Quick read. Johnston Press (JP), the heavily indebted UK news group behind the i, The Scotsman, The Yorkshire Post and around 200 other titles, has (finally) put itself up for sale. The group’s collapse perfectly illustrates the decline of the regional newspaper market in the past decade.
In 2006, the company had 8,823 employees and a salaries bill of £206m; last year there were just 2,141 employees costing some £85m. Between those two dates, recruitment classifieds plunged from £246m to just £80m. But there were other problems.
For 200 years, JP it was a small, family-owned printer publisher based in Falkirk, Scotland. Almost 50 years ago, Freddie Johnston, the founder’s great-great-great grandson started making ever more ambitious acquisitions. The company IPOd in 1988 and proceeded to load up with deals and debt, notably under former engineer Tim Bowdler who was CEO during 2001-9. The engaging Bowdler’s media career started as a steady move through the gears: a cautious start, solid 30%+ profit margins, a buying spree, £1m pay cheques – and, then, crash!
The company has been in a spin ever since but has been struggling even more urgently with its finances since March 2017, when it first started negotiations to refinance a £220m bond due for repayment on June 1 next year. It recently kicked off a strategic review of its options. But newish CEO David King (ex Time Out and BBC Worldwide) has had to admit that the company would struggle, to say the least, to refinance that 2019 debt payment.
Johnston Press is still profitable and actually reported an increase in operating profits of £7.4m at its most recent interim results. But it is highly indebted and also has a pension scheme deficit of £40m, leaving the market value of the company at just £3m (compared with £1bn a decade ago). The more curious losers include JP’s second largest (11%) shareholder, Malaysian communications billionaire Ananda Krishnan who invested his £120m profit from the 2008 sale of London’s Excel exhibition venue, on the fateful advice of a UK media executive. The stake quickly lost most of its value.
Buyers of the stricken newspaper group could include Reach Plc (the former Trinity Mirror which recently acquired the Express and Star daily news brands from Richard Desmond) and the Gannett-owned Newsquest – if they are not put off by the debt and the presumed need for substantial redundancy payments. But insiders are wondering whether Rothschild, which is handling the process, will succeed in flushing out philanthropic or not-for-profit owners for what are still some of the UK’s best-known newspapers.
For all reasons, a single transaction will be the objective of the JP investors-lenders but there will be a much longer line of prospective buyers for individual brands like The Scotsman, Belfast News, Sheffield Star, and Yorkshire Post. The relatively buoyant national newspaper i (formerly owned by The Independent) is most likely to be sold separately anyway, perhaps to Reach or even to The Guardian or News Corp. It may well take a reluctant break-up decision to prompt a flurry of not-for-profit bids for individual regional brands. It’s going to be rough.