TIDMJPR
RNS Number : 9337V
Johnston Press PLC
03 February 2017
3 February 2017
Johnston Press plc
Trading Update
Strong margins, improved circulation for i and good progress
against strategic priorities
The Board of Johnston Press confirms that trading for the 52
weeks to 31 December 2016 (subject to audit) has been broadly in
line with the Board's expectations. Total revenues(1) (after the
benefit of the i newspaper) were down 6%.
After a period of difficult trading in the summer prompted by
Brexit-related uncertainty, trading improved in Q4 as a result of
both strategic initiatives implemented during H1 2016 and signs of
improving business confidence. Q4 total revenues(1) were up 1%
compared to the equivalent quarter last year, driven by a strong
performance from the i as well as other key titles such as The
Yorkshire Post. This compares to a 5% decline in Q3, in the
immediate aftermath of the Brexit vote.
The news publishing market continues to suffer from the severe
headwinds of falling advertising revenues (particularly classified
advertising) and print circulation. Total advertising revenue
(excluding classifieds)(2) fell 7% in Q3 compared to the equivalent
quarter last year, improving to down 3% in Q4. Excluding the i,
total advertising revenue (excluding classifieds) declined 9.7% for
the year, having declined 12% in Q3, while improving to a 7%
decline in Q4, while classifieds have also shown a marginal
improvement in run rate in Q4.
As previously reported, the weakness of sterling post the Brexit
vote has increased the cost of imported paper and ink. However,
management's continued focus on costs has enabled it to maintain an
adjusted EBITDA margin of some 22%, believed to be amongst the
highest in our industry.
Notwithstanding the headwinds faced, in line with our strategy,
a number of areas are in growth. In addition to our digital
business(3) , both Media Sales Centre transactional revenues
(telesales) and contract printing were each up 2% in 2016. In
addition, the decline in circulation revenues in the existing
portfolio has been offset by strong i circulation revenues,
resulting in growth in total circulation revenues up 11%(4) year on
year. These categories make up over 50% of our total revenue.
While the industry and the Group face a difficult operating
environment, especially in classifieds including the structurally
long term challenged areas of Property, Motors, and Jobs, the Board
is pleased to note good progress across its four strategic
priorities:
Priority 1: Grow the overall audience
This year has started strongly with record web figures: 114
million page views, up 15% year on year on January 2016, excluding
disposals. Monetisation of this traffic through 1XL enabled revenue
to increase by 10% in Q4 year on year. Our news brands continue to
see strong audience performance via social networks, led by a 60%
growth in followers on Facebook through 2016, to two million
followers.
January has also seen impressive newspaper sales results
following our strategic focus on the large quality titles operating
in growth markets:
- Full copy sales of the i have increased its market share from
17% on acquisition to some 20% despite the 10p, 25% cover price
rise (Monday - Friday edition).
- The Scotsman has seen print sales gain momentum through the
month, with an average growth of 2% year on year, helped by its
200th anniversary.
- The Yorkshire Post and the News Letter (Northern Ireland) are
both in single digit decline and have further improved their year
on year run rates in January 2017
Priority 2: Drive further success of the i newspaper
The i has increased its newspaper volume sales by 5% (ABC
excluding bulks) year on year, which, coupled with a 10p (25%)
week-day cover price rise, has seen Q4 circulation revenues up 20%
compared to the equivalent quarter last year. The Saturday edition
of the i has performed especially well, with circulation volume up
13% year on year.
These strong sales are attributed to a combination of the
closure of the Independent newspaper, the investment in creating a
dedicated i newspaper editorial team, strong and independent
editorial leadership, and the reintroduction of the title into
Northern Ireland. Being part of the wider Johnston Press Group has
also brought a number of benefits: content sharing, improved
distribution taking advantage of the Group's infrastructure, and
the use of the weekly newspaper portfolio of regional brands to
provide a low cost approach to increasing public awareness of the i
newspaper.
The Group has also invested in the launch of a new website,
inews.co.uk, which in its first nine months has gone from zero to
achieving an average of 1.4 million unique users a month during
Q4.
