Johnston Press plc issues the following trading update relating to the second half of the financial year ending 31 December 2006 and ahead of the Group's preliminary results announcement scheduled for 7 March 2007.
As anticipated at the time of the announcement of our half year results, there has been no discernable improvement in the advertising environment other than that resulting from easier comparatives from the second half of 2005. For the five months ended 30 November 2006 like-for-like print advertising revenues decreased by 8.0%. If the fast growing digital revenues were included this decline would reduce to 7.4%.
The fall in employment revenues, which was 24.2% in the first half of this year, has reduced to 12.2%, reflecting easier comparatives. Difficult market conditions and industry restructuring resulted in motors advertising continuing to experience double digit declines. The retail sector also continues to be challenging. The one category still experiencing growth is property advertising, albeit at a slower rate as the comparatives get tougher.
Newspaper sales revenue continues to grow on a like-for-like basis with increased cover prices more than offsetting declines in circulation.
The increase in organic digital revenues continued throughout the period despite reduced in-paper employment volumes, which through packaged selling have been a significant driver of digital revenue growth. Value added services such as CV matching and our online Local Business Directories continue to be popular with our advertisers. To further accelerate the rapid progress we are already making in this area, the Group is proposing to spend an incremental £5.0m in 2007 on increased marketing and development of our digital activities.
The integration of last year's acquisitions continues to progress well and all are on track to meet our expectations as well as being earnings enhancing in calendar year 2006.
The new printing facility at Dinnington, near Sheffield, is ramping up volumes ahead of anticipated levels, which has allowed the Group to close an existing press at Hartlepool which was not part of our original plan. Together with the closure of two ageing presses in Northern Ireland, this will result in the non-recurring costs for the year being nearer to £6.0m rather than the anticipated £4.0m indicated at the time of the half year results.
In view of the accelerated closure of older equipment made possible by the new press investment programme already exceeding expectations and reflecting reduced print volumes, we plan to take a one-off, non-cash, depreciation charge of £9.0m in the full year results. This anticipates a shortfall in sale proceeds from redundant equipment compared to current net book values.
Looking forward, the Board does not see any early indication of improvements in advertising markets other than those coming from easier comparatives. However, 2007 will benefit from the News International contract running on the new press in Dinnington and this, together with the ongoing contribution from recent acquisitions and continued efficiency improvements, should help to mitigate the impact of any continued weakness in advertising demand.
Tim Bowdler, Chief Executive or Stuart Paterson, Chief Financial Officer
Johnston Press plc
Tel: 0131 225 3361
Richard Oldworth/Suzanne Brocks
Tel: 020 7466 5000