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Monday 11 February, 2008


Strategy Presentation


                                GCap Media plc                                 

                             Strategy Presentation                             

Fru Hazlitt, the new Chief Executive of GCap Media plc ("GCap Media" or the
"Company"), is today presenting her strategy for the Company and its
subsidiaries (the "Group").


Key strategic objectives
  * Focusing on platforms that listeners want and that generate higher revenues
    and profit
  * Focusing on brands and content that can win within a multi-platform
  * Reducing the cost structure of the business accordingly
Key financial objectives*
  * To position the Company for sustainable revenue growth
  * To target full year underlying operating profit margin ranges of 12%-14% in
    the year ending March 2009 and 17%-19% in the year ending March 2010
    supported by specific initiatives delivering full year profit improvements
    of £12.3 million which includes total annualised cost savings, excluding
    the effect of closures and disposals, of £8.8 million.
Key initiatives
  * Closure of non-core brands theJazz and Planet Rock
  * Disposal of Xfm regional analogue licences in Scotland, South Wales and
    Manchester and focusing on Xfm's heritage as a London brand and with a
    national broadband footprint
  * Significant cost savings across the business
  * Disposal of Digital One, leading to reduced DAB transmission fees
  * Increasing inventory at Capital 95.8 to meet demand from advertisers
  * Further operating and capital expenditure of £0.8 million in technology to
    enhance our revenue performance
Fru Hazlitt, Chief Executive of GCap Media, said: "Today we are announcing a
radical but realistic set of measures with the aim of delivering significant
improvements to profits and operating margins and positioning GCap Media for
long term sustainable growth.

"GCap Media will become a leaner and more dynamic company focused on maximising
the revenue and profit potential of five key brands on FM and broadband, the
platforms that we believe consumers want and which offer the greatest growth

"Capital 95.8 will have a new flexible inventory policy with up to nine minutes
of advertising per hour and we plan to dispose of our interest in Digital One,
reflecting our view that DAB is not an economically viable platform for the

*These statements are not profit forecasts. They do not mean that the profits
or earnings per share will necessarily be greater than those for any relevant
preceding financial period.

A presentation for analysts and investors will be held at 9.30am today at the
City Presentation Centre, 4 Chiswell Street, EC1 4UP, with coffee available
from 9am.


GCap Media
Jane Wilson                                     020 7054 8125/8122
Communications Director                         07875 871 068

Guy Lamming/Don Hunter                          020 7251 3801

Key areas of operational focus
Following Fru Hazlitt's appointment as Chief Executive in December, GCap
Media's management team has created a strategy for the Group that takes into
account radio industry trends and the current GCap Media portfolio.

The Group is now focused on a three pillar strategy that is designed to enable
GCap Media to harness the potential of the Group's brands to deliver long term
sustainable revenue and profit growth.

 1. Focusing on platforms that consumers want and that generate higher revenues
    and profit
To deliver growth, it is vital for GCap Media to focus its investment on the
platforms that consumers want and that will generate revenues and profit both
now and in the future. Although we can see longer term opportunities in mobile
telephony and broadcasting our stations through digital television, we believe
that the greatest potential for growth in the near term lies in FM and

FM is the backbone of the radio industry and we believe it compares favourably
to any of the digital platforms currently available to the consumer in terms of
quality. It is also the source of the majority of our revenue.

We believe that broadband is the ideal complementary platform to analogue radio
given the interactivity that they both provide, creating social networks and
communities on-air and online.

We will continue to develop programming and advertising initiatives to leverage
our FM audience of 15 million listeners and our online audience of 1.7 million
listeners across both FM and broadband.

Our broadband strategy
As we announced in our half year statement in November, our online revenues
have been growing faster than the online advertising sector and our audience
growth has exceeded our expectations. We are on target to break even in
broadband operations by the end of this financial year.

This growth is incremental and has not required any additional investment
beyond our budgeted expenditure.

