As I See It
Media beasts battling self-inflicted wounds
Digital growth is helping to offset declines in print, though initial enthusiasm for Johnston Press’s statement, which drove the shares upwards, quickly went off the boil and they closed lower.
Trinity Mirror’s shares have hardly been a revelation either, barely moving this week after it revealed another fall in profits and revenue.
Ashley Highfield, JP’s CEO, perhaps ought to have chosen his words more carefully when he said the group “could” return to growth. It didn’t exactly have a ring of confidence about it.
His statement is also laced with contradictions. On the one hand he refers to remaining confident, while also referencing “painful changes” and difficult trading conditions.
Simon Fox, his counterpart at Trinity, also acknowledges the volatile climate for media, but also clutches at the “brighter outlook” straws that somehow seem to await the company in the second half.
If there is any brightness in either company’s figures it is that the sharp declines of last year appear to have bottomed out.
Sadly for both companies the battle is not just about stemming the decline of print. They also have legacy issues that remain unresolved.
Trinity is still paying out millions to compensate the victims of the phone hacking scandal, while JP is struggling to reduce the burdensome debt it accumulated during an ill-judged acquisition spree that included buying The Scotsman titles for £160m, or 15 times the current value of the entire group.
Mr Highfield said yesterday that the key number in JP’s half year results was the £19.7m it produced in EBITDA. However, this was still down by almost 14% and he failed to mention that £15.2m of this will be used to pay interest on that £191.2m debt. If this is the best he can point to then things are pretty dire.
The predicaments facing the two companies were not a result of current trading conditions. They were self-inflicted wounds that have had serious repercussions. Not only have the penalties they have been forced to pay starved the companies of valuable funds for investment they have also forced both to instigate deep cost cutting which, whatever their CEOs may claim, has eroded the quality of the product.