TIDMJPR
RNS Number : 3966D
Johnston Press PLC
28 March 2014
FOR IMMEDIATE RELEASE 28 March 2014
JOHNSTON PRESS PLC
RESULTS FOR THE 52 WEEKS ENDED 28 December 2013
Underlying operating profit* up 2.5%,
Debt continues to be paid down
Johnston Press plc ("Johnston Press" or "the Group"), one of the
leading community media groups in the British Isles, announces its
results for the 52 week period ended 28 December 2013.
Underlying operating profit* increased by 2.5% from GBP53.0m to
GBP54.3m, the first increase in underlying operating profit for
seven years.
Advertising revenues in 2013 declined 6.4% on an underlying
basis. Unadjusted advertising revenues were down 10% but
significant improvements in the second half reduced this decline to
4.4% in H2.
Digital revenues were up 19.4% in the full year and 25.3% in the
second half of 2013. In our most strategically important area of
digital display advertising, we saw revenue growth of 30.3% for the
period, and 44.6% during H2.
In December 2013 we achieved an aggregate audience of 21.1m, an
increase of 17.1% against December 2012. Digital audience growth
for December was up 47.7% with unique users reaching 13.3m in
December 2013.
Statutory loss before tax of GBP286.8m is due to significant
exceptional items, largely the impairment of assets announced at
the half year and restructuring costs.
Net debt was down GBP17.3m to GBP302.0m for the year with
repayments of GBP33.1m partially offset by the increased PIK
interest accrual of GBP12.1m.
Financial Highlights
GBP'million Statutory Underlying
2013 2012 Change 2013 2012 Change
52 weeks % 52 weeks %
Revenue 302.8^ 358.7^ (15.6) 291.9* 308.8* (5.5)
Operating (loss)/profit (245.6) 40.4 - 54.3** 53.0** 2.5
(Loss)/profit before
tax (286.8) (6.8) - 13.3 8.6 54.7
Net Debt 302.0 319.3 (5.4) 302.0 319.3 (5.4)
Earnings per share(pence)-
basic (32.74) 0.88 - 2.56 2.76 (7.2)
-------- ------- ------- ------- ------- -------
^ Includes exceptional receipt of GBP10.0m (2012: GBP30.0m) in
connection with the cancellation of contract printing arrangements
with News International.
* Underlying is stated excluding exceptional revenues and after
removing trading revenues following the cancellation of contract
print arrangements with News International of GBP0.9m in 2013 and
GBP10.0m in 2012
** Underlying operating profit is stated after removing trading
revenues of GBP9.9m from 2012 and related costs associated with
five titles that changed format from daily to weekly and closed
free titles.
All Underlying figures are stated before IAS 21/39 adjustments
and exceptional items - refer to the Financial Review for a more
detailed description.
Key highlights for financial year 2013
-- Revenue: Underlying total revenues at GBP291.9m, down 5.5% period on period
-- Digital revenues: Up 19.4% period on period, from GBP20.6m to GBP24.6m
-- Cost reduction:Operating costs, before exceptional and IAS
21/39 items, have reduced by GBP33.8m from GBP271.7m to
GBP237.9m
-- Operating margin before exceptional and IAS21/39 items: Up to 18.8%, from 17.3%
-- Continued debt reduction:Net debt down GBP17.3m from December
2012 to GBP302.0m at 28 December 2013
-- Exceptional items: Net exceptional costs before tax of
GBP300.5m, net of a GBP10.0m receipt associated with the
termination of the News International contract
Revenues
Total underlying revenues decreased by 5.5% period on period.
Consumer confidence remained low in the first half of 2013, and
this was reflected in advertiser spending, however the second half
saw signs of improvement.
-- Total advertising revenues declined 6.4% year on year on an
underlying basis (unadjusted decline was 10.0% in the full year).
The unadjusted decline narrowed in the second half to 4.4%.
-- During 2013 digital revenue increased by 19.4%. Following
flat half-on-half digital revenue growth in 2012, 2013 saw a return
to digital growth of some 13.0% in the first half, rising to 25.3%
in the second half.
-- Newspaper sales revenues declined 2.1% on an underlying basis in 2013 (4.5% unadjusted).
Exceptional items
-- The results include a net charge before tax of GBP300.5m in
respect of exceptional items, the majority of which was announced
at the time of the Interim Results in August 2013.
-- The charge includes a non-cash accounting adjustment reducing
the carrying value of our publishing titles by GBP202.4m, print
assets by GBP63.7m and properties held for resale by GBP4.7m.
GBP10.0m of cash was received from the cancellation of the
remaining element of our News International print contract. There
were other cash costs of GBP33.0m in connection with the further
restructuring of the business and GBP5.7m of pension protection
fund levy and other pension charges.
Refinancing
The Company announced on 27 December 2013 that it had reset its
financial covenants through to the maturity of its debt facilities
in September 2015 and intends pursuing a refinancing of its debt
facilities in 2014. On 3 March 2014 the Company announced that as
part of a proposed refinancing of its debt facilities it is
considering a range of options including a potential equity
fundraising. The Company is actively exploring these options and
will make further announcements in due course.
Outlook
In January and February 2014, advertising revenues are down
6.0%. The growth in underlying profits has continued into 2014 with
an 8.0% increase in EBITDA (operating profit before depreciation
and amortisation, exceptional items and IAS21/39 adjustments) to
the end of February. Our digital growth remains strong, with
audiences in the last reported ABC period to December 2013 up by
47.7% year on year to 13.3m unique users per month. In both January
and February 2014, digital audiences have exceeded 15m with year on
year growth of around 50%.
Although the economic outlook is starting to show signs of
improvement, most evident in property and particularly employment,
the Company will continue to manage our cost base while building on
the strong digital growth in the second half of 2013.
Commenting on the annual results for 2013 and outlook, the Chief
Executive, Ashley Highfield, said:
"We are delighted to see a return to underlying operating profit
growth for the first time in seven years, with underlying operating
profits in 2013 increasing by 2.5% on 2012. Having delivered EBITDA
of GBP62.7m in 2013, January and February has seen an 8% increase
in EBITDA year on year. Our digital growth remains strong, with
significantly increasing audiences coming to our websites in 2013
and into 2014. Along with slowing declines in print advertising
revenues, and a stable circulation revenue decline rate, these are
clear indications of good progress during the year in the
implementation of our strategy for growth.
During the year we completed the re-launch of our websites and
our print titles, and took the first steps to re-invent community
newspapers with significantly higher levels of user generated
content. We invested further in technology to build our digital
platforms, including launching DigitalKitbag, a one-stop-shop for
digital marketing services aimed at the hundreds of thousands of
Small and Medium sized Enterprises (SMEs) that we already serve in
print. With the benefits of our actions coming through, coupled
with strong digital growth and a slowing print decline, the Group
is well positioned to make further progress in 2014.
For further information please contact:
Johnston Press 020 7466 5000 (today) or
Ashley Highfield, Chief Executive Officer 020 7614 2602
(thereafter)
David King, Chief Financial Officer
Buchanan 020 7466 5000
Richard Oldworth/Sophie McNulty/Clare Akhurst
Investor presentation and audio cast
A presentation for analysts and live audio cast will be held at
09.00am on Friday 28 March 2014 which will be available at:
http://mediaserve.buchanan.uk.com/2014/jp280314/registration.asp
A replay of the audio cast will be available after 11am on
Friday 28 March on the Group website www.johnstonpress.co.uk and
from the URL above.
Please see the conference call dial in details below:
Number: 02034281542
Participant Pin: 57239117#
The announcement for the period ended 28 December 2013 will be
available at www.johnstonpress.co.uk/investors
Forward-looking statements
The report contains forward looking statements. Although the
Group believes that the expectation reflected in these forward-
looking statements are reasonable, it can give no assurance that
the expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk
factors underlying such forward looking information, actual results
may differ materially from those expressed or implied by these
forward looking statements. The Group undertakes no obligation to
update any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Chairman's Statement
2013 was the year that we started to see signs of an improving
economic climate and positive results from our strategy.
Strategy
2013 was another year of considerable change and innovation at
Johnston Press, during which we made progress towards achieving our
strategic aims and our longer-term vision to build a truly
multimedia business.
For our business it remains essential that we increase our
profitability. We must embrace the changes and innovations we are
undertaking to increase our audience size and the revenue we
generate as a result. Our digital business is key to this strategy,
both in terms of new services and reaching new audiences in
different demographics than our print business. However, our
established print business has an essential role to play as we look
to stabilise our print circulation and advertising revenues. We
have incurred significant restructuring costs in the year as we
implement changes to ensure our cost base is appropriate for our
multimedia future.
In parallel with our operating strategy we are making good
progress towards refinancing our debt. A successful refinancing
would bring a level of financial stability that would allow us to
invest more in delivering our short, medium and longer-term
strategic objectives and would fast track Johnston Press into an
organisation that is fit for a truly multimedia future.
Results
Our results for 2013 were affected by the difficult trading
environment in the first half of the year. Nevertheless, there were
strong results in some of our key advertising categories.
Total statutory revenues were affected by the termination of the
News International contract and conversion of titles from daily to
weekly and closure of certain titles.
Total underlying revenues ended the year down 5.5% from GBP308.8
million to GBP291.9 million, with underlying print advertising down
9.5% from GBP173.5 million to GBP157.1 million. The combined
underlying print and digital advertising revenue was down 6.4% at
GBP181.7 million. However, the rate of decline in our advertising
revenues is narrowing and in the final quarter of 2013 the decline
had narrowed to 5.3%. We are working to build on this momentum in
2014. Underlying newspaper sales revenue, supported by cover price
increases, was down 2.1% from GBP89.6 million to GBP87.7
million.
Digital revenues again grew strongly in the year by 19.4% from
GBP20.6 million to GBP24.6 million, with the second half of the
year experiencing year-on-year digital revenue growth of 25.3%. The
key digital categories of employment, property, motors and local
display all showed strong year-on-year growth.
Despite this, our digital performance was not sufficient in
preventing a decline in our total advertising revenue.
The Group's cost management was extremely impressive once again.
Adjusted operating costs (before exceptional and IAS 21/39 items
and including depreciation and amortisation), were reduced by
GBP33.8 million from GBP271.7 million to GBP237.9 million which
represents a year-on-year decline of 12.4%.
The resulting underlying operating profit was up 2.5% from
GBP53.0 million to GBP54.3 million with underlying operating profit
margins up from 17.2% to 18.6% year-on-year. This is a strong
improvement on 2012 and led to the Group's first year-on-year
underlying operating profit growth for seven years.
Chairman's Statement (continued)
Earnings per share (before exceptional and IAS 21/39 items) were
2.65p, compared to 3.42p in 2012 (Note 11). Underlying net profit
after tax was GBP16.7 million (2012: GBP17.4 million). Cash flow
performance was again strong, with net debt at the end of the year
of GBP302.0 million, a reduction of GBP17.4 million from the start
of 2013.
Total net exceptional items before tax were GBP300.5 million
(2012: GBP16.6 million). These included GBP10.0 million revenue
from the termination of a long-term printing contract with News
International, a GBP202.4 million impairment of publishing titles,
in part reflecting changes in the discount and growth rate
assumptions applicable to the business and sector as a whole, a
GBP68.4 million write down in the value of print press assets and
property assets brought about as a result of structural
rationalisations and closure of specific operations (particularly
presses), GBP33.0 million on restructuring and GBP5.7 million of
pension related Section 75 and pension protection fund levy
expenses. This resulted in a statutory operating loss of GBP245.7
million. More information on these items can be found in the
Financial Review section of this report.
Dividend
We continue to use excess cash to reduce the Group's debt and,
as required under our financing arrangements, no dividend is
proposed for the year.
Industry issues
Lord Justice Leveson made it clear in his enquiry into press
standards that the local press was not guilty of any wrongdoing and
should not be penalised by any new regulatory system. However, we
felt that the Royal Charter proposals would not provide smaller
titles with adequate protection from vexatious or speculative
complaints and the costs associated with processing such claims. As
a result, and in line with the significant majority of the
industry, we have joined the process of establishing the
Independent Press Standards Organisation.
The new regulatory body will have transparent processes,
independence and authority to direct remedial action, call editors
to account, investigate serious breaches of its code and impose
appropriate and proportionate sanctions and fines in the worst
cases.
Board
Geoff Iddison, who served as a Non-Executive Director from
January 2010, stepped down from his role in June 2013. I would like
to thank Geoff for his commitment and contribution to the Group
over the past three-and-a-half years. He made a considerable
contribution to the development of our digital strategy over this
period and we wish him all the best for the future. Stephen van
Rooyen joined the Board as a Non-Executive Director of the Company
with effect from 1 June 2013. Stephen has held a number of senior
roles at Sky since joining in 2006, and is currently Managing
Director, Sales and Marketing. He was previously Director of
Strategy at Virgin Media and has also worked at News International
and Accenture in both Australia and the UK. I am confident
Stephen's knowledge and perspective will add significant value to
the business. We look forward to working with him in continuing to
develop our business.
There was also significant change amongst our Executive
Directors this year. As we announced at the end of 2012, Danny
Cammiade stepped down as Chief Operating Officer at the end of
March 2013. During May 2013 we announced that Grant Murray had
stepped down as Chief Financial Officer and was succeeded by David
King at the beginning of June 2013. David is a former Chief
Executive Officer of Time Out Group and before that was Chief
Financial Officer at BBC Worldwide.
Chairman's Statement (continued)
The Board regularly reviews both the balance of its membership
and the issues it considers when it meets. The agenda for its
meetings are structured to scrutinise both strategic and
operational matters in an atmosphere of constructive challenge and
debate. We have retained our programme of site visits for all our
Non-Executive Directors and I am satisfied that the Board remains
effective.
Employees
Our employees are, of course, key to our business and on behalf
of the Board I wish to express our gratitude to them for their
dedication throughout another year of considerable change. They
have continued to deliver performance and products of a high
quality, and their commitment will remain vital in the year
ahead.
Outlook
The last several years have been impacted by the longest, and at
times the deepest, recession in memory. However, the economic
outlook in the markets in which we operate is more positive. This,
coupled with the changes and innovations that we have made at
Johnston Press, give the Board greater confidence in our future
than at any time in recent years.
Ian Russell
Chairman
Chief Executive's Report
2013 was the year we returned to underlying operating profit
growth.
We continue to transform our business into a modern multimedia
organisation, growing our overall audience strongly, which will
provide us with the best opportunity to succeed in 2014 and
beyond.
2013 was an important year in our turnaround at Johnston Press
as it was the year we posted our first underlying operating profit
growth for seven years. This is an important milestone and
indicates that our strategy for the business is the right one. We
posted an underlying operating profit of GBP54.3 million,
representing year-on-year growth of 2.5%.
Review of the year
2013 started with very difficult trading conditions but as the
year progressed, conditions improved and we ended the year with a
sense of optimism across many business sectors. The improving
conditions were reflected in our trading performance which improved
from quarter to quarter. With property playing a significant role
in the economic recovery to date, we are well placed to take
advantage of this, as our advertiser base comprises many businesses
that benefit from higher volumes in the property market from estate
agents to solicitors, and from furniture retailers to transport
companies.
In response to the macro economic environment we have continued
to transform Johnston Press. We have implemented a number of
strategic initiatives that will continue to reduce our cost base,
to stem the decline in top line revenue and accelerate our digital
growth.
This transformation has allowed us to post the first positive
year-on-year growth in underlying operating profit for seven years.
We grew underlying operating profit by 2.5% year-on-year to GBP54.3
million, stopping the operating profit decline and taking Johnston
Press back to underlying growth.
We have historically converted a high proportion of EBITDA into
operating cashflow and we continue to do so, underpinned by
controlled capital expenditure. This has allowed us to continue to
reduce our net debt burden which has now declined by more than 37%
since December 2008 from GBP476.8 million to GBP302.0 million in
December 2013.
Our aggregate print and digital audience has grown from 18.1
million users in December 2012 to 21.2 million users in December
2013, a year-on-year growth of 17.1%. In the same period digital
audiences grew from 9.0 million unique users to 13.3 million unique
users, a growth of 47.7% year-on-year. This growth demonstrates
that we continue to be relevant to both our readers and
advertisers. Whilst overall circulation revenue declines were as
anticipated in one or two very challenged economic markets,
increasing cover prices during the recession created a greater
circulation decline than expected.
