SMG 'to sell Virgin within six months'

Published on Sunday 30 September 2007 01:23

THE sale of Virgin Radio by SMG is likely to take place within the next six months, according to analysts.

Speculation is mounting that the media group will accept an offer from one of the companies which it says has showed "significant interest" in the radio station, after plans to float the radio arm this autumn were effectively shelved on Friday.

SMG's group chief executive Rob Woodward told the City that due to the recent turmoil in the financial markets it had been forced to "push back the timetable" for the initial public offering.

Although he said an IPO remained "an option", he also admitted that there had been significant interest from "a number of potential buyers".

The announcement has led analysts to believe that a flotation is less likely and that SMG will opt for a sale before the end of spring next year.

Paul Richards, media analyst at Numis Securities, said that either a trade sale or an IPO would take place "within the next six months". Out of the two options he said SMG would likely opt for a trade sale.

Among the companies thought to have approached SMG about Virgin Radio are UTV, the Northern Irish company which owns talkSPORT and Edinburgh's Talk 107 radio station, and Global Radio, the private equity firm run by Fame Academy judge Richard Park.

SMG also announced when it unveiled interim results on Friday that Richard Huntingford, the former boss of Chrysalis Radio, would take over as executive chairman of Virgin Radio from tomorrow. The move comes after the defection of former chief Paul Jackson to Capital Radio in September.

At the same time, the group was forced to slash its valuation of Virgin Radio, which it originally bought from Chris Evans in 2000 for 225m, by 26.6m to 85m. But Woodward insisted that this figure did not reflect how much the company would expect from a sale of the station. He said: "I could sell Virgin Radio today well within the broad range of 50m to 120m."

SMG reported a drop in pre-tax profits from 8m to 1m during the six months to June 30, while revenues were flat at 89m. The profits slide forced the company, which owns STV, to suspend dividend payments and sent shares tumbling by 6.3%. They closed on Friday at 33.5p, their lowest since 1991.

News of the profits drop eclipsed new plans to increase regional advertising and sponsorship revenues. Woodward said the group planned to expand its share of regional advertising by 6%, from 19% to 25%, and double sponsorship revenues.

Targets to dramatically increase its television output were also revealed. The group hopes to almost triple its television output from 45 hours to 130 hours by the turn of the decade. The group is also targeting 2.5m in annual savings. Woodward admitted that 1.5m of this figure would come from job cuts, although he did not give details of where the job cuts are likely to be made.