News: Johnston Press increase operating profit

Johnston Press, one of the largest local newspaper publishers in the UK, has reported that like for like operating profit has increased for the first time in seven years, but a number of write-downs has resulted in losses.

In its latest financial report for the six months to June 29 2013, the printer of titles such as The Yorkshire Post and The Star, stated that like for like operating profit for the six months increased by 4.3% from £27.4m to £28.6m.

However the group made a pre-tax loss of £248.7m compared to a pre-tax profit of £13.6m in the same period last year. This was largely due to reducing the carrying value of publishing titles by £194.5m and print assets by £57.9m.

Headquartered in Edinburgh, Johnston Press operates a £60m printing facility on the site of the former Dinnington Colliery in Rotherham. It was affected earlier this year after News International paid Johnston Press £10m to terminate a lucrative contract.

Now trading as News UK, News International is part of Rupert Murdoch's News Corporation and is home to some of the biggest and most popular British newspapers including The Times and The Sun. The termination followed a similar £30m negotiation in 2012, following the closure of the News of the World.

The results include a £10m receipt associated with the termination of the News International contract but this impacted on revenues by £7.1m and contributed £3m to the reduction in operating profit. The receipt was used to reduce the group's debt and has meant that the group is operating closer to its financial covenants than was originally intended by both the group and its lenders.

In a statement at the time, Johnston Press reassured staff in Rotherham by saying that: "there is no planned headcount reduction as a result of this agreement and Johnston will explore new contract printing opportunities with immediate effect in order to maximise returns from the premium quality capacity at Dinnington."

Contract print revenues in the first half of the year were £6.5m lower than in 2012 driven mainly by the News International contract cancellation.

Today's latest results stated: "We have already secured some new contract work (£0.6m ) which has partially offset this revenue loss, but at lower margins, and we continue to discuss the sale of further freed up capacity with other interested parties. The operating profit impact of the lost News International revenue has also been partially offset by bringing some external printing of our own titles in-house."

Looking forward it also stated: "The anticipated future cash flows from the print assets have reduced following the buy-out of the Group's contract printing arrangements with News International."

A 15 year deal between News International and Johnston Press was announced in 2004, extending previous contractual agreements, and was integral to an additional investment of around £20m in the Dinnington facilities that opened in 2007.

The state-of-the-art facilities include one of the most modern and fastest presses in the world. It has the capacity to print 192 pages in full colour, 120,000 newspapers an hour in full colour and 75 titles per week.

The results also showed that during the first half of 2013 total advertising revenues declined 13.6% but digital revenue increased by 13.3%. Also during the period, Johnston Press relaunched a number of titles as part of a new strategy which are showing early signs of improvement regarding circulation figures.

Ashley Highfield, chief executive of Johnston Press, said: "Johnston Press has continued to make good progress during the first half in the implementation of its strategy for growth, completing the re-launch of its print titles and investing further in technology to build its digital platform whilst maintaining a tight control on costs.

"It is encouraging to see the benefits of our actions starting to come through, with the Group achieving its first like for like operating profit increase in seven years."

Johnston Press website

Images: Johnston Press