As well as growing digital audiences, we grew digital revenues
by 19.4% year-on-year, from GBP20.6 million in 2012 to GBP24.6
million in 2013, with very encouraging growth in some of our key
digital categories. The property category grew by 125.0%
year-on-year, the motors category grew by 200.0% year-on-year and
total digital display advertising grew by 30.3%, albeit from a low
base. These categories are well positioned for growth in 2014, as
we develop our products and propositions with the benefit of a
better economic climate.
The Group's digital employment business, operating in an
exceptionally challenging economic environment for most of 2013,
still managed to post revenue growth of 4.1% year-on-year.
Total display advertising grew by 30.3%, digital local display
advertising grew by 32.7% year-on-year with national display
advertising growing by 25.9% year-on-year, with combined growth in
the second half of the year of 44.6%. This gives us further
confidence for 2014.
Chief Executive's Report (continued)
We launched a new site for the entertainment market,
WOW247.co.uk, to support further the Group's engagement with the
local community and reach beyond newspaper footprints.
Our national advertising sales were depressed by the macro
economic situation, which badly affected some of our largest retail
clients. Our underlying total revenues for the year were down 5.5%,
an improvement on the 7.9% decline we experienced in 2012. Amongst
this, the quarterly run rates for advertising revenues are showing
positive signs, the year-on-year declines for each quarter in 2013
were, 14.8%, 12.7%, 7.6% and 5.3% respectively, once again
providing further encouragement for 2014.
The relaunch of the Group's newspaper titles into more modern
standardised templates was successfully completed in 2013. The
programme has helped quality control and given more time for
editors to develop content in print and digital platforms and is
unrivalled at this scale in the newspaper sector, driving both copy
sales and the national advertising proposition.
One of the direct results of the relaunch programme is that we
now have a platform to provide greater efficiencies in our content
gathering operation from our journalists, freelance contributors
and readers. Using web-based editorial software the Group is now
allowing trusted contributors the ability to author content
directly. If these trials are successful they will provide a
blueprint for the Group to restructure the editorial content
gathering operations and greatly increase the volume of locally
supplied material, ensuring we remain at the heart of our
communities.
We have managed our cost base efficiently during the year.
Adjusted operating costs were reduced by GBP33.8 million in 2013, a
12.4% year-on-year reduction. This is on the back of a GBP37.6
million reduction in 2012 (a 12.2% year-on-year reduction). The
closure of titles and changes in frequency, as well as the loss of
the News International contract have contributed to the reduction
in the cost base during 2013. Adjusted operating profit margins
(before exceptional and IAS 21/39 items) have improved from 17.3%
in 2012 to 18.8% in 2013, and on an underlying basis from 17.2% in
2012 to 18.6% in 2013.
One of the most important efficiency projects this year has been
the identification and implementation of best practice across the
Group in the editorial and the rationalisation of the sales and
back-office functions. This has led to a reduction in the average
number of staff we employ to 4,188, a year-on-year reduction of
13%. We are now a re-sized, flatter and more agile organisation
with better technology and processes to support our journalists and
sales teams. Our centralisation of 14 content centres into two,
while saving considerable costs, caused some short-term drop-off in
our 'other classified' revenue.
Exceptional items
Accounting standards (IAS 36) require us to assess the
recoverable value of our publishing titles and print assets by
discounting the future cash flows the Group expects to derive from
these assets at a market discount rate. Our long-term forecast
model is updated annually and used to satisfy this requirement and
is updated more frequently if we identify impairment indicators.
The reduction in the value of the publishing titles, of GBP202.4
million, is primarily driven by a change in the rate used to
discount future cash flows from 11.0% (2012) to 12.0% (2013) for
our UK publishing titles and from 11.0% (2012) to 15.9% (2013) for
our Republic of Ireland titles (as a result of an increase in
risk-free rates of return and a revised market view on optimal
media sector debt equity structures) and an update to underlying
anticipated cash flows as a result of recent trading results. Due
to the intended disposal of the Republic of Ireland titles, they
have been valued at fair value less estimated cost of disposal. The
key cash flow assumptions for our publishing titles are explained
in Note 12.
Chief Executive's Report (continued)
Exceptional items (continued)
The anticipated future cash flows from the printing assets have
reduced following the buy-out of the Group's contracting printing
arrangements with News International. The review led to the
recognition of an exceptional write-down in the period of
GBP62.3million (refer note 7) which has been recognised in the
Income Statement.
In addition to the write-down of asset values, the Group
incurred other restructuring costs (including redundancy costs) of
GBP33.0 million (2012: GBP24.4 million) and includes a pension
related expense of GBP4.4 million (2012: nil) relating to required
contributions to the Pension Protection Fund and GBP1.3 million
(2012: nil) of Section 75 debt.
Refinancing
In 2012 we successfully refinanced our existing lending
facilities through to September 2015. The terms of our facilities
provide strong incentives to implement an alternative debt
structure by the end of 2014. We are now actively engaged in
seeking a more fundamental restructuring of our debt that would
provide a more normalised capital structure, which would in turn
provide an optimal platform for the Company to continue its
strategic initiatives.
Priorities for 2014
Press with changes and innovations being undertaken to transform
our revenue base and sustain our cost leadership position. More
specifically for 2014, I have identified a number of priorities
that will keep us on track to deliver our vision.
At the heart of this is culture change. Having lost almost 1,600
staff (average number of employees) in two years and, having come
through a period of acquisition before that, we now need to build
our Company as 'one Johnston Press,' putting both quality local
journalism and innovative marketing solutions for small and
medium-sized businesses at our core.
The focus on quality will be key, I want to achieve a big
increase in customer and reader satisfaction by improving our
end-to-end processes across our sales and editorial functions.
To really drive the quality agenda we will invest more resources
into training. We must give our sales teams and journalists the
tools and skills to get their jobs done as simply and effectively
as possible.
Accelerating the growth in our digital offerings will be
achieved through an increased focus on mobile, and expanding the
social engagement of our digital products.
Finally, I want Johnston Press to be a data-driven organisation,
an organisation where we really start to use the data about our
readers and customers, from subscriptions to out-bound marketing,
from targeted and behavioural advertising to winning new customers.
We must put data and insight at the heart of Johnston Press and
with this in mind, we are continuing to invest in and develop our
marketing database.
To enable the above priorities, I have commissioned five
enabling projects around Journalism, Publishing, Commercial,
Digital and Data.
Chief Executive's Report (continued)
Priorities for 2014 (continued)
I am pleased to say our work through the year helped to raise
our share price to levels which had not been seen for some time.
Although we wish to see this grow a great deal more, we are pleased
that there has been recognition for the strategy we are
following.
Employees
I have mentioned that our staff numbers have reduced
significantly over the last year and I recognise that it has been a
difficult year for many employees as they adjust to the changes
needed to take the Group forward. Their professionalism and
dedication has been tremendous and, although much more needs to be
done to complete the delivery of our strategy, I would like to take
the opportunity to thank all of them for their contributions
through a very demanding time.
Summary
Last year, I stated that we remain exceptionally well placed to
serve the demand for information about the communities in which
people work and live. That remains the case but the way we do this
is changing and the growth in our digital audiences continues to
reflect this. To remain relevant to the communities we serve we are
continually innovating. Examples of this are the launch of two
initiatives in Harrogate and Bourne where editorial content is
driven by the readers - an example of 'user generated content' in
action. Early results are both encouraging and exciting and in the
case of Bourne our audience across print and on-line has grown by
over 150%. The demand from advertisers to reach those communities
in a targeted and cost-effective manner also grows. We are on a
clear journey to become the 'one-stop-shop' for advertisers and
readers across all media in the communities we serve.
Ashley Highfield
Chief Executive Officer
Operational Review
Throughout 2013 we have focused on three key themes for the
operational teams - restructuring, building our skills set and
being properly equipped to develop further revenue opportunities as
the Group continued to focus on delivering its strategic aims in
print and digital.
We have made good progress in our on-going implementation of a
new sales plan to up-skill, reorganise and better focus our
face-to-face sales force on meeting local customer needs. This
continues to be one of our most ambitious and, potentially most
beneficial, projects.
The majority of our advertising customers are local businesses
who we have served for many years. A great deal of work has been
dedicated to an on-going review of many markets and sales teams to
ensure we continue to have the right resources, technology and
customer insight to meet the marketing requirements of local
consumers. We are now able to offer more defined marketing
solutions from the various media platforms we can provide. The
review also includes an evaluation of sales skills and measures
have subsequently been introduced to ensure that all existing and
new employees attain an agreed standard of expertise.
This work has helped to embed the Group's multimedia
face-to-face customer engagement programme and the organisation can
fully benefit from the many digital platforms which have been
advanced during the year.
To support media sales, the Group has made further improvements
to its consolidated centre operations in Sheffield and Edinburgh.
This has focused on implementing and developing best practices from
the contact centre industry, using enhanced technology to manage
the volume of enquiries and new customer relationship management
systems to provide better customer insight.
These projects are now supporting our various business
development, including the new digital platforms for property and
motors, the Group's voucher website, DealMonster (which is now
operational in 14 towns, cities or regional areas), as well as
non-geographical markets for travel and shopping deals. A new site
has also been launched for the entertainment market, WOW247.co.uk,
to support further the Group's engagement with the local
communities.
In addition, the Group's recruitment portal Jobstoday.co.uk,
continues to grow with new services such as The SmartList which
provides application filtering and other benefits for a fixed price
to recruiters.
All of our local digital platforms can be accessed via a
dedicated mobile website. We have 196 websites for our local
titles, and a further 13 sites for e-commerce, such as DealMonster
and SmartList. We have tablet apps for 18 titles on iPad, Amazon
Kindle Fire and Google Play Android. In addition, 11 titles now
have smartphone football apps on both iPhone and Android platforms.
These solutions support the programme of change in print products
and some of the relaunched newspapers, and were backed by expanded
digital activity including the ability to subscribe to the
newspaper and digital service for a single price. During 2013 we
completed the relaunch of the Group's newspaper titles into more
modern standardised templates. The programme has helped quality
control and given more time for editors to develop content in print
and digital platforms and is unrivalled at this scale in the
newspaper sector, driving both copy sales and and the national
advertising proposition.
The implementation of the re-launch programme has been assisted
by changes made to our backroom fulfilment services. All aspects of
production are now centralised to a single point enabling each
newspaper to have the same workflows supported by a single design
team for both advertising and editorial. These changes have
included further consolidation of our press centres with the
closure of the Peterborough, Leeds and Sunderland press halls over
the past two years and also the partial outsourcing of
advertisement creation work which has driven further
efficiencies.
Operational Review (continued)
We are continuing to look at a number of markets and centres
that still have accommodation which does not meet the requirements
of the business going forward. We are looking at these properties
in light of our 'Environment Charter'. The Charter is a commitment
to provide accommodation and technology which will enable staff to
conduct their specified tasks, primarily content gathering, in a
modern and efficient way. Although a great deal of progress has
been made in this regard, the projects will continue during 2014.
Allied to this review, we are continuing to look at the technology
and resources that our staff required. Accordingly, our programme
to enhance technology systems across the Group has continued and
many iPads and smartphones have been issued to sales staff,
allowing them remote access to our customer relationship management
system and providing much greater insight into our customers'
needs. The Group has also equiped journalists to enable them to
again work remotely in the heart of their local communities. This
initiative has helped to greatly improve the quality, quantity and
timeliness of multimedia content available on websites, mobile
sites and tablet apps.
The importance of our staff remains paramount. We continue to
invest in training and development along with further improvements
to Group-wide communication. As we seek to re-inforce a shared
culture through our 'one Johnston Press' initiative, features such
as the Group's weekly e-newsletter and website 'The Word' become
ever more important as a source of Group information. We again
launched a staff satisfaction survey in 2013 to identify areas of
improvement such as career development, recognition, training and
leadership. Following the feedback from our initial survey we
introduced a new annual Johnston Press plc awards scheme, to
recognise and celebrate media and commercial excellence in our
staff. Our first awards night was held in March 2013.
As our work to reshape Johnston Press continued through 2013,
all aspects of the business were reviewed. As a consequence, we
offered a voluntary redundancy programme to all our employees
during the autumn which contributed to a reduction in average
headcount of 609 over the period. This has allowed staff to accept
enhanced terms to leave the Group and with a number of them doing
so during the early part of 2014. Careful planning has been
undertaken to ensure the efficiency of future operations and to
maintain quality. The programme has allowed us to review and reform
the way in which many services are provided, not least front
counter operations and photography.
Financial Review
In 2013 we posted the first positive year-on-year growth in
underlying operating profit for seven years. We grew underlying
operating profit by 2.5% year-on-year to GBP54.3 million.
Introduction
This Financial Review, based on the condensed consolidated
financial statements of the Group, provides commentary on the
Group's performance during the 52 week period ended 28 December
2013.
Despite achieving some positive operational milestones in 2013,
the financial result was adversely affected by a number of
exceptional and one-off costs associated with the reshaping of the
business.
Basis of presentation of results
In preparing commentary on performance, the financial impact of
a number of significant accounting and operational items affecting
the results have been adjusted for in arriving at the underlying
results discussed in this Financial Review.
A reconciliation from the statutory to the adjusted and
underlying results is provided below along with a description of
the nature of the adjustments made.
Reconciliation of Statutory to Adjusted and Underlying
Performance
Statutory Exceptionals(1) IAS 21/39(2) Adjusted Other(3) Underlying
52 weeks ended 28 GBPm GBPm GBPm GBPm GBPm GBPm
December 2013
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Revenue 302.8 (10.0) - 292.8 (0.9) 291.9
Operating costs(4) (540.6) 310.5 - (230.1) 0.3 (229.8)
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
EBITDA(5) (237.8) 300.5 - 62.7 (0.6) 62.1
Depreciation and amortisation (7.8) - - (7.8) - (7.8)
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Operating (loss)/profit (245.6) 300.5 - 54.9 (0.6) 54.3
Net finance costs (41.2) - 0.2 (41.0) - (41.0)
(Loss)/profit before
tax (286.8) 300.5 0.2 13.9 (0.6) 13.3
Tax 74.8 (71.3) (0.1) 3.4 - 3.4
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
(Loss)/profit for
the period (212.0) 229.2 0.1 17.3 (0.6) 16.7
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Operating margin (81.1%) 18.8% 18.6%
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Financial Review (continued)
Statutory Exceptionals(1) IAS 21/39(2) Adjusted Other(3) Underlying
52 weeks ended 29 GBPm GBPm GBPm GBPm GBPm GBPm
December 2012
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Revenue 358.7 (30.0) - 328.7 (19.9) 308.8
Operating costs(4) (305.6) 46.6 - (259.0) 15.9 (243.1)
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
EBITDA(5) 53.1 16.6 - 69.7 (4.0) 65.7
Depreciation and amortisation (12.7) - - (12.7) - (12.7)
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Operating (loss)/profit 40.4 16.6 - 57.0 (4.0) 53.0
Net finance costs (47.2) - 2.8 (44.4) - (44.4)
(Loss)/profit before
tax (6.8) 16.6 2.8 12.6 (4.0) 8.6
Tax 12.4 (2.9) (0.7) 8.8 - 8.8
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Profit/(loss) for
the period 5.6 13.7 2.1 21.4 (4.0) 17.4
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
Operating margin 11.3 % 17.3% 17.2%
------------------------------- ---------- ---------------- ------------- --------- --------- -----------
(1) Exceptional items set out in Note 7 to the condensed financial statements.
(2) IAS 21/39 finance costs set out in Note 9 to the condensed
consolidated financial statements.
(3) Other adjustments have been made to reflect the impact of
closed titles and the change of publication frequency of five
titles from daily to weekly as well as the impact of the
termination of the News International printing contracts in 2012
and 2013.
(4) Operating costs include cost of sales and are stated before depreciation and amortisation.
(5) EBITDA is earnings before interest, tax, depreciation and amortisation.
