commercial radio station for Wales.

Rock Radio, the division’s newest brand, continued to establish itself in Scotland and Manchester.

At the beginning of 2009 Stuart Taylor formally took over from John Myers as chief executive of GMG Radio. John, who decided to take semi-retirement, was the driving force behind the growth of the division from its inception some ten years ago. The Group thanks him for the energy, enthusiasm and inspiration he brought to the role. Stuart has already proved a more than capable successor.

The radio industry is undergoing a period of change, and various key issues are the subject of intense debate and scrutiny. The government’s Digital Britain process, the John Myers review of localness, the OFT’s review of the local merger regime, the statutory review of the Broadcasting Code and a renegotiation of the music licensing arrangements have all come at a time when parts of the industry are facing economic crisis.

GMG Radio is participating fully to influence and shape the future of the industry. Furthermore, favourable outcomes from several of these reviews could result in opportunities for GMG Radio to significantly improve its position in the market and to expand its options for growth.

While visibility in terms of revenue remains low, with its strong networks and highly motivated people GMG Radio is well placed to take advantage of these opportunities and to create value for the Group.

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