Creditors beware: newspaper industry in freefall during Covid-19 as sales plunge 39% as publisher Archant seeks to dump their pension fund and leave shareholders with nothing

Pic: FT

Creditors beware: newspaper industry in freefall during Covid-19 as sales plunge 39% as publisher Archant seeks to dump their pension fund and leave shareholders with nothing

The Guardian has reported that The Financial Times and the i newspaper saw declines in circulation of 39% and 38%, respectively. They said: “The decline of circulation of the i was exacerbated by the cessation of the distribution of bulks, free copies, to locations including airports, gyms and railway stations.”

Ian Carrotte of ICSM Credit said Covid-19 have brought forward the demise of several industries and speeded up social changes due to the lock-down. “Newspapers and magazines have seen a steady declines for years due to two factors,” he said. “The flight of advertising to the internet and the rise in the use of mobile phones, tablets and laptops to read long form articles and news stories. Now with Covid-19 it's worse as it's difficult to pop to the local shop without having to queue and put on a mask.”

He cautioned suppliers of paper, ink, computer technology and printing presses to the industry after Archant became the latest publisher to get into financial trouble. In 2018 one of the UK’s biggest newspaper publishers Johnston Press went into administration and was bought in a pre-pack by JPI Media dumping large amounts of debt. Daily and weekly titles like the The Oldham Evening Chronicle published by collapsed Hirst, Kidd and Rennie publishers which closed in 2017, while since then more 100 newspaper titles have gone.

Archant clings to CVA hope

The newspaper industry’s trade publication Press Gazette has reported that the UK’s fourth biggest local newspaper publisher Archant has been bought out by a private equity firm in a deal which leaves shareholders with nothing. However the proposed CVA (Company Voluntary Arrangement) has to be agreed negotiated with the help of KPMG has to be agreed with creditors who look set to get little or nothing.

Under the deal reported the Press Gazette Rcapital Partners will take a 90% stake in the company, which publishes the The New European and the Eastern Daily Press as well as a number of local weekly news titles and monthly magazines.

Pension scheme issue

The Press Gazette reported: “The company’s pension scheme, which is believed to have deficit of around £50m, will be taken over by the government’s Pension Protection Fund. The pension fund shortfall had been costing the company £3m a year. The deal is an alternative to liquidating the company, which means creditors will get more of their money back and the new owners may have more room to invest.”

Chief executive Simon Bax broke the news to staff in an email in which he said, “the impact of the downturn on our advertising and circulation revenues due to Covid-19 has been profound”. He said the new owners would invest in the business and provide a “sustainable financial platform upon which the company can continue its transformation”.

Carrotte: 'it's wishful thinking'

Ian Carrotte of ICSM Credit said that was all wishful thinking as the business model for many local newspapers was broken and he foresaw more financial problems for the print based titles such as the Norwich Evening News. As a result of the deal, two of Archant’s holding companies – Archant Ltd and Archant Community Media Holdings Limited – will be placed into administration. Archant Community Media Limited, under which it employs its staff, will continue to trade. Shareholders in Archant Ltd will lose out, however, including employees who held shares in the company.

Archant was founded in 1845 in Norwich, where it is still headquartered, as the Norfolk News. The Colman family, who produce the region’s famous mustard, are among its shareholders, with Jeremiah Colman having been one of its founders. The group’s private pension fund will retain the final 10% stake in the business. Archant needs to secure at least 75% creditor approval by value for the CVA for it to proceed. Talks are already underway with key creditors through KPMG.

The Press Gazzete said Archant made a pre-tax loss of £7.6m in 2018 on group revenue of £87.3m, which was down 9.6% on the year before. The group still relies on print for 78% of its total revenues, although advertising, which makes made up the bulk of its income, fell by 10.8% to £64.2m and newspaper circulation fell by 6.6% to £16.4m in 2018.

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