Regional newspaper publisher Johnston Press endured a worse start to 2011 than expected after spending cuts in UK hammered its advertising revenue, and Irish revenues dipped 19 per cent.
The group, whose titles include the Yorkshire Post and Irish newspapers the Leinster Leader and the Donegal Democrat, said total advertising for the first nine weeks of 2011 fell 11.4 per cent compared with a drop of 6.4 per cent for the whole of 2010.
In Ireland, revenues fell to £11 million from £13.6 million a year earlier, although the pace of decline moderated somewhat in the second half of the year, slowing to 15 per cent in the final six months.
"We also saw an improvement in the rate of decline in the Republic of Ireland but this is a result of the comparatives in 2009 being lower rather than any improvement in the economic conditions in that market," the group said in a statement.
The company, which owns the Limerick Leader and Limerick Chronicle newspapers, last year shut down its printing press on Dock Road in Limerick, with the loss of 29 jobs.
The weak trading, together with chief executive John Fry's decision to stand down by March 2012 and a forecast that the economic outlook for 2011 would remain uncertain, sent Johnston shares down more than 20 per cent.
Finance director Stuart Paterson said the advertising market had been poorer than expected. "Once the government got in, public sector recruitment really dropped," he said. The British government has cut its spending on advertising as part of an overall drive to cut its budget deficit.
Johnston shares were down 21 per cent to 9.7 pence by 0850 GMT, valuing the company at around £62 million. The decline wiped out a rally which had carried the stock to a near three-month high of 13.25p earlier this month.
Analysts at brokerage Numis said they had placed their target price for Johnston shares and their recommendation on the stock under review. "Given the lower base, (the) weak start to 2011 and mindful of inflationary cost pressure in newsprint we are downgrading our full-year 2011 pretax profit (forecast) from £40 million to £30 million," they said in a note.
The negative factors overshadowed the fact the group posted its first underlying operating profit increase since 2004, due to cost cuts and stronger digital advertising revenue.
Operating profit rose 3.9 per cent to £72 million, after the group cut total operating costs by £30.1 million, on revenue down 6 per cent to £398 million.
"The board's short-term priority remains debt reduction," it said. "No final dividend is proposed."
The group said it would start looking for a new chief executive after Mr Fry said he would step down from his role by March 2012.
Additional reporting: Reuters
