What Fru Does Next

On Monday morning, GCap Chief Exec Fru Hazlitt is going to announce to the City her strategic plans for the company. She’s somewhat under pressure as she’s got Global Radio knocking on the door looking to take over the company. So, what’s going to happen?

I think one of the key things that she’s got to demonstrate is that she’s different to the last boss – Ralph Bernard – and that the company needs to move in a very different direction. She’ll also have to play the crowd somewhat, the crowd being the City, and tell them things that they want to hear. These things might not be completely sensible or things that the company would ideally do. However, it’s in a tight spot, so needs to make a positive splash. So, what will Fru do?

DAB Digital Radio

Firstly she has to make some big DAB announcements. DAB was a Ralph thing and it costs quite a bit of money, money the City would like returned to them in profits. It’s a very short sighted view, especially as DAB now accounts for 10% of all radio listening and pretty much every other radio firm is behind it. However, needs must. Therefore I think we’ll see her sell GCap’s 63% share of Digital One. The key thing this does is remove the pressure of having to fill the capacity on the multiplex. It will also allow her to shut down either Planet Rock or theJazz or maybe even both of them. Whilst both these stations are building decent audiences they probably cost the firm £3m to £4m in total to operate.

Selling D1 and shutting down services will end up being earnings enhancing and it’ll bring in a nice pot of cash for the group.

The local multiplex network isn’t such a cash drain for the group, but it’s likely that Chill will be sacrificed in places where they can being in some more money from third party service providers. This will leave GCap with FM, Gold and XFM in most local areas and (probably still) Choice on the regional multiplexes.

Cost Savings

With Dirk, Steve and Ralph off to pastures new, she’ll have already made a saving of around £1.5m, however I think we’ll end up seeing more management cuts around the group. This coupled with rising revenues will improve profitability. I don’t think we’ll hear any firm announcements of any daytime networking due to the new Ofcom rules, but we will probably hear her allude to synergies which will be able to made in the near future.

Sell-Offs

I’m not sure what news of station sell-offs we’l hear. If she was brave she’d sell off something like Classic FM. It’s a very mature product as is its audience. It might be better off with GMG sitting alongside Smooth. However, with the markets the way there are at the moment I don’t think you would be able to get the money it’s probably worth. So it will stay. Probably similar for XFM.

We might see some announcements of the periphery of the One Network being flogged off, but again i’m not sure if the market can support that many stations being ‘up for sale’ so even if it does the price won’t be that high.

New Directions

By slimming down digital (and perhaps a bit of analogue) the main message will be that GCap doesn’t see that much growth in ‘radio’. It therefore will have to re-focus back to the internet. They’ll probably announce, again, that they’re putting more money into things like XFM and Choice online and they might even buy some internet sites, perhaps music ones, but definitely something that sits nicely alongside the remaining businesses.

Money-wise they’ll probably split the cash they make from savings and sales between investment (as above) and an extra shareholder dividend. This will be an attempt to undermine the cash offer from Global and will hopefully suggest to shareholders that in the medium term they’ll make more money sticking with GCap than selling out.

Repercussions

* Who’ll buy Digital One? I think in the frame could be the current other shareholder – Arqiva, newly rejuvenated and big brand owner Bauer or maybe even Channel 4 – that way perhaps they don’t need to launch a 2nd national multiplex.
* If it’s Bauer – maybe there’s some swaps for Kerrang West Mids too.
* More stories about DAB Digital Radio being doomed – once more ignoring all the facts about take-up and listening
* What will Global do? I think they’ll plough on by offering a £2.30ish bid for shares. It’ll be interesting to see whether GCap shareholders want to go on another new journey with another new GCap boss.
* Staff morale will not be very good – telling a load of radio people that the future’s the internet won’t be very motivating.

4 thoughts on “What Fru Does Next”

  1. Interesting / depressing, if it leads to the closure of some interesting stations – Jazz, Chill, Planet Rock etc.

    Obviously your predictions would cut a lot of costs. But, as a strategy, though, isn’t your vision just a case of “managing decline”? The rump of Gcap becomes Classic (mature), One network (declining), Capital (struggling), Xfm (niche). How does the company grow in that scenario? Isn’t putting all prospects of growth onto online just as likely as putting all prospects of growth onto DAB?

  2. “Staff morale will not be very good – telling a load of radio people that the future’s the internet won’t be very motivating.”

    – True, unless you work in the online department!

    Otherwise a very astute commentry on what may or may not happen this coming Monday. It will certainly be interesting to see what Fru has to say for herself and GCap.

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