Newspaper publisher Trinity Mirror warned yesterday that advertising markets remained in the doldrums as it met forecasts with a 5.9 per cent rise in underlying annual profit, helped by tight cost controls.
"The pressure on earnings continues as there is as yet no sign of improvement in our traditional advertising markets," chairman Sir Victor Blank said.
Sir Victor has said he will leave Trinity in May after its annual shareholder meeting.
The Daily Mirror and Birmingham Post owner made £220.9 million profit before tax and exceptional items in the 52 weeks to January 1, on revenues down 1.3 per cent to £1.11 billion.
Operating profit increased by 1.7 per cent to £250.2 million.
Cost control helped widen its margin to 22.5 per cent from 21.8 per cent amid falling advertising revenue, including a "sharp decline" in the recruitment category, Trinity's most profitable sector.
For 2006, the company saw pressures coming from both the cost and revenue sides.
Sir Victor said that alongside tough advertising markets, "we also anticipate significant cost pressure from newsprint price increases of seven per cent, increasing energy costs, increased labour costs and other inflationary increases".
Finance director Vijay V aghela said group advertising revenues for January and February were down 13.5 per cent.
"We will see an improving trend in the second half as the comps (comparative figures for 2005) get easier," he added.
Annual advertising revenue at Trinity's Regionals division fell 2.7 per cent to £403.7 million, following a seven per cent decline in the second half. Ad revenues at the Nationals division fell 9.2 per cent to £176.2 million, within which UK Nationals were down 11.4 per cent and Scottish Nationals down 2.6 per cent.
Trinity's Racing Post, published seven days a week for the horseracing community, bucked the trend elsewhere with circulation revenues up 4.5 per cent to £32.6 million.
The company's magazines and exhibitions division, which runs the National Boat, Caravan and Outdoor Show, saw revenues rise 3.2 per cent to £32.7 million.
Mr Vaghela said Trinity's £250 million share buyback programme had been cancelled with just over £50 million spent.
The group exceeded its annualised net cost savings target of £35 million by £5 million. Further net savings of £15 million are projected for 2006.
It is actively pursuing its digital strategy which has seen the acquisition of four on-line advertising businesses and a small traditional recruitment consultancy for £92.7 million.
Of the move, chief executive Sly Bailey told the Stock Market: "Our initial focus has been in the key classified category of recruitment advertising and during the year we launched a total of nine local recruitment sites. Our aim is to win strong, profitable positions on-line that complement our print brands."
Meanwhile the Regionals division had improved both operating profit and margin "despite extremely difficult revenue conditions".
In a letter to employees, Ms Bailey added: "We have had to take some very tough decisions over the last 12 months or so, and I am well aware of the impact these decisions have on everyone working in our business.
"However, we have to act in the long term interests of the group and its total workforce, and that means taking a pragmatic approach to the issues we face.
"This is not the first time the media industry has been affected by a cyclical advertising downturn, and it won't be the last.
"Time and again we have shown our resilience and the foundations of our group have never been stronger than they are today. The doom-mongers have been predicting the demise of the newspaper business for decades, and yet here we are successful, profitable and publishing titles read by millions every day.
"2006 will be another tough year, but we are well prepared for the challenges ahead."
The final dividend was set at 15.5 pence, making the total dividend 8.4 per cent higher at 21.9 pence. Shares closed down 5p at 5751/2p.