COMMUNITY media company Archant, whose titles include the East Anglian Daily Times and the Ipswich Star, has seen a fall in operating profits while continuing to invest in its future business development and generating increased digital media revenues.

In a preliminary statement to shareholders, chairman Richard Jewson said results in the year to December 31, saw an operating profit before amortisation and exceptional costs of £6.3million, down 39.5% from £10.4m in 2011, on turnover down 2.7% at £131.4m.

Operating profit for the second half came in at £4.4m, against £7.8m in the corresponding period in 2011, on turnover of £64.9m, down 4.2% from £67.8m in the same period a year earlier.

Revenues from online activities increased to £6.4m over the full year and were up 15% in the second half.

Operating costs before amortisation and exceptional items grew by 0.4%, to £125.1m from £124.6m) after absorbing increased costs of contract printing of newspapers, investment in business development, an increase in the size of the sales force and specific programmes of sales force training.

Despite the pressures on trading results, the business remained cash generative with cash flow from operating activities of £7.6m, against £13.1m in 2011. Net debt at the year end was further reduced, to £15.7m from £17.4m.

Following a recent tax case involving another company, provision has been made in the 2012 accounts for a possible payment to HMRC in respect of Corporation Tax and interest of up to £13m dating back almost 10 years.

“There is likely to be further litigation before the position becomes clear.

“If the company is ultimately required to meet these liabilities, it will do so within its existing banking arrangements,” Archant said.

After one-off costs and the impact of an impairment charge of £4.8m, relating principally to the write down of the value of certain acquired newspaper titles, there was an underlying post-tax loss of £2.2m, against a loss of £1.5m in 2011.

Mr Jewson said: “Archant has had a challenging year but has remained profitable and cash generative whilst making real progress in strengthening its traditional products and in generating increased revenues from digital media. These show through in a satisfactory start to the current year.”

Archant’s annual general meeting takes place at noon on Tuesday, April 23 at the John Innes Centre in Norwich.