Change looms at newspaper group
Shares soar ahead of Johnston Press talks
Chairman Ian Russell will meet one of its key shareholders which is believed to be turning up pressure at the newspaper group.
Crystal Amber, which owns a 3.3% stake, has a track record as an activist investor and has forced other companies in which it has investments to take decisive action.
The value of Johnston Press, owner of The Scotsman, Falkirk Herald and the Yorkshire Post, has plummeted by more than 90% over the last 12 months and the group on Friday was worth just £8.58 million, much of which is understood to be cash in the bank.
On Tuesday (13th) the shares rocketed from 6.19p to 15p, valuing the company at £15.88m.
No details were given of the agenda for Tuesday’s meeting but one report suggests that pressure is mounting on Mr Russell and chief executive Ashley Highfield.
The group has spent several years cutting costs and selling titles since former CEO Tim Bowdler embarked on an acquisition spree in the 2000s culminating in 2005 when it spent £500 million in that year alone on newspaper assets.
This included £160m paid for The Scotsman Publications and £155m for the local newspaper division of what was Scottish Radio Holdings, former owner of Forth and Clyde Radio.
Those deals were financed through bank borrowing but as newspaper sales and advertising began to tumble the group found itself saddled with more than £300m of debt. While its titles continued to make profit, it was forced to divert cash into interest payments.
Current management has been selling more assets and laying off staff to improve the trading position and strengthen the balance sheet. There is speculation that another round of job cuts is looming.
In April this year, in an attempt to bulk up the volume of sales and improve the advertising proposition, it bought the ‘i’ newspaper for £24m.
Of concern to some investors, however, is that having re-negotiated its debt repayments and reduced the headline figure, the group’s debt rose on completion of the ‘i’ deal, from £179.4m in January to £209.4m in July.
In its half-year results last month the group revealed that it had written down the value of its titles which had the effect of pushing it to a pre-tax loss of £183.7m on adjusted revenues down by 9.7pc to £113.9m.
The Sunday Telegraph claims that Crystal Amber will wait until after the meeting on Tuesday before deciding whether it will call for change at the publisher.