Johnston Press reported on 11 March 2009 that total advertising revenues for the first 9 weeks of the year were down 35.9% on the same period in the prior year. Over the 19 weeks to 9 May 2009, total advertising revenues were down 34.4% compared to the same period last year.
Whilst advertising revenue has reduced in the first 19 weeks of 2009 compared to the second half of 2008, there has been greater stability over recent weeks.
The Group continues to reduce costs in order to offset the impact of lower revenues. Year-on-year costs are expected to reduce by over £30m, despite the increased cost of newsprint. These cost savings will mean that non-recurring and redundancy costs for the year will be in the region of £8.0m. Whilst these cost savings are encouraging, they will be not be sufficient to offset the fall in advertising revenues which are running below market expectations. This means that operating profit for 2009 is likely to be towards the lower end of current market expectations.
Given this backdrop it is likely that there will be further impairment charges against the carrying value of publishing titles and goodwill at the half year.
The business continues to be cash generative and net debt at the end of April 2009 was £448m down £29m from the start of the year. £13m of this reduction was due to the strengthening of Sterling against the Euro and £16m was cash generated from operations. This level of cash generation is particularly encouraging given that it has been achieved during the seasonally weakest months for cash generation in the Group's financial year.
The Board confirms that the sale process being conducted to dispose of the Republic of Ireland titles has now been terminated. While there was considerable interest shown from both trade and financial buyers, the Board decided that it was not at a sufficiently high price to be in the Company's best interest.
As stated in March 2009 in the Company's preliminary results, if the sale of the Irish businesses were not successfully completed, there would be a strong likelihood of a breach of a financial covenant in the Group's debt facilities during 2009. Given such uncertainty, the Group had begun discussions with its debt providers to obtain a relaxation in the debt covenants, as well as putting in place more appropriate facilities extending beyond September 2010. Those discussions, which have so far been constructive and supportive, continue with all of the Group's providers of debt. The Company expects to have the refinancing discussions completed and new facilities in place before its half year announcement in late August.
John Fry (pictured), Chief Executive commented: "Whilst our market remains fragile, we have seen some stability in advertising revenue over recent weeks, our cost reduction programme is on track, and we are making good progress in the discussions with our debt providers. This gives us encouragement that we will be well placed to benefit from any recovery in the economy as and when it emerges."