Exceptional items
Exceptionals mainly relate to the impairment of publishing
titles and assets and restructuring costs incurred in reshaping the
business as it progressively moves from a print to digital business
as well as cutting our costs to maintain margins. Exceptional items
include the following:
-- GBP10.0 million revenue from printing contract termination;
-- GBP202.4 million impairment of publishing titles;
-- GBP68.4 million write downs in the value of presses and property assets;
-- GBP34.0 million on restructuring and other costs; and
-- GBP5.7 million PPF levy and Section 75 provision.
Refer to the discussion of 'Exceptional items' for further
details.
"IAS 21/39"
These accounting adjustments relate to the fair value movement
in derivatives and currency exchange and are separated out to
assist the reader in understanding the operating results of the
business:
-- GBP1.7 million charge on changes in fair value hedges; and
-- GBP1.5 million gain on retranslation of foreign denominated borrowings.
Financial Review (continued)
"Other Adjustments" to reflect "Underlying" business
The Group results were impacted by operational changes which
included the closure or merging of titles in previous years and the
conversion of five titles from daily to weekly publications. In
addition, a significant print contract was terminated with News
International with the remaining contracts bought out in 2013.
The details of the Other Adjustments are as follows:
-- In each reported year, the revenues lost due to the closure
in previous periods of 54 free titles and 4 paid-for titles,
together with the conversion of five newspapers from daily to
weekly publications have been removed from revenue; and
-- the Group removes from operating profit an amount of cost that is equal to
(i) 100 per cent of the lost revenue from the newspapers that
were closed or converted to weekly publication;
(ii) costs equivalent to 10% of revenue for 2012 to cater for an
allocation of shared costs to reorganised titles; and
(iii) the actual cost of sales of the discontinued printing
operations for News International, together with mitigating cost
savings and revenue from new print contracts which commenced in
2012.
In the case of the News International contract, these
"Underlying" business adjustments reconcile to amounts in the
Group's accounting records. In the case of revenue lost from
newspaper closures and conversions to weekly publications, the
revenue adjustments represent an estimate that is based on the
financial performance of the affected publications in the periods
immediately prior to and immediately following the change. In the
case of the associated adjustments to operating profit relating to
newspaper closures and conversions, the cost adjustment that is
equal to lost revenue is an estimate of the cost benefit arising as
a result of the closure or conversion based on an assumption these
activities were at a break-even position, but also recognising the
benefit derived by these titles from shared costs.
Financial Review (continued)
Performance Review
Statutory Underlying
----------------------------------- --- -----------------------------------
2013 2012 % 2013 2012 %
GBP'm GBP'm GBP'm change GBP'm GBP'm GBP'm change
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
Advertising Revenues
Print advertising 157.1 181.3 (24.2) (13.3) 157.1 173.5 (16.4) (9.5)
Digital advertising(2) 24.6 20.6 4.0 19.4 24.6 20.6 4.0 19.4
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
Total advertising
revenues 181.7 201.9 (20.2) (10.0) 181.7 194.1 (12.4) (6.4)
Non Advertising Revenues
Newspaper sales 87.7 91.8 (4.1) (4.5) 87.7 89.6 (1.9) (2.1)
Contract printing 21.2 48.4 (27.2) (56.2) 10.3 8.4 1.9 22.6
Other 12.2 16.6 (4.4) (26.5) 12.2 16.7 (4.5) (26.9)
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
Total other revenues 121.1 156.8 (35.7) (22.8) 110.2 114.7 (4.5) (3.9)
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
Total revenues 302.8 358.7 (55.9) (15.6) 291.9 308.8 (16.9) (5.5)
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
Operating (loss)/profit (245.6) 40.4 (286.0) (707.9) 54.3 53.0 1.3 2.5
------------------------- ------- ------- ------- -------- --- ------- ------- ------- --------
(1) Operating costs includes depreciation, amortisation and exceptional items.
(2) Digital advertising includes all digital revenues including
DealMonster and other marginal non advertising digital
revenues.
Advertising revenue
Total advertising revenues in 2013 were GBP181.7 million, a
decline of 10% from previous year. The underlying decline was 6.4%
after adjusting for the impact of changing five titles from daily
to weekly. All of this decline was from the print advertising
categories which had an underlying decline of 9.5%, with digital
revenues growing by 19.4%. The overall reduction in the rate of
decline in total advertising revenues as the year progressed was
encouraging, with declines improving from quarter to quarter. The
quarter one to quarter four year on year declines were 14.8%,
12.7%, 7.6% and 5.3% respectively.
Print and Digital Advertising
Revenue Analysis
Full Year Print Digital
-------------------------- ------------------------- ------------------------- ---------------------------
2013 2012 % change 2013 2012 % change 2013 2012 % change
Categories GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------ ------ --------- ------ ------ --------- ------ ------ -----------
Property 24.9 27.9 (10.8) 24.0 27.5 (12.7) 0.9 0.4 125.0
Employment 20.3 21.9 (7.3) 12.7 14.6 (13.0) 7.6 7.3 4.1
Motors 14.9 17.2 (13.4) 14.0 16.9 (17.2) 0.9 0.3 200.0
Other 44.4 49.0 (9.4) 37.8 43.0 (12.1) 6.6 6.0 10.0
Display 77.2 85.9 (10.1) 68.6 79.3 (13.5) 8.6 6.6 30.3
-------------------------- ------ ------ --------- ------ ------ --------- ------ ---------- -------
Total 181.7 201.9 (10.0) 157.1 181.3 (13.3) 24.6 20.6 19.4
-------------------------- ------ ------ --------- ------ ------ --------- ------ ---------- -------
Underlying adjustment(1) - (7.8)
-------------------------- ------ ------ --------- ------ ------ --------- ------ ---------- -------
Total underlying
revenue 181.7 194.1
-------------------------- ------ ------ --------- ------ ------ --------- ------ ---------- -------
(1) Reflects the impact of closed titles and the change of
publication frequency of five titles from daily to weekly.
Financial Review (continued)
Print and Digital Advertising
Half- Yearly Revenue Analysis
52 week period First half to Second half to
June December
---------------- ------------------------- ------------------------- -------------------------
2013 2012 % change 2013 2012 % change 2013 2012 % change
Categories GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ------ --------- ------ ------ --------- ------ ------ ---------
Property 24.9 27.9 (10.8) 13.6 15.7 (13.4) 11.3 12.2 (7.4)
Employment 20.3 21.9 (7.3) 10.7 12.5 (14.4) 9.6 9.4 2.1
Motors 14.9 17.2 (13.4) 7.6 9.5 (20.0) 7.3 7.7 (5.2)
Other 44.4 49.0 (9.4) 21.6 25.9 (16.6) 22.8 23.1 (1.3)
Display 77.2 85.9 (10.1) 38.1 44.1 (13.6) 39.1 41.8 (6.5)
---------------- ------ ------ --------- ------ ------ --------- ------ ------ ---------
Total 181.7 201.9 (10.0) 91.6 107.7 (14.9) 90.1 94.2 (4.4)
---------------- ------ ------ --------- ------ ------ --------- ------ ------ ---------
Our advertising categories are driven by a number of key macro
indicators including GDP, and the level of unemployment and levels
of consumer confidence. Throughout the year as the forecasts for
these indicators improved, so did our performance and the second
half of the year was significantly better than the first half, with
decline rates in total advertising revenues moving from 14.9% in
January to June to 4.4% in July to December.
Property
A strong property market with growing volumes of property
transactions from both new build and older properties will fuel
growth in our Property advertising business in both print and
digital. We saw early signs of this in the second half of the year
primarily driven by government backed schemes. This is an important
advertising category and a healthy property market will not only
benefit this category but can also benefit local display as
businesses servicing home buyers and owners increase advertising
spend. Despite this, the first half of 2013 still remained a very
difficult market and as a result we saw this category decline by
10.8% year on year in 2013, with the January to June declines of
13.4% but encouragingly July to December declines reduced to 7.4%.
Property Print advertising recorded an annual decline of 12.7%,
while Digital advertising grew 125% albeit from a low base.
Employment
Our employment category was our strongest performing category
over the year and generated GBP20.3m in 2013, a single digit annual
decline of 7.3%. There was a stark difference in the first half of
the year and second half of the year performance, with January to
June 2013 recording an annual decline of 14.4% and July to December
2013 recording annual growth of 2.1%. Most of the 2013 growth was
digital led with digital employment growing by 4.1% year on year
and print declining by 13% year on year. Digital employment revenue
now accounts for 37% of our total employment revenue and is the
category with the highest proportion of digital revenue. While the
Employment market remains strong, our improving performance in this
category and changing mix from print to digital is expected to
continue into 2014.
Motors
2013 remained difficult for both new and used car dealers.
Encouragingly however, the macro indicators for new car
registrations is more positive for 2014 and we did witness some of
this improvement in the second half of the year. Overall the motors
category generated GBP14.9m of revenue in 2013, an annual decline
of 13.4%. Importantly the second half year annual decline was only
5.2% on the back of the first half year decline of 20%. The print
category accounted for all the decline, with annual decline rates
17.2% and digital growing by 200%.
Financial Review (continued)
Display
Display advertising is sensitive to a number of macro indicators
including the ones that drive our classified categories of
Employment, Property and Motors. Our advertisers in these
classified categories use display advertising both to generate
sales, but also we believe for local brand awareness. 2013 started
with tight control over marketing budgets for many of our Display
advertising customers both at a local and national level. As with
our other categories, there were signs of increasing spend during
the year and this was reflected in the performance for this
category in the latter months. Overall display advertising
generated GBP77.2m in 2013, an annual decline of 10.1%, with the
first half of the year declining by 13.6% year-on-year and the
second half declining by 6.5% year-on-year. Print advertising
declined by 13.5% year-on-year and digital grew by 30.3%
year-on-year.
Other
The Other category includes Entertainment, Public Notices and
Other Classified, DealMonster and other marginal digital income.
This combined category generated GBP44.4m in revenue, representing
an annual decline of 9.4%, with print declining 12.1% and digital
growing by 10%. Public Notices in print performed comparatively
well with an annual decline rate of 6.8%, Other classified and
Entertainments had the biggest decline rates of 17% and 23%
respectively. The digital growth of 10% was driven by Public
Notices.
Audience growth
Our digital advertising as a whole has benefited from
substantial traffic growth, following further investment in our
websites, and increased levels of content. In summary we have more
visitors to our websites, who visit more frequently, more pages and
higher sell through rates with higher average order values.
Non advertising revenue
Newspaper sales generated GBP87.7 million in the year against
GBP91.8 million in 2012, a decline of 4.5%. This decline was halved
to 2.1% after taking account of the closed titles and change of
frequency of the 5 titles from daily to weekly. 2013 was the year
that we completed the relaunch of all our titles and continued our
strategy of cover price increases. Our relaunched titles have
standardised templates that we believe will be more attractive to
readers and make it easier for advertisers to buy across multiple
titles.
Contract printing revenue was down 56.2% compared to 2012 and
was almost exclusively a result of the termination of the News
International Contract.
Financial Review (continued)
Operating Costs
In the period ended 28 December 2013, operating costs including
exceptional items and IAS21/39 adjustments increased by GBP230.1
million to GBP548.4 million (2012: GBP318.3 million). Total
operating costs before exceptionals reduced by GBP33.8 million to
GBP237.9 million (2012: GBP271.7 million).
Statutory Underlying
2013 2012 % 2013 2012 %
GBP'm GBP'm GBP'm change GBP'm GBP'm GBP'm change
------------------ --------- ------- ------- -------- --- --------- ------- ------- --------
Operating costs -
ordinary 237.9 271.7 (33.8) (12.4) 237.6 255.8 (18.2) (7.1)
Operating costs -
exceptional 310.5 46.6 263.9 566.3 - - - -
------------------ --------- ------- ------- -------- --- --------- ------- ------- --------
Operating costs 548.4 318.3 230.1 72.3 237.6 255.8 (18.2) (7.1)
------------------ --------- ------- ------- -------- --- --------- ------- ------- --------
On an underlying basis, after adjusting for exceptionals and
IAS21/39 adjustments (as well as making adjustments for the closure
of titles, changes in frequency of publication and stripping out
the costs associated with the termination of the News International
print contract), underlying operating costs decreased by GBP18.2
million to GBP237.6 million (2012: GBP255.8 million).
Refer to the section on Exceptional items for a description of
exceptional operating expenses.
Operating Profit
In 2013 we posted the first positive year on year growth in
underlying operating profit for seven years. Underlying operating
profit grew by 2.5% year on year to GBP54.3 million from GBP53.0
million. This compares favourably with previous years. We have
stemmed the rate of profit decline.
Despite underlying profit growth, the trading environment in the
Group's markets continued to be difficult during 2013 albeit with
early signs of improvement in the latter part of the year.
Advertising revenues remained under pressure throughout the year
but we saw significant improvements in the rate of decline as each
quarter passed. Total underlying Group revenues were down GBP16.9
million to GBP291.9 million, a decline of 5.5%.
The revenue declines were mitigated by cost reductions, which
were reduced from GBP255.8 million to GBP237.6 million, a year on
year underlying reduction of 7.1%.
Our gross margin remains strong and grew from 17.2% to 18.6% on
an underlying basis for the year, despite a level of investment in
the online business.
Financial Review (continued)
Exceptional items
In addition to the trading results discussed above, a number of
items have been identified as exceptional either due to the size or
nature of the item. Total net exceptional items before tax was
GBP300.5 million (2012: GBP16.6 million) and included:
-- GBP10.0 million revenue from the termination of a long term
printing contract with News International;
-- GBP202.4 million impairment of publishing titles, in part
reflecting changes in the discount and growth rate assumptions
applicable to the business and sector as a whole;
-- GBP68.4 million write down in the value of presses and
property assets brought about as a result of structural
rationalisations and closure of specific operations (particularly
presses);
-- GBP33.0 million on restructuring and other costs designed to
reduce staff costs and enable operating efficiencies and GBP1.0
million on professional fees and aborted disposal costs; and
-- GBP5.7 million net pension charge due to accrual of Pension
Protection Fund levies of GBP4.4 million and a section 75 debt of
GBP1.3 million.
The only exceptional items that involved significant cash
outflows for the Group in 2013 were the restructuring costs of
GBP33.0 million of which GBP9.4 million was paid in the period with
the balance to follow in subsequent years, and pension related
costs. Further details are included in the cash flow statement and
notes and in Note 5 to the condensed financial statements.
IAS 21/39 Items
IAS 21/39 items relate to the fair value movement in the Group's
derivative financial instruments (primarily interest rate caps and
foreign exchange call options) as well as the retranslation of the
Group's US dollar and Euro denominated borrowings. The net charge
for the year was GBP0.2 million (2012: charge of GBP2.8 million).
Further details are shown in Note 9 to the condensed consolidated
financial statements.
Finance Income and Costs (excluding IAS 21/39 items)
Net finance costs excluding IAS 21/39 items for the 52 week
period ended 28 December 2013 were GBP41.0 million, a decrease of
GBP3.4 million or 7.7 per cent from net finance costs of GBP44.4
million for the 52 week period ended 29 December 2012. The largest
component of net finance costs was interest on loans, which were
GBP39.8 million in 2013 and GBP42.1 million in 2012.
The GBP3.4 million decrease in net finance costs was primarily
due to reduced debt levels and includes a GBP0.9 million decrease
associated with pensions.
In accordance with Group policy, the Group's interest rate
exposure (excluding any impact of exchange rates) is hedged through
interest rate caps. Accordingly, the Group's exposure to interest
rate increases is limited.
Loss Before Tax
The Group's loss before tax was GBP286.8 million (2012: loss
before tax of GBP6.8 million). The significant difference between
2013 and 2012 was the exceptional expense recognised in 2013 of
GBP300.5 million as discussed previously.
Financial Review (continued)
Tax Rate
The statutory tax credit of GBP74.8 million (2012: GBP12.4
million) comprises a current tax charge of GBP0.6 million (2012:
GBP3.7 million) and a deferred tax credit of GBP75.4 million (2012:
credit of GBP16.1 million).
The tax credit of GBP74.8 million for the period and the GBP62.4
million increase was primarily attributable to the recognition of
the tax benefit arising on the impairment write-down on intangible
publishing title assets and benefit of reorganisation costs as well
as the benefit of the change in tax rate to 23% from 1 April
2013.
