SMG bullish despite £49.2m write-down on Virgin plans

Published on Thursday 3 April 2008 21:41

SCOTTISH Media Group has posted bottom-line losses of almost £85 million for 2007 after a series of asset write-downs, but the company yesterday insisted its turnaround programme is on track.

Glasgow-based SMG, which owns the ITV franchises for most of Scotland, booked exceptional charges of 91.9m as it streamlined the business, including writing off 49.2m of goodwill from Virgin Radio, which is up for sale.

SMG, which has decided to focus on Scottish television, also took a 15.4m hit against cinema advertising business Pearl & Dean, which is also for sale.

Excluding the exceptional charges, pre-tax profits fell 56 per cent to 4.4m. But chairman Richard Findlay said the year had been "transformational", with the group debt reduced by 110m to 47.1m.

The results were broadly in line with market expectations, but analysts seized on a lack of news on progress with the disposal of Virgin Radio, which is reportedly on the verge of a sale to privately owned Absolute Radio for 60m.

Chief executive Rob Woodward said yesterday that the company was in "active negotiations" but would not give details. He repeated claims that SMG was not a forced seller and would only sell if the price was right.

A 90m rights issue earlier this year means delaying the sale would not jeopardise SMG's three-year turnaround plan.

However, SMG has promised that some of the cash from a Virgin sale will be returned to shareholders, so shelving the sale could risk investor anger.

Woodward said that, following the rights issue and the establishment of a new banking facility, interest costs will be 10-15m below last year, contributing to the group's financial position "turning around" this year.

He added that the company is delivering against most of its "key performance indicators" under the three-year plan.

This includes building its online presence, stv.tv, to create an audience of 200,000 unique users a day. Yesterday it announced a deal with Brightcove, the video streaming company, to improve online content.

Despite the write-down against Virgin Radio, profits at that business rose 87 per cent to 4.3m, helped by improved advertising and lower AM licence fees.

Television profits, however, fell slightly to 11.1m. There were also signs of an improving advertising market. Despite warning that the media markets were "challenging", SMG reported that regional television advertising in the first quarter of 2008 is 14 per cent ahead of the same time last year, against a 2 per cent fall in national advertising.

Shares in SMG fell 0.25p to 11.25p, valuing the company at 109.4m.