Johnson Press: Zombie Company?

The company is saddled with huge debt.

Johnston Press is known in some circles, rather unkindly, as a zombie company.

This is because in blunt financial terms the main reason it exists is to enable it to continue to service its £351.7m bank debt at the usurious interest rate of 10 per cent.

The reason the rate is so high is because – like Greece – the banks have doubts about whether the cash can ever be repaid.

Against this backdrop and a share price of 6p (compared with over £4 five years ago) chief executive Ashley Highfield has set out a vision to return the company to growth and pay back all that cash.

It’s a bold vision and Highfield deserves huge credit for the creativity he has brought to this challenge. He’s the first major regional press chief executive I can remember in recent years who hasn’t been an accountant or a salesperson and it shows.

He’s also happy to put his vision up to journalistic scrutiny by being questioned about it – which makes a refreshing change.
Highfield answered questions from Press Gazette and other publications yesterday.

We asked whether Johnston wasn’t paying the price for the folly of his predecessors in pursuing unsustainable profit margins (of 35-40 per cent) and over expansion.

Johnston is saddled with the huge debt it has because it overpaid grossly for assets like Regional Interactive Media (£560m in 2002 at more than 20 times operating profit) and £160m on The Scotsman in 2005.

The tragedy of Johnston Press is that, in the current climate, most businesses would do cartwheels at managing an operating profit margin of 17 per cent last year which it did.

But Highfield, through no fault of his own, has to double that margin over the next eight years if he is to pay back is bank paymasters. And that’s what his 2020 vision is based on.

He told Press Gazette that debt or no debt he would be pursuing the same strategy. And that the size of the group enables him make use of things like state-of-the art owned print plants and a national content network. But one wonders if so many experienced journalists and editors would be losing their jobs (more than 500 staff cut in the last year alone) if it wasn’t for the need to pay the bankers.

Some £250,000 is being spend on new design templates to relaunch all Johnston’s paid-for daily and weekly titles. This compares with £11.5m spent just paying the fees on agreeing a new finance deal with the banks (£38.5m was spent on interest alone last year).

But we are where we are and Highfield’s vision is a bold one. He sees a long-term future for weekly papers, a limited one for dailies and salvation in the form of mobile and online content.

I believe it could work, but I fear the days of 35 per cent-plus profit margins are long-gone – and were not sustainable even in the early Naughties.

Highfield insists that the digital-first strategy won’t “rob print Peter to pay digital  – Paul” – thereby hastening the decline of print.

But while that is easy to say whilst martialing a powerpoint flowchart in the boardroom, it is common sense that a journalist writing breaking-news for online cannot at the same time work-up an in-depth news story, feature, backgrounder or exclusive for print. We must, at times, do one or the other.

As I said I do not want to appear overly pessimistic. Highfield’s vision is a rational one. With a fair wind he could pay down another £70m of debt over the next three years, bring the debt-to-earnings ratio down to 3-1 and have an opportunity to renegotiate the lending deals and get the blood-sucking bankers off his back.

And then we could be looking at a bright new future for Johnston Press.

In the meantime, that share price says that the market remains sceptical about whether this will happen.

Asked how journalists can be optimistic about their prospects in these circumstances, Highfield says:

” I’ve literally had hundreds of emails from staff, saying that they’ve really bought into this, because what we’re laying out is a future, a good future where JP not just survives, but thrives. Where, if you’re a journalist, more people read what you write rather than less and more people consume it across print and digital.

“I suppose the only thing you need to get your head round as a journalist, is that that audience in the future is going to be a different mix of print and online, and the vast majority of journalists welcome that, not least because they are already there in the blogosphere and using Twitter, they are already engaging with their audience and finding it benefits their written word in print and online.

“Of course if there are some impacts on JP on making it a more efficient organisation, there will inevitably, at times, be impacts on staff, I can’t deny that. The staff recognise that, they want to be treated as grown-ups but given a clear direction that the company’s heading in and that’s what I’m trying to do.”

You can read the full in-depth Ashley Highfield interview in the May edition of Press Gazette.

Johnson Press, Photograph, Getty Images.

Dominic Ponsford is editor of Press Gazette

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Will the collapse of the EU/Canada trade deal speed the demise of Jean-Claude Juncker?

The embattled European Comission President has already survived the migrant crisis and Brexit.

Jean-Claude Juncker, the embattled President of the European Commission, is likely to come under renewed pressure to resign later this week now that the Belgian region of Wallonia has likely scuppered the EU’s flagship trade deal with Canada.