The Group's effective tax rate was 26.1% for the 2013 financial
year and 182.8% in its 2012 financial year. The 23.25% basic tax
rate applied for the 2013 period was a blended rate due to the tax
rate of 24.0% in effect for the first quarter of 2013, changing to
23.0% from 1 April 2013 under the section 6 of the Finance Act
2012.
Earnings Per Share and Dividends
Basic loss per share was 32.74p, compared with earnings of 0.88p
in 2012. The deterioration of basic earnings per share reflects the
following:
-- Impairments and write down of assets totalled GBP270.8
million in 2013 compared with GBP24.8 million in 2012;
-- Other exceptional operating expenses items totalled GBP39.8
million in 2013 compared with GBP21.8 million in 2012;
-- A reduction in the operating profit before exceptional and
IAS 21/39 items of GBP2.1 million;
-- A GBP6.0 million decrease in finance costs including a GBP0.9
million decrease in net finance expense on pension
assets/liabilities;
-- IAS 21/39 movements in 2013 were a charge of GBP0.2 million
compared to a charge of GBP2.8 million in 2012; and
-- The increase in tax credits of GBP62.4 million.
Excluding exceptional and IAS 21/39 items, the adjusted earnings
per share of 2.65p was down from the previous year's comparative of
3.42p.
The Group's finance arrangements preclude the payment of
ordinary dividends until the ratio of net debt to EDITDA falls
below 2.5 times.
Cashflow, Financing and Net Debt
Net debt at 28 December 2013 was GBP302.0 million, a reduction
of GBP17.3 million on the prior year. The Group remained cash
generative throughout the year, with net cash received from
operating activities of GBP51.7 million including GBP10.0 million
received from News International. The cash was primarily used for
cash interest payments of GBP24.8 million and to repay borrowings
and loan notes of GBP33.1 million. The Group maintained tight
control of net capital expenditure with GBP7.4 million spent, while
proceeds received from the disposal of surplus assets (primarily
property sales, titles and the disposal of closed presses) were
GBP5.7 million.
The maximum cash interest margin payable in the case of the bank
facilities is LIBOR plus 5.0%, and in the case of the loan notes, a
cash interest coupon rate of up to 10.3%. The interest rates are
based on the absolute amount of debt outstanding and leverage
multiples and reduce based on agreed ratchets.
In addition to the cash interest, a PIK margin accumulates and
is payable at the end of the facility. The PIK accrual has
increased from GBP8.5 million to GBP20.3 million reflecting a
non-cash charge of GBP11.8 million in the period. The PIK margin
rate is again based on the absolute amount of the debt outstanding
and leverage multiples and reduces based on agreed ratchets. If the
loan facilities are fully repaid prior to 31 December 2014, the
rate of the PIK margin accrued throughout the period of the
agreement will be recalculated at a substantially reduced rate.
Financial Review (continued)
Cashflow, Financing and Net Debt (continued)
There is an agreed repayment schedule of GBP70.0 million over
three years with GBP30.0 million remaining payable as at 28
December 2013, of which GBP5 million was paid on 31 December 2013.
In addition, a pay-if-you-can (PIYC) repayment schedule was agreed
totalling GBP60.0 million over three years, with GBP52.5 million
remaining payable at 28 December 2013 of which GBP7.5 million was
paid on 31 December 2013.
Five-year share warrants over the Company's share capital have
been issued to the Group's lenders. Warrants for 2.5% of the
Company's share capital were issued on completion of the new
financing arrangements and a further 5.0% were issued in September
2012. In addition, the exercise period for the 5.0% warrants issued
to the lenders in August 2009 was extended to make the expiry of
all the warrants coterminous in September 2017. As a result,
warrants equivalent to a total of 5.1% of the Company's issued
ordinary share capital have been issued. During 2013, 44,428,306
warrants were exercised, generating GBP4.4 million of cash for the
group.
Net Asset Position
At the period end, the Group had net assets of GBP97.1 million,
a decrease of GBP176.8 million on the prior year. The movements in
the net asset position from the prior year includes GBP202.4
million on impairment of publishing titles in part reflecting
changes in the discount and growth rate assumptions applicable to
the business and sector as a whole; GBP68.4 million write downs in
the value of presses and property assets brought about as a result
of structural rationalisation and the exit of the remaining News
International contract; increased centralisation, divisional and
title reorganisations and closure of specific operations
particularly presses; and GBP24.4 million on redundancy accruals
relating to restructuring. These were partially offset by a GBP43.0
million reduction in the deficit on the defined benefit plan as the
actual return on assets exceeded the expected return and a GBP67.8
million reduction in deferred tax principally due to the tax
effecting of the intangible write downs and change in tax
rates.
Pensions
The Group's defined benefit pension plan deficit (as assessed
under IAS 19) decreased by GBP43.0 million over the year to GBP78.3
million. The decrease in the deficit was largely due to
improvements in the asset valuations partially offset by increased
inflation assumptions.
The amount of contributions committed to be paid to the scheme
during 2014 is GBP5.7 million (2013: GBP5.7 million) plus share of
asset disposal proceeds, as agreed as part of the formal actuarial
valuation undertaken as at 31 December 2010.
The Pension Fund Trustees are taking professional advice,
including actuarial input, to determine whether any employer debt
is payable to the Plan following the previous cessation of five
participating employers. At period end, GBP1.3 million has been
provided for.
During the period the Pension Fund Trustees have agreed to carry
out a formal actuarial valuation at 31 December 2012, effective as
at one year ahead of the next planned valuation date of 31 December
2013. The outcome of the review will not be formalised until after
the reporting date. The Trustees have indicated that they will seek
an increase in the committed annual contributions. The Trustees are
also consulting with the Group about planned changes to the
investment strategy of the Plan to reduce the level of risk.
The levy payable by the Pension Fund to the Pension Protection
Fund for the year to 31 March 2013 was GBP3.1 million and for the
year to 31 March 2014 is GBP3.2 million. The Group has committed to
the Pension Fund to underwrite any annual charge in excess of
GBP0.7 million. The Group has paid GBP1.5 million during 2013 and
at period end accrued GBP1.0 million in connection with the year to
31 March 2013 and a further GBP1.9 million has been provided for
the nine month period to 28 December 2013 within trade and other
payables. It is expected that this levy will continue in 2014. The
level of increase in charges is not known at this point.
Financial Review (continued)
Pensions (continued)
The Johnston Press Pension Plan is subject to a potential
increase in its liabilities due to benefit equalisation not having
taken effect for a specific group of members. The Group's lawyers
have advised that an application to court be made and are confident
of a successful outcome in the case. The Group is aiming to issue
an application to court in the first half of 2014 with the
expectation that the hearing would take place before the end of
2014. No provision has been made in the financial statements as the
Group's management does not consider that there is any probable
loss however the maximum obligation in relation to this matter is
expected to be in the region of GBP8 million, based on the most
recent calculations.
IAS 19 (revised 2011) - "Employee benefits" is effective for
annual periods beginning on or after 1 January 2013 and will
therefore be applied in the next accounting period. The key changes
are the deferral of actuarial gains and losses will no longer be
permitted and the deficit should be recognised in full on the
balance sheet (subject to any restrictions in IFRIC 14); the
finance cost, which is currently the difference between the
interest on liabilities and expected return on assets will be
replaced by a net interest cost. In most cases the finance cost
will increase as the expected return on assets will effectively be
based on the discount rate (i.e. the returns available on AA-rated
corporate bonds) with no allowance made for any outperformance
expected from the Plan's actual asset holding; more disclosure will
be required about the risks posed by the Plan. Had the Standard
been applied in the current financial year, the Group's profit
before tax would have been reduced by approximately GBP5.2
million.
Capital Expenditure
In the financial periods ended 28 December 2013 and 29 December
2012, the Group incurred capital expenditure of GBP7.3 million and
GBP5.2 million respectively. Of this, GBP4.3 million was spent on
infrastructure and GBP3.0 million on developing the digital
platforms.
Financial Reporting
With the exception of the application of IAS 19 (revised) -
Employee Benefits in 2014, the IFRS standard changes applicable in
2014 are not expected to have a material impact on the financial
statements of the Group in future periods. Additional details on
changes in the standards are included in Note 3 to the Condensed
Consolidated Financial Statements.
Control Processes
As discussed in the Report of the Audit Committee, the Group
operates internal control processes that assist in the efficient
operation of the Group's businesses. Central to these processes and
controls is the fact that the general ledgers, fixed asset
registers, payables system, expenses and payroll are controlled
through our shared services centre in Peterborough, with all cash
processing and sales ledger balances for mainland UK being
controlled through a single centre in Leeds. Plc related
expenditure is managed in Edinburgh.
Financial Review (continued)
Factors Affecting Future Group Performance
The performance of the Group will continue to be affected by the
economic conditions in our markets, cyclical conditions, structural
and business specific circumstances and trends in employment,
property transactions, new car sales and the levels of consumer
confidence.
However, the outlook for the Group will also depend on a number
of other factors, including:
-- Successful implementation of the Group's strategy;
-- Growing new revenues (particularly digital) in the Group's existing market segments;
-- Trends seen in the last half of 2013, continuing in 2014;
-- Ability to adapt to customer requirements through new sales
propositions and advertising channels;
-- Continually improving existing efficient operations through
technology infrastructure and improved processes; and
-- Further re-engineering of the cost base of the business.
Liquidity and Going Concern
The Group and the Company continues to adopt the going concern
basis of accounting in preparing the consolidated financial
statements.
The Group's bank facilities and private placement loan notes
contain three quarterly covenant tests, Consolidated EBITDA to
Consolidated Net Borrowing Costs, Consolidated Net Borrowings to
Consolidated EBITDA, and Consolidated Net Cash Flow to Total Debt
Service, in addition to a Consolidated Net Worth covenant which is
tested at the half year and year end. In December 2013 the Company
and its lenders agreed to reset financial covenants until September
2015, providing the Company with the opportunity to pursue a full
refinancing in 2014. When tested throughout the year and at 28
December 2013, the covenants were all met.
The Group has continued to report improving trends in underlying
profitability, has reduced its net debt from GBP319.3 million at 29
December 2012 to GBP302.0 million at 28 December 2013, and is now
exploring the opportunity to repay its existing bank facilities and
private placement loan notes, through a combined debt and equity
capital refinancing during 2014.
The Board has undertaken a recent and thorough review of its
forecasts and associated risks. These forecasts extend for a period
of 12 months from the date of approval of these financial
statements and demonstrate anticipated compliance with financial
covenants over this forecast period, albeit with limited headroom.
The Directors are satisfied that it is reasonable to adopt the
going concern basis of accounting following this review, further
details of which are set out below.
Financial Review (continued)
The forecasts make key assumptions, based on information
available to the Directors, on a number of items including:
-- External advertising forecasts;
-- Current print advertising run rates;
-- Growth in digital revenues;
-- The impact of newspaper cover price increases on circulation revenues;
-- Existing and planned cost reduction measures;
-- Planned disposals of non-strategic assets;
-- Projected debt service and interest costs over the next 12 months;
-- Expected future cost of the PPF levy; and
-- The levels of advisory fees and other costs incurred in
exploring refinancing if it were subsequently delayed or
aborted.
The Directors recognise that some of the assumptions referred to
above are not within the Group's control, and around which
therefore there remains some uncertainty. Good progress has been
and continues to be made against all of the key assumptions: the
overall economic environment is improving, digital revenues are
growing strongly, circulation revenues are stabilising, cost
savings targets have been met, good progress has been made on
planned asset disposals, and debt reduction continued, as evidenced
by underlying increases in operating profits and margins, and debt
reduction.
The risks described are not new. However, in the event that a
number of the following were to happen concurrently, before the
Group has successfully refinanced - a deteriorating economic
climate, a lack of successful execution of the strategy by the
Group, the delay or inability to continue to make cost savings,
unexpected increase in raw materials, a lack of success or delays
in completing the sale of non-core property and other assets and
the Group incurred significant additional adviser and other costs
in connection with a refinancing without the benefit of a
successful refinancing - and thus the Group were to breach its
financial covenants, then this would give lenders, acting in their
majority, the ability to demand repayment of the facilities. As
discussed, the Group has renegotiated its covenants and is in
constructive discussion with its existing lenders and Pension
Trustees with a view to achieving a successful refinancing during
2014.
Despite the covenant reset, the Group forecasts show limited
headroom and therefore in accordance with Accounting Standards and
the UK Financial Reporting Council guidance for Directors on going
concern, it is appropriate for the Directors to recognise a
material uncertainty, which may give rise to significant doubt over
the Group's and the Company's ability to continue as a going
concern, and if the majority of lenders chose to exercise their
rights in such an event, the Group and the Company may be unable to
realise assets and discharge their liabilities in the normal course
of business. The condensed consolidated financial statements do not
include any adjustments that would result from the going concern
basis of preparation being inappropriate.
Nevertheless, after making enquiries and considering the
uncertainties above, the Directors have a reasonable expectation
that the Group and the Company will continue to trade within the
terms of its existing financial arrangements and will have adequate
resources to continue operating in the normal course of business
for the foreseeable future. Thus the Directors continue to adopt
the going concern basis of accounting in preparing the consolidated
and parent company financial statements.
Directors' Responsibility Statement
We confirm to the best of our knowledge:
The responsibility statement below has been prepared in
connection with the Company's full annual report for the year
ending 28 December 2013. Certain parts thereof are not included
within this announcement.
1. The Consolidated Financial Statements, prepared in accordance
with the relevant financial reporting framework, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
2. The Chairman's Statement, Chief Executive's Report,
Operational Review and Financial Review, include a fair review of
the development and performance of the business and the position of
the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
This responsibility statement was approved by the board of
directors on 28 March 2014 and is signed on its behalf by :
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
28 March 2014 28 March 2014
Group Income Statement for the 52 week period ended 28 December
2013
2013 2012
Before Before
exceptional exceptional
and and
IAS IAS Revised(1)
21/39 Exceptional IAS 21/39 Exceptional IAS
items items 21/39 Total items items 21/39 Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Revenue 6 292,799 10,000 - 302,799 328,691 30,000 - 358,691
Cost of sales (173,710) - - (173,710) (207,868) - - (207,868)
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Gross profit 119,089 10,000 - 129,089 120,823 30,000 - 150,823
Operating expenses 7 (64,210) (39,756) - (103,966) (63,778) (21,824) - (85,602)
Impairment of
intangibles,
property,
plant and
equipment
and assets held
for sale(1) 7 - (270,793) - (270,793) - (24,780) - (24,780)
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Total operating
expenses (64,210) (310,549) - (374,759) (63,778) (46,604) - (110,382)
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Operating
(loss)/profit 8 54,879 (300,549) - (245,670) 57,045 (16,604) - 40,441
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Financing
Investment income 394 - - 394 148 - - 148
Net finance expense
on pension
assets/liabilities 9 (1,576) - - (1,576) (2,471) - - (2,471)
Change in fair
value of hedges 9 - - (1,691) (1,691) - - (7,297) (7,297)
Retranslation
of USD debt 9 - - 1,749 1,749 - - 4,275 4,275
Retranslation
of Euro debt 9 - - (235) (235) - - 262 262
Finance costs 9 (39,808) - - (39,808) (42,129) - - (42,129)
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Net finance costs (40,990) - (177) (41,167) (44,452) - (2,760) (47,212)
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Share of results
of associates 2 - - 2 6 - - 6
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
(Loss)/profit
before tax 13,891 (300,549) (177) (286,835) 12,599 (16,604) (2,760) (6,765)
Tax 10 3,420 71,394 55 74,869 8,825 2,875 676 12,376
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
(Loss)/profit
for the period 17,311 (229,155) (122) (211,966) 21,424 (13,729) (2,084) 5,611
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
Earnings per share
(p) 11
Earnings per share
- Basic 2.65 (35.37) (0.02) (32.74) 3.42 (2.20) (0.34) 0.88
Earnings per share
- Diluted 2.65 (35.37) (0.02) (32.74) 3.40 (2.19) (0.34) 0.87
-------------------- ------ ------------ ------------ -------- ---------- ------------ ------------ -------- ----------
(1) The presentation of the 29 December 2012 exceptional item
numbers has been revised to split out separately exceptional
operating expenses of GBP21,824,000 and exceptional impairment of
GBP24,780,000 to be consistent with the format of current year
disclosures.
