Regional press group Johnston Press published a plethora of profit and loss figures today for the first six months of the year– but for chief executive Ashley Highfield the EBITDA total of £19.7m is the number that matters.
This is the figure which reveals how well the business is doing before you subtract the £15.2m it spent paying finance costs to bankers for interest on its £191.2m of debt.
Revenue from continuing operations was down a modest 3.1 per cent to £102.9m for the period.
He told Press Gazette: “If you go back a year the number that everyone produced, because our friends at The Guardian always like to take the worst number, was the statutory number which showed a big loss. If they were being fair they would say there’s been a massive swing from a £211.7m loss to a £4.9m profit on a statutory basis.” This technical loss was due to a write-down in the value of the company’s newspaper assets.
Highfield added: “Realistically the one that I focus on is EBITDA [earnings before interet, tax, deductibles and amortisation) that is the more accurate test of a business.
“Yes it’s down from £22.8m to £19.7m but that is just over a couple of million. That’s got to be our absolute focus now to get EBITDA up – through our strategy of growing digital, and growing i and the biggest titles that make the biggest contribution.”
Over the year JP is on course to make £40m EBITDA profit on turnover of around £200m – a 20 per cent profit margin which shows there is still money to made from its network of 200 local newspaper titles, despite the challenges the industry faces.
JP’s debt mountain was accumulated during its period of rapid expansion before the 2008 financial crash. The relatively healthy EBITDA figure means the creditors won’t be pulling the plug on JP any time soon.
Highfield said the fact that revenues grew in the first six months by 4.6 per cent to £85.6m (if you exclude classified advertising) shows that his strategy for the business is paying off.
Classified ads for cars, jobs and houses appear to be seen as something of a lost cause at Johnston Press as they continue to migrate to the likes of Autotrader, Rightmove and other specialist platforms.
Classified advertising revenue (once the financial backbone of the regional press) fell 28.9 per cent to £17.3m in the first half at JP.
Highfield said: “There was a period during last year when people were starting to wonder whether the growth in digital was running out of steam.
“It’s encouraging and very important for the business that we are able to post digital display growth, and the most recent figures for June and July getting stronger still [up 25 per cent year on year].
“The reasons for that are pretty clear – that we are creating great content and content that’s trusted because of our trusted brands in a world of increasing fake news and advertisers want to know where their adverts are appearing.
“After a couple of years of advertisers and agencies saying that context wasn’t important, they just wanted to buy programmatically, I think they’ve woken up to that fact that context does matter.”
He said that quality ad slots and new technology which enables advertisers to target audiences more precisely are what gives JP a “USP over the likes of Facebook and Google”.
In 2016 the UK’s regional newspaper industry websites collectively made £193m in digital revenue versus more than £6bn for Facebook and Google.
Is Johnston Press getting a fair deal from the US digital giants which distribute its content?
“We certainly don’t get enough as an industry. We put the majority of investment in and get a tiny sliver of the reward out.
“The industry has recognised this is unsustainable and unfair and the Government has as well. I think that we probably need to work with Google and Facebook to come up with a better economic model that sees sustained viability for content creation – with their help in their algorithms to highlight and promote quality trusted content. There’s probably a win-win way of doing this.”
The JP half-year results compare favourably to those of Trinity Mirror, the UK’s biggest regional publisher which also owns the national Mirror titles, which were released yesterday.
Trinity’s revenue plunged £55m year on year to £320m in the first half.
Highfield declined to be drawn into comparisons, but he did say: “We’ve all got many of the same headwinds and some of those headwinds will be solved by getting bigger, by being a scale business .
“I know a lot of people hanker after cottage industries but they are just not viable in this industry. Consolidation is a good for this industry and pretty necessary and pretty inevitable.”
Last week Johnston Press outlined plans to pool editorial resources on its smallest Scottish weeklies as way of avoiding closing them. Some 25 editorial jobs are to go.
What is the outlook for the smaller titles in the group. Are more closures and job losses on the cards?
“I hope that the measures that we are taking at the moment will ensure the sustainability of our smaller titles. They are the ones that contribute the least to the group, the contribution is very marginal.
“The uncomfortable but necessary changes that we are making across the portfolio are absolutely with the intention of keeping them in the market.”
And what of the broader outlook for the UK’s regional newspaper industry?
“I think what we are doing is going to create a long-term viable, sustainable regional press. The titles that we are focusing on – the likes of the Sheffield Star and Portsmouth News are creating titles across print and web which are servicing their community really well.
“If you look at these cities like Sheffield, like Peterborough, like Northampton – our websites are huge, they reach well over half of the total population. That is a great sustainable future. There is no business in Northants that shouldn’t be advertising in the Northants Chron and Echo online.
“I think that’s the message we’ve got to take to the advertisers and offer really good print and digital solutions that enable advertisers to reach the advertisers they want to reach.
“I do think that for the very smallest of our titles, where the digital scale is never going to be sufficient, we need to run them as groups of titles to keep the cost base as low as possible to ensure their long-term viability. That does mean you have to run them in a different way.”