We believe that brands such as Xfm and Classic have strong potential for
developing communities of interest around music genres, and brands such as
Capital or stations within The One Network enjoy long-term local loyalties on
which powerful online communities can be built.

A key element of our broadband strategy is about getting our content and brands
on to the new devices that people are increasingly using to consume
entertainment and music and doing it in ways that give GCap Media credibility
and relevance today and reach to the mass market in the future.

In executing our broadband strategy, we are partnering with both Nokia and
Apple, the market leaders in both their fields for the production of mobile
handsets and MP3 players. Progress has already been made in developing Nokia
Visual Radio and we will be working with Nokia to develop enhanced versions of
the product later this year. Our technical team has struck up a great working
relationship with Apple, resulting in the first live streamed radio to the iPod
Touch in the UK.

The AM stations
AM is fast becoming obsolete for music radio given the low quality of its
transmission and we do not believe that the next generation will want to tune
into AM-quality radio. GCap Media has a network of 25 Gold stations which are
also broadcast online, on DAB and on digital television. Our AM transmission
contracts run until between 2012 and 2016 depending on the individual licences,
which is why immediate exit from AM is not an option for GCap Media. We will be
lobbying vociferously for AM switch off.

According to the latest RAJAR data, the DAB platform accounts for only about 9
per cent of all radio listening, and the vast majority of this is to
established, analogue stations. Listening to digital-only stations including
all of the BBC's digital stations as well as the commercial sector accounts for
less than 4 per cent of all radio listening.

Against this backdrop, GCap Media's net spend on DAB was £8m in 2006/2007. This
was made up of the £18m cost of running Digital One and Regional multiplexes,
less £15 million of revenue received by these multiplexes from service
providers, plus the cost of transmitting GCap Media services on 3rd party local
and regional multiplexes of £4m and the other net costs of digital broadcasting
of £1 million. 

Since both BT Movio and Oneword have now closed, Digital One will not receive
this level of income from these services in the future. The effect in 2008/09
of these contracts being cancelled will reduce its revenues by around £5.5
million year-on-year. Whilst last summer it may have been assumed that this
capacity could be filled, there is now little demand and with the launch of D2,
a surfeit of supply, so we do not believe that this is possible. So without any
mitigation this would mean GCap Media's net DAB spend in 2009 would be
materially higher.

The Board of GCap Media believes that DAB, with its current cost structure and
infrastructure, is not an economically viable growth platform for GCap Media.

The options available to the Company are limited for two key reasons:

Transmission contracts, which run to between 2012 and 2016, have very limited
break clauses and in most cases GCap Media would remain liable for outstanding
fees for the duration of the contract.

We also have had automatic renewal of many of our analogue FM licences on the
condition of providing DAB services. This means all the top 10 One Network
stations have been renewed on this basis and if we withdrew the DAB services,
under current legislation Ofcom would have to re-advertise our FM licences.

However, we are pleased to announce that we have reached agreement in principle
to sell our shareholding in Digital One to Arqiva. While the consideration for
the sale is nominal, we have also agreed in principle that the Group will
terminate at no cost the transmission contracts for all of our capacity on
Digital One except Classic FM.

We anticipate a further saving in digital and analogue transmission costs as a
result of Arqiva's merger with National Grid Wireless.

 2. Focusing on brands that can win within a multi-platform environment
We have reviewed our brand portfolio according to the following criteria:

  * Current brand stature and potential for longevity
  * Size of audience, listener demographic and opportunity for audience growth
  * Potential for growth across a variety of platforms
  * Revenue potential
Following this review, we have decided to focus on the brands that we believe
offer the greatest growth potential and to dispose of or close those that do
not. Therefore, we plan to close theJazz and Planet Rock and dispose of, or if
necessary, hand back to Ofcom the Xfm licences in Scotland, Manchester and
South Wales, all by 28 March 2008.

We also have one transitional brand - the Gold Network,. We have decided to
scale back our investment in Gold to a level that will allow us to sustain an
on-air product that remains attractive to our listeners, but which reflects
that it is broadcast mainly on the declining AM medium.

