Tough quarter for Gannett


Broadcasting revenues fell 5.9% in Q2 at Gannett, while newspaper ad revenues plunged 13.5%. The company managed to his its earnings target of $1.02 per share, down from $1.24 a year ago. However, the results reported this morning are only preliminary, since Gannett still has to calculate non-cash charges of $2.6-2.9 billion largely related to its UK operations.

With the Summer Olympics coming in Q3 and political advertising picking up, CEO Craig Dubow is projecting that revenues for the current quarter will be up in the mid- to high-single digits for the company’s TV group.

Broadcasting revenues were down 7.9% in June to $56.5 million. That brought Q2 to a decline of 5.9% to $192.6 million. That includes the Captivate in-elevator video service. TV alone was down 6.5%.

Gannett’s TV group is comping against $29 million of Olympic revenue in Q3 2004 and $22 million of political.

“As we look forward…the Olympic business with primary sponsors is a little slower than we had anticipated. However, there seems to be a pickup at this point from our political as we go across the board. We certainly would anticipate that we’re going to see that have some other impact to the positive as we move into the Olympics and certainly from that into the bigger spending from September on to the election time,” Dubow said in the Q&A session with analysts. But he noted that some traditional business categories are soft, with auto the “most difficult category.”

One analyst wanted to know how Gannett might be affected as NBC, as announced earlier this year, tries to move toward reverse compensation from its affiliates. Dubow noted that his company’s NBC affiliation contracts run through 2015, so there’ll be no change soon in network comp. CFO Gracia Martore noted that network comp is “very minor” for the TV group these days, and any decline will likely be more than compensated for by cash payments from cable MSOs for retransmission consent.

But that’s television – and Gannett is the nation’s largest newspaper company. Q2 publishing ad revenues plunged 13.5% to $1.11 billion. Retail dropped 8.3%, national 14% and classified 18.7%.

For the entire company, operating revenues fell 10.2% to $1.72 billion and operating cash flow dropped 20.3% to $429.9 million. Broadcasting division operating cash flow was down 6.8% to $89.4 million and publishing division operating cash flow dropped 24.7% to $345.4 million.

RBR/TVBR observation: If you think the advertising market is tough to deal with, at least broadcasters aren’t impacted as much as newspapers by rising commodity prices. Newsprint prices are at record highs, so Gannett and many other publishers are reducing their page sizes, printing fewer pages and using cheaper, thinner paper. But then, it also takes gasoline to get those papers distributed. This, as general ad sales are soft and classified is going into the tank.