Regional newspaper company Johnston Press said today it was not expecting any improvement in advertising in the second half of the year as it reported a rise in pre-tax profits.

Johnston, the fourth largest regional publisher in the UK with 241 titles including the Yorkshire Post and Sunderland Echo, said advertising revenues had been down 0.8% in the first six months of the year.

That represents a slowdown from the 1.4% growth recorded between January and April, and 2.6% in the first two months of the year.

Employment advertising was the worst affected category, down 9%, while motors was another area in decline, Johnston said.

"There's no disguising the fact that the marketplace is more difficult, particularly so for employment advertising," said the company's chief executive, Tim Bowdler.

"It's really a reflection of confidence levels dropping generally. Times are tough in the high street and employers are looking hard at whether they fill vacancies."

Mr Bowdler said May had been the worst month, when revenues was down 4.7% partly as a result of the general election, which cut off government advertising and saw advertisers squeeze their budgets.

Johnston's woes continued into last month, when advertising revenues were down 3%.

As for the rest of the year, Mr Bowdler painted a gloomy picture.

"We see no fundamental reason why it should change significantly in the second half, though the comparatives do get easier ... but we'll keep a tight rein on costs and continue to work hard to grow the top line."

The Edinburgh-based group said newspaper sales had been flat over the course of the first six months of 2005.

But the group's other revenues performed well, up 8%, spearheaded by internet revenues, which rose by nearly a third.

Mr Bowdler said 40,000 people had registered with the company's CV matching service, which directs them to the right advertisements for them.

Johnston runs the Jobs Today portal, which is embedded into its 220 regional websites, and it is also planning local online auction services modelled on eBay.

Like other regional newspaper groups, it is increasingly keen to improve its online presence in classified advertising.

While it is concentrating on organic initiatives, it is not ruling out an acquisition.

Together with Daily Mail & General Trust and Trinity, Johnston is reported to be interested in buying recruitment advertising business Hotgroup, thought to be worth around £50m.

"It's not surprising when Johnston Press gets linked to various things going on in the market," Mr Bowdler said.

"Our main emphasis is on organic growth ... but if we can identify an internet business that fits our strategy and moves us forward we would certainly be interested. But we haven't currently acquired anything of that sort."

Johnston reported today that turnover was up 1.2% to £264.6m in the first six months of 2005, while pre-tax profits rose 9.3% to £82.2m.