The above revenue and (loss)/profit are derived from continuing
operations. The accompanying notes are an integral part of these
condensed financial statements.
The comparative period is for the 52 week period ended 29
December 2012.
Group Statement of Comprehensive Income for the 52 week period
ended 28 December 2013
Revaluation Translation Retained
Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------ ------------ ------------ ----------
Loss for the period - - (211,966) (211,966)
Other items of comprehensive loss
Items that will not be reclassified subsequently
to profit or loss
Actuarial gain on defined benefit pension
schemes (net of tax)(1) - - 28,935 28,935
--------------------------------------------------- ------------ ------------ ------------ ----------
Total items that will not be reclassified
subsequently to profit or loss - - 28,935 28,935
--------------------------------------------------- ------------ ------------ ------------ ----------
Items that may be reclassified subsequently
to profit or loss
Revaluation adjustment (46) - 46 -
Exchange differences on translation of foreign
operations - 500 - 500
Deferred tax on exchange differences - (188) - (188)
Change in deferred tax rate to 20% - - 1,131 1,131
--------------------------------------------------- ------------ ------------ ------------ ----------
Total items that may be reclassified subsequently
to profit or loss (46) 312 1,177 1,443
--------------------------------------------------- ------------ ------------ ------------ ----------
Total other comprehensive (loss)/profit for
the period (46) 312 30,112 30,378
--------------------------------------------------- ------------ ------------ ------------ ----------
Total comprehensive loss for the period (46) 312 (181,854) (181,588)
--------------------------------------------------- ------------ ------------ ------------ ----------
For the 52 week period ended 29 December
2012
Profit for the period - - 5,611 5,611
Other items of comprehensive loss
Items that will not be reclassified subsequently
to profit or loss
Actuarial loss on defined benefit pension
schemes (net of tax) (1) - - (15,877) (15,877)
--------------------------------------------------- ------------ ------------ ------------ ----------
Total items that will not be reclassified
subsequently to profit or loss - - (15,877) (15,877)
--------------------------------------------------- ------------ ------------ ------------ ----------
Items that may be reclassified subsequently
to profit or loss
Revaluation adjustment (377) - 377 -
Exchange differences on translation of foreign
operations - (645) - (645)
Deferred tax on exchange differences - 133 - 133
Change in deferred tax rate to 23.0% - - (421) (421)
--------------------------------------------------- ------------ ------------ ------------ ----------
Total items that may be reclassified subsequently
to profit or loss (377) (512) (44) (933)
--------------------------------------------------- ------------ ------------ ------------ ----------
Total other comprehensive (loss)/profit for
the period (377) (512) (15,921) (16,810)
--------------------------------------------------- ------------ ------------ ------------ ----------
Total comprehensive loss for the period (377) (512) (10,310) (11,199)
--------------------------------------------------- ------------ ------------ ------------ ----------
(1) Relates to actuarial gain of GBP29,025,000 (2012: loss of
GBP15,877,000) for the Johnston Press Pension Plan (refer note 15),
and a net actuarial loss of GBP90,000 (2012: GBPnil) for two other
pension related liabilities.
Group Statement of Changes in Equity for the 52 week period
ended 28 December 2013
Share-based
Share Share Payments Revaluation Own Translation Retained
Capital Premium Reserve Reserve Shares Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Opening
balances 65,081 502,818 18,959 1,783 (5,589) 9,267 (318,402) 273,917
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Total
comprehensive
loss for the
period - - - (46) - 312 (181,854) (181,588)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Recognised
directly
in equity:
Preference
share
dividends
paid - - - - - - (152) (152)
Share-based
payments
charge - - 512 - - - - 512
Deferred tax
on
share-based
payment
transactions - - 20 - - - - 20
Share capital
issued
(Note 16) 4,460 11 - - - - - 4,471
Release on
exercise
of warrants - - (5,541) - - - 5,541 -
Release of
deferred
bonus shares - - (374) - 374 - - -
Own shares
purchased - - - - (97) - - (97)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Net changes
directly
in equity 4,460 11 (5,383) - 277 - 5,389 4,754
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Total
movements 4,460 11 (5,383) (46) 277 312 (176,465) (176,834)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Equity at the
end of
the period 69,541 502,829 13,576 1,737 (5,312) 9,579 (494,867) 97,083
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
For the 52
week period
ended 29
December 2012
Opening
balances 65,081 502,818 17,845 2,160 (5,379) 9,779 (307,940) 284,364
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Total
comprehensive
loss for the
period - - - (377) - (512) (10,310) (11,199)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Recognised
directly
in equity:
Preference
share
dividends
paid - - - - - - (152) (152)
Share-based
payments
charge - - 606 - - - - 606
Share warrants
issued - - 551 - - - - 551
Release of
deferred
bonus shares - - (43) - 43 - - -
Own shares
purchased - - - - (253) - - (253)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Net changes
directly
in equity - - 1,114 - (210) - (152) 752
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Total
movements - - 1,114 (377) (210) (512) (10,462) (10,477)
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
Equity at the
end of
the period 65,081 502,818 18,959 1,783 (5,589) 9,267 (318,402) 273,917
--------------- -------- -------- ---------------------- ------------ -------- ------------ ---------- ----------
The accompanying notes are an integral part of these condensed
financial statements.
Group Statement of Financial Position at 28 December 2013
Notes 2013 2012
GBP'000 GBP'000
------------------------------------ ------ ---------- ----------
Non-current assets
Intangible assets 12 541,360 742,294
Property, plant and equipment 54,181 127,223
Available for sale investments 970 970
Interests in associates 22 20
Trade and other receivables 6 6
Derivative financial instruments 14 - 2,742
------------------------------------ ------ ---------- ----------
596,539 873,255
------------------------------------ ------ ---------- ----------
Current assets
Assets classified as held for sale 6,625 7,601
Inventories 2,545 2,850
Trade and other receivables 36,718 41,628
Cash and cash equivalents 29,075 32,789
Derivative financial instruments 14 1,108 155
------------------------------------ ------ ---------- ----------
76,071 85,023
------------------------------------ ------ ---------- ----------
Total assets 672,610 958,278
------------------------------------ ------ ---------- ----------
Current liabilities
Trade and other payables 74,013 50,934
Current tax liabilities 752 2,947
Retirement benefit obligation 15 5,700 5,700
Borrowings 13 8,553 8,520
Derivative financial instruments 14 - 99
Short-term provisions 1,796 1,327
------------------------------------ ------ ---------- ----------
90,814 69,527
------------------------------------ ------ ---------- ----------
Non-current liabilities
Borrowings 13 314,863 334,220
Retirement benefit obligation 15 72,634 115,619
Deferred tax liabilities 92,776 160,584
Trade and other payables 136 142
Long-term provisions 4,304 4,269
------------------------------------ ------ ---------- ----------
484,713 614,834
------------------------------------ ------ ---------- ----------
Total liabilities 575,527 684,361
------------------------------------ ------ ---------- ----------
Net assets 97,083 273,917
------------------------------------ ------ ---------- ----------
Equity
Share capital 16 69,541 65,081
Share premium account 502,829 502,818
Share-based payments reserve 13,576 18,959
Revaluation reserve 1,737 1,783
Own shares (5,312) (5,589)
Translation reserve 9,579 9,267
Retained earnings (494,867) (318,402)
------------------------------------ ------ ---------- ----------
Total equity 97,083 273,917
------------------------------------ ------ ---------- ----------
The comparative numbers are as at 29 December 2012.
The condensed financial statements of Johnston Press plc,
registered in Scotland (number 15382), were approved by the Board
of Directors and authorised for issue on 28 March 2014.
They were signed on its behalf by:
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
The accompanying notes are an integral part of these condensed
financial statements.
Group Cash Flow Statement for the 52 week period ended 28
December 2013
Revised(1,3)
2013 2012
Notes GBP'000 GBP'000
-------------------------------------------------------- ------ --------- -------------
Cash flow from operating activities
Cash generated from operations(2,3) 17 54,537 80,692
Income tax paid (2,800) (4,809)
-------------------------------------------------------- ------ --------- -------------
Net cash inflow from operating activities 51,737 75,883
-------------------------------------------------------- ------ --------- -------------
Investing activities
Interest received 16 120
Dividends received from available for sale investments 378 22
Proceeds on disposal of publishing titles 12 1,965 -
Proceeds on disposal of property, plant and equipment 3,697 8,936
Expenditure on digital intangible assets 12 (3,033) -
Purchases of property, plant and equipment (4,320) (5,171)
-------------------------------------------------------- ------ --------- -------------
Net cash (used in)/received from investing activities (1,297) 3,907
-------------------------------------------------------- ------ --------- -------------
Financing activities
Dividends paid (152) (152)
Interest paid(3) (24,803) (21,837)
Repayment of borrowings (26,586) (2,697)
Repayment of loan notes (6,473) (23,841)
Financing fees (514) (11,826)
Net cash flow from derivatives - 198
Issue of shares 16 4,471 -
Cash movement relating to own shares held (97) (253)
-------------------------------------------------------- ------ --------- -------------
Net cash used in financing activities (54,154) (60,408)
-------------------------------------------------------- ------ --------- -------------
Net (decrease)/increase in cash and cash equivalents (3,714) 19,382
Cash and cash equivalents at the beginning of period 32,789 13,407
-------------------------------------------------------- ------ --------- -------------
Cash and cash equivalents at the end of the period 29,075 32,789
-------------------------------------------------------- ------ --------- -------------
(1) The presentation of the 29 December 2012 'cash generated
from operations' number has been revised to be consistent with
current year disclosures.
(2) Includes exceptional cash receipts of GBP10.0 million (2012:
GBP30.0 million) due to the termination of the News International
printing contract in 2012 and 2013.
(3) Interest paid in 2012 has been revised to include
GBP4,594,000 that in the prior year was incorrectly classified as
'cash generated from operations'. A subsequent amendment has also
been made to note 17 (refer therein). This adjustment did not in
any way impact the prior year income statement, assets, liabilities
or equity and is purely presentational in nature.
The comparative period is for the 52 week period ended 29
December 2012.
The accompanying notes are an integral part of these condensed
financial statements.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013
1. General Information
The financial information in the Preliminary Results
Announcement is derived from but does not represent the full
statutory accounts of Johnston Press plc. The statutory accounts
for the 52 week period ended 29 December 2012 have been filed with
the Registrar of Companies and those for the 52 week period ended
28 December 2013 will be filed following the Company's Annual
General Meeting in 2014. The auditor's reports on the statutory
accounts for the 52 week periods ended 29 December 2012 and 28
December 2013 were unqualified, however the report on the 52 week
period ended 28 December 2013 did include an emphasis of matter
regarding a material uncertainty in relation to going concern.
Neither report contained a statement under Sections 498 (2) or (3)
of the Companies Act 2006.
The condensed consolidated financial statements of Johnston
Press Plc have been prepared on a going concern basis (discussed
further in the Financial Review) and under the historical cost
convention, except for the revaluation of certain properties and
financial instruments, share-based payments and defined benefit
pension obligations that are measured at revalued amounts or fair
value at the end of each reporting period. The accounting policies
adopted in the preparation of this condensed consolidated financial
statement are consistent with those applied by the Group in its
audited consolidated financial statements for the period ended 28
December 2013.
Whilst the financial information included in this Results
Announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. This Results
Announcement constitutes a dissemination announcement in accordance
with Section 6.3 of the Disclosure and Transparency Rules (DTR).
The 2013 Annual Report and Accounts for the 52 weeks ended 28
December 2013 will be made available on the Company's website at
www.johnstonpress.co.uk, at the Company's registered office at 108,
Holyrood Road, Edinburgh EH8 8AS and sent to shareholders in April
2014.
2. Basis of preparation
The Group's business activities, together with factors likely to
affect its future development, performance and financial position
and commentary on the Group's financial results, its cash flows,
liquidity requirements and borrowing facilities are set out in the
Financial Review on pages 10 to 21.
The financial statements have been prepared for the 52 week
period ended 28 December 2013. The 2012 information relates to the
52 week period ended 29 December 2012.
3. Adoption of new or amended standards and interpretations in
the current year
The following new and revised Standards and Interpretations have
been adopted for the 52 week period ended 28 December 2013. Their
adoption has not had any significant impact on the amounts reported
in these financial statements but may impact the accounting for
future transactions and arrangements.
-- IAS 1 (amended) Presentation of Items of Other Comprehensive Income
-- IFRS 1 (amended) First time adoption of IFRS - Government Loans
-- IFRS 1 (amended) First time adoption of IFRS - Severe
Hyperinflation and Removal of Fixed Dates for First-time
Adopters
-- IAS 12 (amended) Deferred Tax: Recovery of Underlying Assets
-- IFRS 7 (amended) Disclosures - Offsetting Financial Assets and Financial Liabilities
-- IAS 32 (amended) Offsetting Financial Assets and Financial Liabilities
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013
(continued)
3. Adoption of new or amended standards and interpretations in
the current year (continued)
-- Annual Improvements to IFRS 2009 - 2011 Cycle
o IFRS 10 Consolidated Financial Statements
o IFRS 11 Joint Arrangements
o IFRS 12 Disclosure of Interests in Other Entities
o IAS 27 (revised) Separate Financial Statements
o IAS 28 (revised) Investments in Associates and Joint
Ventures
The following new standards, amendments to standards and
interpretations that are expected to impact the Group, which have
not been applied in these financial statements, were in issue, and
endorsed and applicable to reporting periods commencing from 1
January 2013 onwards. These standards will be applied to the
financial statements for the 53 week period commencing 29 December
2013:
IAS 19 (revised 2011) - Employee benefits: is effective for
annual periods beginning on or after 1 January 2013. The key
changes are the deferral of actuarial gains and losses will no
longer be permitted and the deficit should be recognised in full on
the balance sheet (subject to any restrictions in IFRIC 14); the
finance cost, which is currently the difference between the
interest on liabilities and expected return on assets will be
replaced by a net interest cost. In most cases the finance cost
will increase as the expected return on assets will effectively be
based on the discount rate (i.e. the returns available on AA-rated
corporate bonds) with no allowance made for any outperformance
expected from the Plan's actual asset holding. More disclosure will
be required about the risks posed by the Plan. Had the Standard
been applied in the current financial year, the Group's loss before
tax would have been increased by approximately GBP5.2 million.
IFRS 13 Fair Value Measurement:is mandatory for annual periods
beginning on or after 1 January 2013 with earlier application
permitted. Once adopted, IFRS 13 Fair Value Measurement applies
whenever another IFRS requires or permits fair value measurements,
or disclosures about fair value measurements, with some limited
exceptions. The IFRS also applies to measurements such as fair
value less costs to sell that are clearly based upon fair value, as
well as to disclosures about such items. IFRS 13 provides a
consistent framework with a single definition of fair value as 'the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date'. IFRS 13 includes extensive disclosure
requirements. The impact on the amounts recognised in the
consolidated financial statements has not yet been assessed.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013
(continued)
3. Adoption of new or amended standards and interpretations in
the current year (continued)
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases had not yet been endorsed by the EU).
-- Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment Entities (endorsed 20 November 2013)
-- IAS 36 (amendments) - Recoverable Amount Disclosures for
Non-Financial Assets (endorsed 19 December 2013)
-- IAS 39 - Novation of Derivatives and Continuation of Hedge
Accounting (endorsed 19 December 2013)
-- IFRIC 21 - Levies (Issued 20 May 2013, endorsement expected
Q2 '14 to be effective 1 January 2014)
-- IFRS 9 Financial Instruments amendments (Issued 19 November
2013, endorsement postponed). IFRS 9 will impact the presentation
of certain disclosures in the financial statements.
-- IFRS 14 Regulatory Deferral Accounts (Issued 30 January 2014,
endorsement expected Q1 '15 to be effective 1 January 2016)
-- Annual Improvements to IFRS's 2010 - 2012 Cycle (Issued 12
December 2013, endorsement expected Q4 '14)
-- Annual Improvements to IFRS's 2011 - 2013 Cycle (Issued 12
December 2013, endorsement expected Q4 '14)
The directors do not expect that the adoption of the standards
listed will have a material impact on the financial statements of
the Group in future periods.
Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a
detailed review has been completed.
The Group continues to assess the impact of adopting the above
new or amended standards and interpretations in future accounting
periods.
4. Critical Accounting Judgements and Key Sources of Estimation
Uncertainty
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies,
management has made the following judgements that have the most
significant effect on the amounts recognised in the financial
statements (apart from those involving estimations, which are dealt
with below).
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
Exceptional items
Exceptional items include significant transactions such as the
costs associated with restructuring of businesses along with
material items including for example revenue received on the
termination of significant print contracts, significant pension
related costs, the disposal or exit of a significant property
directly linked to restructuring and impairment of intangible and
tangible assets together with the associated tax impact. The
Company considers such items are material to the Income Statement
and their separate disclosure is necessary for an appropriate
understanding of the Group's financial performance. These items
have been presented as a separate column in the Group Income
Statement.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013
(continued)
4. Critical Accounting Judgements and Key Sources of Estimation
Uncertainty (continued)
Valuation of publishing titles on acquisition
The Group's policies require that a fair value at the date of
acquisition be attributed to the publishing titles owned by each
acquired entity. The Group's management uses its judgement to
determine the fair value attributable to each acquired publishing
title taking into account the consideration paid, the earnings
history and potential of the title, any recent similar
transactions, industry statistics such as average earnings
multiples and any other relevant factors.
The publishing titles are considered to have indefinite economic
lives due to the historic longevity of the brands and the ability
to evolve the brands in the changing media environment.
Assets held for sale
Where a property or a significant item of equipment (such as a
print press or property no longer required as part of Group
operations) is marketed for sale, management is highly committed to
the sale and the asset is available for immediate sale, the Group
classifies that asset as held for sale. If the asset is expected to
be sold within twelve months, the asset is classed as a current
asset. The value of the asset is held at the lower of the net book
value or the expected realisable sale value. The Directors have
estimated the sale values based on the current price that the asset
is being marketed at and advice from independent property agents.
The actual sale proceeds may differ from the estimate.
Provisions for onerous leases and dilapidations
Where the Group exits a rented property, an estimate of the
anticipated total future cost payable under the terms of the
operating lease, including rentals, rates and other related
expenses, is charged to the Income Statement at the point of exit
as an onerous lease. Where there is a break clause in the contract,
rentals are provided for up to that point. In addition, an estimate
is made of the likelihood of sub-letting the premises and any
rentals that would be receivable from a sub tenant. Where receipt
of sub-lease rentals is considered reasonable, these amounts are
deducted from the rentals payable by the Group under the lease and
provision charged for the net amount.
Under the terms of a number of property leases, the Group is
required to return the property to its original condition at the
lease expiry date. The Group has estimated the expected costs of
these dilapidations and charged these costs to the Income
Statement. No discounting has been applied to the provision as the
effect of the discounting is not considered material.
Valuation of share-based payments
The Group estimates the expected value of equity-settled
share-based payments and this is charged through the Income
Statement over the vesting periods of the relevant awards. The cost
is estimated using a Black-Scholes valuation model. The
Black-Scholes calculations are based on a number of assumptions and
are amended to take account of estimated levels of share vesting
and exercise.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the period end date that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013
(continued)
4. Critical Accounting Judgements and Key Sources of Estimation
Uncertainty (continued)
Impairment of publishing titles and print presses
Determining whether publishing titles are impaired requires an
estimation of the value in use of the cash generating units (CGUs)
to which these assets are allocated. Key areas of judgement in the
value in use calculation include the identification of appropriate
CGUs, estimation of future cash flows expected to arise from each
CGU, the long-term growth rates and a suitable discount rate to
apply to cash flows in order to calculate present value. The Group
has identified its CGUs based on the seven geographic regions in
which it operates. This is considered to be the lowest level at
which cash inflows generated are largely independent of the cash
inflows from other groups of assets and has been consistently
applied in the current and prior periods. GBP202.4 million
impairment loss has been recognised in 2013 (2012: nil). The
carrying value of publishing titles at 28 December 2013 was
GBP538.5 million (2012: GBP742.3 million). Details of the
impairment reviews that the Group performs are provided in Note
12.
Determining whether print presses are impaired requires an
estimation of the value in use of each print site. The value in use
calculation requires the Group to estimate the future cash flows
expected to arise from the print sites and a suitable discount rate
in order to calculate present value.
Valuation of pension liabilities
The Group records in its Statement of Financial Position a
liability equivalent to the deficit on the Group's defined benefit
pension schemes. This liability is determined with advice from the
Group's actuarial advisers each year and can fluctuate based on a
number of factors, some of which are outside the control of
management. The main factors that can impact the valuation
include:
-- the discount rate used to discount future liabilities back to
the present date, determined each year from the yield on corporate
bonds;
-- the actual returns on investments experienced as compared to
the expected rates used in the previous valuation;
-- the actual rates of salary and pension increase as compared
to the expected rates used in the previous valuation;
-- the forecast inflation rate experienced as compared to the
expected rates used in the previous valuation; and
-- mortality assumptions.
Details of the assumptions used to determine the liability at 28
December 2013 are set out in Note 15.
5. Business segments
Information reported to the Chief Executive Officer for the
purpose of resource allocation and assessment of segment
performance is focussed on the two areas of Publishing (in print
and online) and Contract Printing. Geographical segments are not
presented as the primary segment is the UK which is greater than
90% of Group activities.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
6. Segment Information
a) Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment:
Revised(1)
---------- --------- ------------ --------- ----------------------------------------------
Contract Contract
Publishing printing Eliminations Group Publishing printing Eliminations Group
2013 2013 2013 2013 2012 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- --------- ------------ --------- ---------- --------- ------------- --------
Revenue
Print advertising 157,057 - - 157,057 181,257 - - 181,257
Digital advertising 24,529 - - 24,529 20,606 - - 20,606
Newspaper sales 87,658 - - 87,658 91,763 - - 91,763
Contract printing - 11,206 - 11,206 - 18,371 - 18,371
Other 10,759 1,590 - 12,349 14,812 1,882 - 16,694
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Total external sales 280,003 12,796 - 292,799 308,438 20,253 - 328,691
Inter-segment sales(2) - 39,436 (39,436) - - 53,019 (53,019) -
Exceptionals - 10,000 - 10,000 - 30,000 - 30,000
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Total revenue 280,003 62,232 (39,436) 302,799 308,438 103,272 (53,019) 358,691
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Operating
(loss)/profit
Segment result before
exceptional items 50,495 4,384 - 54,879 51,554 5,491 - 57,045
Exceptional items (246,458) (54,091) - (300,549) (22,667) 6,063 - (16,604)
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Net segment result (195,963) (49,707) - (245,670) 28,887 11,554 - 40,441
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Investment income 394 148
Net finance expense on
pension
assets/liabilities (1,576) (2,471)
IAS 21/39 adjustments (177) (2,760)
Finance costs (39,808) (42,129)
Share of results of
associates 2 6
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
Loss before tax (286,835) (6,765)
Tax 74,869 12,376
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
(Loss)/profit for the
period (211,966) 5,611
---------------------- ---------- --------- ------------ --------- ---------- --------- ------------- --------
(1) The presentation of the 29 December 2012 exceptional item
numbers has been revised to be consistent with current year
disclosures.
(2) Inter-segment sales are charged at prevailing market
prices.
The segment result represents the (loss)/profit earned by each
segment without allocation of the share of results of associates,
investment income, finance costs (including in relation to pension
assets and liabilities) and income tax expense. This is the measure
reported to the Group's Chief Executive Officer for the purpose of
resource allocation and assessment of segment performance.
b) Segment assets
2013 2012
GBP'000 GBP'000
--------------------------- --------- ---------
Assets
Publishing 638,679 855,372
Contract printing 32,823 99,039
--------------------------- --------- ---------
Total segment assets 671,502 954,411
Unallocated assets 1,108 3,867
--------------------------- --------- ---------
Consolidated total assets 672,610 958,278
--------------------------- --------- ---------
For the purposes of monitoring segment performance and
allocating resources between segments, the Group's Chief Executive
Officer monitors the tangible, intangible and financial assets
attributable to each segment. All assets are allocated to
reportable segments with the exception of available-for-sale
investments and derivative financial instruments.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
6. Segment Information (continued)
c) Other segment information
Contract Contract
Publishing printing Group Publishing printing Group
2013 2013 2013 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---------- --------- -------- ---------- --------- --------
Additions to property, plant and equipment 4,320 - 4,320 4,912 180 5,092
Depreciation and amortisation expense 4,108 3,644 7,752 5,077 7,638 12,715
Impairment of property, plant and
equipment 1,443 62,252 63,695 - 17,239 17,329
Net impairment of intangibles 202,427 - 202,427 - - -
------------------------------------------- ---------- --------- -------- ---------- --------- --------
7. Exceptional Items
2013 2012
GBP'000 GBP'000
----------------------------------------------------------- ---------- ---------
Revenue
Termination of print contract 10,000 30,000
----------------------------------------------------------- ---------- ---------
Total revenue - exceptional items 10,000 30,000
----------------------------------------------------------- ---------- ---------
Operating expenses
Operating expenses - pensions
Pension protection fund contribution (4,408) -
Section 75 pension debt (1,268) -
IAS 19 past service gain (Note 15) - 1,540
Operating expenses - restructuring costs
Redundancy costs (24,444) (21,582)
Lease termination costs, empty property and dilapidations (5,843) (1,610)
Other restructuring costs (2,773) (1,211)
Operating expenses - gain on disposal
Gain on sale of assets 199 986
Operating expenses - other (1,219) 53
Total exceptional expenses (39,756) (21,824)
----------------------------------------------------------- ---------- ---------
Impairment of intangible assets, property, plant
and equipment and assets held for sale
Intangible assets (Note 12) (202,427) -
Property, plant and equipment (63,695) (17,239)
Assets held for sale (4,671) (7,541)
----------------------------------------------------------- ---------- ---------
Total impairment of intangible assets, property,
plant and equipment and assets held for sale (270,793) (24,780)
----------------------------------------------------------- ---------- ---------
Total operating expenses and impairment (310,549) (46,604)
----------------------------------------------------------- ---------- ---------
Total exceptional items (300,549) (16,604)
----------------------------------------------------------- ---------- ---------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
7. Exceptional Items (continued)
Revenue
The Group has recognised revenue of GBP10.0 million (2012:
GBP30.0 million) during the period as a result of a termination fee
payable on the final aspect of a long term contract with News
International. The prior year income represents an earlier
termination of aspects of the contract.
Operating expenses - pensions
During 2013, the pension regulator has requested payment of PPF
levies amounting to GBP3.1 million and GBP3.2 million for the years
ending 31 March 2013 and 31 March 2014 respectively, GBP1.3 million
of which will be settled by the Johnston Press Pension Plan,
leaving GBP6.3 million (2012: nil) payable by the Company, in
accordance with the agreed Schedule of Contributions. GBP4.4
million has been charged to the income statement for the period to
28 December 2013. Additionally, the Group incurred a Section 75
debt amounting to GBP1.3 million (2012: nil) following the wind up
of certain companies in prior years. In 2012, the Group offered a
number of existing pensioners the opportunity to take part in a
pension exchange where, for a higher pension today, they forgo a
proportion of future increases. This resulted in a gain of GBP1.5
million.
Operating expenses - restructuring costs
Restructuring costs primarily relate to various reorganisation
processes designed to reduce the size and cost of overhead
functions (2013: GBP24.4 million, 2012: GBP21.6 million), early
lease termination costs (2013: GBP3.0 million, 2012: GBPnil), empty
property costs (2013: GBP1.4 million, 2012: GBP1.4), dilapidations
(2013: GBP1.4m, 2012: GBP0.2) and other associated legal and
consulting fees (2013: GBP2.8 million, 2012: GBP1.2 million) .
Operating expenses - gain on disposal
During 2012, the Group recognised a gain of GBP1.0 million from
the disposal of a significant property.
Operating expenses - other
The Group incurred other operating expenses of GBP0.7 million
(2012: GBPnil) relating to to legal fees in relation to the
exploration of refinancing and GBP0.5 million (2012: GBPnil)
relating to legal fees for an aborted disposal.
Impairment of intangible assets, property, plant and equipment
and assets held for sale
In the period ended 28 December 2013, an impairment of GBP202.4
million (2012: GBPnil) was recognised by the Group for publishing
titles largely due to changes in the discount and growth rate
assumptions applicable to the business and sector as a whole.
The Group also incurred charges for write down in the value of
presses and property assets (2013: GBP68.4 million, 2012: GBP24.8
million). During the period, as a result of structural
rationalisations, increased centralisation, divisional and title
reorganisations and closure of specific operations particularly
presses, the Group carried out a review of the recoverable amount
of its print manufacturing plant and related equipment. These
assets are used in the Group's print segment. The review led to the
recognition of an impairment loss of GBP62.3 million which has been
recognised in the Income Statement. The Group also estimated the
fair value less costs to sell of its print plant and related
equipment, which is based on the recent market prices of assets
with similar age and obsolescence. The fair value less costs to
sell is less than the value in use and hence the recoverable amount
of the relevant assets has been determined on the basis of their
value in use. The discount rate used in measuring value in use was
12% per annum.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
7. Exceptional Items (continued)
Additional impairment losses recognised in respect of property,
plant and equipment in the period amounted to GBP1.4 million. These
losses reflect the Group's future expected use of the asset,
resulting in value in use reflecting the cash flows from proposed
disposal of the asset. Those assets have been impaired in full and
belong to the Group's publishing segment. The impairment losses
have been included in the Income Statement in the cost of sales
line item.
Tax-effect of exceptional items
The Group has disclosed a GBP71.3 million tax credit in relation
to the total exceptional items of GBP300.5 million. The tax credit
is primarily attributable to the deferred tax adjustment relating
to the impairment of intangible assets of GBP64.6 million
(including credit relating to reduction in deferred tax rate to
20%), and deductible restructuring costs tax credit of GBP7.7
million.
8. Operating (Loss)/Profit
2013 2012
GBP'000 GBP'000
-------------------------------------------------------------- --------- ---------
Operating (loss)/profit is shown after charging/(crediting):
Depreciation of property, plant and equipment 7,543 12,715
Exceptional write down in value of presses 63,695 17,239
Write down of assets classified as held for sale)
Exceptionals 4,671 7,541
Operating - 276
Profit on disposal of property, plant and equipment:
Operating disposals (1,068) (695)
Exceptional disposals (199) (986)
Assets held for sale disposals - (390)
Movement in allowance for doubtful debts (1,019) (2,069)
Staff costs excluding redundancy costs 113,461 131,526
Redundancy costs 24,444 21,582
Auditor's remuneration:
Audit services
Company and Group accounts 173 120
Subsidiaries 240 240
Operating lease charges:
Plant and machinery 1,887 1,847
Other 5,040 3,841
Rentals received on sub-let property (115) (221)
Net foreign exchange gains (146) (59)
Cost of inventories recognised as expense 27,720 36,111
Write down of inventories - 647
-------------------------------------------------------------- --------- ---------
Profit on disposal of property, plant and equipment - operating
disposals
The Group operates a large portfolio of properties, and
regularly exits and renews leases, as well as sale and leaseback of
freehold properties. Profits of GBP0.6 million in 2013 (2012:
GBP0.7 million) were included in operating profits from property
sales. There were nine such sales in 2013. Similar profits are
expected to be earned in 2014.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
8. Operating (Loss)/Profit (continued)
Staff costs shown above include GBP3,710,000 (2012:
GBP2,284,000) relating to remuneration of Directors. In addition to
the auditor's remuneration shown above, the auditor received the
following fees for non-audit services.
2013 2012
GBP'000 GBP'000
---------------------------------- --------- ---------
Audit-related assurance services 55 95
Taxation compliance services 68 49
Other taxation advisory services 5 28
Other services 6 69
---------------------------------- --------- ---------
134 241
---------------------------------- --------- ---------
All non-audit services were approved by the Audit Committee. The
Audit Committee considers that these non-audit services have not
impacted the independence of the audit process. In addition, an
amount of GBP19,000 (2012: GBP19,000) was paid to the external
auditor for the audit of the Group's pension scheme.
