It takes chutzpah to recommend buying a “dead tree” publishing group these days but Liberum Capital remains a fan of Johnston Press plc (LON:JPR).
The publisher of The Scotsman and The Yorkshire Post posted a trading update last week in which it said its Total print and digital advertising revenues, excluding classifieds, for the full year were down 7%.
Total revenues were down 6% year-on-year but Liberum said the fourth quarter performance was better than expected, though it is too soon in the broker’s view to call it the start of a trend.
“However, despite the still tough market conditions Johnston Press has in 2016 managed to implement its strategy. The company acquired I, which turns out to be a hidden gem,” said the media team at Liberum.
It also disposed of various news titles, generating more than £20m in cash, and showed continued cost discipline.
To reflect the disposal of its East Anglia & Midlands titles and factoring in ongoing market pressure, Liberum has lopped 18% off its earnings estimates for the current year and 22% for next year.
“Despite i having been acquired only eight months ago, it already provides a meaningful contribution to the group. While group profits have fallen over the year, i's EBITDA contribution has risen. The market share of i has also increased from 17% to 20% in less than a year, despite a 25% cover price rise. Overall the title's circulation revenues were up 20% yoy [year-on-year] in Q4,” Liberum noted.
The broker reckons there could be more to come from the newest edition to the Johnston table, and would not rule out another price rise, given the loyalty of the title’s readership.
Though it remains a buyer of the stock, which currently trades at 16.19p, it has slashed its discounted cash flow-derived price target to 80p from 150p.