Johnston Press, the regional newspaper group behind more than 300 local and regional titles including The Scotsman, recently announced a 4.8% dip in profits.
Operating margins were down nearly 2% to 30.9% and overall advertising revenues were down 1.5% in the six months to 30 June.
Nevertheless, chief executive Tim Bowdler remains sanguine about the future of regional newspapers. He says Johnston's profit margins, while slightly dented, still outstrip those of rival regional publisher Trinity Mirror.
Furthermore, the rate of decline in advertising revenues has slowed considerably, down 2.9% compared to 9.2% in the second half of 2006.
Bowdler says: "In July, we actually saw a small increase in ad revenues for the first time in nearly two years. Our trend line suggests that we are seeing a bottoming out."
If consumer confidence, and employment and property advertising withstand the latest interest rate increases, the regional press should be boosted, he adds.
Bowdler also has high hopes for Johnston's digital revenues, which grew by 33.5% over the past six months, with unique users nearing eight million per month.
And yet, despite such rapid growth, internet advertising accounted for just £71m, or 2.5%, of total regional press advertising revenues in 2006, says an annual survey from the Newspaper Society.
Digital potential
"Internet advertising is growing and is contributing to profits. I am in no doubt that digital will be a growing part of total revenues, but we are coming off a very small base," Bowdler concedes.
Formerly an engineer, Bowdler took the reins at Johnston Press in 1994 as a complete outsider, but quickly put his stamp on the industry with a bold and swift acquisition strategy, buying up first the Halifax Courier, followed by Portsmouth and Sunderland Newspapers in 1999.
He went on to acquire Regional Independent Media - publisher of the Yorkshire Post - in 2002, and bought Scotsman Publications from the Barclay brothers in 2005.
The latest splurge put Johnston Press ahead of Northcliffe Media and Newsquest as the second- largest regional newspaper group behind Trinity Mirror.
While refusing to comment on specific titles he is eyeing - Trinity Mirror has said it will finalise the sale of the The Birmingham Post and Coventry Evening Telegraph by the end of September - Bowdler makes no secret of Johnston's acquisitive ambitions.
"We're the size we are because we have done a number of deals, but those deals have to be the right sort of properties and add value to shareholders," he says, predicting further consolidation across the industry.
"There are more deals to be done. I believe that consolidation is broadly a good thing; it provides a better-resourced and a better-funded industry," he adds.
Johnston Press, like most regional publishers, has invested heavily in online over the past 12 months, ploughing £10m this year into direct digital activities. Bowdler expects to spend even more in, 2008, as the group develops and promotes its 340 websites, including the recently relaunched Jobs Today site.
Integrated newsrooms
One of his proudest achievements as chief executive is the roll-out of fully integrated print and internet newsrooms to all Johnston's daily and larger weekly centres.
In a rolling news conference, journalists can gauge the response to online stories and react accordingly in print. They can also break news online for the first time.
"It is hugely exciting," Bowdler says. "We lost the ability to break news, but we are now breaking news of local events ahead of the BBC and broadcast media generally."
More importantly, the surge in online activity has in no way dampened circulation of the printed product, according to Bowdler.
"Breaking news online stimulates interest in those stories because it gets them more widely disseminated," he says.
"The newspaper doesn't repeat what's said online; it gives a different angle that adds to the news experience."
Bowdler is passionate about engaging with local communities - through blogs, chatrooms and "intelligently managed" citizen journalism - to extend audience and advertiser reach. Johnston launched 68 free community newsletters in the first half of 2007, targeted at relatively small rural and urban communities.
The newsletters carry very local content and a greater amount of local advertising than would be appropriate in some of the larger titles, at a reduced cost.
It is all part of a strategy seeking to provide readers across the UK with the specialised community content that is missing from national papers, and even from local radio.
If Bowdler's optimism is a measure of industry fortunes, the future's bright and it is local
CV
1997: Chief executive, Johnston Press
1994: Group managing director, Johnston Press
1992: Divisional managing director, Cape Building and Architectural
Products
1990: Divisional managing director, Cape Architectural Products
1989: Director of northern division, Tyzack & Partners
1987: Managing director, Chloride Motive Power
1984: Managing director, Spooner Industries
1981: Director and general manager, Sandvik Steel
1977: General manager, business operations, RHP Bearings
1975: Commercial manager, RHP Bearings
1969: Graduate trainee, GKN Sankey