David Montgomery’s National World eyes cost cuts and acquisitions in 2022

David Montgomery, who has been the subject of a no-confidence vote from staff at National World — David Montgomery, director of National World. Picture: Reuters

David Montgomery’s National World is planning to “turn its focus” to M&A after what was described as a “solid” first year of owning JPI Media.

The publisher is “actively engaged” in looking at acquisitions and is aiming to broaden its content base beyond news, build on its digital capabilities, and create more shareholder value with more cost-saving synergies.

The company bought JPI, the UK’s third-largest local news publisher, at the start of 2021 for £10.2m. The deal included 13 regional and city daily newspapers and more than 100 other brands in print and online. The heritage newspaper brands include The Yorkshire Post, The Scotsman, Sunderland Echo, Sheffield Star and The News in Portsmouth.

National World has since built a “UK-wide footprint” by launching seven new “World”-branded websites in cities where JPI did not already have a presence. It also launched a national news website named National World with which it hopes to rival The Independent, and began consolidating JPI’s existing smaller news websites into county-wide sites.

A pre-close trading update for National World’s year to 1 January 2022 showed the publisher’s revenues for 2021 are estimated to be about £85m, down from £88.2m in 2020.

Digital revenues are expected to have grown by 20% to £12.4m – including £8.3m from advertising and £1.6m from circulation (such as subscriptions).

Print however still makes up 84% of total group revenue (£71.2m) despite anticipated decline of 7%. Some £35.4m comes from print circulation while £33.3m is from advertising.

National World said the modernisation of the JPI business has “proceeded at pace” and that it had “delivered efficiencies” and boosted advertising revenue.

The trading update said National World is “currently implementing a new phase of restructure to create a sustainable premium content and sales business as well as maintaining performance in the near term.

“Management is actively engaged in developing acquisition opportunities primarily targeting businesses that will enhance its digital capabilities and broaden its content base beyond news.

“It is also open to adding to its heritage assets to build scale and enhance shareholder value through synergies.”

An accompanying note from Dowgate Capital said National World had “stabilised” JPI, with profit-before-tax anticipated at £7.6m.

Earnings before interest, taxes, depreciation, and amortisation are expected to increase by 20% to £9.2m.

Dowgate said National World’s “operational transformation” had boosted revenue performance “more quickly than we had expected” and that the company is now anticipated to “turn its focus” to M&A, whether in digital or heritage assets.

Operationally the second half of the year “remained robust”, the trading update said, while the full-year results are expected to be “substantially ahead” of expectations.

National World said it was in a strong financial position with around £23m in cash at the end of the year, up about £4m from June.

This year the company secured £5m in annual cost savings following the buyout, with restructuring costs of £4m. It has also seen one-off costs but savings to come as it, similar to other publishers including Reach and Archant, closed office spaces to embrace flexible working.

Dowgate said higher newsprint and energy prices were expected next year while National World will also spend more on “ongoing investment in new digital products”. But the analysts added: “… this will be offset by a
full year of cost savings and property rationalisation.”