The number of advertising brands in the i increased to 103
during December 2016, the highest since acquisition. Brands
including Porsche, Fedex and Debenhams have advertised with the i
for the first time.
Since acquisition a number of inherited contracts have been
renegotiated, reducing costs by over GBP1 million. Further cost
reductions are expected as contracts come up for renewal.
Having acquired the i for GBP24 million (a 4.6x historic
operating profit multiple) the Group expects to see the full year
benefits of circulation improvement, improved advertising trends
since the transition period post acquisition, and cost reduction
actions taken, to deliver continuing improvement in performance
from the i in 2017.
Priority 3: Execute on an ever more efficient editorial and
sales operation
2016 saw a restructured sales team removing layers of management
and reforming the isolated, regional approach with a more modern
consistent approach using Salesforce.com to support the sale of
creative, native, and targeted digital and print advertising
solutions. The relentless cost cutting programme saved over GBP25
million during 2016, and now totals some GBP100 million since 2012,
ensuring we maintained strong margins despite severe revenue
pressures.
Priority 4: Strengthen the Balance sheet
Having previously indicated that the Group would seek to sell
assets in non-strategic markets and then following the acquisition
of the i for GBP24 million, the Group indicated that it would
continue to seek to sell assets with a view to replacing the cash
invested. In 2016 the Isle of Man business was sold for GBP4.25
million, and in January 2017 the Group sold its East Anglia
portfolio for GBP17 million. The cash from disposals reduces net
debt, while also providing the business with liquidity, enabling
the Group to cancel its Revolving Credit Facility.
Ashley Highfield, Chief Executive Officer, commented:
"Despite the challenging print market, including a very
difficult summer prompted by Brexit-related uncertainties, we have
seen some improvement in our markets during the fourth quarter.
Whilst we expect the overall market environment to remain
challenging for both the Group and the industry as a whole, we
remain focused on delivering on our strategic priorities of growing
our overall audience, driving the further success of the i
newspaper, delivering a more efficient editorial and sales
operation and strengthening the balance sheet.
"The market for quality news brands, that know their audience,
in print and online, in a world of 'fake news', 'alternative
facts', and internet ad fraud, is increasingly appreciated by our
readers and advertisers alike. Our continued drive to maximise
operational efficiencies gives us flexibility in the face of a
challenging market and gives the management confidence that we can
make further progress."
-ends-
For more information, contact:
Johnston Press plc
Ashley Highfield, CEO 020 7612
David King, CFO 2600
Powerscourt 020 7250
Juliet Callaghan / John Elliott 1446
Notes to the Trading Update
1 The figures are presented on a continuing adjusted basis
including the acquisition of the i on 11 April 2016 and excluding
disposals or closures of businesses and other non-trading or
exceptional items. The tables below present the financial
information including and excluding the i.
2 Total advertising revenues (excluding classifieds) excludes
revenues from Jobs, Property, Motors, other classifieds and
features.
3 The digital business (Digital advertising revenue (excluding
classifieds)) includes Local and National Display, digital
marketing services, content marketing and syndication revenues and
excludes classifieds.
4 Newspaper sales includes the i newspaper from 11 April 2016.
Including the i Full Q3 2016 Q4 2016
Year
2016
--------------------------------- ------ -------- --------
Total revenues -6% -5% +1%
--------------------------------- ------ -------- --------
Circulation revenue +11% +18% +24%
--------------------------------- ------ -------- --------
Digital advertising revenues
(excluding classifieds) +1% -4% +5%
--------------------------------- ------ -------- --------
Total advertising revenue
(print and digital) (excluding
classifieds) -7% -7% -3%
--------------------------------- ------ -------- --------
Excluding the i Full Q3 2016 Q4 2016
Year
2016
--------------------------------- ------ -------- --------
Total revenues -14% -16% -11%
--------------------------------- ------ -------- --------
Circulation revenue -9% -10% -8%
--------------------------------- ------ -------- --------
Digital advertising revenues
(excluding classifieds) +1% -4% +5%
--------------------------------- ------ -------- --------
Total advertising revenue
(print and digital) (excluding
classifieds) -10% -12% -7%
--------------------------------- ------ -------- --------
The announcement contains inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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