Guardian Media Group’s regional newspaper division has seen operating profits fall to £21.6m, according to the group’s annual report.

A “static advertising market coupled with a defection of readers and advertisers to the Internet” resulted in the fall for the year to April 2, compared with operating profits of £34.4m for the previous year.

The division publishes the Manchester Evening News and Reading Evening Post, along with 41 weekly papers in Greater Manchester, Cheshire, Lancashire, Surrey, Berkshire and Hampshire, and also runs several newspaper-related websites and the TV station Channel M.

Turnover was down seven per cent to £126.8m, and the group said advertising revenues were “severely depressed” during the year, but had recovered in the first quarter of 2006, resulting in year-end revenue of £105.7m, down 8.4 per cent on 2005.

Chief executive Sir Robert Phillis, who retired on Monday, said the division’s recruitment revenues had been the most seriously hit, with a 17.8 per cent decline year-on-year.

He said: “The division is developing a more flexible range of media options for our advertisers which will address a number of key issues over the coming year.

“All advertising sales functions have been brought together under the banner of MEN Media Sales, with responsibility for commercial revenues across all media platforms in Greater Manchester.

“MEN Media Sales will shape advertising sales strategies to meet the varied future requirements of advertising clients.”

For the group as a whole, which also includes the national newspaper division, Trader Media and GMG Radio, turnover from continuing operations was £700.3m, down 0.7 per cent, pre-tax profits rose to £66.4m and operating profits, excluding exceptionals, fell to £116.4m from £127.2m the previous year.

Chairman Paul Myners said: “These are a very satisfactory set of financial results in what have been difficult trading conditions across the media sector in general, and the national and regional press in particular.

“It has also been a year of very considerable investment in both our traditional publishing activities and in the digital/electronic publishing future.”