November 11, 2009 / 7:33 AM / 9 years ago

UPDATE 2-Johnston sees profit meeting view, shares up

* Ad decline slows to 22 pct in first 18 weeks of H2

* Full-year cost savings seen at 50 million pounds

* Says no decision taken on capital raising

* Shares up 4.6 percent

(Adds comment by company, reaction, share price)

By Georgina Prodhan and Paul Sandle

LONDON, Nov 11 (Reuters) - Johnston Press JPR.L, Britain’s biggest publisher of regional newspapers, expects to meet market expectations for its full-year operating profit as an advertising decline slows, it said on Wednesday.

The company said total advertising revenue fell 22 percent in the first 18 weeks of the second half from 33 percent in the first half.

“Recruitment advertising had got consistently poorer since the start of the year, whereas property started to see more encouraging signs in the second quarter and has continued,” Chief Finance Officer Stuart Paterson said in a call with reporters.

Johnston said more stabile advertising revenues, combined with cost savings, meant it was confident of delivering an operating profit in line with current market expectations for 2009 of about 62 million pounds ($104 million).

Britain’s regional newspaper industry has been hit hard by a severe downturn in classified advertising, but signs have been emerging that declines may be bottoming out.

Gannett (GCI.N), the largest U.S. newspaper publisher, last month reported an improvement in classified advertising in the quarter, including at its British unit Newsquest, the UK’s second-biggest regional newspaper publisher after Johnston.

Classified ad revenue at Newsquest, whose titles include the Glasgow Evening Standard and the Oxford Mail, fell 35 percent in the third quarter — an improvement of 10 percentage points on its second-quarter year-on-year decline.

RECOVERY POTENTIAL

Shares in Johnston, which touched a more than 10-year low of 4.8 pence in March, were 4.6 percent higher at 28 pence by 0924 GMT. The DJ Stoxx European media sector index .SXMP was down 0.6 percent.

Broker Numis, which recently raised its rating on the stock to “buy” from “hold”, said the company continued to work hard on costs.

“Whilst we see long-term structural challenges in the regional press we believe the downturn in the industry’s revenues has been overwhelmingly cyclical and that a suitably geared business would look attractively valued given the recovery potential,” the broker said in a note.

Analysts had been hoping for a rights issue at Johnston, which recently agreed an expensive new three-year facility with its lenders, as market appetite for equity increases, but Paterson disappointed them on Wednesday.

“The refinancing gave us the flexibility to pay down debt in whichever way we chose,” he told reporters.

“One of the things we have to evaluate is the benefit to shareholders of whatever path we take, whether that’s trading through the cycle with the flexibility our new finance arrangements give us or whether it raising capital.”

Johnston said it expected further progress in cost-cutting, with its full-year reduction seen at about 50 million pounds.

It added that it would write off the book value of 20 million pounds for two printing presses it closed last month, and would incur exceptional costs of close to 12 million pounds for redundancies.

The group said circulation revenue at its titles, which include The Scotsman, Yorkshire Post and Sunderland Echo, continued to decline at about the 1.9 percent rate recorded in the first half.

No disposals were on the cards, however, as Paterson said there was little appetite from buyers. ($1=.5973 pounds) (Reporting by Georgina Prodhan; Editing by Greg Mahlich)

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