Johnston Press confirms 'i' acquisition approval alongside 2015 accounts

Richard Stuart-Turner
Thursday, March 24, 2016

Johnston Press has confirmed shareholder approval of the acquisition of the i newspaper as it revealed income and operating profit dropped in 2015 but pre-tax profits rose after it cut net debt and costs.

Highfield: We are on a clear journey to become the ‘one-stop-shop’ for advertisers and readers across all media in the communities we serve
Highfield: We are on a clear journey to become the ‘one-stop-shop’ for advertisers and readers across all media in the communities we serve

The proposed acquisition was approved at a general shareholder meeting held on Monday (21 March), achieving 99.85% of votes cast in favour.

The £24m acquisition of i from ESI Media will complete on 10 April. It will be earnings enhancing and “brings opportunities to accelerate the transformation of the group”, the Edinburgh-based publisher said.

“The acquisition of the i newspaper gives us scale, with a combined JP plus i daily print circulation of over 600,000 papers making us the UK’s fourth largest news publisher, and thus numerous revenue and cost synergy opportunities,” said Johnston Press chief executive Ashley Highfield.

He said the i would contribute to earnings, enable the publisher to accelerate growth in digital, and help stabilise circulation revenues.

“Our focus, having banked the i, is to grow that, but we will also be looking at other small bolt-on investments, based on the criteria we used to assess the acquisition of the i,” he added. 

Meanwhile, the publisher’s 2015 accounts, for the period to 2 January 2016, showed that its revenues for the 53-week period fell by 8.8% to £245.1m (2014: £268.8m ) or by 6.8% to £242.3m (2014: £260m) when adjusted to exclude one-off costs such as restructuring costs, items related to the defined benefit pension plan and legal costs.

It made a pre-tax profit of £2.9m, compared to a pre-tax loss of £23.9m last year while its adjusted pre-tax profit, excluding the aforementioned one-off costs increased by 22.6% to £31.5m (2014: £25.7m). This was achieved by cost-cutting measures, with total operating costs cut by 6.7% to £191.7m.

Total advertising revenue (combined print and digital) fell from £167m to £151m (down by 7.8% to £148.7m adjusted), which included print advertising down from £138m to £120m (£118.1m adjusted).

Digital advertising revenues were up from £29.1m to £31.7m (or up from £27.2m to £30.6m when adjusted).

Underlying newspaper sales revenue fell from £79m to £72.4m (down from £78m to £72.4m adjusted).

The group said daily titles in economically challenged markets continued to see volume declines above group averages, and above weekly titles, reflecting local conditions.

Operating profit was £1m, down by 90.7% from £10.7m last year (though adjusted it was down from £54.7m to £50.6m). Net debt was further reduced by 20.9% from £184.6m to £146.1m (or from £194.2m to £179.4m when adjusted).

EBITDA of £9.3m was achieved in 2015, compared to £16.2m in 2014. When adjusted it was £57.3m in 2015, compared to £60.2m in 2014.

The publisher also drastically reduced its £90m pension deficit this year by 70% to £27m following a reassessment of its scheme and concluding a pension study to better understand its long-term pension liability. 

The company said the run-up to the general election saw trading slow down and the anticipated post-election recovery did not materialise, with print revenues remaining soft through the year.

It added total revenues for the eight-week period to 27 February 2016 were down 13% “against strong year-on-year comparatives” in the first quarter of 2015, which in line with the sector weakened substantially during the second half of 2015.

Highfield said the firm has reduced costs to maintain profitability and will now focus this year on investing in its primary brands that operate in growth markets with “attractive audiences”.

“Whilst our forward order book is looking more positive going into Q2, we are not banking on that and therefore we are ensuring we keep continued tight cost control,” he said. 

The publisher owns more than 200 titles but is expected to close or cut costs at many of these.

Chairman Ian Russell said: “We have identified a number of newsbrands that are now considered non-core and such will be either divested or run with less costs, reflecting the medium-term outlook for the identified assets that fall into this category.

“The company will run a formal process, with advisers, to market defined asset groups for sale during 2016. Interest by third parties, enquiring about assets, has been encouraging so far.”

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