Johnston Press back in the black as advertising shows signs of recovery

Published on Tuesday 24 August 2010 21:50

SHARES in Johnston Press jumped 8.5 per cent yesterday after the publisher of The Scotsman announced a return to half-year profit amid an improvement in advertising revenues.

Pre-tax profit at the group, which publishes a raft of titles, also including Scotland on Sunday and the Yorkshire Post, rose to 26.1 million in the 26 weeks to 3 July, compared with a 94.2m loss in the same period last year.

The Edinburgh-based company witnessed a substantial easing in the rate of decline in advertising income, raising hopes that the ad market is on the road to recovery.

Total advertising revenues were down 6.3 per cent in the first half of the year compared to a 18.1 per cent drop in the second half of 2009. Advertising income fell 32.7 per cent in the first half of 2009.

Circulation revenues also proved resilient during the first half of 2010, recording a marginal decrease of 2.8 per cent.

The company continued to make progress on the digital front, with revenue growth in this area increasing 10.9 per cent to 10m during the period.

Shares in Johnston Press closed up 1.25p at 16p as the group also announced that costs were 13.6m lower than the comparable period in 2009.

Chief executive John Fry said advertising revenues in the first six weeks of the second half also gave cause for optimism.

"In the first half the group achieved an operating profit before non-recurring items of 40.5m, up from 38.2m in the prior year. This represents our first operating profit increase reported since 2006," he said.

"As we move into the second half of the year, we have seen the improving trend in advertising revenues continue with total advertising in the first six weeks on a like-for-like basis only down 3.7 per cent.

"Within this performance digital revenues grew by 9.7 per cent. Circulation revenues in July have also performed well and are down only 1.6 per cent."

Fry added that unless there was further substantial deterioration in the UK economy, 2010 results would be "in line with current market expectations". Finance director Stuart Paterson said the group was "getting ever closer to that break even point" on advertising.

"Hopefully it will come if not by the end of this year, early next," he said.

The group has succeeded in reducing net debt by 20.9m since the start of the year to 401.1m.

Analysts at Numis said: "Although Johnston remains a higher risk investment due to cyclical, structural and financial issues, further advertising recovery and tight control of costs should see value transferred from debt to equity holders and our recommendation is buy."