August 2, 2017 Last Updated 7:59 am

Johnston Press reports growing digital revenue, but total revenue declines and pretax profits fall in 26-week report

‘This is a business which we have long believed needed to transform, but once done, could return to growth’ — Ashley Highfield, Chief Executive Officer

Edinburgh, Scotland — August 2, 2017 — Johnston Press plc, announces its results for the 26 week period ended 1 July 2017. Whilst the wider publishing industry continues to experience sharp declines, the Group is pleased to report that strong growth in digital revenues and the i newspaper combined to offset print decline in the business (excluding classifieds). The Board remains confident in the outlook for the rest of 2017.

Financial Highlights (adjusted including the i newspaper)1

  • Revenue grew by 4.6% during the period (excluding classifieds)2
  • Digital advertising revenues were up 14.8% (excluding classifieds)3
  • Print and digital advertising revenues combined were flat for the period (excluding classifieds)4
  • The i newspaper delivered strong performance: H1 revenue of £14.5m (up 28.6% in the comparable 12 week period post acquisition) and EBITDA of £3.7m6 (up 42% to proforma)
  • Transactional media sales centre (telesales) revenues were up 1% to £10.3m5
  • Operating costs reduced 7.3% before full period effect of the i newspaper
  • The Group delivered Adjusted EBITDA of £19.7m
  • As of 1 July 2017, the Group had total cash of £28.8m, with net debt7 down 8.7% in the period.

Financial Highlights – Statutory

  • Total revenues declined by £9.5m to £103.3m, of which £5.4m related to the sale of the Midlands titles. Excluding the Midlands titles revenues fell 4%
  • Operating profit of £4.9m compares to a H1 16 loss of £211.7m

Strategic Headlines1

Business Trends Improving

  • Stronger digital revenue performance combined with 6 months of i newspaper revenues has outweighed other declines enabling the Group to grow revenues by 4.6% (excluding classifieds)2
  • Advertising revenues were flat for the period (print and digital combined excluding classifieds)4 having experienced heavy declines during 2016.

Digital Audience & Revenue Growth

  • Digital advertising revenues up 14.8%3 year on year (YoY), with growth accelerating through the period, driven by growing audiences and stronger yields both locally and nationally (via the 1XL network), as demand for trusted, quality, targetable news increases
  • Digital audiences grew 15% to a record high of 26.5m unique users a month, and with increased engagement, page views were up 20% to over 110m average page views per month.

Success of the i newspaper6

  • Acquired on 10 April 2016, increased contribution from the newspaper, with circulation revenue increase from £4.4m to £11.0m and advertising revenues from £0.8m to £3.0m6
  • The i newspaper delivered £3.7m EBITDA for the 6 months, compared to £2.6m pro-forma 6 month EBITDA at acquisition (up 42%)
  • In the comparable 12 weeks period post acquisition (from 10 April to end of each half year), total i newspaper revenue increased 28.6%.

Operational Performance

Operational Highlights – Publishing & Sales strategy execution

  • Our focus on the larger titles that have significant print and digital reach in their geographies and communities has resulted in strong profit contributions led by the ‘Nationals’, i.e. The Scotsman, The Newsletter (Northern Ireland) and The Yorkshire Post, and by the ‘Big City Dailies’ such as The Sheffield Star and the Portsmouth News
  • The Media Sales Centre (transactional revenues including central digital display, BMDs & Public Notices), which now accounts for 20% of advertising revenues, was in growth during the period, as a result of the ongoing sales transformation programme
  • In January 2017, the Group sold 13 titles in the Midlands for a total consideration of £17m

Strategic Review

On 29 March 2017 we announced that the Group had commenced a strategic review, working with our advisers Rothschild and Ashurst LLP, to assess the financing options open to the Group in relation to the £220 million 8.625% senior secured notes which become due for repayment on 1 June 2019. As a key part of the strategic review process, the Board has engaged with its major stakeholders, including shareholders, holders of senior secured notes, Pension Trustees and the Pensions Regulator.

After a period of initial consultations with the largest shareholders and bondholders we are currently focused on discussions with the Pension Trustees. The Board is pleased by the continued support of the major stakeholders during the review process.

Current trading

Trading conditions across the industry continue to be difficult, especially in classified advertising.

Encouragingly, whilst print advertising revenues will continue to decline, we are seeing the monetisation of our growing digital audience gain momentum which combined with the transformation of our products (including targeted advertising and sponsored content) in 2016 has seen digital display advertising up 25% YoY across June and July. Digital as a proportion of local display revenue has now reached nearly 30%.

The continuing improvements in trading trend seen in the i newspaper in H1 are expected to continue in H2 as advertisers seek out a quality, impartial, concise, daily national news provider.

Ashley Highfield, Chief Executive Officer, commented,

“In the context of the broader industry trading environment where print classifieds in particular are in continued significant structural decline, we are focused on creating a business for the future. Our core business provides advertising and digital marketing solutions to companies, large and small, around our trusted, quality, brands that have significant reach into their communities.

This is a business which we have long believed needed to transform, but once done, could return to growth. Thus, since 2012 we have been making the necessary and at times painful changes to transform Johnston Press into a truly cross-platform business. Whilst trading remains challenging, the business has responded and, as a result of our substantial efforts and clear strategic focus, I am very pleased to announce that we have posted revenue growth in the business (excluding classifieds) of 4.6% during the half.

Digital revenues (excluding classifieds) have outweighed the declines of print advertising revenues, helped by an editorial focus that has resulted in digital audiences at a record high, and by a fantastic performance from the i newspaper which has achieved significantly enhanced performance during the sixteen months since acquisition.

The Group delivered Adjusted EBITDA of £19.7m in the first six months, in line with the Board’s expectations. Having implemented the next phase of planned cost reduction initiatives aligned to the Group’s wider publishing strategy, the Board remains confident in the outlook for the rest of 2017.”

Notes

1 The results are presented on a continuing adjusted basis which exclude the following items: mark-to-market gain on the Group’s bonds, impairment of intangible and tangible assets, restructuring costs, items related to the defined benefit pension plan, share based payment costs, trading and write downs relating to the closure of titles and digital operations, one-off legal costs and disposal gains. It includes the results from the acquisition of the i newspaper from April 2016 and excludes the results of the Isle of Man operations disposed in August 2016. The statutory continuing operations also include the results from the Midlands titles disposed of 17 January 2017. For additional information refer to the Non-GAAP measures included as supplementary information for the financial statements. We focus on revenue figures excluding classifieds in order to provide relevant information on those aspects of the business which are anticipated to have the greatest potential for future growth
2 Including classifieds, total revenue decline narrowed to 3.1%
3 Including classifieds, digital revenues grew 2.5%, with gaining momentum during the period
4 Including classifieds, total advertising revenues declined by 11.8%. Classified and other advertising for the period is £17.3m, down 29% for the period. Classified and other advertising includes property, motors, jobs and other advertising including features, entertainment and other classifieds
5 Transactional revenues in the MSC include BMD’s (births, marriages and deaths), public notices and central digital display
6 2017 includes 26 weeks of the i newspaper revenues versus 12 weeks in the period to 2 July 2016
7 Adjusted net debt is stated excluding fair value mark to market valuation adjustments on the Bonds- refer to Note 12 of the financial statements for additional information.

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