Against the criteria of the internal brand portfolio review detailed above, the
Board of GCap Media believes the brands with the greatest potential for growth
are: Capital Radio, Choice FM and Xfm in London, the national station Classic
FM and The One Network.

We are taking the following steps to maximise the monetisation of these brands:

Capital 95.8
Paul Jackson has been with us for two months and has already made significant
changes to the station to enhance the on-air offering:

  * Denise Van Outen hired as co-presenter of our breakfast show
  * Improved music sweeps with 10 songs in a row every hour between 10am and
  * Upcoming launch of high profile events programme including Party in the
    Capital and more Help A London Child events
All of this is being done within current budgeted levels of expenditure.

We will also be introducing a new flexible inventory policy with traditional
advertising break lengths. Advertising minutage will not exceed nine minutes
per hour in total - which is line with the commercial radio industry norms.

Demand for advertising space on Capital currently outstrips supply. Based on
estimates derived from internal information on minutage and pricing, the board
of GCap Media believes the net effect of this new inventory policy will be £1.8
million profit in the first year to March 2009, rising to £3.6 million in the
second year.

Xfm in London
We propose to build upon the credibility established by Xfm as a new music
authority in FM in London and nationally on broadband. We intend to dispose of
our regional analogue licences and focus on Xfm in London and broadband
nationally. In the coming months a full review of Xfm's output will ensure that
we have the right on-air and online offering.

Our aim is to grow audience through a tighter focus on the London station and
increase our revenues. We currently fill our inventory on Xfm in London and
online therefore we fully expect that this increase in revenues can be

Choice FM
Choice FM is a highly successful urban contemporary music brand with the
highest profile within GCap Media of the commercially attractive 15-24
demographic. Despite its current analogue transmitters only covering one third
of Londoners, it achieves similar audiences in this demographic to that of a
brand like Kiss.

Our ambition is to enhance our service of this passionate audience, to monetise
Choice FM more effectively on air and to grow audiences online.

The One Network
We propose to continue moves to harmonise our stations into a coherent national
buy for advertisers. At the same time we will change the business model of The
One Network to reduce stations' dependency on central services.

In the second half of 2007, we:

  * Rebranded The One Network and supported it with a customer-facing campaign
    focusing on the strength of the network and the value of the brand
  * Changed the on-air production logo and marketing approach to create
    consistency across the network
  * Networked a number of high quality shows
  * Relaunched local websites to make them significantly more interactive
  * Strengthened the management teams at the stations to allow a reduced
    dependence on central resources giving a reduction in central costs and an
    improvement in overall Group profitability
We are now further reorganising our regional structure to concentrate resources
on the eight stations that so far this year have accounted for over 50% of the
aggregate profits and audiences on The One Network.

Classic FM
Classic FM has a highly attractive ABC1 demographic. It is a powerful brand
that has already successfully diversified 20 per cent of its revenues into
non-traditional sources including events, CD sales and online. Its revenues
exhibit reduced sensitivity to the fluctuations of RAJAR results.

 3. Reducing the cost structure of the business accordingly
The initiatives announced today allow us to bring forward our target operating
profit margin of 12% to 14% for the 2009/10 year to 2008/09, as well as to set
a new target margin of 17% to 19% for 2009/10. These targets assume full
implementation of the initiatives set out in this announcement and are
dependent on our ability to achieve revenue upsides from our existing strategic
plans. Our profitability is highly geared to our revenues, in particular to
radio advertising revenues. We make no forecast of future revenues and
therefore any particular level of future profits. Going forward we will
continue to strive for margin improvement and will be targeting further margin
growth into 2010/11.

