Newspaper article The Evening Standard (London, England)

Bad Vibes over Dividend and Earnings for GCap

Newspaper article The Evening Standard (London, England)

Bad Vibes over Dividend and Earnings for GCap

Article excerpt

Byline: JIM ARMITAGE

MARKET REPORT DIRECTORS at Capital Radio owner GCap Media are going to cop a whole load of static with tomorrow's trading statement.

A few soothing bars of Classic FM, which it also owns, will not be enough to calm the frayed nerves of investors if analysts' predictions prove accurate.

Earlier this month, GCap, the merged GWR and Capital Radio, announced chief executive David Mansfield, formerly boss of Capital, was quitting. That leaves onetime GWR skipper Ralph Bernard at the helm.

While the move was presented as the final stage in integrating the businesses, it did nothing to assuage fears that a profit warning and dividend cut could be in the offing.

Investment bank Credit Suisse First Boston had already been tipping a smaller divi and "short-term tough trading conditions".

Bernard has gone so far as to admit the board is "discussing" the dividend as part of a strategy review due to complete in November. Even if the market's worst expectations prove unfounded, GCap shares are unlikely to claw back much of the 15% of market value eroded since the merger eight months ago.

Brokers at Numis Securities reckon the [pounds sterling]10 billion per year market for repairing Britain's swathe of social housing is ripe for some company takeover activity alongside healthy organic revenue growth among the sector's leading builders.

The key players Numis identifies are Connaught, Morgan Sindall's Lovell subsidiary, AWG's Morrison division, Mears and privately owned Keepmoat.

These five have a combined turnover of [pounds sterling]787 million but only account for 8% of the market. The share prices of Morgan Sindall and others identified in the Numis report as sector leaders - Rok Property, Balfour Beatty, Galliford Try and Kier - have rocketed over the past two years thanks to growing public-sector spending on social housing.

Numis analysts Francesca Raleigh and James Manson-Bahr talk of a "fragmented" market allowing the bigger players to achieve above- average sales growth before the market moves into "consolidation phase".

Buyers, the brokers note, could be "new entrants, existing players, players in a related local authority market". …

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