Buteman’s owner improving performance but crippled by bank costs

Johnston Press, owner of one of Argyll’spectrum of  great local newspapers, The Buteman, is in the position of having all of its 18 daily papers and 300 weekly ones profitable, having reduced its debt and improved its earnings-to-debt ratio – but seeing its bank costs almost double from £10.4 million to a knee-buckling £21.4 million.

The company has taken its formal debt down from £422 million to £401 million, a drop of £21 million.

The additional £10.9 million on its bank costs includes £5.6 million in higher interest charges and £4.9 million as a first installment of ‘special facility’ charges.

Basically, Johnston Press have been in a position where they could pay down their debt but not keep up with the interest charges. When the company was unable to make set dates, the bank took that as an opportunty to renegotiate the loan arrangements – hence the higher interest charges and the special facility charge.

Alongside this, the company saw its first rise since 2006 in underlying profit – up to £40.5 million – and a 2% rise in its operating profit.

The costs of financing though, led to a fall of 29% in its earnings per share, falling from 3.1p to 2.2p.

Costs and payroll were both reduced over the period.

The circulation revenues of the company’s titles have seen a slide of no more than 1.6% in July 2010 and digital revenues were up 9.7% on this July’s performance as compared with July 2009.

Total revenues continued what has been a falling pattern – sharply down 52% to £207 million. However, a brake has been put on the rate of decline of advertising revenues – compare the mid-2009 figure of 25.4% decline with a 2010 first half of 5.2%  – and an encouraging further reduction in fall rate in July and August 2010 – to 3.7%.

Support for current performance came from an increase in property advertising, up by 9.5% – a by-product of the recession and the fall in house sales.

The relaunch of the company’s digital service on job availabilities has produced an improvement leading to a strategy to grow the group’s job advertising revenues.

Johnston Press shares, down by 50% since May 2010, showed a positive response to the news with a 6.25% rise in share price -  up by 1p to 16p.