The rebellious Walloons on Friday blocked the Comprehensive Economic and Trade Agreement (CETA). The deal for 500 million Europeans was at the final hurdle when it fell, struck down by an administration representing 3.2 million people.

As Canada’s trade minister, Chrystia Freeland, walked out of talks in tears and declared the deal dead, fingers were pointed at Juncker. Under pressure from EU governments, he had agreed that CETA would be a “mixed agreement”. He overruled the executive’s legal advice that finalising the deal was in the Commission’s power.

CETA now had to be ratified by each member state. In the case of Belgium, it means it had to be approved by each of its seven parliaments, giving the Walloons an effective veto.

Wallonia’s charismatic socialist Minister-President Paul Magnette needed a cause celebre to head off gains made by the rival Marxist PTB party. He found it in opposition to an investor protection clause that will allow multinationals to sue governments, just a month after the news that plant closures by the world’s leading heavy machinery maker Caterpillar would cost Wallonia 2,200 jobs.

Juncker was furious. Nobody spoke up when the EU signed a deal with Vietnam, “known the world over for applying all democratic principles”, he sarcastically told reporters.

“But when it comes to signing an agreement with Canada, an accomplished dictatorship as we all know, the whole world wants to say we don’t respect human right or social and economic rights,” he added.  

The Canadian Prime Minister Justin Trudeau was due to arrive in Brussels on Thursday to sign CETA, which is backed by all EU leaders.

European Council President, Donald Tusk, has today spoken to Trudeau and his visit is currently scheduled to go ahead. This morning, the Walloons said they would not be held to ransom by the “EU ultimatum”.

If signed, CETA will remove customs duties, open up markets, and encourage investment, the Commission has said. Losing it will cost jobs and billions in lost trade to Europe’s stagnant economy.

“The credibility of Europe is at stake”, Tusk has warned.

Failure to deliver CETA will be a serious blow to the European Union and call into question the European Commission’s exclusive mandate to strike trade deals on behalf of EU nations.

It will jeopardise a similar trade agreement with the USA, the Transatlantic Trade and Investment Partnership (TTIP). The Commission claims that an “ambitious” TTIP could increase the size of the EU economy by €120 billion (or 0.5% of GDP).

The Commission has already missed its end of year deadline to conclude trade talks with the US. It will now have to continue negotiations with whoever succeeds Obama as US President.

And if the EU cannot, after seven years of painstaking negotiations, get a deal with Canada done, how will it manage if the time comes to strike a similar pact with a "hard Brexit" Britain?

Juncker has faced criticism before.  After the Brexit referendum, the Czechs and the Poles wanted him gone. Hungary’s Prime Minister Viktor Orban muttered darkly about “personnel issues” at the Commission.

In July, it was reported that Angela Merkel, the most powerful politician in Europe, was plotting to oust Juncker. Merkel stayed her hand, and with German elections looming next year is unlikely to pull the trigger now.

When he took office in November 2014, Juncker promised that his administration would be a “political Commission”. But there has never been any sign he would be willing to bear the political consequences of his failures.

Asked if Juncker would quit after Brexit, the Commission’s chief spokesman said, “the answer has two letters and the first one is ‘N’”.

Just days into his administration, Juncker was embroiled in the LuxLeaks scandal. When he was Luxembourg’s prime minister and finance minister, the country had struck sweetheart tax deals with multinational companies.  

Despite official denials, rumours about his drinking and health continue to swirl around Brussels. They are exacerbated by bizarre behaviour such as kissing Belgium’s Charles Michel on his bald head and greeting Orban with a cheery “Hello dictator”!

On Juncker’s watch, border controls have been reintroduced in the once-sacrosanct Schengen passport-free zone, as the EU struggles to handle the migration crisis.

Member states promised to relocate 160,000 refugees in Italy and Greece across the bloc by September 2017. One year on, just 6,651 asylum seekers have been re-homed.

All this would be enough to claim the scalp of a normal politician but Juncker remains bulletproof.

The European Commission President can, in theory, only be forced out by the European Parliament, as happened to Jacques Santer in 1999.

The European Parliament President is Martin Schulz, a German socialist. His term is up for renewal next year and Juncker, a centre-right politician, has already endorsed its renewal in a joint interview.

There is little chance that Juncker will be replaced with a leader more sympathetic to the British before the Brexit negotiations begin next year.

James Crisp is the news editor at EurActiv, an online EU news service.