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
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.