JOHNSTON Press has fallen £300 million into the red after slashing £337m off the valuation of its newspapers, prompting the firm to call a general meeting to consider if steps should be taken to strengthen its balance sheet.

The company, whose titles include the i and The Scotsman, disclosed that the writedowns cut the value of its net assets to a level that meant the company was required by law to consult shareholders.

Announcing its 2016 annual results, the company said: “As a consequence of the impairment of publishing titles, the Company has net assets which are less than half of its called-up share capital. Pursuant to section 656 of the Companies Act 2006, the directors will call a general meeting of the company within 28 days to consider whether any, and if so what, steps should be taken to deal with the situation.”

Directors said they had concluded it was appropriate to prepare the group’s accounts on a going concern basis as they believe it has adequate financial resources to meet its operational needs for at least the next 12 months.

However, the results announcement underlines the scale of the challenges facing the business, which is due to repay £220m high yield bonds in June 2019.

“In light of the challenges faced by the industry as a whole, the current trading experience of the Group, and the likely financial position of the group at the time the bonds are due for repayment in June 2019 there is uncertainty surrounding the group’s ability to refinance the bonds at par in the debt markets on commercially acceptable terms,” said the company.

Noting that default could have a material impact on its ability to continue as a going concern, Johnston Press added: “The directors, along with the group’s advisers, are exploring the strategic options available to the group in the event that a refinancing of the bonds in the debt markets prior to June 2019 is not possible.”

But chief executive Ashley Highfield said the actions taken to pilot the business through a rapidly- changing market and to create the conditions from which to create growth are starting to bear fruit.

The actions have included developing digital revenue streams, selling non-core titles and a “relentless focus on cost management”. Mr Highfield said the acquisition of the i in April had been transformational, boosting circulation revenues and advertising revenues.

He noted: “We have seen digital return to growth in Q1 2017, with better margin products, and will see growth from our investment in the i from both the newspaper and website.”

Johnston Press remains focused on delivering its strategic priorities of growing its overall audience, driving the success of the i, increasing efficiency and strengthening its balance sheet.

Revenues from continuing operations fell eight per cent to £222.7m in the 52 weeks to December 31, from £242.1m last time. The company had net liabilities of £24.6m at the year end. Assets exceeded liabilities by £259m at the preceding year end.

The £300m pre tax loss on continuing operations in 2016 followed a £2m profit in 2015.

The £337m total writedowns included £43m in respect of titles in Scotland. The calculation of the writedowns took account of management forecasts of expected changes in demand for print and digital products, costs and inflation for the period to the end of 2019.

Jonathan Helliwell at house broker Panmure Gordon wrote: “The group continues to trade resiliently in very difficult markets,”

Johnston Press shares closed down 2p, nine per cent, at 20p.