The rich rewards for failure

CONTRIBUTED

It was fascinating, sickening and frankly heart-breaking to learn this week that the four former Tweeddale Press [TP] newspaper titles which circulate throughout the Scottish Borders had been valued by an administrator who is currently cleaning up the mess within publishers Johnston Press at just £102,000.

Each one of the former independent groups of weeklies [and dailies] which had fallen under the control of the Johnston empire during the last 30 years or so has been given a price tag, apparently at 'fire sale' rates although for now each of the titles has been swallowed up by a newly formed business named JPI Media.

The complete financial collapse of Johnston Press with debts of £220 million and a pension fund it has been forced to hand over to others is one of the biggest disasters in the recent history of the British newspaper industry.

But back to the Scottish Borders where the scale of the catastrophe can be graphically illustrated in terms of hard cash.

The generations who used to rush to get their Southern Reporter, Berwickshire News, Selkirk Saturday Advertiser and their more recent stablemate Hawick News may have largely deserted these bastions of local democracy after watching each of them starved of investment and denied adequate levels of of staff by their 'new' overlords.

For it is less than 20 years - December 31st 1999 to be precise - that Johnston Press was happy to pay £7,799,765 to get their hands on those Tweeddale Press titles currently valued at £102,000. A year earlier The Hawick News had been snapped up by North-east Press - soon to become another Johnston acquisition - for a very respectable £875,000.

Readers were promised investment for the TP Group with expansion on the editorial front. In fact the reason cited by the Smail family for selling their highly respected [and profitable] weeklies  to Johnston was "the firm could no longer compete when it came to investing in titles."

Instead Johnston soon welched on its pledge. It began to close local newspaper offices in most Borders towns while journalists and other members of staff were saddled with heavier workloads as employment levels were cut repeatedly to save money. Those who are left perform miracles each week just to get the papers out in a scenario which exists throughout Johnston offices nationwide.

The first 'threat' to the Johnston newspapers was probably delivered in 2000 when, after trumpeting a £65 million profit for the previous year, the bosses announced they would be investing heavily in "new media" having launched their first website in 1997.

According to the Johnston executives in their 2000 annual report: "The new media represents an exciting and rapidly growing opportunity. We believe we are strongly placed to resist any threat these new developments may pose to our traditional publishing activities".

So how did that forecast work out?

Well, so far as the Tweeddale Press is concerned failures by their proprietors since the takeover mean the Borders titles appear to be worth a miserable 1.5 cent when compared to their valuation for sale by previous owners back in 1999. However, even £102,000 looks like a small fortune compared to The Galloway Gazette where two titles have been valued at £4,000.

Apparently Scotsman Publications whose papers still sell in small numbers in this part of the world has been awarded a £4 million value by the administrator having been bought for £160 million in December 2005 from publisher Andrew Neil, of Press Holdings Group.

While hundreds of skilful, long serving and often dedicated reporters, photographers and sub-editors in Johnston subsidiaries throughout the land have had their employment terminated by redundancy, the rewards for those running the show seem to have been kept firmly in place as each annual report clearly shows.

Chief Executive Officer (CEO) Ashley Highfield, whose tenure stretched from 2011 until earlier this year presided over much of the so-called digital revolution as well as the more recent staff culls. At the same time newspapers, almost without exception, suffered significant losses of circulation and advertising revenue.

In 2016 and 2017 Johnston Press spent a total of £14.5 million on redundancy packages for hundreds of workers. Indeed the company told shareholders in 2017: "The need to invest in cost reduction limits the company's ability to invest in the business. The company's ability to invest in new digital product development is limited. This hinders its ability to stay competitive". Sound familiar?

However, the last annual report (for 2017) before the collapse into administration included a detailed  section on the work of the Remuneration Committee which recommends the levels of executive pay. It says the committee made "a careful assessment of performance": presumably after the annual loss of £29.6 million.

The report continues: "Over the period bonuses of 58% and 48.3% of salary were earned by the CEO and CFO (Chief Financial Officer David King)". This level of bonus was approved by the committee, and subsequently by shareholders at a desperate time for the business even though the two directors concerned voluntarily agreed the bonuses be deferred until the company had "a sound financial base". Some hope!

Mr Highfield's 2017 earnings, including deferred payments, totalled £808,000 (2016 total £556,000) made up of of a basic salary of £430,000, £11,000 in benefits - health insurance, car allowance,, telephone and life assurance - a bonus of £249,000 plus pension benefits of £115,000. Mr King's earnings in 2017, including deferred payments, totalled £452,000 (2016 £319,000).

It means their respective remunerations increased by 45% and 41% over 2016 levels at a time when the flagship Johnston Press was about to hit the rocks and be crippled fatally below the waterline.

Now it is to be hoped at least some of the smaller ships which make up the fleet, including Tweeddale Press, manage to sail into calmer waters after the financial storms that have buffeted them all in recent times.