Directors Dealings
Coming back to Johnston Press, the chart below shows clearly just how beaten down they have been over the last 5 years — from 300p to 4p at the lows — effectively a 99% wipe out of equity value. This is principally due to one reason — the company’s debt burden. On virtually all equity valuation metrics — price to sales, PE, price to book, price to cash flow — then the company appears exceptionally cheap, but of course the debt overhang is what has acted as the brake on the stock price.
The last audited figures in April of this year show a net debt figure of £361m with an annual interest bill of almost £27m. The Group reported net assets of just under £300m against a current market cap of just over £70m, however.
Johnston Press - Chart
In April of this year, management took concrete steps to address the debt burden through a successful refinancing. This gives the Group headroom of £393m until the end of Sep 2015, and so giving the Board a good degree of breathing room to allow their strategy of investing in digital media in order to increase advertising revenues to bear fruit. Additionally, newspaper entrepreneur Sir Ron Tindle has been stake building during the last year, holding just over 8%. He has gone on record as stating that JPR has “one of the best collections of newspapers in the country”. There have been numerous Director purchases this year as well as at the tail end of 2011 with the majority being bought around the 5-8p per share level.
On the 15 October, CEO Ashley Highfield purchased another 90k shares at 11p — not a massive capital outlay, but on top of the sustained purchasing by the rest of the Board in September and June — either side of the closed period, certainly a signal that is being sent to the market that he believes there is a way to go in restoring meaningful equity value.
The shares have had a bit of a run in recent weeks, from the 8p level to scratching 14p in mid-October. Consequently, as we can see from the chart here, the RSI measure is somewhat overbought now and so we wouldn’t chase the shares just now, but allow them to consolidate the gains first if you are minded for a bull trade.
76 | www.financial-spread-betting.com | November 2012