THE attempt by Daily Mail and General Trust (DMGT) to put a high price tag on its regional newspapers will depend on whether would-be buyers are willing to believe that the prevailing slump in classified advertising is temporary.

Classified advertising was down by 1.7 per cent in the second half of the year to October 2, fuelled by a collapse in recruitment advertising, which tumbled 10.9 per cent in the second half — and by 16 per cent in the last quarter — mirroring trends seen across the publishing world.

DMGT executives, and their rivals in the sector, say that the problems simply reflect the economy, in which unemployment is rising, implying that the number of jobs on offer is declining. “This is cyclical,” Charles Sinclair, the chief executive, said.

Peter Williams, the finance director, said: “Local newspapers are all about local relationships — there’s no way Google is going to be able to know more about a place like Hull than the local newspaper does.” Among the titles owned by DMGT is the Hull Daily Mail.

Johnston Press, a rival local newspaper owner, agreed. Tim Bowdler, its chief executive, said: “(It is) very much a cyclical issue. We’re not saying the internet won’t hit local papers, but there is very little evidence of that happening.”

However, venture capital sources and City bankers were not so sure. Advertising is crucial to the local newspaper business, accounting for two thirds of revenues of Northcliffe Newspapers, the publisher of regional titles such as the Aberdeen Press & Journal.

One adviser pointed to Emap’s recent results announcement, in which the publishing group gave warning that revenue from classified job advertising was down 26 per cent in the first half for Nursing Times. The trade magazine had been hit after the NHS launched its own recruitment website. Other employers are experimenting with using the internet to advertise jobs directly. J Sainsbury, the supermarket group, operates its own online database of jobs, reducing its need to place adverts.

DMGT has also tried to protect its classified advertising base, and in 2003 bought Jobsite, an online recruitment service. Jobsite, which is not up for sale, helped the company’s internet activities to improve revenues by 74 per cent in the year to £30 million.

Classifed advertising was similarly weak at Associated Newspapers, the DMGT business that houses the Daily Mail itself, its Sunday sister paper and the London Evening Standard. In September, classified advertising was down nearly 18 per cent year on year, and the more lucrative display advertising was down almost 10 per cent.

Internet growth helped to keep Associated’s overall revenue flat at £878 million, while operating profits were up 5 per cent to £95 million.

Elsewhere, the company’s electronic information arm improved profits by 43 per cent to £52 million, demonstrating the pace of growth elsewhere.

Overall, full-year pre-tax profits were £162.9 million, up 31 per cent, on flat turnover of £2.14 billion. The dividend is 12p, up from 11p last time.

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