9. Finance costs
------------------------------------------------------ --------- ---------
a) Net finance expense on pension assets/liabilities
Interest on pension liabilities (Note 15) 22,227 22,708
Expected return on pension assets (Note 15) (20,651) (20,237)
------------------------------------------------------ --------- ---------
1,576 2,471
------------------------------------------------------ --------- ---------
b) Finance costs
Interest on bank overdrafts and loans 23,504 26,944
Payment-in-kind interest accrual 12,148 11,048
Amortisation of term debt issue costs 4,156 4,137
------------------------------------------------------ --------- ---------
39,808 42,129
------------------------------------------------------ --------- ---------
c) IAS 21/39 items
All movements in the fair value of derivative financial
instruments are recorded in the Income Statement. In the current
period, this movement was a net charge of GBP1.7 million (2012:
charge of GBP7.3 million), consisting of a realised net credit of
GBPnil million (2012: GBP0.2 million) and an unrealised charge of
GBP1.7 million (2012: GBP7.5 million). The retranslation of foreign
denominated debt at the period end resulted in a net credit of
GBP1.5 million (2012: GBP4.5 million) being recorded in the Income
Statement. The retranslation of the Euro denominated publishing
titles held at fair value is shown in the Statement of
Comprehensive Income.
10. Tax
2013 2012
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Current tax
Charge for the period - 3,541
Adjustment in respect of prior periods 617 130
------------------------------------------------------ --------- ---------
617 3,671
------------------------------------------------------ --------- ---------
Deferred tax
Credit for the period (12,693) (4,168)
Adjustment in respect of prior periods (1,629) 191
Deferred tax adjustment relating to the impairment (41,667) -
of publishing titles
Credit relating to reduction in deferred tax rate to
20% (2012: 23.0%) (19,497) (12,070)
------------------------------------------------------ --------- ---------
(75,486) (16,047)
------------------------------------------------------ --------- ---------
Total tax credit for the period (74,869) (12,376)
------------------------------------------------------ --------- ---------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
10. Tax (continued)
UK corporation tax is calculated at 23.25% (2012: 24.5%) of the
estimated assessable loss for the period. The 23.25% basic tax rate
applied for the 2013 period was a blended rate due to the tax rate
of 24.0% in effect for the first quarter of 2013, changing to 23.0%
from 1 April 2013 under the 2012 Finance Act. Taxation for other
jurisdictions is calculated at the rates prevailing in the relevant
jurisdiction. The Group has recognised a GBP19.5 million tax credit
as a result of the change to the UK deferred tax rate from 23% to
20% being the substantively enacted rate at the balance sheet
date..
The tax credit for the period can be reconciled to the loss per
the Income Statement as follows:
2013 2012
GBP'000 % GBP'000 %
------------------------------------------------ ---------- ------ --------- -------
Loss before tax (286,835) 100.0 (6,765) 100.0
Tax at 23.25% (2012: 24.5%) (66,689) 23.3 (1,657) 24.5
Tax effect of expenses that are non-deductible
in determining taxable profit 7,125 (2.5) 2,130 (31.5)
Tax effect of income that is non-taxable in
determining taxable profit - - (793) 11.7
Tax effect of investment income (88) - (5) -
Effect of other tax rates 2,780 (1.0) (302) (4.5)
Adjustment in respect of prior periods (1,008) 0.4 321 (4.7)
Unrecognised deferred tax assets 2,508 (0.9) - -
Effect of reduction in deferred tax rate to
20.0% (2012: 23.0%) (19,497) 6.8 (12,070) 178.4
------------------------------------------------ ---------- ------ --------- -------
Tax credit for the period and effective rate (74,869) 26.1 (12,376) 182.8
------------------------------------------------ ---------- ------ --------- -------
11. Earnings per Share
The calculation of earnings per share is based on the following
(losses)/profits and weighted average number of shares:
2013 2012
GBP'000 GBP'000
---------------------------------------------------------- ---------- ---------
Earnings
(Loss)/profit for the period (211,966) 5,611
Preference dividend (152) (152)
---------------------------------------------------------- ---------- ---------
Earnings for the purposes of basic and diluted earnings
per share (212,118) 5,459
Exceptional and IAS 21/39 items (after tax) 229,277 15,813
---------------------------------------------------------- ---------- ---------
Earnings for the purposes of adjusted earnings per share 17,159 21,272
---------------------------------------------------------- ---------- ---------
2013 2012
No. of No. of
shares shares
------------------------------------------------------- ------------ ------------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share 647,803,578 621,758,744
Effect of dilutive potential ordinary shares:
- warrants and employee share options - 2,594,333
- deferred bonus shares - 1,788,822
------------------------------------------------------- ------------ ------------
Number of shares for the purposes of diluted earnings
per share 647,803,578 626,141,899
------------------------------------------------------- ------------ ------------
Earnings per share (p)
Basic (32.74) 0.88
Adjusted 2.65 3.42
Diluted - see below (32.74) 0.87
------------------------------------------------------- ------------ ------------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
11. Earnings per share (continued)
The weighted average number of ordinary shares above are shown
excluding owns shares held.
Adjusted EPS figures are presented to show the effect of
excluding exceptional and IAS 21/39 items from earnings per share.
Diluted earnings per share are presented when a company could be
called upon to issue shares that would decrease net profit or
increase loss per share.
As explained in Note 16, the preference shares qualify as equity
under IAS 32. In line with IAS 33, the preference dividend and the
number of preference shares are excluded from the calculation of
earnings per share.
12. Intangible Assets
Digital
Publishing intangible
titles assets Total
GBP'000 GBP'000 GBP'000
------------------------------------------------ ------------ ------------- ----------
Cost
Opening balance 1,308,677 - 1,308,677
Additions - 3,033 3,033
Disposals (7,034) - (7,034)
Exchange movements 634 - 634
------------------------------------------------ ------------ ------------- ----------
Closing balance 1,302,277 3,033 1,305,310
------------------------------------------------ ------------ ------------- ----------
Accumulated impairment losses and amortisation
Opening balance 566,383 - 566,383
Amortisation for the period - 209 209
Disposals (5,069) - (5,069)
Impairment losses for the period 202,427 - 202,427
------------------------------------------------ ------------ ------------- ----------
Closing balance 763,741 209 763,950
------------------------------------------------ ------------ ------------- ----------
Carrying amount
Opening balance 742,294 - 742,294
------------------------------------------------ ------------ ------------- ----------
Closing balance 538,536 2,824 541,360
------------------------------------------------ ------------ ------------- ----------
The exchange movement above reflects the impact of the exchange
rate on the valuation of publishing titles denominated in Euros at
the period end date.
During 2013, the Group disposed of Petersfield Post, Goole
Courier and Selby Times publishing titles for total consideration
of GBP1.9m. At the time of disposal, the Directors assessed these
titles were held at their fair value due to previous impairment
write-downs incurred.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
12. Intangible assets (continued)
Publishing titles
The carrying amount of publishing titles by cash generating unit
(CGU) is as follows:
2012 Impairment Disposal Translation 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- --------- ----------- --------- ------------ ---------
Scotland 56,013 (3,886) - - 52,127
North 272,190 (53,418) (1,541) - 217,231
Northwest 93,201 (31,689) - - 61,512
Midlands 168,190 (48,108) - - 120,082
South 60,602 (13,887) (424) - 46,291
Northern Ireland 73,422 (37,597) - 62 35,887
Republic of Ireland 18,676 (13,842) - 572 5,406
------------------------------------- --------- ----------- --------- ------------ ---------
Total carrying amount of publishing
titles 742,294 (202,427) (1,965) 634 538,536
------------------------------------- --------- ----------- --------- ------------ ---------
The Group tests the carrying value of publishing titles held
within the publishing operating segment for impairment annually or
more frequently if there are indications that they might be
impaired. The publishing titles are grouped by CGUs, being the
lowest levels for which there are separately identifiable cash
flows independent of the cash inflows from other groups of
assets.
The recoverable amounts of the CGUs are determined from value in
use calculations, with the exception of the Republic of Ireland
publishing titles which are valued at fair value less cost of
sales, due to the intended disposal of these publishing titles. The
publishing titles have not been reported as assets held for sale as
the completion of the transaction does not meet the strict criteria
to deem it highly probable. The key assumptions for the value in
use calculations are:
-- the discount rate;
-- expected changes in underlying revenues and direct costs during the period; and
-- growth rates.
Management estimates discount rates using pre-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the CGUs. The discount rate applied to the
future cash flows in 2013 was 12.0% (2012: 11.0%) for the CGUs in
the United Kingdom and 15.9% (2012:11.0%) for the CGU in the
Republic of Ireland. The discount rate reflects management's view
of the current risk profile of the underlying assets being valued
with regard to the current economic environment and the risks that
the regional media industry is facing.
Changes in underlying revenue and direct costs are based on past
practices and expectations of future changes in the market. These
include changes in demand for print and digital, circulation, cover
prices, advertising rates as well as movement in newsprint and
production costs and inflation.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
12. Intangible assets (continued)
Discounted cash flow forecasts are prepared using:
-- the most recent financial budgets and projections approved by
management for 2014 which reflect management's current experience
and future expectations of the markets the CGUs operate in;
-- net cash inflows for 2015 to 2033 that are extrapolated based
on an estimated annual long-term growth rate of 1.0%;
-- a discounted residual value of 5 times the final year's cash flow; and
-- capital expenditure cash flows to reflect the cycle of capital investment required.
The present value of the cash flows is then compared to the
carrying value of the asset to determine if there is any impairment
loss.
The total net impairment charge recognised in 2013 was GBP202.4
million (2012: net impairment charge of GBPnil). The Impairment
charge for the period comprises GBP53.4m in the North, GBP48.1m in
Midlands, GBP37.6m in Northern Ireland, GBP31.7m in the Northwest,
GBP13.9m in the South, GBP13.8m in the Republic of Ireland and
GBP3.9m in Scotland.
The Group has conducted sensitivity analysis on the impairment
test of each CGU's carrying value. A decrease in the long term
growth rate of 0.5% would result in an impairment for the Group of
GBP10.3 million and an increase in the discount rate of 0.5% would
result in an impairment of GBP20.0 million.
Growth Discount
rate rate
sensitivity sensitivity
GBP'000 GBP'000
------------------------------------------------------ ------------- -------------
Scotland 1,092 2,110
North 3,997 7,720
Northwest 1,081 2,087
Midlands 2,114 4,084
South 1,098 2,121
Northern Ireland 734 1,417
Republic of Ireland 219 461
------------------------------------------------------ ------------- -------------
Total potential impairment from sensitivity analysis 10,335 20,000
------------------------------------------------------ ------------- -------------
Digital intangible assets
Digital intangible assets primarily relates to the new design of
the Group's 196 local websites and the development of a Customer
Relationship Management (CRM) capability. The websites form the
core platform for the Group's digital revenue activities whereas
the CRM capability will enable the Group to accelerate the growth
of its subscriber base. These assets are being amortised over a
period of three years. Amortisation for the year has been charged
through cost of sales.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
13. Borrowings
Borrowings shown at amortised cost at the period end were:
2013 2012
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Bank loans 200,851 227,316
Private placement loan notes 110,994 119,162
Payment-in-kind interest accrual 20,372 8,535
-------------------------------------------------- --------- ---------
Total borrowings excluding term debt issue costs 332,217 355,013
Term debt issue costs (8,801) (12,273)
-------------------------------------------------- --------- ---------
Total borrowings 323,416 342,740
-------------------------------------------------- --------- ---------
The borrowings are disclosed in the financial statements as:
2013 2012
GBP'000 GBP'000
------------------------ --------- ---------
Current borrowings 8,553 8,520
Non-current borrowings 314,863 334,220
------------------------ --------- ---------
Total borrowings 323,416 342,740
------------------------ --------- ---------
The Group's net debt(1) is:
2013 2012
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Gross borrowings as above 323,416 342,740
Cash and cash equivalents (29,075) (32,789)
Impact of currency hedge instruments (1,104) (2,854)
----------------------------------------------- --------- ---------
Net debt including currency hedge instruments 293,237 307,097
Term debt issue costs 8,801 12,273
----------------------------------------------- --------- ---------
Net debt excluding term debt issue costs 302,038 319,370
----------------------------------------------- --------- ---------
(1) Net debt is a non statutory term presented to show the
Group's borrowings net of cash equivalents, fair value of foreign
exchange options and term debt issue costs.
Analysis of borrowings by currency:
Total Sterling Euros US dollars
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- --------- -----------
At 28 December 2013
Bank loans 200,851 188,318 12,533 -
Private placement loan notes 110,994 32,179 - 78,815
Term debt issue costs (8,801) (8,801) - -
Payment-in-kind interest accrual 20,372 15,084 - 5,288
---------------------------------- --------- --------- --------- -----------
323,416 226,780 12,533 84,103
---------------------------------- --------- --------- --------- -----------
At 29 December 2012
Bank loans 227,316 215,015 12,301 -
Private placement loan notes 119,162 33,956 - 85,206
Term debt issue costs (12,273) (12,273) - -
Payment-in-kind interest accrual 8,535 6,342 - 2,193
---------------------------------- --------- --------- --------- -----------
342,740 243,040 12,301 87,399
---------------------------------- --------- --------- --------- -----------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
13. Borrowings (continued)
Bank loans
The Group has credit facilities with a number of banks. The
total facility at 28 December 2013 is GBP225.2 million
(2012:GBP237.5million) of which GBP24.4 million is unutilised at
the balance sheet date (2012: GBP10.0 million). The credit
facilities are provided under two separate tranches as detailed
below.
-- Facility A - a revolving credit facility of GBP55.0 million.
This facility includes a bank overdraft facility of GBP10.0 million
(2012: GBP10.0 million). The loans can be drawn down for three
month terms with interest payable at LIBOR plus a maximum cash
margin of 5.00% (2012: 5.00%).
-- Facility B - a term loan facility of GBP170.2 million (2012:
GBP182.5 million), which can be drawn in Sterling or Euros.
Interest is payable quarterly at LIBOR plus a cash margin of up to
5.00% (2012: 5.00%).
In accordance with the credit agreements in place, the Group
hedges a portion of the bank loans via interest rate swaps
exchanging floating rate interest for fixed rate interest and
interest rate caps. At the balance sheet date, borrowings of GBPnil
million (2012: GBP30.0 million) were arranged at fixed rate, while
a further GBP180.0 million borrowings (2012: GBP180.0) were hedged
through interest rate caps.
Private placement loan notes
The Group has total private placement loan notes at 28 December
2013 of GBP32.3 million and $130.7 million (2012: GBP34.0 million
and $137.8 million). Interest is payable quarterly at fixed coupon
rates up to 10.30% (2012: 10.30%) depending on covenants.
The private placement loan notes consist of:
-- GBP32.3 million at a coupon rate of up to 10.30% (2012:
GBP34.0 million at a coupon rate of up to 10.30%)
-- $55.7 million at a coupon rate of up to 9.75% (2012: $58.7
million at a coupon rate of up to 9.75%)
-- $26.6 million at a coupon rate of up to 10.18% (2012: $28.1
million at a coupon rate of up to 10.18%)
-- $48.4 million at a coupon rate of up to 10.28% (2012: $51.0
million at a coupon rate of up to 10.28%)
In order to hedge the Group's exposure to US dollar exchange
rate fluctuations, the Group has in place foreign exchange options.
These options allow the Group to purchase US dollars at a set
exchange rate, hedging the Group's cash flow risk if the market
rate falls below the set rate. The options are in place to cover
all interest payments and scheduled principal repayments due on the
US denominated private placement notes.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
13. Borrowings (continued)
Repayments
All facilities are due for full repayment on 30 September
2015.
Scheduled repayments are due every six months in relation to
both the bank loans and private placement loan notes. Scheduled
repayments total GBP70.0 million from 30 June 2012 to 30 June 2015.
As at 28 December 2013 GBP30.0 million remained payable, with
GBP5.0 million paid on 31 December 2013.
