The Scotsman publisher Johnston Press’s earnings are a sorry site for a grey, drizzly morning. Yes, the group saw digital revenue grow 52.1 percent to an unstated figure in the six months to June 30. But overall advertising revenue fell 9.5 percent, causing pre-tax profit to slump 18.1 percent year-on-year to £62.5 million, on 6.3 percent worse revenue of £293.1 million.
Johnston is in trouble. It sold 20 percent of the company to Malaysian investors Usaha Tegas in May to raise £249.2 million to throw against its debts – but earnings show it still has debts of £483.9 million, and that figure is inflated due to Euro exchange rates. It’s now postponed its dividend, saying its most prudent use of the cash would be to continue to offset debt.
Straight-talking CEO Tim Bowdler said a sharp economic downturn now “represents the most challenging conditions encountered by the group for a considerable number of years“: “Forecasts (are) generally painting a very gloomy picture for the next 18 months at the very least. Our share price performance has been very disappointing throughout the period.” If that share price continues to suffer, Johnston could find itself the target of acquisition approaches – though, with most news publishers suffering similar conditions, it’s possible only private investors would have the financial balls to make an offer.
It’s not as though the problems are just down to the internet, Bowdler noted; after all, UK circulation sales were down only 1.1 percent: “Whilst the existence of established online competition, especially in the key classified advertising categories, is clearly evident, its impact on our print revenues has been far less significant than that inflicted by the economic downturn.” UK ad sales declined 6.7 percent in Q1, 12.3 percent in Q2 and were down a massive 15.9 percent in June alone (property classifieds down 17.8 percent in the six months and 33.1 percent in June alone).
Online, monthly unique users grew 42 percent to 11.2 million, web investment was higher than the previous period and the group reported a “substantial increase in online display advertising and business directory listings”. The iAnnounce births, deaths and marriages service, which Johnston took on in January, is now making up a tenth of its digital sales. Former AOL (NYSE: TWX) UK strategy VP Lori Cunningham came in as digital director in March. The company says it’s making “good progress” on the planned replacement of CEO Bowdler.