Regional newspaper publisher Johnston Press has negotiated a new three-year £485m financing deal as pre-tax profit fell 56.1 per cent in the first six months of the year.
Profits fell to £27.5m in the first half of the year from the £62.5m achieved in the first half of 2008. Despite the decline the company said advertising revenue had started to even out as the year progressed.
Total advertising revenue was down 32.7 per cent on same period last year.
Revenue from print ads fell 33.5 per cent with digital ad revenue falling for the first time, by 18.8 per cent.
Johnston Press said classified advertising was proving to be the most difficult area. Revenue from employment ads was down by 53.8 per cent, property by 54.2 per cent, motors by 29.3 per cent and other classified by 11.5 per cent.
Revenue from newspaper sales fell just 1.9 per cent while circulation dropped on average by 7.7 per cent across Johnston Press’ daily titles and 7.1 per cent across its weeklies.
Despite the poor state of the advertising revenues, the company said it had seen some stability since the start of July, with ad revenue down 26.1 per cent down year-on-year in the last eight weeks.
Johnston Press said total revenue dropped 25.4 per cent to £218.6m from the £293.1m it recorded in the same period last year and as a result of continued trading difficulties it had taken a pre-tax impairment charge of £126m. This means they have reduced the value of their newspaper titles.
Chief executive John Fry said that the timing of the economic upturn remained uncertain but he expected cyclical improvements in advertising revenue, when they came, to more than compensate for ongoing structural change in the regional news industry.
In May, Johnston Press said that its failure to dispose of its Irish newspaper business had placed it at risk of breaching its banking covenants and it therefore needed to amend the existing facility, which runs to 2010, or put in place a new arrangement.
One of the elements of the new financing deal, which overrides existing arrangements, was the issue of share warrants to the value of five per cent of the company’s capital between its 22 lenders.
Speaking to journalists this morning Stuart Paterson, Johnston Press chief financial officer, said the new deal would increase the company’s debt burden but give the company the comfort to trade through the rest of the currently gloomy economic cycle.
Despite reports this week that a consortium of Scottish businessmen had made an approach to buy Johnston Press’ flagship title, The Scotsman, Paterson said the company had no disposal plans.
The company said net debt has been reduced by £52.8 million to £424.0 million at the half year as it took £31m of debt out of the business.
The company said it would continue to focus on cost reduction in the second half of the year and that a further reduction in the size of its staff was inevitable.
The publisher reduced staff headcount from the 6,408 it employed in the first half of last year to 5,969 in the same period this year.