November 10, 2010 8:56 pm

Johnston Press hit by recruitment ad setback

The decline in advertising revenues at Johnston Press moderated in the third quarter, but the regional newspaper publisher said recruitment advertising continued to fall sharply amid worsening conditions in the job market.

Advertising revenues at the publisher of The Scotsman and The Yorkshire Post fell 5.4 per cent in the 18 weeks to November 6 compared with the same period a year ago, improving on the 6.3 per cent decline in the first half of the year thanks to growth in demand for property and display advertisements.

However, recruitment advertising plummeted 29.1 per cent, dragging down the overall figure. Excluding recruitment, print advertising revenues would have been down 2.5 per cent.

“We were hoping at the start of the year that things would be a little bit better by now,” said John Fry, chief executive. “But while we’re seeing general improvement in some advertising categories, we’re not seeing it within recruitment, where the public sector in particular has stepped down.”

The company does not expect advertising revenue to return to growth until some time next year. Mr Fry said the worse than expected fall in advertising sales would be “largely offset” by increased cost savings, including 335 job cuts since the start of the year and a decision to shift delivery of some local papers to wholesalers. As a result, he said, Johnston should still meet analysts’ expectations for adjusted profit of about £35m ($56m) in the year to this December.

Consensus forecasts are for revenue of about £409m.

Net debt was cut to £388m at the end of October, £13m lower than at the end of the first half.

That allowed Johnston to pull forward the £30m reduction of its facilities scheduled in 2011 to September 30, saving the company about £1m in interest costs in 2011.

Shares in Johnston Press fell 6.3 per cent, or ¾p, to 11¼p.

FT Comment

Regional newspaper circulation has been falling for more than a decade. The recession tightened the squeeze on revenues, as local businesses – from estate agents to hairdressers – curtailed their advertising spend. It looks like a cyclical recovery in advertising has been choked by public spending cuts and weak recruitment demand. With undiluted exposure to the local media sector, Johnston Press is the most vulnerable of the listed regional publishers. Trinity Mirror’s regionals are cushioned by its national newspapers, where ad revenues have already returned to growth, while Daily Mail & General Trust has a robust business-to-business arm that generates two-thirds of operating profit. Johnston shares trade at just less than three times 2010 earnings, compared with Trinity’s four times and DMGT’s 11. The discount, though tough, is fair.

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