Johnston Press profits fall by half

Print advertising revenues at regional newspaper publisher slump by 12.5%, but digital revenues rise 8.4%

Johnston Press saw adjusted pre-tax profits almost halve to just over £8m in the first half of 2012, as print advertising revenues slumped by 12.5%.

The regional newspaper publisher, which owns about 250 titles, reported operating profit in the 26 weeks to 30 June rose by 16% to £37.8m.

However, a £30m one-off windfall from News International following the partial termination of a long-term contract boosted the regional newspaper publisher’s bottom line. If this windfall is stripped out pre-tax profits fell by 48.6% year on year from £15.69m to £8.06m.

On the company’s preferred measure of underlying profitability, operating profit before non-recurring items fell just 8.7% to £30.4m.

In addition, Johnston Press has maintained margins at 17.3%, well ahead of a typical market average of 10% to 12%.

Johnston Press also recorded more than £20m in one-off costs, including staff redundancies, which hit its bottom line. Staff numbers were reduced by 8.5% year on year in the first half – 412 employees were cut, reducing total numbers from 4,843 to 4,431.

The publisher reported total revenues down 8.2% year on year in the 26 weeks to 30 June.

Within this print advertising fell 12.5% to £97.4m, cover price income fell 3.1% to £46.7m and revenues from contract printing fell 10% to £12.6m.

The fall in total revenues was mitigated by £12.8m of savings in the first half.

A bright spot was an 8.4% rise in digital revenues, albeit from a small base, to £10.3m.

Chief executive Ashley Highfield said he was “strategically hanging his hat on” digital display advertising. Digital advertising was up 43.8% year on year.

The publisher’s websites have seen a 39% increase in traffic year on year, while the fledgling mobile business has seen a 100% increase in usage.

Johnston Press incurred £10.8m in one-off restructuring costs relating to existing businesses, including redundancy costs.

In addition there was a £13.3m writedown in the value of printing presses, due to the closure of the Peterborough printing press.

During the period the publisher began an ambitious overhaul of its portfolio with the relaunch of 23 titles and the conversion of five daily titles into weekly newspapers.

Net debt at 30 June was £361.7m, but thanks to the News International payment, at 31 July this had reduced to £332m.

The company said that it expected net debt to stand at between £310m and £315m by the end of the year.

Grant Murray, the Johnston Press finance director, said that at the current rate of paydown of about £40m a year, the company would be under the “magical” £235m mark by the end of 2014.

This figure is key for Johnston Press as it means that the business would be operating at less than a ratio of three times net debt to earnings before interest, tax, depreciation and amortisation.

If the company can hit this by the end of 2014 it will get a reduced interest rate from its banks. Net interest paid in the first half of 2012 was a hefty £13.6m.

Finance costs remain high, increasing from £18.9m in the first six months of last year to £21.2m in the first half of 2012.

The publisher’s pension deficit stands at £102.2m. From the beginning of June Johnston Press increased its contributions to the scheme from £2.2m to £5.7m.

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