Johnston Press under pressure over bonds

By Jo Francis, Thursday 30 March 2017

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Johnston Press has made a £300m loss after a further major writedown in the value of its assets, and is under pressure from its biggest shareholder as it wrestles with the financial implications surrounding the coming repayment of £220m in high-yield bonds.

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Johnston Press: improving trend in print circulation of key titles

The news publisher, which went from regional to UK-wide national publisher with last year’s acquisition of the i newspaper, posted sales down 8% to £222.7m in the year to 31 December 2016.

The results were complicated by a number of factors, including the acquisition of i, and the sale of its Isle of Man, East Midlands and East Anglia titles.

Adjusted sales on continuing operations were down 6% at £221.5m.  

Following a further £120.4m non-cash impairment charge in the value of the group’s newspaper and print assets, on top of the £223.9m charge taken in the first half of the year, the group’s pre-tax loss for the year ballooned to £300.3m.

Adjusted EBITDA was down 12.4% at £49.1m, although Johnston Press highlighted the fact that its EBITDA margins “continue to exceed 20%”.

Print advertising on continuing operations, excluding classifieds, was down 8.9% at £61m, while digital advertising grew 1.1% to £18.5m. It cited the negative impact of the Brexit vote in June, and in the following quarter, but the company also said its biggest titles had posted an “improving trend” in print circulation in Q1.

Contract printing sales grew 1.3% to £12.8m. New contract wins included a 12-month rolling contract to print Metro in Portsmouth, and a new multimillion pound, five-year deal with DMG Media/Associated Newspapers to print Monday to Saturday copies of the Daily Mail.

Revenues from paper supply fell by 11.4% to £2.6m due circulation volume reductions at customers, and Johnston Press also said the weakness of sterling had increased its costs for imported paper and ink.

Chief executive Ashley Highfield said the immense amount of restructuring at the group was starting to bear fruit, and the acquisition of i had been “transformational” for the business with the newspaper’s overall audience increasing both in print and through the addition of a dedicated website for the brand.

However, the looming issue of the group’s £220m high-yield bond repayment, due in June 2019, is causing further friction with major shareholder Crystal Amber, which has already called for Highfield to be replaced.

According to a Daily Telegraph report, Crystal Amber founder Richard Bernstein is in talks with bondholders about a possible debt-for-equity swap as part of a financial restructure. Bernstein told the Telegraph: "Shareholders have taken a lot of pain and for a future, sustainable and viable business, the bondholders are likely to need to take some too.”

Johnston Press’ share price fell 15% to 18.68p on the results announcement, but has since recovered to 20.25p. The group’s market capitalisation is £21.4m.

In its statement, Johnston Press acknowledged the issue with the bond repayment, and said that if it failed to repay, refinance, satisfy or “otherwise retire the bonds” it could have a material impact on its ability to continue as a going concern.

“As a result, the directors along with the group’s advisors, are currently exploring strategic options available to the group in the event that a refinancing of the bond in the debt markets prior to June 2019 is not possible,” the group stated.

The deficit in the group's pension scheme increased by £40.8m to £67.7m. The triennial valuation of the scheme has just been completed, but not yet reported. A new agreement with the trustees on the level of future payments will be deferred until the strategic review into the bond repayment issue has been completed.

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