Group must prove money well spent
A new dawn beckons as presses roll for JP’s ‘i’
For the second time this year, a newspaper venture kicks off today when Johnston Press relaunches the i as the latest attempt at proving there is a profitable future in print journalism.
In February Trinity Mirror launched New Day, a bargain-priced daily into an already saturated market and has struggled to reach its circulation targets.
Johnston Press, the owner of The Scotsman and the Yorkshire Post yesterday took ownership of the i, which was established in 2010 as a cheaper offshoot of the The Independent, now digital-only.
Unlike the New Day, which is seeking a new readership, the i has the advantage of a 270,000 print run, garnered under the tenure of its Russian owner Evgeny Lebedev.
After agreeing to part with £24 million for the title on 12 February, Johnston Press will have to prove to the wider market – as well as its own sceptical staff – that it is money well spent.
It may be just the tonic that debt-laden group needs in order to persuade national advertisers to embrace its regional titles, but the decision to back a print product at a time when the newspaper industry is in freefall is one that carries a large degree of risk.
Pre-tax profit at JP may have risen 22.6% in the last year, but the company continues to rely on cost-cutting and sweating the assets. Online ad revenues rose 12.4% to just over £30m but digital still accounts for only 20% of the cash the group requires and it will be wedded to print for some time yet.
Clearly it hopes that the i will introduce some much-needed new sources of revenue into the group. It made a £5.7m profit last year largely because of its lean business model, but under the new owner staffing will increase sharply from 17 to 50 staff to compensate for losing its dependence on The Independent.
The number crunchers are still questioning the logic of the new combination. Analysts at Numis Securities ask why the company did not use the £24m it generated in cash to further pay down the debt, still a whopping £179m, or four times JP’s stock market value.
There are also those questioning the move into print when the company has for years been pushing a “digital first” strategy. It will not go unnoticed that today the Daily Mail & General Trust is considering a bid for the search engine site Yahoo as it steps up its move into online journalism.
Ashley Highfield, JP’s chief executive, was due to visit Trinity Mirror’s Watford printing plant yesterday to see i roll off the presses for the first time under his company’s ownership. He told the trade press that the return on i is higher than paying down the loan.
He said the task of turning around JP had been “a tougher challenge than I had anticipated” but added that he was “messianically driven to get this company to a position where it is standing on its own feet for the long term.”
However, readers and journalists on the group’s titles, who have seen many high profile names leave the group, may challenge his assertion in Campaign that the editorial product has “probably never been of a higher quality”, something he puts down to “social media, reader-generated content and real-time analytics”.
In a statement to the stock market this morning, Mr Highfield said: “This is a transformational acquisition for Johnston Press and an important step towards delivering our long-term strategy. i is a highly regarded newspaper with a clear market position and a loyal readership.
“By joining with Johnston Press the combined circulation will be equal to 9% of national daily circulation, making us the fourth largest player in the market. This enhanced reach represents a significant growth opportunity for Johnston Press in terms of national print and advertising revenue. It also rebalances our revenues towards less volatile circulation revenues.
“With our considerable digital experience the combination of Johnston Press and i will also allow us to grow digital audiences and revenues through the creation of inews.co.uk.
“We have a great new team in place at i under the editorial leadership of Oly Duff and look forward to working with them as we deliver the next phase of Johnston Press’ strategy.”