A schedule of pay-if-you-can (PIYC) repayments are also agreed
for both the bank loans and private placement notes totalling
GBP60.0 million up to 30 June 2015. As at 28 December 2013 GBP52.5
million remained payable, with GBP7.5 million paid on 31 December
2013.
In addition, the Company is required to make mandatory
repayments equivalent to 75% of the net proceeds of certain asset
disposals with the remaining 25% payable to the Johnston Press
Pension Plan (note 15). During the period, the Company made
repayments totalling GBP3.5 million in respect of asset
disposals.
Covenant reset
On 27 December 2013, the Company and its lenders agreed to reset
its financial covenants until maturity in September 2015. A fee of
GBP0.5 million was paid to the lenders on completion of this
agreement. This fee has been capitalised and amortised over the
period to maturity.
Payment-in-kind interest
In addition to the cash margin payable on the bank facilities
and private placement loan notes, a payment-in-kind (PIK) margin
accumulates and is payable at the end of the facility. The PIK
accrues at a maximum margin of 4.0% depending on the absolute
amount of debt outstanding and leverage multiples. If the
facilities are fully repaid prior to 31 December 2014, the rate at
which the PIK margin accrued throughout the period of the agreement
will be recalculated at a substantially reduced rate.
Refinancing
The Company announced on 27 December 2013 that it had reset its
financial covenants through to the maturity of its debt facilities
in September 2015 and intends to pursue a refinancing of its debt
facilities in 2014. On 3 March 2014 the Company announced that as
part of a proposed refinancing of its debt facilities it is
considering a range of options including a potential equity
fundraising. Since then, the Company has made good progress
evaluating a number of options, including a potential equity
fundraising which would be interconditional with a refinancing of
its debt facilities and restructuring its pension arrangements.
There can be no certainty that a refinancing of its debt facilities
will be concluded in 2014, nor that an equity fundraising will
proceed.
No adjustments have been made to the financial statements to
reflect any early repayment that may arise from a refinancing.
Interest rates:
The weighted average interest rates paid over the course of the
year were as follows:
2013 2012
% %
------------------------------ ----- -----
Bank overdrafts 5.5 5.5
Bank loans 10.6 11.3
Private placement loan notes 13.9 12.5
------------------------------ ----- -----
11.7 11.7
------------------------------ ----- -----
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
14. Derivative Financial Instruments
Derivatives that are carried at fair value are as follows:
2013 2012
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Interest rate swaps - current liability - (99)
Interest rate caps - current asset 4 -
Interest rate caps - non-current asset - 43
Foreign exchange options - current asset 1,104 155
Foreign exchange options - non-current asset - 2,699
---------------------------------------------- --------- ---------
Total derivative financial instruments 1,108 2,798
---------------------------------------------- --------- ---------
15. Retirement Benefit Obligation
Throughout 2013 the Group operated the Johnston Press Pension
Plan (JPPP), together with the following schemes:
-- A defined contribution scheme for the Republic of Ireland,
the Johnston Press (Ireland) Pension Scheme.
-- An ROI industry-wide final salary scheme for journalists
which was closed on 31 October 2012 and a final salary scheme for a
small number of employees in Limerick which has been closed to
future accruals since 2010. Consequently, the Group's obligation to
these schemes is included in Long Term Provisions and the details
shown below exclude these schemes.
The JPPP is in two parts, a defined contribution scheme and a
defined benefit scheme. The latter is closed to new members and
closed to future accrual in 2010. The assets of the schemes are
held separately from those of the Group. The contributions are
determined by a qualified actuary on the basis of a triennial
valuation using the projected unit method. The contributions to the
defined benefit scheme are fixed annual amounts with the intention
of eliminating the deficit. Based on the outcome of the triennial
valuation at 31 December 2010, the fixed annual contribution amount
is GBP5.7 million from 1 June 2012 under the schedule of
contributions agreed between the Company and the JPPP Trustees.
These were paid in full during the period. In accordance with the
amended and restated finance agreement dated 24 April 2012, the
Company is required to make additional contributions equivalent to
25% of the net proceeds of certain asset disposals. During the
period, the Company made additional contributions of GBP1.2 million
following the disposal of such qualifying assets. As the defined
benefit scheme has been closed to new members for a considerable
period the last deferred member is scheduled to retire in 35 years
with, at current mortality assumptions, the last pension paid in
around 80 years (based on the mortality assumptions used for the
2010 triennial valuation). On a discounted basis the duration of
the pension liabilities is circa 20 years. The financial
information provided below relates to the defined benefit element
of the JPPP.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
15. Retirement Benefit Obligation (continued)
During 2011 and 2012, the Company carried out pension exchange
exercises whereby a number of pensioner members were made an offer
by the Company to exchange some of their future pension increases
for a one-off increase in pension, where the new uplifted amount
would no longer be eligible for increases in payment. There was no
such exercise in 2013.
The composition of the trustees of the JPPP is made up of an
independent Chairman, a number of member nominated (by ballot)
trustees and several Company appointed trustees. Half of the
trustees are nominated by members of the JPPP, both current
employees and pensioner members. The trustees appoint their own
advisers and administrators of the Plan. Discussions take place
with the Executive Directors of the Company to agree matters such
as the contribution rates.
The defined contribution schemes provide for employee
contributions between 2-6% dependent on age and position in the
Group, with higher contributions from the Group. In addition, the
Group bears the majority of the administration costs and also life
cover.
The pension cost charged to the Income Statement for the defined
contribution schemes and Irish schemes in 2013 was GBP4,550,000
(2012: GBP6,724,000).
Major assumptions re JPPP pension scheme:
2013 2012
---------------------------------- ------ -----------
Discount rate 4.65% 4.5%
Expected return on scheme assets 5.5% 5.6%
Future pension increases
Deferred revaluations (CPI) 2.4% 1.9%
Pensions in payment (RPI) 3.4% 2.8%
Life expectancy
Male 22.1 23.1 years
Female 24.1 23.1 years
---------------------------------- ------ -----------
The valuation of the defined benefit scheme's funding position
is dependent on a number of assumptions and is therefore sensitive
to changes in the assumptions used. The impact of variations in the
key assumptions are detailed below:
-- A change in the discount rate of 0.1% pa would change the
value of liabilities by approximately 1.5% or GBP7.6 million.
-- A change in the life expectancy by a 10% adjustment to the
base table mortality rates would change liabilities by
approximately 2.4% or GBP11.9 million.
-- A change in the inflation rate of 0.1% pa would change the
value of the liabilities by 0.8% or GBP4.0 million.
Amounts recognised in the Income Statement in respect of defined
benefit schemes:
2013 2012
GBP'000 GBP'000
----------------------------- --------- ---------
Net interest expense 1,576 2,471
Past service gain (note 15) - (1,540)
----------------------------- --------- ---------
1,576 931
----------------------------- --------- ---------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
15. Retirement Benefit Obligation (continued)
There was no current service cost in 2013 (2012: GBPnil) as the
Defined Benefit scheme was closed to future accrual in 2010.
An actuarial gain of GBP37,695,000 (2012: loss of GBP21,065,000)
has been recognised in the Group Statement of Comprehensive Income
in the current period. This has been shown net of deferred tax of
GBP8,670,000 (2012: GBP5,188,000). The cumulative amount of
actuarial gains and losses recognised in the Group Statement of
Comprehensive Income since the date of transition to IFRS is a loss
of GBP67,835,000 (2012: loss of GBP105,530,000). The actual return
on scheme assets was a GBP50,989,000 profit (2012: GBP28,494,000
profit).
Amounts included in the Statement of Financial Position:
2013 2012
GBP'000 GBP'000
---------------------------------------------------------- ---------- ----------
Present value of defined benefit obligations 498,640 504,111
Fair value of plan assets (420,306) (382,792)
---------------------------------------------------------- ---------- ----------
Total liability recognised in the Statement of Financial
Position 78,334 121,319
Amount included in current liabilities (5,700) (5,700)
---------------------------------------------------------- ---------- ----------
Amount included in non-current liabilities 72,634 115,619
---------------------------------------------------------- ---------- ----------
The amounts of contributions committed to be paid to the scheme
during 2014 is GBP5,700,000 (2013: GBP5,700,000) plus share of
asset disposal proceeds, as agreed as part of the formal actuarial
valuation undertaken as at 31 December 2010.
The Pension Fund Trustees are taking professional advice,
including actuarial input, to determine whether any employer debt
is payable to the Plan following the previous cessation of five
participating employers. At period end, GBP1.3 million has been
provided for.
The levy payable by the Pension Fund to the Pension Protection
Fund for the year to 31 March 2013 was GBP3.1 million and for the
year to 31 March 2014 is GBP3.2 million. The Group has committed to
the Pension Fund to underwrite any annual charge in excess of
GBP0.7 million. The Group has paid GBP1.5 million during the period
and at period end has accrued GBP1.0 million in connection with the
year to 31 March 2013 and a further GBP1.9 million has been
provided for the nine month period to 28 December 2013 within trade
and other payables. It is expected that this levy will continue in
2014. The level of increase in charges is not known at this
point.
During the period the Pension Fund Trustees have agreed to carry
out a formal actuarial valuation at 31 December 2012 effective as
at one year ahead of the next planned valuation date of 31 December
2013. The outcome of the review will not be formalised until after
the reporting date. The Trustees have indicated that they will seek
an increase in the committed annual contributions. The Trustees are
also consulting with the Group about planned changes to the
Investment strategy of the Plan to reduce the level of risk.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
15. Retirement Benefit Obligation (continued)
Movements in the present value of defined benefit
obligations:
2013 2012
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Balance at the start of the period 504,111 472,708
Interest costs 22,227 22,708
Age related rebates 511 630
Changes in assumptions underlying the defined benefit
obligations (7,357) 29,322
Past service gain - (1,540)
Benefits paid (20,852) (19,717)
------------------------------------------------------- --------- ---------
Balance at the end of the period 498,640 504,111
------------------------------------------------------- --------- ---------
Movements in the fair value of plan assets:
2013 2012
GBP'000 GBP'000
--------------------------------------------------- --------- ---------
Balance at the start of the period 382,792 368,718
Expected return on plan assets 20,651 20,237
Actual return less expected return on plan assets 30,338 8,257
Contributions from the sponsoring companies 6,866 4,667
Age related rebates 511 630
Benefits paid (20,852) (19,717)
--------------------------------------------------- --------- ---------
Balance at the end of the period 420,306 382,792
--------------------------------------------------- --------- ---------
Analysis of the plan assets and the expected rate of return:
Expected Fair value of
return assets
2013 2012 2013 2012
% % GBP'000 GBP'000
------------------- ---- ---- -------- --------
Equity instruments 6.8 6.8 268,394 240,011
Debt instruments 3.6 3.8 115,370 100,674
Property 4.8 4.8 11,366 17,991
Other assets 1.7 2.7 25,176 24,116
------------------- ---- ---- -------- --------
5.5 5.6 420,306 382,792
------------------- ---- ---- -------- --------
Five year history:
2013 2012 2011 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fair value of scheme assets 420,306 382,792 368,718 385,309 362,006
Present value of defined
benefit obligations (498,640) (504,111) (472,708) (446,095) (446,114)
-------------------------------- ---------- ---------- ---------- ---------- ----------
Deficit in the plan (78,334) (121,319) (103,990) (60,786) (84,108)
-------------------------------- ---------- ---------- ---------- ---------- ----------
Experience adjustments on
scheme liabilities
Amount (GBP'000) 7,357 (29,332) (22,524) 2,925 (100,425)
-------------------------------- ---------- ---------- ---------- ---------- ----------
Percentage of plan liabilities
(%) 1.5% (5.8%) (4.8%) 0.7% (22.5%)
-------------------------------- ---------- ---------- ---------- ---------- ----------
Experience adjustments on
scheme assets
Amounts (GBP'000) 30,338 8,257 (27,060) 11,139 29,137
-------------------------------- ---------- ---------- ---------- ---------- ----------
Percentage of plan assets
(%) 7.5% 2.2% (7.3%) 2.9% 8.0%
-------------------------------- ---------- ---------- ---------- ---------- ----------
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
16. Share Capital
2013 2012
GBP'000 GBP'000
------------------------------------------------------------- --------- ---------
Issued
684,352,165 Ordinary Shares of 10p each (2012: 639,746,083) 68,435 63,975
756,000 13.75% Cumulative Preference Shares of GBP1 each
(2012: 756,000) 756 756
349,600 13.75% 'A' Preference Shares of GBP1 each (2012:
349,600) 350 350
------------------------------------------------------------- --------- ---------
Total issued share capital 69,541 65,081
------------------------------------------------------------- --------- ---------
The Company has only one class of ordinary shares which has no
right to fixed income. All the preference shares carry the right,
subject to the discretion of the Company to distribute profits, to
a fixed dividend of 13.75% and rank in priority to the ordinary
shares. Given the discretionary nature of the dividend right, the
preference shares are considered to be equity under IAS 32.
During the period 44,428,306 ordinary shares of 10p each were
issued following the exercise of share warrants, generating
GBP4,443,000 of cash for the Company.
At the balance sheet date 35,193,717 warrants were
outstanding.
In addition, 177,776 ordinary shares of 10p each were issued
during the period following exercises under the Group Savings
Related Share Option Scheme, generating GBP28,000 of cash for the
Company.
17. Notes to the Cash Flow Statement
Revised(1)
2013 2012
Note GBP'000 GBP'000
---------------------------------------------------- ------- ------------ -----------
Operating (loss)/profit (245,670) 40,441
Adjustments for:
Impairment of publishing titles 7 202,427 -
Write down of printing presses and property, plant
and equipment 7 63,695 17,239
Write down of assets held for sale 7 4,671 7,817
Amortisation of intangible assets 209 -
Depreciation of D Depreciation charges 8 7,543 12,715
Currency differences 8 (146) (59)
Charge from share-based payments 512 606
Gain on disposal of property, plant and equipment (1,267) (2,047)
Exceptional pension protection fund contribution 2,908 -
Exceptional Section 75 pension debt 1,268 -
Exceptional redundancy costs(2) 17,820 2,617
Exceptional legal and other professional fees 1,169 -
Pension funding contributions 15 (6,866) (4,668)
IAS 19 past service gain (exceptional) - (1,540)
Movement in long-term provisions 377 119
Working capital changes:
Decrease in inventories 305 1,859
Decrease in receivables 4,910 6,769
Increase/(decrease) in payables(2) 672 (1,176)
---------------------------------------------------- ------- ------------ -----------
Cash generated from operations 54,537 80,692
---------------------------------------------------- ------- ------------ -----------
(1) The presentation of the 29 December 2012 'exceptional
redundancy costs' and 'increase/(decrease) in payables' numbers has
been revised to be consistent with current year disclosures.
(2) Amounts decreased by GBP2,617,000 to correct prior year
classification. This has been accounted for as a non cash item, as
'exceptional redundancy costs'.
(3) Amounts increased by GBP4,594,000 to correct prior year
classification. This has been recorded as 'interest paid' on the
face of the primary cash flow statement. This adjustment did not in
any way impact the prior year income statement, assets, liabilities
or equity and is purely presentational in nature..
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Statement of Financial Position
comprise cash at bank and other short-term highly liquid
investments with a maturity of three months or less.
Notes to the Condensed Consolidated Financial Statements for the
52 week period ended 28 December 2013 (continued)
18. Post Balance Sheet Events
Discussions are at an advanced stage in relation to the possible
sale of the Group's 14 regional newspapers in the Republic of
Ireland which include the Leinster Leader, the Donegal Democrat,
the Limerick Leader and the Kilkenny People, and certain freehold
property interests, fixtures, fittings and vehicles as announced on
2 December 2013.
The value in use for the Irish assets reflects expected disposal
proceeds on the basis that at the balance sheet date, discussions
were well progressed and management's intention was committed to
selling the assets.
The assets, included in the proposed disposal, have not been
reported as assets held for sale given the sale does not meet the
strict criteria that the sale must be deemed "highly probable" and
neither Board or bank approval has been achieved.
This announcement does not constitute an offer of securities for
sale within the United States or any other jurisdiction. Securities
can be offered or sold within the United States only pursuant to a
registration with the US Securities and Exchange Commission or an
exemption from registration. The Company does not intend to
register any offer of securities for sale within the United
States.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FDLLLZXFZBBV
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