Eight years ago Virgin Radio was at a high with Chris Evans in charge, it had a fresh new style that appealed to advertisers and gained a loyal following. Chris Evans sold it to SMG in 2000 for £225 million, making a profit of £140 million.
Seven years on and times are far more challenging with radio advertising under pressure and competition between stations greater than ever. SMG is rumoured to be looking for from a flotation of £80 million. However, even this range has been met with skepticism from leading institutions with a history of media investment. In the year to December 31, 2006, operating profits at Virgin Radio were £2.3 million and revenue was £22 million.
A source at a leading institution said: “The radio sector has cost investors a lot of money in recent times and, although the outlook now appears better than at any time since the late Nineties, we still feel investors lack confidence in the medium, especially after the relative disappointment that DAB [digital radio] has proven to be. It would be surprising if investors were willing to pay a high valuation for Virgin.” Under the Virgin contract owned by Sir Richard Branson, Virgin Radio is not to be sold to any company that is in direct competition with Virgin.