JOHNSTON Press saw its shares slip yesterday after it said recruitment advertising revenues fell by nearly 23percent in the second half of its financial year.

"Looking forward, the board does not anticipate any early marked improvement in advertising revenue streams, " the company said in a pre-close trading statement.

Edinburgh-based Johnston, the UK' s fourth-largest local and regional newspaper publisher, said like-for-like recruitment advertising revenues for the five months to November 30 fell by 22.9percent, while overall revenues fell by 6.7percent.

More encouragingly, newspaper sales revenues grew over the second half - more than offsetting a modest overall decline in circulation - while internet revenues continued to show strong growth.

"An increase of 29percent in online employment advertising was driven by strong growth from our recently launched CV matching service and increased packaging of added-value online services with our print publications, " the group said. It described 2005 as a "year of progress" and said it expected 2006 to be "satisfactory".

In response to speculation that it could be a possible bidder forNorthcliffe Newspapers, the regional press business and owner of Aberdeen's Press & Journal put up for auction by Daily Mail & General Trust last month, Johnston said the move "confirms the group's long-held view that ownership changes and consolidation in the sector are likely to continue".

It went on: "Whilst we will take an interest in developments, this will only be done in the context of creating value for our shareholders and in the belief that this is unlikely to be the last significant structural change in our industry."

Stuart Patterson, chief financial officer, said overlaps between the Johnston Press and Northcliffe newspaper titles could cause regulatory concerns if it did decide to make a bid for Northcliffe. "The largest area would be Lincolnshire where we have quite a lot of titles, but Northcliffe also has a lot of titles."

Analysts believe Northcliffe could fetch about [GBP]1.5bn, but Patterson said financing a deal would not be a problem if it decided to make a bid.

On the advertising market Patterson said the fall in recruitment revenues was partly due to lower consumer confidence, making employers more cautious about replacing staff. He added: "We do not expect any significant improvement (in 2006) from where we are now. I think it will be difficult in the first half of 2006 (but) I think it will get easier in the second half."

The sale plans forNorthcliffe had been viewed by some analysts as symbolising the longterm decline of regional newspapers - hit by reduced profitability and declining advertising revenues.

However, Patterson insisted that the long-term future of regional newspapers was bright. "The penetration (for advertisers) we can give in local markets is unrivalled online and for print. It's our unique selling point. In most of the markets that we operate in, we are by far the leading media business."

Johnston shares fell 20p to close at 457p.