Shares in Johnston Press [JP], the local newspaper publishing group (and publishers of the weekly Peterborough Telegraph) have dived more than 16per cent as JP warned that full-year profits would be hit after advertising sales 'declined more sharply than expected' in the first half of the year.
That compares with a drop of 4.3per cent in the first half of 2014.
Analysts predicted the company will now take longer than previously forecast to pay its first dividend since 2007. The slide in its share price means the company now has a market capitalisation of only £125.5m, which is less than the £160m it paid to acquire The Scotsman alone a decade ago.
Johnston Press publishes some 200 titles of varying scale, but all local and regional newspapers have been hit hard as classified advertising moved online to platforms such as Google and eBay. The local newspaper was also dubbed by wags as the 'Petertorygraph' as it relentlessly promoted Tory MPs and Tory Councillors as 'star columnists' much to the dismay of its readers...
The trading environment has been challenging during the first half of the year. Although the company traded well in the first quarter, the second quarter has been impacted by a slowdown in general trading as well as specific weakness in the run up to, and the period immediately after the election. Based on most recent indicators, July is expected to show an improvement.
During the 26 weeks to 4 July 2015 ('the period') total revenue is expected to fall by approximately 5% year on year (compared to 4.3% for the first half last year, 2014). Total advertising revenue is expected to fall by some 5% (compared to 4.6% for the first half last year). In the second quarter, around the time of the election, a number of national and local advertisers chose to reduce or delay their spend in both print and online. Circulation revenue is also expected to fall by some 5.5% during the period, while circulation volumes are showing a small improvement in the decline rate. Management took action to mitigate much of the revenue reduction in the period, limiting the impact on profits.However, first half profits are likely to be marginally below last year.
Our digital audience continues to grow with average monthly unique users growing by over 20%. Digital revenues also continue to grow, and we are expecting to report growth of some 17% in the period. With pleasing growth expected from its 1XL digital advertising exchange partnership, and further digital product releases during the second half, the business expects to achieve its digital revenue growth targets.
The business continues to deliver strong cash flows, and has reduced net debt, in line with expectations.
As a result of the off-trend trading in the second quarter, the business enters the second half from a lower base than planned, and revenue trends, whilst expected to improve, may be impacted by market volatility during the rest of the year.
The group will continue to invest to drive revenue growth, but will also continue to make cost savings, to fund that investment. However, at this stage, we anticipate full year profit will be slightly below market expectations.
Ashley Highfield, Chief Executive, commented; "Trading conditions in the first half of 2015 have undoubtedly been challenging, especially in the period around the General Election - a time when there was also a high degree of uncertainty in the wider market. Whilst we expect this will have an impact on profit both at the half year and the full year, there are positive indicators coming through with digital growth and continued strong cash flow."
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