Good morning. It looks like another weak open is likely, as the FTSE 100 Futures are down 32 points at 6,408.

The first company accounts I've looked at this morning are interims from Johnston Press (LON:JPR), the regional newspapers group. As mentioned in the past, in my opinion the shares in this company are worth nothing, because it is effectively insolvent - i.e. it has higher levels of debt than it will in all likelihood ever be able to repay.

The market disagrees, and is currently valuing Johnston at £106.8m at 16p per share. I think that's crazy, and regard these shares as little more than chips to gamble with. The problem is, they have a declining business, e.g. turnover shrank 9.8% versus the comparable period last year, to £144.3m for the 26 weeks to 29 Jun 2013. Not only is their business declining, but it also has gigantic debt, and the interest cost alone is swallowing up a lot of the still considerable cashflow generated.

So operating profit of £28.6m was made in this 26 week period in 2013, a very strong operating profit margin of 19.1%. However, interest costs were £20.1m in th period. So the business is effectively being run to service the debt & the pension fund. Net debt has fallen, but at £306.4m simply looks insurmountable.

I don't see how Johnston can possibly both service the interest payments, and repay the capital on that debt. Hence the shares really are worth nothing, because equity ranks behind debt. The only way I can see the market cap of £106.8m making sense, is if you assume that shareholders will be willing to inject more money, alongside perhaps a debt for equity swap, or a write-down of the debt by the Banks.

That is however a pretty herioc assumption to base an investment on, and looks foolish to me.

Most of the debt reduction in the last year appears to have come from one-off payments from News International, on the termination of a long-term printing contract. Without that revenue, it's difficult to see how they will be able to make much more of a dent in net debt after interest costs.

If you look at the Balance Sheet overall, there have been some large write-downs in this period, and net assets have fallen almost two thirds in the last…

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