Radio setback for SMG

TROUBLED Scottish media group

The decision to write down the 29% stake in SRH is understood to have been forced on it by auditors, who insisted that assets be represented on the books at 'fair value' when the group announces full-year results shortly.

The move is a blow for the strategy of SMG chief executive Andrew Flanagan, who has been accused of overpaying for acquisitions as he tried to build the group into a multi-media company. Flanagan bought the stake in SRH for £147 million last year and paid £225 million in 2000 for Ginger Media Group, which includes Virgin Radio.

Flanagan was severely criticised by Granada, one of SMG's biggest shareholders, for his decision to buy into SRH at £15 a share. Since then, SRH's share price has plummeted, closing last week week at 860p.

SMG issued a statement last Friday stating that it was still in discussion with banks over its borrowing and would announce its results when the discussions were completed. It insisted it could satisfy all its financial obligations and that its underlying results would be in line with market expectations.

SMG sources also insist that the decision to write down SRH, the largest radio broadcaster in Scotland with 15 stations as well as more than 40 local newspapers, does not affect Virgin Radio.

SMG was thought to be aiming to make a full takeover bid for SRH in the long term when media ownership rules are clarified.