Financial effects of initiatives
The implementation of the initiatives announced today should increase operating
profits in a full year by £12.3 million and this is net of extra operating
spend in new systems of £0.4 million. We anticipate that most of the
initiatives will be implemented by 31 March 2008. The improvement in operating
profits in 2008/09 from these initiatives is forecast to be £10.3 million. We
are forecasting £7 million of one-off restructuring costs to deliver these
initiatives, which includes £1m of non-cash costs

Savings from disposal / closure of stations

We are structuring the business around the revenue streams that can deliver us
the most profit going forward. Planet Rock and theJazz are brands that we do
not believe can win for us.

We are currently in discussions with third parties regarding the sale of our
three Xfm Regional stations in Wales, Scotland and Manchester. These stations
are forecast to make a combined loss of £800k this year.

The proposed closure of Planet Rock and theJazz, and disposal of our Xfm
regional stations, all by 31 March 2008, should improve profits by £1.5 million
compared to this year's forecasts for those stations. If we are unable to
dispose of the Xfm regional stations, these licences will be handed back to
Ofcom on 28 March 2008 reducing this saving by £0.4 million. The savings
identified in this release assume the stations are closed from 28 March 2008 -
the net savings reflect the loss of this year's forecast revenues from the two
stations of £1m in total and gross costs of £1.7m.

Cost savings
We are making annualised cost savings, excluding the effects of closures and
disposals, of £6.8 million in the business (effect on 2008/09: £6.6 million).
This includes savings in plc costs (reflecting an ongoing structure with two
fewer executive directors), and in central support functions across the One
Network and Gold stations as outlined above. The One Network efficiencies are
expected to increase operating profits by £2.0 million whilst Gold savings are
£0.8 million, both in a full year.

In addition, in the context of the Competition Commission inquiry into their
completed merger with National Grid Wireless, as reported in the press, Arqiva
have offered a reduction in the costs of all radio transmission contracts,
analogue and digital, of 15% from 1 April 2008, which would reduce our costs by
£2 million in a full year. The Competition Commission is due to publish its
final report by 18 March 2008 at the latest.

Capital 95.8 Inventory Policy
We estimate that the reduced minutage policy at Capital 95.8, announced in
December 2005, cost us £5.8m in lost revenue in 2006/07 compared with the
previous year. This resulted from cutting inventory by, on average 50%, and
maintaining the price at which we sold. Our new flexible advertising policy
will run from 1 April 2008 from when we will no longer restrict advertising
breaks to two commercials. There will be a gradual increase in inventory over
2008/09 which should lead to an uplift in minutage of about 50% by the end of
that year. On these assumptions, we estimate a £2 million increase in revenues
for 2008/09 and £4 million in a full year of the new policy for 2009/10, before
royalty costs of around 10% (net full year profit improvement is therefore £3.6
million). The £4 million uplift is less than the £5.8 million we estimate we
lost originally, primarily because of the audience reductions incurred since
that date.

Disposal of Digital One
We have now reached agreement in principle with Arqiva for the sale of our 63%
shareholding in Digital One, giving them 100% control of the national
commercial multiplex. This deal will be at a nominal consideration but will
include the cancellation of our national digital broadcast contracts for
theJazz, Planet Rock, Core and Life that would otherwise have cost us £4.7
million per annum, based on internal forecasts of our cost base for 2007/2008.
Although Digital One is forecast to make a standalone profit of £5.9 million
this year (including the revenues from GCap stations) we were forecasting a
significant reduction in its results into 2008/09. This was because of both the
loss of the BT Movio and Oneword contracts, which contributed in aggregate £5.5
million to profit this year and because we have been unable to sub-let that
spectrum to a third party. We have assumed in our savings that this deal will
complete on 31 March 2008.

The figures contained in this statement exclude the effect of the initiatives
and any intangible write-downs, goodwill impairment, or profit or losses on

Future expenditure plans

Due to inefficiencies in our inventory management systems, we only operate to a
95% fill rate of total inventory available. As such, our one area of increased
spend is in technology, primarily focusing on our inventory management system.
This will be a total ongoing expenditure of £0.8 million, half of which will be
capital spend.

