Conditions 'challenging' says group
Cost cutting helps Scotsman owner lift profits
Johnston Press, owner of The Scotsman, Scotland on Sunday, the Falkirk Herald and The Yorkshire Post, said “challenging” trading conditions over the last 12 months had continued into the current year.
It said it was continuing to “explore opportunities for the disposal of assets”. During the year it categorised its titles according to their importance to the group. Among 59 regarded as ‘sub core’ – or likely to be sold – was Scotland on Sunday.
The company today said pre-tax profit for the year had risen but 2016 had begun with a fall in revenue, down 13% for the eight week period to 27 February.
Trading slowed in the run up to last year’s General Election and the anticipated post-election recovery did not materialise, with print revenues remaining soft through the year.
“Action was taken to cut costs and maintain profit as it became clear that the UK’s economic performance remains uneven outside London,” it said.
In results for the year to 2 January, the group reported a 22.6% uplift in pre-tax profits to £31.5 million through continued cost-cutting, lower interest charges on its debt and higher digital revenues.
“Cost savings substantially mitigated revenue declines; and the benefit of reduced financing costs (down 34.1%) resulted in improved profit before tax and earnings per share,” it said.
Group revenue was down 6.8% to £242.3m.
Total advertising revenue (combined print and digital) was down 7.8% to £148.7m.
Print advertising was down 11.9% to £118.1m, while digital revenues grew 12.4% year-on-year to £30.6m.
Newspaper sales revenue was down 7% to £72.4m.
Operating profit of £50.6m was down by £4.1m on the prior year, while adjusted profit before tax increased 22.6% to £31.5m (2014: £25.7m).
EBITDA of £57.3m was down £2.9m on 2014.
The group’s operating margin was down from 21% to 20.9%.
Operating costs (including depreciation and amortisation) reduced to £191.7m from £205.3m, reflecting ongoing cost control.
Net debt has also been reduced from £194.2m to £179.4m and the interest paid was reduced to £19.1m from £29m.
No dividend is proposed. The company said: “The provisions of our bonds restrict the Company’s ability to pay ordinary dividends until certain conditions are met. The Board wishes to resume ordinary dividend payments as soon as is appropriate, but no ordinary dividend is proposed for the year.”
Chairman Ian Russell said: “The sector experienced tough trading conditions in the second half of 2015 and this has continued into the early part of 2016. The outlook for 2016 remains challenging, and we are maintaining our focus on those areas which can deliver the greatest benefits while continuing to innovate our product portfolio and our editorial and sales processes.
“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.
“We remain focused on driving increased audiences and providing creative solutions for our advertisers. We will also continue to explore opportunities for the disposal of assets, with a view to deleveraging the balance sheet and further cutting financing costs.”
On 12 February the company announced the acquisition of the i newspaper and the deal was approved by shareholders yesterday. Mr Russell said it will “provide the Group with significantly increased scale, a national footprint, and add a major brand to its portfolio.”
Ashley Highfield, chief executive, commented: “The challenging trading conditions experienced in the second half of 2015 have continued into Q1 2016. We have reduced costs to maintain profitability, reset our portfolio and refocused on priority markets with attractive audiences that offer the best opportunity for growth. Success in driving our national display advertising business in 2015 and the rollout of our local display advertising Sales Force initiative gives me confidence for the future despite the fact that the market remains difficult.
“The acquisition of the i newspaper is also incredibly exciting for us. It gives us scale, with a combined JP plus i daily print circulation of over 600,000 papers making us the UK’s 4th largest news publisher, and thus numerous revenue and cost synergy opportunities. Further, not only will the i contribute positively to earnings but it will allow us to accelerate growth in digital, and help stabilise our circulation revenues. In conjunction with the planned asset disposals this will enable us to continue to reduce debt levels and cut financing costs further.”