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Grampian profits by Scot FM sale. TV company doubles its money with #5.25m deal for loss-making radio station

GRAMPIAN Television has sold its loss-making radio station Scot FM for #5.25m to IRG, a Manchester-based company formed last year to build up a chain of local radio stations.

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The full price reflects the strong demand for local radio franchises throughout the UK from media groups keen to share in the rapid growth of radio advertising revenues. Grampian, which completed the deal on Thursday, has virtually doubled the money which it has invested in Scot FM since it launched the Leith-based radio station in September 1994. ``The reason we sold was because IRG approached us and made us an offer which we felt we really had to accept,'' a Grampian spokesman said. Despite the change of ownership, fans of Scot FM's controversial talk show host Scottie McClue need not worry that he will be taken off the air. IRG says it has no plans to interfere with Scot FM's programming and Colin Lamont, who plays the part of Scottie, is an old friend of IRG chief executive Michael Connolly. The two men used to work together at Red Rose Radio in Lancashire in the early nineties. ``We feel we had a great deal to do with bringing Scottie McClue to his present level of professionalism,'' Mr Connolly said. Grampian also remains enthusiastic about McClue, the ``Shock Jock'' with strong and often bigoted views, who specialises in insulting callers to his mid-morning phone-in programme. The Aberdeen-based ITV station said yesterday it was planning to give him his own TV show with a studio audience in September. Mr Connolly said that after teething troubles in its early days Scot-FM was on the right track. He said IRG had been attracted to the station because of its large franchise covering central Scotland and the potential for continuing to grow its audience. The latest quarterly survey by Rajar, the radio ratings agency, shows that 435,000 people listen to Scot FM each week. Most are in the 24 to 44 age bracket. Sixteen percent of the 2.8 million adult population in central Scotland tune in to the station regularly, but Mr Connolly believes that IRG can improve that figure to 20% by the end of 1996. Scot FM has lost #1m a year during its first two years of life, but Mr Connolly sees losses falling to about #250,000 this year. The station should make its first profit in the financial year ending February 28, 1998, he predicted. Mr Connolly said that IRG would bring a ``radio ethos'' to the management of Scot FM, which Grampian as a television station did not have. Grampian chief executive Donald Waters agreed with this. ``The UK radio industry is consolidating into larger groupings and we believe the future of Scot FM lies within such a grouping,'' he said. IRG already operates three local radio stations south of the Border and has won a licence to start up a fourth on Merseyside next year. It ventured into Scotland for the first time in December 1995, buying Paisley-based Q-96 FM. Scot FM is a much bigger prize, but it covers the same area as Q-96, so the Paisley station has been put at arms' length for the time being to comply with the Government's media ownership rules. These will be liberalised once the new Broadcasting Act becomes law later this year and IRG plans to resume full control of Q-96 then. It has sold an 80% stake in station for #880,00 to John Crowther, a wealthy English solicitor, and John Tomlinson, a businessman based in Lytham St Annes, but there is a clause in the sale agreement which allows IRG to buy back the shares within 12 months. ``We would like to buy it back if the legislation allows us to do so,'' Mr Connolly said. IRG raised #9.7m in a placing on the Alternative Investment Market (AIM) in October to provide an initial war chest for buying radio stations. It is now going back to the market for #8.7m to finance the acquisition of Scot FM and the start-up of its new station in the Wigan/St Helens area. This second placing is priced at 115p, an 11.5% discount to yesterday's closing price of 130p. Grampian shares rose 3p to 269p on news that it had got rid of Scot FM, seen by many as an albatross around the company's neck. But Richard Andrews, an analyst with Greig Middleton in Edinburgh, said that with Grampian now sitting on a cash pile of nearly #17m, the shares still looked cheap. Grampian said it planned to undertake new investments in the media and property sectors, but gave no clue as to what what these might be. Last year it bid unsuccessfully to buy the Aberdeen Press & Journal and its sister paper the Evening Express. These eventually went to the Northcliffe group of regional newspapers instead. Grampian has generally kept its investments close to home in the Aberdeen area. That is where Glenburnie Properties, the company's commerial property arm, has concentrated its #11m portfolio of rented office space. The Scot FM venture was Grampian's first attempt to break out of its North-east Scotland heartland. It remains to be seen whether the company will be so adventurous again.

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