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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How the Brexit referendum has infantilised British politics

Politicians like Boris are not characters in a fantasy show. If they aspire to high office then they must be held to high standards. 

Ancient Greece is the cradle of modern Europe.  From its primordial soup emerged so much of our culture, our language and our politics. Of the three, it seems to be the politics that has made the least progress over the centuries. In fact, if you dropped an Athenian into the middle of politics in the UK today, they would find themselves right at home. This is not because of the direct democracy, the demagogues or the xenophobia, though all are worryingly familiar, but because of the style of the debate itself.

To understand politics in ancient Greece you have to grasp that they had no concept of ‘the truth’. This is not to say that they were liars, simply that the framework by which we judge credibility was not one they would have recognised. The myths and legends that dominated their discourse were neither thought of as being ‘true’ or ‘made-up’, they simply were, and the fact of their being known allowed them to be used as reference points for debate and argument.

Modern politics seems to be sliding back towards this infant state, and nothing embodies this more than the childish slanging match that passes for an EU referendum debate. In the past six years the UK has had three great exercises of direct democracy and it is safe to say none of the campaigns have added a great deal to sum of human enlightenment. Who remembers the claims that babies would die as a result of the special voting machines needed to conduct AV elections? But the EU referendum has taken this to new extremes. The In campaign are executing what is a fairly predictable strategy, the kind of thing that is normal fare in politics these days. Dossiers of doomsday scenarios. Experts wheeled out. Statistics embellished to dazzle the public. One can question the exact accuracy, but at least you feel they operate within certain parameters of veracity.

What is happening on the Out side, in contrast, is the collective nervous breakdown of a large section of the political establishment. Just this week we have had Penny Mordaunt, a government minister, flat-out denying the UK’s right to veto new accessions to the EU. We have seen the fiercely independent Institute for Fiscal Studies denounced as a propaganda arm for Brussels. Most bizarrely, Boris Johnson even tried to claim that the EU had banned bananas from being sold in bunches larger than three, something that nobody who has actually visited a shop in the UK could possibly believe. These kind of claims stretch our political discourse way beyond the crudely drawn boundaries of factual accuracy that normally constrain what politicians can do and say. Surely the people peddling these myths can never be taken seriously again?

But they will. You just watch as Johnson, Mordaunt and the rest slide effortlessly back into public life. Instead of being ridiculed for their unhinged statements, they will be rewarded with plush offices and ministerial cars. Journalists will continue to hang on every word they say. Their views will be published in newspapers, their faces will flit ceaselessly across our TV screens. Johnson is even touted as a plausible future leader of our country, possibly before the year is out. A man who over his meandering career seems to have held every possible opinion on any topic you care to name. Or rather, perhaps it is more accurate to say that the character we call Boris has no opinions at all, simply interests. The public, who have scant regard for a political class they believe to be untrustworthy, seem to have taken a shine to a man who is perhaps the most fundamentally dishonest of Westminster’s denizens.

What does all this say about the state of our politics? If it is true that we are seeing the advent of ‘post-truth’ politics, as some have argued, then it has grown out of the corrosive relationship between politicians and the public. It is both a great irony and a great tragedy that the very fact that people distrust all politicians is what has permitted the most opportunistic to peddle more and more outlandish claims. Political discourse has ceased to be a rational debate with agreed parameters and, like the ancient Greeks, more resembles a series of competing myths. Claims are assessed not by their accuracy but by their place in the grand narrative which is politics.

But the truth matters. For the ancients it was the historian Thucydides who shifted the dial decisively in favour of fact over fiction. In writing his Histories he decided that he wanted to know what actually happened, not just what made a good story. In a similar vein British politics needs to take a step back towards the real world. Broadcasters launching fact-checkers are a good start, but we need to up the level of scrutiny on political claims and those who make them. At times it feels like the press operate as a kind of counterweight to Game of Thrones author George RR Martin, going easy on much-loved characters for fear of upsetting the viewers.

But politicians like Boris are not characters in a fantasy show. If they aspire to high office then they must be held to high standards. If politics is the art of the possible, then political discourse is the art of saying what you can get away with. Until there are consequences for the worst offenders, the age of post-truth politics will continue suck the life from our public debate.