Johnston Press today announced a £212m rights issue and foreign investment to tackle debts of £700m after advertising revenues dropped 7.1 per cent year on year in the 17 weeks to April.
The company, which publishes 18 daily and more than 300 weekly regional newspapers, said today in an interim management statement that the rights issue would help the group ‘weather cyclical pressures’while continuing to invest in digital media. In a rights issue, businesses create extra shares at discounted prices to encourage investors to buy, injecting extra short-term capital. Shareholders have first refusal of any new shares and can sell the rights to others if they wish.
Usaha Tegas, a Malaysian media holding company owned by billionaire Ananda Krishnan, has bought 10 per cent of the company taking its total stake to 20 per cent. The Johnston family, which owns 19.5 per cent, and other shareholders agreed to sell 32m shares at 135.75p making the deal worth just under £43m. Krishnan, rated the 116th richest man in the world by the Forbes magazine rich list, will appoint a new Johnston Press board member.
Johnston Press chief executive Tim Bowdler said today: ‘The great thing is from our point of view – they came to us and liked out company structure.”
Advertising revenues for the group was down 5.7 per cent for the 17 tweeks to 26 April compared with the same period last year. The decline accelerated compared with the 4.2 per cent year-on-year drop for the first eight weeks of the year, announced in the company’s annual results in March.
The overall decline to April on a like-for-like basis was 7.1 per cent due to falls in revenue from employment, property and motor, which was down by 16.4 per cent.
Johnston Press said although print advertising was down by 9.1 per cent, its digital advertising grew by 56.8 per cent during the 17 weeks.
Declines in circulation have been offset by increased cover prices, leaving overall sales revenue flat year-on-year.
A printing deal with News International at Johnston’s Portsmouth presses helped the group’s contract printing rise 6.8 per cent of last year.
The statement said Johnston’s board expected to ‘deliver a satisfactory result for 2008 in very difficult circumstances”.
Addressing a meeting of analysts and journalists this morning, Bowdler said: ‘The need for re-capitalisation was obvious. This is a pro-active step. It wasn’t on the brink of breaching any [banking] covenants but we felt it was a move to get ahead of the game.
‘We have a huge print infrastructure and a massive number if journalists who are really in touch with their local communities
‘In terms of advertising platforms, there is no doubt that although there has been a slight decline in recent years, print advertising is still 17 per cent of the advertising taking in the UK.”
Bowdler stressed that despite a decline in circulation of 5.8 per cent over the past three years, the company had launched 200 new print titles, including its free ‘City Lite’lifestyle papers.
‘Structural changes’were to blame such as local and national government cutting back on job adverts, the ‘homogenisation’of the high street and decline of small traders, he said.
‘We depend very significantly on print revenues for our revenues and print advertising is challenged in a number of ways. The cyclical impact on our business is quite significant – the economic environment we are working in is a tough one.”