The Senior Team
GCap Media now has an excellent senior team in place who will deliver upon the
strategy, working alongside Chief Executive Fru Hazlitt and Finance Director
Wendy Pallot.

The Executive Team includes:

  * Paul Jackson, Managing Director in charge of our London brands, which
    include Capital, Xfm and Choice FM
  * Darren Henley, Managing Director of Classic FM
  * Mark Lee, Managing Director of the One Network, running our business
    outside London
  * Robin Pembrooke, heading up Online and Interactive activities
  * Simon Daglish and John McGeough, who are running the commercial team
  * Will Harding, who is leading the strategy team
Sources and Bases

 1. Unless otherwise stated, savings are estimates derived from internal
    forecasts of the cost base of the GCap Media Group for the financial year
    ending 31 March 2008
 2. Financial information provided in relation to the financial year ending on
    31 March 2008 is estimated and derived from internal forecasts of financial
    information for that year
 3. Financial information provided in relation to the financial years ended 31
    March 2007 and 31 March 2006 is derived from the audited annual accounts of
    GCap Media for those periods
 4. Listener and minutage information provided is based on RAJAR wave 4 2007
    published information and GCap Media's internal tracking data
 5. Inventory information provided is based on information in GCap Media's
    commercial planning system
Financial Appendices:

Effect of initiatives announced 11 February                                          
2008: Impact on 2008/09                                                              
                                         Impact on 2008/09                    
                        Revenue Direct Personnel Operating Depreciation Total  Total 
                                 Costs     costs     costs              costs profit
                            £m      £m       £m         £m          £m     £m     £m
Disposal/closures of         
   Closure of Planet      (1.0)    0.1      1.0      0.6       0.0     1.7       0.7
   Rock / the Jazz                                                         
   Dispose of regional    (3.6)    0.7      1.8      1.8       0.1     4.4       0.8 
   Xfm stations                                                                      
Total disposals/          (4.6)    0.8      2.8      2.4       0.1     6.1       1.5 
closures of stations                                                                 
Cost savings within our                                                              
   Plc costs                0.0    0.0      1.2      0.1       0.0     1.3       1.3 
   Central support        (0.4)    0.1      1.3      1.7       0.0     3.1       2.7 
   One Network              0.3    0.1      1.3      0.1       0.0     1.5       1.8 
   Gold savings             0.0    0.0      0.6      0.2       0.0     0.8       0.8 
Total cost savings        (0.1)    0.2      4.4      2.1       0.0     6.7       6.6 
within our control                                                                   
Potential reduction in    (0.6)    0.0      0.0      2.6       0.0     2.6       2.0 
transmission fees                                                                    
Capital Radio flexible      2.0  (0.2)      0.0      0.0       0.0   (0.2)       1.8 
inventory policy                                                                     
Disposal of Digital One                                                              
   Digital One profits    (9.9)    0.1      0.6      3.3       0.0     4.0     (5.9) 
   Removal of national      0.0    0.0      0.0      4.7       0.0     4.7       4.7 
Total Disposal of         (9.9)    0.1      0.6      8.0       0.0     8.7     (1.2) 
Digital One                                                                          
Additional technology       0.0    0.0    (0.2)      0.0     (0.2)   (0.4)     (0.4) 
   Total                 (13.2)    0.9      7.6     15.1     (0.1)    23.5      10.3 
Non-direct cost savings                   15.3%                                      
as % 2006/07 cost base                                                               

