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| Johnston Press's Ashley Highfield inflicts 'maximum pain' on staff | Johnston Press's Ashley Highfield inflicts 'maximum pain' on staff |
| (6 months later) | |
| This week MediaGuardian 25, our survey of Britain's most important media companies, covering TV, radio, newspapers, magazines, music and digital, looks at Johnston Press. | This week MediaGuardian 25, our survey of Britain's most important media companies, covering TV, radio, newspapers, magazines, music and digital, looks at Johnston Press. |
| In Ashley Highfield's first year in charge of Johnston Press, the UK's largest publisher of regional newspapers, almost a quarter of staff lost their jobs. More than 1,300 employees headed out the door as chief executive Highfield, formerly of Microsoft and the BBC's ex-technology director, implemented his digitally charged vision at the 245-year-old publisher. "It was the moment of maximum pain," says one City source. | In Ashley Highfield's first year in charge of Johnston Press, the UK's largest publisher of regional newspapers, almost a quarter of staff lost their jobs. More than 1,300 employees headed out the door as chief executive Highfield, formerly of Microsoft and the BBC's ex-technology director, implemented his digitally charged vision at the 245-year-old publisher. "It was the moment of maximum pain," says one City source. |
| Investors had all but given up hope when Highfield joined in November 2011, with the company's share price languishing at between 4p and 5p and a market capitalisation struggling to top £20m – a swift, painful fall from the 350p share price and £1bn-plus market capitalisation it enjoyed as recently as 2007. | Investors had all but given up hope when Highfield joined in November 2011, with the company's share price languishing at between 4p and 5p and a market capitalisation struggling to top £20m – a swift, painful fall from the 350p share price and £1bn-plus market capitalisation it enjoyed as recently as 2007. |
| The tech man with no previous newspaper experience inherited a hellish intray which included debt of close to £400m, putting the publisher at a huge disadvantage in a renegotiation of banking facilities in April 2012 that resulted in a murderous blended interest rate of 13%. | The tech man with no previous newspaper experience inherited a hellish intray which included debt of close to £400m, putting the publisher at a huge disadvantage in a renegotiation of banking facilities in April 2012 that resulted in a murderous blended interest rate of 13%. |
| Despite the patently clear shift to online consumption in recent years, Johnston Press had failed to come up with a strategy looking beyond print – digital accounted for just 4% of total revenues in 2011. "It was some baptism of fire, for his first year in charge of a publicly-listed company and his first exposure to the newspaper industry," says a second City source. "Last year will prove to be his toughest." | Despite the patently clear shift to online consumption in recent years, Johnston Press had failed to come up with a strategy looking beyond print – digital accounted for just 4% of total revenues in 2011. "It was some baptism of fire, for his first year in charge of a publicly-listed company and his first exposure to the newspaper industry," says a second City source. "Last year will prove to be his toughest." |
| Highfield has moved swiftly, rolling out a sweeping, and often painful, restructure plan under which about 220 of Johnston Press's 250 titles (which include the Scotsman and the Yorkshire Post) have relaunched to date. | Highfield has moved swiftly, rolling out a sweeping, and often painful, restructure plan under which about 220 of Johnston Press's 250 titles (which include the Scotsman and the Yorkshire Post) have relaunched to date. |
| He claims the programme is proving a success with circulation revenues up between 5% and more than 6% post-relaunch. "Successive relaunches are getting better and better at driving revenues," he says, quietly confident that 2013 could be the landmark year that sales income returns to growth for the first time since the last halcyon days of the regional press in 2007. "I'd be disappointed if we saw a circulation revenue decline this year." | He claims the programme is proving a success with circulation revenues up between 5% and more than 6% post-relaunch. "Successive relaunches are getting better and better at driving revenues," he says, quietly confident that 2013 could be the landmark year that sales income returns to growth for the first time since the last halcyon days of the regional press in 2007. "I'd be disappointed if we saw a circulation revenue decline this year." |
| Ian Russell, the chairman of Johnston Press, calls the £37.6m in cost savings made from Highfield's programme last year "outstanding", but the effects of the cuts to headcount and newspaper operations have been devastating. | Ian Russell, the chairman of Johnston Press, calls the £37.6m in cost savings made from Highfield's programme last year "outstanding", but the effects of the cuts to headcount and newspaper operations have been devastating. |
| "Not one of us thinks that we are going to be in a job in a year," says one insider. "They have in their heads that we are all Luddites and against change. We're not. We do the best we can all day, every day to produce great product on piddling budgets and they call that success. Morale is not good at all." | "Not one of us thinks that we are going to be in a job in a year," says one insider. "They have in their heads that we are all Luddites and against change. We're not. We do the best we can all day, every day to produce great product on piddling budgets and they call that success. Morale is not good at all." |
| Highfield's digital plan has also seen the launch of the first 20 tablet and mobile apps, 200 mobile websites, an overhaul of existing newspaper sites, and the development of new digital revenue streams such as the GroupOn-style DealMonster local deals service. | Highfield's digital plan has also seen the launch of the first 20 tablet and mobile apps, 200 mobile websites, an overhaul of existing newspaper sites, and the development of new digital revenue streams such as the GroupOn-style DealMonster local deals service. |
| There were embarrassing reports that sales staff were forced to pitch images of what Johnston Press's apps could do to advertisers from computer print-outs; but the problem was swiftly remedied by the handing-out of 800 iPads. | There were embarrassing reports that sales staff were forced to pitch images of what Johnston Press's apps could do to advertisers from computer print-outs; but the problem was swiftly remedied by the handing-out of 800 iPads. |
