EDINBURGH-based newspaper publisher Johnston Press has posted a pre-tax loss of £143.8 million after writing down the value of its titles by £163.7m and unveiling a new loan deal that could see its lenders acquire 12.5% of the company.
Johnston's shares fell 0.25p, or 4.4%, to 5.5p after the owner of The Scotsman and Yorkshire Post newspapers said advertising revenues in the first 15 weeks of its new financial year were 10.6% down.
Last week chief executive Ashley Highfield, who succeeded John Fry in November, unveiled plans to relaunch its 170 paid-for titles and provide more digital content.
Having delayed publication of its 2011 results until it had thrashed out a deal with lenders, Johnston Press revealed it has been given a new three-year facility of £393m.
Its debt stood at £351.7m at the end of 2011 after £35m was repaid.
Mr Highfield, a former BBC and Microsoft executive, told The Herald he was "very pleased" with the loan deal.
"We are aligned. Both sides want to pay debt down and have the opportunity to refinance at the end of 2014 and have lower interest rates going forward."
Johnston has paid £11.5m in fees for the new deal and faces an interest rate of around 10%.
Mr Highfield said: "It is a tough market and, in line with market conditions, the interest rates are where they are."
Johnston has also given warrants equivalent to 7.5% of the company to its lenders, on top of the 5% handed out previously.
These can be exercised at 10p meaning that lenders will profit only if Johnston's share price doubles.
The deal also includes potentially punitive payment-in-kind interest that will kick in unless Johnston successfully refinances by the end of 2014, which Mr Highfield said incentivises it to execute his new strategy. The company recorded its third loss in four years, after seeing a pre-tax profit of £16.5m for 2010 turned into a deficit of £143.8m last year.
This was thanks to a writedown of £163.7m in the value of its titles, including £23.8m at its Scottish publications.
Johnston said this was due to bringing its calculations into line with other publishers.
After paying a £38.5m interest bill, underlying earnings for the year to December 31 came in at £28m, which was better than many in the City had expected.
Revenues of £373.8m, down 6.1% on 2010, were worse than anticipated.
However, Johnston cut £16.9m from its running costs, thanks in part to a 11.3% fall in employee numbers to 5245.
Mr Highfield warned of more job losses to come.
"It is inevitable that there will be some overall net reduction in head count numbers at Johnston Press. That is reflecting the industry at large."
Its pension deficit widened from £56.3m to £101.8m. Payments to the scheme will rise from £2.2m to £5.7m this year.
While digital revenues grew 0.7% to £18.4m in 2011, it was hit by a 9.7% slump in print revenues to £212.9m.
Most of this was down to a fall in job advertising.
Mr Highfield's strategy will see a number of its daily newspapers converted into weekly titles supported by websites.
Mr Highfield confirmed the Edinburgh Evening News would remain daily, as will The Scotsman.
He said of the new approach: "While the financial benefits are going to be reasonably small in 2012, investors will certainly see whether it is working or not."
He added: "It will only really start to add to the bottom line in 2013."
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