Gannett suffers from housing downturn

In a reversal of fortunes, falling UK house prices began to have an impact on one corner of the US economy as Gannett reported it was likely to miss earnings forecasts and reported an impairment charge of up to $3bn.

The US newspaper publisher blamed its Newsquest arm, the UK’s second-largest regional newspaper chain, for the worst performance as property advertising led the way downhill.

Craig Dubow, chief executive, told an investors’ conference in New York that the downturn in revenues had begun in the second week in March.

“It has been consistently declining from that point,” Mr Dubow said.

“What we’re expecting is similar if not tougher.”

Gracia Martore, chief financial officer, said much of the writedown, which will be in the range of $2.5bn to $3bn, reflected the declining value of Newsquest. She emphasised this was mostly a technical step to reflect the fact that Gannett’s share price had roughly halved in the past year.

Until this announcement, the performance of the UK newspapers had exceeded much of Gannett’s US business as the decline in advertising revenues struck American titles first.

Richard Menzies-Gow, analyst with Dresdner, said: “I think this shows very much what we have been seeing in the UK regional newspaper market. Q1 was OK, but everything fell sharply in April and into May.

“June, we have been hearing, is still pretty tough. In local press, as in radio, you do tend to see things working through from the general economy pretty quickly.

“You have to say it is looking pretty bleak. There is a lot of gallows laughter out there.”

Other UK newspaper groups have reported significant falls in revenues, with a 9 per cent drop shown in Johnston Press’s figures last month as it announced a rights issue to reduce debt.

Both Trinity Mirror and Daily Mail and General Trust have released similarly morose assessments of the second quarter of the year.

Ms Martore said that Gannett still had faith in its UK investment.

“I don’t think it reflects that Newsquest was a bad acquisition,” she said, predicting second-quarter earnings that would come in about $1.01 to $1.03 per share, below a consensus estimate of $1.06.

– By Ben Fenton

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