Johnston Press Signals Deals Appetite Despite Falling Sales

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Johnston Press Plc said it’s still on the look-out for acquisitions as a sharp decline in print advertising weighs on sales at Britain’s second-biggest local newspaper publisher.

“We’ve built up a cash pile and we’re looking at the right investments,” Chief Executive Officer Ashley Highfield said on a conference call Tuesday, responding to a question about possible industry consolidation involving rivals Trinity Mirror Plc and Local World. “If the right opportunities come along at the right price, we’ll look at them seriously.”

Local newspaper publishers have had a miserable 2015 so far, with Johnston -- owner of about 250 titles including The Scotsman -- ascribing much of the blame to uncertainty around the U.K. general election and its impact on corporate ad spending.

On Tuesday, Johnston reported a 4.6 percent drop in sales in the 26 weeks ended July 4, when including a pension impact and other adjustments. Trinity last month reported a 9 percent first-half revenue decline.

Highfield said the poor second quarter had led some peers to reconsider whether mergers really were the answer to the structural decline in print ads, but he said: “I still think long-term consolidation is in the interests of the industry.”

An acquisition or merger could help achieve cost savings and make Johnston’s ad offerings more attractive because of a larger geographical base, Alex De Groote, media analyst at Peel Hunt, said by phone Tuesday.

Share Plunge

The appetite for deals comes despite Johnston shares falling 20 percent on July 14 after it issued a profit warning ahead of its half-year results. Operating profit including exceptional items fell 4.3 percent to 27 million pounds.

Johnston’s main competitors in print, such as Trinity and Daily Mail and General Trust Plc, have also seen their share prices decline this year.

Johnston said the pace of the slowdown in ad sales had lessened slightly in July, with its monthly decline running at 7.7 percent year-on-year.

Digital advertising revenue rose 17.5 percent in the first half. Digital sales now represent about a fifth of total ad revenue, up from 13 percent two years ago.

Johnston also cut net debt by 10.9 million pounds to 183.3 million pounds.

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