The full report can be downloaded here.
Chief Executive’s (John Fry - pictured) Half Year Statement
“The Group achieved an operating profit (before non-recurring and IAS 21/39 items) of £33.3 million despite the challenging UK economic environment of the first half of 2011, down 17.6% on the first half of 2010.
Display revenues continue to perform relatively well and are proving resilient. However, the deterioration of employment print advertising revenues has resulted in the year-on-year total revenue decline of -7.5% in the current period. Digital revenues were down 5.0% in the first half with online trading being impacted by the difficult employment conditions and resultant reduced up-sell from the printed product. Conversely, digital display revenues have performed well and the Find it business directory offering has shown strong growth since its launch in March. Performance in these areas in particular has reversed the year-on-year declines seen in digital in the first quarter to increasing levels of growth in May and June.
We are delighted to announce two new digital partnerships with Zoopla and Nimble Commerce, for property and online vouchers respectively. Zoopla will replace our in-house developed property website and provide a much enhanced experience for our viewers and greater audience response for advertisers. Our partnership with Nimble Commerce takes the Group into the rapidly growing vouchers market. As we possess unique access to both local audiences and advertisers we believe the Group is well placed to source deals for local consumers. A launch under the Deal Monster brand is planned for the last quarter of this year.
The Group has continued to make cost reductions with an element from a reduction in full time equivalent headcount, down from 5,228 at the start of the period to 5,049 at the half year. Total costs (before non-recurring and IAS 21/39 items) in the period were £8.3 million less than the first half of 2010, despite significant increases in newsprint price costing the Group an additional £4.2 million year-on-year.
The Group’s operating cashflow remains strong supported by tight control of working capital and low capital expenditure. This enabled net debt to be reduced by £16.0 million over the period to £370.7 million. The reduction in debt remains a focus for the Group and costs continue to be closely managed.
Earnings per share (EPS) before non-recurring and IAS 21/39 items were 1.84p (2010: 2.22p). The reduction in EPS reflects the difficult trading conditions in the first half of 2011 and the increase in newsprint cost.
In order to preserve cash and continue to reduce net debt, no interim ordinary dividend has been proposed.
Outlook
We continue to be cautious about the advertising outlook for the second half of the year with total print advertising revenues in the first seven weeks down 8.1%. The rate of decline in print employment revenues is reducing as the 2010 comparables reflect the fall off in this category which started in the second half of last year.
Digital revenues, which returned to year-on-year growth in May, have continued to grow in the second half with the first seven weeks showing an increase of 6.8% on the same period in 2010. Circulation revenues continue to perform well.
Operating cash flow within the Group remains strong with further cost savings and debt reduction achieved. We will be commencing the process of refinancing our borrowings in the second half of the year with a view to completing this in the first quarter of 2012. Our current facilities are due to expire in September 2012.
In the absence of a further deterioration in the UK economy, the Board is confident that the outcome for the Group in 2011 will be in line with current expectations.”
