Printing goes all the way back to the 1400’s but with the rise of the internet and the proliferation of smart phones one could argue that the traditional newspaper is now obsolete. With younger generations obtaining their daily news through other sources there seems to be only one logical direction for traditional newspaper revenues. Many newspaper publishers battling with declining circulations and declining advertising revenues are now reaching their do or die moment as they fight to transition themselves online to keep touch with the modern consumer.
One such company is Johnston Press PLC which is a multimedia company based in Edinburgh, Scotland, who own a number of newspapers like the i, The Scotsman, the Yorkshire Post, the Falkirk Herald, The News and The News Letter. The company dates back to 1767 when it was first established and it made its first acquisition in 1846 and has since gone on to operate approximately 200 other newspapers and linked websites in the United Kingdom. Johnston Press aims to provide a highly reliable news source to local communities by meeting their needs for local news, information and advertising services through the use of media that includes things like physical print (newspapers) and online channels.
Even though they are a printing company, since the emergence of the Internet they have understood that in order to keep the company a success they have adapt to ever changing technologies, which is why they have strived to create an online presence to entice the younger generation, who are glued to their computers and the Internet.
However despite their early transition online Johnston press now finds themselves facing their very own do or die moment. With a £200 million 8.625% bond due for repayment in June 2019 and little cash on the balance sheet the company certainly is facing stormy waters. Shares of the company have recently been trading at at an all time low of 2.41p, giving the entire company a market cap of just £2.5 million. To put that market cap into perspective for this year they are forecast to bring in a whopping £36 million EBITDA on revenue of £188 million leading to an EPS of 6.54p. Clearly the market didn’t think they’re going to be able to refinance that bond and consequently they were being priced as if bankruptcy is a near certainty. But what sparks my interest is since hitting that low the shares have been on a tear and are now trading at 9.1p rising an outstanding 160% since last Thursday. It certainly looks like something could be brewing.
For people who are adverse to risk then Johnston press could be very off-putting due to the fact that if they don’t refinance the bond then they risk going under. But for the seasoned investor, especially those who know what to look for when spotting opportunities this could be the perfect opportunity to make a killing, because even after the rise over the last few days the price of their shares is still so low there is still plenty of more room to run if they do refinance the bond, but on the flip side if they don’t get their finances in order who knows what the future will hold it could be a fire sale of the prized assets or maybe even bankruptcy.
Armed with this information it is easy to see why it might be worth investing in the shares and take a chance, but it is a high risk high reward investment given the refinancing of the bond so maybe it isn’t worth it after all but it’s up to the you to make that decision.