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

Photo: Getty Images
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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.