The statement said:
Highlights for the period:
• Market conditions in the first 18 weeks of the second half of 2012 were more challenging than in the first half with like for like total revenues down 11.4% year on year although we are seeing some positive signs of a slowing in the rate of revenue decline in November
• Successful re-launch of 54 paid-for titles has contributed to a slowing of the Group’s year on year circulation revenue decline to just 0.5% on a like for like basis, and we anticipate year on year growth in circulation revenues in Q4
• Extensive reshaping of the business has seen the level of cost savings increase and we now expect cost savings for the full year to be around £30m, a £5m increase on the previous estimate
• Continuing focus on reducing net debt with repayment of borrowings ahead of schedule although the robust operating cash flow in the first 18 weeks of the second half has been offset by the cash cost of restructuring in the period
• Digital audience growth across our network of websites has continued apace, with monthly website visitors for October showing a 25.2% year on year increase to 9.8m
Operational performance
As forecast at the time of the interim results, difficult market conditions mean that trading in the second half of 2012 has been even more challenging than in the first. The results also include the impact of moving a number of titles from daily to weekly, the closure of titles, and changes to the contract printing operations as a result of the revised arrangements with News International. The overall movement in the second half (18 weeks) compared to the same period last year is therefore given on both a like for like and unadjusted basis.
On a like for like basis, total revenues were down 11.4% year on year, with circulation revenues down 0.5% and total print and digital advertising revenues down 14.0%. The unadjusted declines were 16.1%, 5.1% and 16.3% respectively.
The second phase of the re-launch programme has been implemented and, while it is early days, we are seeing a positive impact on these titles with circulation revenues of the 31 paid-for titles re-launched in the second half up 19.5% on the week immediately prior to re-launch and 13.8% up year on year.
Display advertising declined by 16.8% in the 18 week period compared to last year, principally as a result of weakness in national advertising revenues over the summer and relatively strong comparatives in 2011. The decline in classified advertising of 19.1% in the period was primarily due to the economic environment, but also reflects some transitional impact arising from the consolidation of the number of contact centres in the Group from 14 to 2. We anticipate that any residual impact from this transition will have been removed by the end of 2012 and that we will see the additional benefits of the new arrangements building into 2013.
Digital revenues grew by 2.9% year on year in the 18 week period. Online display revenues in particular continue to show strong growth but the overall digital growth has been impacted by the reduced digital upsell from a lower level of print employment advertising. This is being addressed by an increased focus on standalone digital employment advertising and a move to a ‘digital first’ approach.
Cost savings and debt reduction
We project that full year like for like cost savings in 2012 will now exceed £30m, representing a further £5m saving over and above the amount estimated at the time of the interim results.
Net debt has fallen from £351.7m at the start of the year to £336m as at the end of October with further reductions expected over the remainder of the year. This has been achieved after incurring £11.7m of refinancing costs and £13.8 m relating to the cash impact of restructuring.
Outlook
Provided that the trading environment does not deteriorate further, with continued achievement of the identified cost savings, increased circulation revenues during Q4 and a growing digital business, we expect full year operating profit performance for 2012 to be broadly in line with current market expectations.
Commenting on the Interim Management Statement, Johnston Press’ CEO Ashley Highfield said: “The second half of 2012 has seen acceleration in the implementation of the strategy for the business. While market conditions have been even tougher than expected, we have made good progress in restructuring our operations, reducing the cost base, maintaining focus on debt reduction and continuing to invest in growth areas. We have moved forward with the re-launch of our titles with encouraging early signs, and our digital business has seen a huge increase in audience this year, as well as the launch of services across iPad, mobile and PC, which will provide a spring-board to future digital revenue growth. As a result, the business is moving onto a more stable footing as we go into 2013 when the full benefits of the changes will be seen.”
