Costs down ten per cent as Johnston Press financial statement seeks to draw some comfort

THE newspaper publishers, Johnston Press – which owns The Scotsman and several Scots local newspapers, plus titles elsewhere in the UK – has reported that it has managed to reduce its year-on-year costs by ten per cent.

In an interim management statement published today, the publisher also records an increase in operating profit (before exceptional items) by 7.8 per cent, but declines in revenue (6.8 per cent) and advertising revenue (6.5 per cent). The period the statement covers is the 18 weeks up to the second of this month.

Currently, the publisher is sifting through applications for voluntary redundancy across its Scots titles, and its year-on-year ten per cent reduction in costs is the equivalent, it says, of over £30 million, during the year to date.

The statement also notes (in its words):

* Digital revenue growth momentum continuing to build – digital revenue up 32 per cent year-on-year for the period and up 44.7 per cent in October;

* New website roll-out completed in September providing robust platform for next phase of growth;

* Total monthly average aggregate audience over the 18-week period growing by seven per cent to 25.3 million with continuing strong growth in monthly digital unique users (up 39 per cent year-on-year to 13.7 million in October); and

* Debt reduction remains a priority – five per cent year-on-year reduction and further reductions planned.

Continues the statement: “The group has continued to build on the good progress achieved in the first half of the year. Having achieved the first increase in like-for-like operating profit for seven years in the first half of 2013 of 4.3 per cent, this was followed up by a 7.8 per cent year-on-year growth in the 18 weeks to the end of October.

“Operating profit margins increased to 20 per cent in the period as a result of the continuing focus on costs. The cost base reduced by £32.4 million (13.9 per cent) year-on-year.

“The reduced rate of decline in total revenues is encouraging with revenues for the period down -6.8 per cent year-on-year. Advertising revenue decline reduced to -6.5 per cent year-on-year compared to a 13.6 per cent decline in advertising revenue reported in [the first half of the year]. Our key advertising revenue lines have benefited from a number of factors including our continued investment in our digital strategy, an improved sales process and a better economic outlook.

“Following the completion of the re-launch of the group’s titles, print circulation revenue was -4.3 per cent in the period.

“A key objective during the period has been to maintain the accelerating growth of digital revenues by investing in new digital products such as SME marketing services (Digital Kitbag). In September, the re-launch of our 196 websites was completed and our investment is starting to deliver results.  Monthly unique digital users reached 13.7 million in October, up 39 per cent year-on-year and now over a third of our users are accessing our news sites through mobile devices. Moreover, digital revenues in the 18-week period were up by 32.8 per cent compared to the same period last year and in October were up by 44.7 per cent year-on-year. This accelerating trend is underpinned by our drive to improve group digital conversion, which is now at 49.7 per cent, meaning that almost half of our print advertisers are now also advertising with us online, and this continues to improve across the business.

“As a result of the continuing growth in digital, the Midlands (our largest) publishing unit, achieved an important milestone, becoming the first to reach a digital ‘Tipping Point’ in local display advertising for the month of September, where the growth in local digital revenues outstripped the decline in local print revenues.”

As for outlook, the statement continues: “Provided that the trading environment remains relatively stable and the full benefit of cost saving initiatives are realised, we expect full-year operating profit to approach the mid-range of market expectations for 2013,  having been impacted by increased paper prices, and after allowing for further investment in growing the digital business.”

The statement quotes CEO, Ashley Highfield, as saying: “I am pleased to report that our growth strategy is making good progress and has delivered encouraging results in the period. Digital revenue growth remains a priority and the Midlands reaching a ‘Tipping Point’ in local display advertising is a highlight for the business. It remains a key goal for the whole group to reach the point where digital growth will offset any further decline so we can return to overall top-line growth. With the refreshed print titles and websites, averaging monthly audiences of over 25 million, and new digital products and services, we believe that Johnston Press remains as relevant to local communities and advertisers, both local and national as it has ever been. We also continue to focus on reducing our cost base whilst increasing our investment in our digital future.”