Effect of Initiatives announced 11                                                   
February 2008: Annualised impact                                                     
                                          Annualised impact                     
                         Revenue Direct  Personnel Operating Depreciation Total Total 
                                 costs       costs     costs             costs profit
                            £m      £m          £m        £m          £m   £m    £m    
Disposals/closures of                                                                
      Closure of Planet    (1.0)    0.1       1.0       0.6          0.0   1.7    0.7
      Rock / theJazz                                                                 
      Dispose of           (3.6)    0.7       1.8       1.8          0.1   4.4    0.8
      regional Xfm                                                                   
Total disposals/closures   (4.6)    0.8       2.8       2.4          0.1   6.1    1.5
of stations                                                                          
Cost savings within our                                                              
      Plc costs              0.0    0.0       1.2       0.1          0.0   1.3    1.3
      Central support      (0.4)    0.1       1.3       1.7          0.0   3.1    2.7
      One Network            0.3    0.1       1.3       0.3          0.0   1.7    2.0
      Gold savings           0.0    0.0       0.6       0.2          0.0   0.8    0.8
Total cost savings         (0.1)    0.2       4.4       2.3          0.0   6.9    6.8
within our control                                                                   
Potential reduction in     (0.6)    0.0       0.0       2.6          0.0   2.6    2.0
transmission fees                                                                    
Capital Radio flexible       4.0  (0.4)       0.0       0.0          0.0 (0.4)    3.6
inventory policy                                                                     
Diposal of Digital One                                                               
      Digital One          (9.9)    0.1       0.6       3.3          0.0   4.0  (5.9)
      profits removed                                                                
      Removal of             0.0    0.0       0.0       4.7          0.0   4.7    4.7
Total diposal of Digital   (9.9)    0.1       0.6       8.0          0.0   8.7  (1.2)
Additional technology        0.0    0.0     (0.2)       0.0        (0.2) (0.4)  (0.4)
Total                     (11.2)    0.7       7.6      15.3        (0.1)  23.5   12.3
Non-direct cost savings                                 15.4%                        
as % of 2006/07 cost                                                                 

Other Financial targets 2008/09 year                                                                         
Underlying net working                      Nil                                   
capital requirement                                                                  
Capital expenditure                                                                                                   
(including £0.4m new                        £5.9 million                                                                

Net DAB spend in 2006/07 year                                                                          
                                            National  Local     Total        Digital   Consolidation   Total 
                                            Multiplex Multiplex Multiplex   Broadcast                     
                                                  £m        £m       £m        £m             £m     £m    
      Internal revenues                           5.3      6.3      11.6         -        (11.6)      -
      External revenues                           9.9      5.0      14.9       2.1           0.0   17.0
Total turnover                                   15.2     11.3      26.5       2.1        (11.6)   17.0
      Direct                                    (0.1)        -     (0.1)     (0.3)             -  (0.4)
      Personnel                                 (0.7)        -     (0.7)     (0.9)             -  (1.6)
             Transmission costs:                                                                       
                 Simulcast costs for                -        -         -     (8.8)           5.6  (3.2)
                 analogue brands                                                                       
                 Digital Only Services              -        -         -     (6.7)           6.0  (0.7)
                 Multiplex infrastructure       (8.0)    (7.1)    (15.1)         -             - (15.1)
             Other operating costs              (0.8)    (1.6)     (2.4)     (1.6)             -  (4.0)
                                                (8.8)    (8.7)    (17.5)    (17.1)          11.6 (23.0)
Total costs                                     (9.6)    (8.7)    (18.3)    (18.3)          11.6 (25.0)
Standalone operating profit/(loss)                5.6      2.6       8.2    (16.2)             -  (8.0)
Consolidation adjustment                        (5.3)    (6.3)                                         
Consolidated operating profit/(loss)              0.3    (3.7)                                         
This schedule is included to provide information on transmission costs for the                         
year ended 31 March 2007.                                                                              

This announcement contains statements that are or may be forward looking with
respect to the financial condition, results of operations and businesses of
GCap Media plc. These statements can be identified by the use of forward
looking terminology such as "believe", "expects", "prospect", "estimated",
"target", "forecast", "plan", "should", "may" or the negative thereof, or other
variations thereof, or comparable terminology indicating targets, expectations
or beliefs concerning future events. These forward looking statements include
risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future. There are a number of factors which could or may
cause actual results or developments to differ materially from those expressed
or implied by such forward looking statements. These statements are not profit
forecasts. They do not mean that the profits or earnings per share will
necessarily be greater than those for any relevant preceding financial period.