The merger of Classic FM owner GWR and Capital Radio was overshadowed yesterday by figures which showed a sharp deterioration in trading at the two businesses.
GCap Media's first announcement - on the day the tie-up was completed - featured a combined fall of 17 per cent in revenues for April and a warning that the weak advertising market was likely to continue into May and June.
The warning, which sent GCap shares eight per cent lower in the first hour of trading, came as Capital said underlying profits had fallen to £10.8 million in the six months to March 31, down from £12.1 million a year earlier.
Half-year revenues were slightly lower at £58.5 million with the group's biggest advertising market of retail - accounting for 17 per cent of business - showing a nine per cent year-on-year fall in sales.
Capital and GWR struck the merger as part of efforts to develop a stronger position in digital radio and compete more effectively with the BBC.
The deal creates a group with more than 50 analogue stations and almost 100 digital stations. GWR owns Classic FM and stations including Trent FM, Essex FM and Beacon. Capital has BRMB in Birmingham.
In its details of current trading, GCap said revenues at Capital Radio were down 21 per cent and by 15 per cent at GWR. It blamed weak consumer confidence and low spending by the "traditional top ten radio advertisers" for affecting demand, although it also pointed to one-off factors such as Easter and the General Election.
As well as its main London radio station, Capital broadcasts Xfm, the Century FM network and Choice FM.
Yesterday, GCap said it had also agreed to sell its Nottingham-based regional commercial station, 106 Century FM, to Chrysalis Radio Holdings for £29.5 million, a deal required in order for the GWR tie-up to be granted regulatory clearance.
The transaction is being funded partly by a new bank facility from the Royal Bank of Scotland and partly from Chrysalis's internal cash resources.
Chrysalis will combine 100.7 Heart FM in the West Midlands and 106 Century FM in the East Midlands.
In the year to September 30, 2004, 106 Century FM generated revenue of £3.6 million, trading off an average total hours listened figure of three million.
Chrysalis said it expects to incur a one-off charge of £500,000 in the 2005/06 financial year to cover the cost of re-branding 106 Century FM to Heart.
The transaction is expected to be earnings neutral in that first full financial year of ownership.