March 28, 2014 Last Updated 11:46 am

Johnston Press posts £287 million loss due to impairment of assets

Digital revenue up 19.4 percent in latest earnings report, though total ad revenue still declines 10 percent

The UK newspaper publisher Johnston Press reported a huge loss in its latest earnings report, though the loss was created by impairment of assets, and without this charge was able to report a small profit in the quarter.

“We are delighted to see a return to underlying operating profit growth for the first time in seven years, with underlying operating profits in 2013 increasing by 2.5% on 2012,” Chief Executive, Ashley Highfield, said. “Having delivered EBITDA of £62.7m in 2013, January and February has seen an 8% increase in EBITDA year on year. Our digital growth remains strong, with significantly increasing audiences coming to our websites in 2013 and into 2014. Along with slowing declines in print advertising revenues, and a stable circulation revenue decline rate, these are clear indications of good progress during the year in the implementation of our strategy for growth.”

Here are the highlights from the earnings announcement:

Revenues

Total underlying revenues decreased by 5.5% period on period. Consumer confidence remained low in the first half of 2013, and this was reflected in advertiser spending, however the second half saw signs of improvement.

  • Total advertising revenues declined 6.4% year on year on an underlying basis (unadjusted decline was 10.0% in the full year). The unadjusted decline narrowed in the second half to 4.4%.
  • During 2013 digital revenue increased by 19.4%. Following flat half-on-half digital revenue growth in 2012, 2013 saw a return to digital growth of some 13.0% in the first half, rising to 25.3% in the second half.
  • Newspaper sales revenues declined 2.1% on an underlying basis in 2013 (4.5% unadjusted).

Exceptional items

  • The results include a net charge before tax of £300.5m in respect of exceptional items, the majority of which was announced at the time of the Interim Results in August 2013.
  • The charge includes a non-cash accounting adjustment reducing the carrying value of our publishing titles by £202.4m, print assets by £63.7m and properties held for resale by £4.7m. £10.0m of cash was received from the cancellation of the remaining element of our News International print contract. There were other cash costs of £33.0m in connection with the further restructuring of the business and £5.7m of pension protection fund levy and other pension charges.

Refinancing

The Company announced on 27 December 2013 that it had reset its financial covenants through to the maturity of its debt facilities in September 2015 and intends pursuing a refinancing of its debt facilities in 2014. On 3 March 2014 the Company announced that as part of a proposed refinancing of its debt facilities it is considering a range of options including a potential equity fundraising. The Company is actively exploring these options and will make further announcements in due course.

Outlook

In January and February 2014, advertising revenues are down 6.0%. The growth in underlying profits has continued into 2014 with an 8.0% increase in EBITDA (operating profit before depreciation and amortisation, exceptional items and IAS21/39 adjustments) to the end of February. Our digital growth remains strong, with audiences in the last reported ABC period to December 2013 up by 47.7% year on year to 13.3m unique users per month. In both January and February 2014, digital audiences have exceeded 15m with year on year growth of around 50%.

Although the economic outlook is starting to show signs of improvement, most evident in property and particularly employment, the Company will continue to manage our cost base while building on the strong digital growth in the second half of 2013.

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