Gannett Blames UK House Price Slump for Flunking Earnings Forecast

11 June 2008

McLEAN, Virginia: America's largest newspaper publisher The Gannett Company - flagship title USA Today - is unlikely to meet its 2008 earnings forecast and has incurred an impairment charge of up to $3 billion (€1.91bn; £1.52bn).

The bad news beans were spilled by Gannett cfo Gracia Martore, addressing an investor conference in New York this week.

He told the assembled moneymen that the writedown is largely due to declining value in Newsquest, its UK unit and that nation's second largest newspaper publishing business.

Acquired by Gannett in 1999, it employs about 8,500 people. With a portfolio of seventeen regional dailies and nearly 300 provincial weeklies, Newsquest's UK titles have a combined readership of more than 13 million.

Martore put a positive spin on the bad news, stressing that the write-down is a purely accounting issue that will not affect Gannett's day-to-day business operations. With about 228 million shares outstanding, the company has a market capitalization of about $6.26bn.

While Gannett ceo Craig Dubow on Monday attempted to inspirit US and UK staff with an upbeat email: "Let me begin by assuring you that the company remains healthy," he wrote.

"This charge will not hold us back in any way: we can pay our dividends and our debts, make strategic acquisitions and investments, and repurchase shares of our stock. There is no impact on our strong cash flow.

"Basically, this charge is a result of the challenging business environment and worsening economic conditions in the US and UK. As I'm sure you know, these conditions have had a significant impact on our stock price. Under current accounting rules, this requires us to take a non-cash impairment charge to reflect the change in stock value." 

Dubow claims that Wall Street is unduly bearish as to Gannett's prospects. "I believe our strengths are getting undervalued way too much," he said.

And in a rallying cry to the troops he assured that Gannett will rebound once the economy turns around.

Data sourced from USA Today; additional content by WARC staff