| Digital revenues grew 12% last year to £20.6m – with the critical online display element up 39% – to account for just over 6% of Johnston Press's total revenues of £358.7m. | Digital revenues grew 12% last year to £20.6m – with the critical online display element up 39% – to account for just over 6% of Johnston Press's total revenues of £358.7m. |
| Highfield is excited by the digital story ("digital display is the future of the digital business and therefore potentially the future of the whole business"), but a browse through Johnston Press's balance sheet shows there is a significant mountain to climb. | Highfield is excited by the digital story ("digital display is the future of the digital business and therefore potentially the future of the whole business"), but a browse through Johnston Press's balance sheet shows there is a significant mountain to climb. |
| Print ad revenues remain the lifeblood of the business, accounting for half of total revenues, but they continue on a double-digit downward spiral. The ad decline was 15% last year and, worryingly, even worse in the first 10 weeks of 2013 at almost 16% down. And there's no chance of the digital pennies gained making up for the loss of print pounds. | Print ad revenues remain the lifeblood of the business, accounting for half of total revenues, but they continue on a double-digit downward spiral. The ad decline was 15% last year and, worryingly, even worse in the first 10 weeks of 2013 at almost 16% down. And there's no chance of the digital pennies gained making up for the loss of print pounds. |
| Marring the balance sheet too is Johnston Press's onerous £319m debt pile, albeit reduced by £32.3m last year. Highfield is focused on this – the high interest rates make annual payments an eye-watering £40m – knowing that if he can pay it down by a further £80m by the end of next year life will get easier. "Two years of pain" lie ahead, he acknowledges. | Marring the balance sheet too is Johnston Press's onerous £319m debt pile, albeit reduced by £32.3m last year. Highfield is focused on this – the high interest rates make annual payments an eye-watering £40m – knowing that if he can pay it down by a further £80m by the end of next year life will get easier. "Two years of pain" lie ahead, he acknowledges. |
| If Johnston Press can hit a debt level of £240m by the end of next year, it will receive a £25m windfall and, crucially, be able to negotiate a better rate from banks. If it can secure a typical rate of about 8% interest, the payment level will be about half what it is today. | If Johnston Press can hit a debt level of £240m by the end of next year, it will receive a £25m windfall and, crucially, be able to negotiate a better rate from banks. If it can secure a typical rate of about 8% interest, the payment level will be about half what it is today. |
| The Highfield plan appears to be winning over investors, with the share price up to 16.5p last week, a level not seen since September 2010, with the market cap nosing above the £100m mark. | The Highfield plan appears to be winning over investors, with the share price up to 16.5p last week, a level not seen since September 2010, with the market cap nosing above the £100m mark. |
| The company remains highly cash generative: operating profits were £57m last year although this was an 11.6% year-on-year fall, and its impressive 17% margin outstrips rivals. Trinity Mirror, the largest regional publisher by circulation revenue, has a margin of 15%; Northcliffe, the fourth largest player, now part of David Montgomery's Local World venture, operates at 12%. | The company remains highly cash generative: operating profits were £57m last year although this was an 11.6% year-on-year fall, and its impressive 17% margin outstrips rivals. Trinity Mirror, the largest regional publisher by circulation revenue, has a margin of 15%; Northcliffe, the fourth largest player, now part of David Montgomery's Local World venture, operates at 12%. |
| Nevertheless staff remain convinced that if the publisher is eventually restored to financial health, only shareholders will reap the rewards. "All this talk about profit margins and refinancing is well and good, but it will all end up going on bonuses and in the pockets of shareholders," says one staff member. "Do you really think if they achieve their targets we will get more staff, better equipment, more investment or the heating fixed? I don't." | Nevertheless staff remain convinced that if the publisher is eventually restored to financial health, only shareholders will reap the rewards. "All this talk about profit margins and refinancing is well and good, but it will all end up going on bonuses and in the pockets of shareholders," says one staff member. "Do you really think if they achieve their targets we will get more staff, better equipment, more investment or the heating fixed? I don't." |
| Johnston Press's 4,350 remaining staff face another uncertain year. With a target of £15m further savings for 2013, Highfield refuses to rule out more job cuts but he does believe the worst is over. | Johnston Press's 4,350 remaining staff face another uncertain year. With a target of £15m further savings for 2013, Highfield refuses to rule out more job cuts but he does believe the worst is over. |
| "I don't need to make such big cuts again," he says. "I wanted to get most of the pain over as quickly as possible. News International [which paid £30m to partially terminate a printing contract] funded a quicker restructure than we would have been allowed. We don't need to go at the same rate over the next couple of years." | "I don't need to make such big cuts again," he says. "I wanted to get most of the pain over as quickly as possible. News International [which paid £30m to partially terminate a printing contract] funded a quicker restructure than we would have been allowed. We don't need to go at the same rate over the next couple of years." |
| The numbers | The numbers |
| 2012 results | 2012 results |
| Pre-tax loss: £6.8m (2011: £144m loss) | Pre-tax loss: £6.8m (2011: £144m loss) |
| Revenue: £358.7m (-4%) | Revenue: £358.7m (-4%) |
| Print advertising: £181.3m (-14.8%) | Print advertising: £181.3m (-14.8%) |
| Digital advertising: £20.6m (12%) | Digital advertising: £20.6m (12%) |
| Net debt: £319.4m (10.1%) | Net debt: £319.4m (10.1%) |
| Staff: 4,350 as at 29 December, 2012 (-23.1%) | Staff: 4,350 as at 29 December, 2012 (-23.1%) |
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