Capital losses mount in flagging GCap merger

Nearly one year on, the GCap merger Рeven at the time a bit of a m̩salliance between GWR and Capital Рis looking frankly disastrous.

What other interpretation are we to arrive at after reviewing some of the salient developments in its wake? The Capital side of the equation seems a hollowed-out wraith of its former self. Plunging audience figures have been accompanied by a steady exodus of all the top Capital players. First to go (most would say inevitably, in view of the known personal chemistry with GWR chief Ralph Bernard) was former Capital supremo David Mansfield, only four months into the merger. Next out were commercial director Linda Smith and operations director Paul Davies. Graham Bryce, managing director of Choice and XFM, also from the Capital camp, left. Last week, it was the turn of Capital managing director Keith Pringle and programme director Nik Goodman to quit. The suspicion is that their departure heralds a particularly weak set of forthcoming first-quarter Rajar audience figures, although it must remain just that for the time being.

Even GCap’s combative chairman Bernard concedes that Capital (the renamed 95.8 London station) is “in intensive care” and that he is withholding marketing support for it until further notice. Perversely, at first sight, GCap’s flagging share price has rallied over the past few weeks – but only because bid fever is now in the air – and the Capital fiasco is at the heart of it.

With events at this low ebb, the wonder is how anyone of Bernard’s calibre could have got involved with the merger idea in the first place. And still more, perhaps, how he intends to extricate his reputation, and that of the company he runs, from the morass.

The probable answer to the first question is that he would not, if he could have foreseen just how much the situation would deteriorate by the time the merger deal was clinched. The logic of combining two of the largest radio groups in the face of a developing digital radio revolution was far more compelling in the early 2000s than two and a half years later when it finally lumbered, after much public scrutiny and executive hesitation, to a conclusion. By then the plight of Capital – once the unquestioned premier commercial radio station – was painfully apparent. Increasingly besieged by Heart and Magic on its own terrain, it was also being disproportionately affected by a resurgent BBC.

Bernard has not exactly been idle in trying to address the Capital problem. The “decluttering” of ad space was an imaginative attempt to shore up a premium ratecard in the light of heavily declining audience. But it is strategic, in the sense that &£7m (the write-off costs) will take a long time to recover. And, in any case, advertisers are only likely to be won over if there is a dramatic improvement in the programme content, an achievement that remains elusive. Investors may not be so patient.

All of which must be very frustrating for Bernard. After all, there is a lot more to GCap than Capital (“only” 10% of its revenues). Yet it is a declining legacy brand that stubbornly continues to dominate the thinking of his twin bêtes noires, City analysts and business journalists, whenever the talk turns to GCap.