AS A manager of engineering companies, Tim Bowdler knew all there was to know about making vending machines, ball bearings, saws and tools, ovens and paper driers, vehicle batteries and building materials.
So he was more than a little surprised when a headhunter called and asked if he would be interested in running a newspaper group.
The answer was no, and anyway, he did not want to move to Edinburgh, where Johnston Press, a company founded in 1767 and now in search of a chief executive, was based.
He even rang to cancel a meeting with Freddie Johnston — then the chairman, now a non-executive director of the company — before he could be persuaded to change his mind. In fact, Johnston considered Bowdler’s lack of experience in newspapers a key qualification for the job.
“Freddie was looking for someone who knew nothing about newspapers — and they couldn’t find anyone who knew less than me,” Bowdler laughs.
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Freddie Johnston had plenty of people who knew about the industry. What he needed was someone to manage the business. Bowdler has been chief executive of Johnston Press for ten years, a decade in which the company has emerged from the ranks of middle-sized operators to become one of the biggest players in the British regional newspaper industry.
Johnston floated in 1988 with a stock market value of £22 million, and when Bowdler arrived in 1994 it was worth about £65 million. Now the figure is £1.6 billion and the once tiny Scottish weekly newspaper publisher owns 241 weekly and daily titles.
When Bowdler arrived the company was in acquisition talks with the Halifax Evening Courier, which was to become its first daily paper.
“It was a matter of getting on a fast-moving train,” Bowdler, who was given a three-month crash course in newspapers, says.
“What did I bring to it? In the broadest terms, management skills, a well organised approach and a knowledge of acquisitions and disposals.”
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This week Johnston Press was able to tell the City that trading for the 23 weeks to June 30 had shown like-for-like advertising growth of 5.8 per cent, and that all categories of advertising were ahead.
As a result, analysts have been nudging up their pre-tax profits forecasts for the full year by a few million pounds to £143 million.
On Friday Johnston’s shares hit a record 570p — a price that means the company is worth only £300 million less than Emap, the radio and magazine group. It was Emap that helped to accelerate Johnston’s growth by deciding to sell all its newspaper interests in 1986.
Two large newspaper acquisitions have followed — Portsmouth & Sunderland Newspapers and, in 2002, Regional Independent Media (RIM), publishers of the Yorkshire Post. There have also been smaller deals.
The Johnston strategy has simply been to acquire good and profitable newspaper businesses and then, through a process akin to the production engineering in which Bowdler was well versed, lift the profit margins of the new company up to the Johnston average. Last year Johnston’s margin was 33 per cent and it will almost certainly edge up a little more this year.
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“We are where we are because Freddie was prepared to bet the company at times,” Bowdler says. “By being willing to pay over the odds and taking the view that the value was there and we really could extract more from it, we have been able to do deals that others weren’t willing to go to.”
But there has always been a detailed plan. When Johnston moved into RIM there was a ten-page document setting out a timetable for everything that had to be done.
First Johnston puts in its own executives, then, almost immediately, the unneeded head office goes. A 28-strong accounts section at RIM was replaced by three extra staff at Johnston head office. Economies of scale on purchasing were realised and surplus presses were shut down.
The aim is to make all the backroom functions as costeffective as possible. “It’s not really about cost savings. It’s about being a more efficient organisation which uses its scale intelligently,” Bowdler says. It took him just 18 months to get RIM margins up to the Johnston average.
Last year, the company says, only one area of costs rose at the former RIM — editorial, up by 6 per cent. Bowdler says the aim is to continue to invest in content, including new supplements and local guides. “We are in the business for the long term. It is our core business. If we don’t have healthy newspapers then in the long term we are destroying our own business.”
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Every year Johnston directors debate the future of the company and consider whether it is time for a move into other media such as commercial radio. Every year the answer is no. Johnston Press does not see how it could earn as high margins in any other media sector.
Despite Johnston’s strong reputation, problems remain, particularly with evening papers, which can easily lose 2 per cent of circulation in a year almost irrespective of what management does.
“We have the potential to stem the decline,” Bowdler says. “The fight is against lifestyle. People have more things to do and more media options now than they have ever had before.”
Strategies such as better content and earlier production schedules to hit the lunchtime trade are helping to reverse the tide.
Meanwhile, Johnston’s 121 paid-for weeklies have just had their seventh successive year of circulation growth as people appear increasingly to value a sense of community.
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“Every medium has seen fragmentation (of audiences). Strangely the local newspaper could be regarded as the last mass medium,” Bowdler says.
Naturally, he is still on the lookout for acquisitions.
“I think there will be more consolidation,” he says. “For the right deal, we will certainly be prepared to push out to achieve it.”