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TWST: Can we start with an introduction and update on Capital Radio (London: CAP.L)?

Mr Mansfield: Capital Radio is 30 years old this year. We started broadcasting in London in 1973 as the second commercial radio company, i.e. a company that’s funded by advertising revenues. In the last 30 years we have grown to be the UK’s leading commercial radio group. Over the last decade in particular, the company has grown its business mostly through the acquisition of other radio stations to the extent that we now own over 20 radio stations broadcasting throughout the UK. We are leading discussions with the Government regarding the forthcoming Communications Bill to ensure that the new legislation will create new opportunities for us to grow our business.

TWST: You mentioned government regulation and the Communications Bill, which is working its way through parliament. Can you comment on how that will shape the radio broadcasting environment and how it will impact you directly?

Mr Mansfield: The UK Government has acknowledged that the current rules we have are very restrictive and archaic. For example the rules don’t allow for consolidation. So, after an awful lot of procrastination, the Government is currently pushing through a new Communications Bill. What it means for radio is that there are no limits on the number of radio stations that can be owned by any company throughout the UK and that within each local marketplace there have to be at least two owners. At the moment Capital has three radio stations in London and we are restricted from increasing this number. However, under the new rules we would be able to own nine, subject to competition laws. So the new rules are going to make a significant difference.

TWST: Just going back to Capital, can you comment on how the tough advertising environment has impacted the radio space specifically?

Mr Mansfield: Capital is one of only two pure play commercial radio businesses in the UK. Our biggest shareholder has around 12% of the company and we’re 100% free float. The reason why we stay focused on radio is because it has been the fastest growing advertising medium for the last decade and the forecasts going forward are that it will continue to outperform the advertising market in general. A decade ago radio was seen as a peripheral type of medium - what you did if you couldn’t afford to advertise on more expensive media like TV. But now radio is seen as a key medium for targeted advertising and a popular marketing tool because it has a very strong listenership amongst 16 to 34 year olds that are difficult to reach in other mass market media. The immediate outlook for the advertising market is not great. Companies like WPP say they don’t see any recovery this year. Company earnings are still going backwards rather than forwards, so that undoubtedly hits advertising budgets and investment in new products. However, radio has not suffered as badly as other media. If you take Capital’s specific results for the year ending September last year, the radio market was only down 2%. Capital was down 2% too, so we performed in line with the market. In our AGM statement made on 23rd January 2003, we announced that in the October to December 2002 quarter like for like radio revenue was down 6% against the same quarter in the previous year. We are anticipating that like for like radio revenue will have declined by 3% in the January to March 2003 quarter. This will result in a 5% decline in like for like radio revenue for the six months to 31st March 2003, which is in line with our expectations. The short term market is very uncertain and we remain cautious regarding future advertising demand. Our plan is to continue to manage the cost base of our business on the assumption that the advertising market remains under pressure for the rest of our financial year.