Johnston Press issues profit warning as advertisers cut spending

http://www.theguardian.com/media/2015/jul/14/johnston-press-profit-warning-advertisers-cut-spending

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Shares in the Yorkshire Post and Scotsman publisher Johnston Press have plunged as it warned that profits would be cut. The company blamed poor trading around the general election as firms appeared to hedge their bets.

The Edinburgh-based firm said full-year profits would be down by around 5.5% and half year profits by around 5% after it saw a fall in advertising revenues and circulation sales in the 26 weeks to 4 July this year.

It said advertisers chose to hold off and slash spending across print and online amid the uncertainty caused by the election.

Johnston took action to limit the impact, but said half-year profits were still expected to come in below a year earlier, while profits over the full year would now be “slightly below” forecasts in the market.

Its share price fell by more than 16% on the news of the profit warning.

Chief executive Ashley Highfield said: “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.”

He added there were still encouraging signs from digital revenues, which the group has been focusing on to help offset ongoing pressure on print ad sales.

The news comes less than three months after it emerged that Highfield’s pay package more than trebled in the space of a year.

He took home £1.65m pay in 2014, including a £645,000 bonus and awards related to his “golden hello”, as compared to the £592,000 he was given in 2013.

According to one expert, the fall in print advertising around the general election were not peculiar to Johnston Press. Douglas McCabe, chief executive of Enders Analysis, said the firm was not suffering any more or less than any other.

“The biggest risk for publishers is that advertisers change habits: having reduced their spend with newspapers, brands may find their market share is not materially damaged and, therefore, it becomes harder to justify spending again.”

McCabe added that, in order to convince firms to keep advertising, newspaper publishers would be hoping for a renewed retail price war. “Businesses move in packs: if one retailer gains share by marketing effectively, others tend to follow pretty quickly.”

While revenue had been lost, he predicted that the second half of this calendar year would be stronger than the first across the industry.

Johnston Press’s digital revenues were expected to have jumped by around 17% in the group’s first half, while readers visiting its sites are up by more than a fifth.

The group also said there were signs of a pick-up in trading so far in July.

But it cautioned that despite better trading since the election and aims to cut costs to fund revenue growth plans, full-year profits were still likely to be below expectations.

Johnston Press owns around 250 newspapers and 198 websites, including the Sheffield Star and Lancashire Evening Post. Earlier this month, it was announced that the firm had acquired the Brighton and Hove Independent, a free weekly newspaper

Originally founded in Falkirk in 1767, Johnston has been battling to overcome the decline in the wider UK newspaper market in recent years, slashing costs and boosting its online offering.