TIDMJPR
RNS Number : 3682I
Johnston Press PLC
25 March 2015
25 March 2015
JOHNSTON PRESS PLC
RESULTS FOR THE 53 WEEKS ENDED 3 January 2015
Underlying profit before tax up 235.1%; Underlying operating
profit up 2.8%; Net debt down 38.9%(1)
Johnston Press plc ("Johnston Press" or "the Group"), one of the
leading media groups in the UK, announces its results for the 53
weeks ended 3 January 2015.
2014 was a 53 week trading period and the underlying results
have been adjusted to exclude the impact of the extra week. Unless
otherwise stated, or where the context otherwise requires,
financial information in this announcement is provided on an
underlying basis.(1)
Key highlights(1) :
-- Profit before tax: Underlying profit before tax increased 235.1% to GBP29.9m from GBP8.9m
-- Operating profit: Increased for the second consecutive year to GBP55.5m - up 2.8%
-- Revenue: Total underlying revenues of GBP265.9m reflect a decline of 4.4% for the period
-- Digital revenues: Up 20.0% for the period, from GBP24.0m to
GBP28.8m representing 17.4% of advertising revenues (2013:
13.8%)
-- Digital audience grew by 35.8% to an average of 16.7m in 2014 (2013: 12.3m)
-- Cost reduction: Operating costs reduced by GBP13.8m net of investment in digital
-- Operating margin: Up to 20.9%, from 19.4%
-- Continued debt reduction: Net debt down to GBP184.6m at
period end (2013: GBP302.0m), reflecting refinancing
During 2014 we continued to transform our business in line with
the strategic priorities set out in 2012. The debt and equity
refinancing in June provided a platform of financial stability to
allow us to focus on our strategic objectives, including growing
our digital business, beginning the process of changing the way we
create content in our newsrooms and structure our sales teams and
continuing to increase our overall audiences.
Financial Highlights:
GBP million Continuing Operations - Underlying(1) Continuing Operations - Statutory
2014 2013 Change 2014 2013 Change
52 weeks 52 weeks % 53 weeks 52 weeks %
Revenue 265.9 278.2 (4.4) 268.8 290.0(2) (7.3)
Operating profit/(loss) 55.5(3) 54.0 2.8 10.7 (245.7) -
(Loss)/profit before
tax 29.9 8.9 235.1 (23.9) (291.4) -
Net Debt 194.2(4) 304.4(4) (36.2) 184.6 302.0 (38.9)
1. The results are presented on a continuing underlying basis which
is excluding exceptional items (refer Note 6) and further adjusted
to remove week 53 revenues and trading revenues following closure
or disposal of titles (also refer to the Financial Review for additional
explanation). The results are restated to present the Republic of
Ireland operations as discontinued following their disposal to Iconic
in April 2014 and for the restatement of results for the adoption
of IFRS 19 and other pension related adjustments.
(2. Includes exceptional receipt of GBP10.0m in connection with the
cancellation of contract printing arrangements with News International.)
(3. Underlying operating profit is stated after excluding the impact
of week 53 revenues and related costs and the impact of the closure
or disposal of titles. Other adjustments reflect the impact of pension
plan expenses, share based payments and disposed or converted titles
as well as the impact of the termination of a print contract with
News International in 2013.)
(4. Underlying net debt is stated excluding fair value mark to market
valuation adjustments on the bond.)
----------------------------------------------------------------------------------------------------------
Strategic progress
Digital revenue growth:
Digital revenues were up 20.0% underlying in the full year
growing from GBP24.0m to GBP28.8m with property, motors and local
display joining employment in showing strong year on year growth.
New products and national platforms for local businesses for
example SkyAdsmart and 1XL were launched and DigitalKitbag was
rolled out.
Returning to top line growth:
Total underlying revenue of GBP265.9m declined 4.4% for the
period, reducing the rate of decline from 5.2% in 2013 and 7.4% in
2012.
-- Total advertising revenues of GBP165.7m declined 4.7%, print
advertising declined 8.7% to GBP136.9m while digital revenues were
up 20%. The employment category led the way with revenue growth of
3.4%, becoming the first to reach the overall digital tipping
point.
-- Newspaper sales revenue was down 4.8% from GBP81.8m to GBP77.9m.
Audience growth:
Average total monthly audience for the year was 27.3m, up from
24.5m in 2013, representing an increase of 11.4%. Digital audiences
grew by 35.8% from an average in 2013 of 12.3m to an average of
16.7m per month in 2014. 40.7% of our digital users are now reached
via mobile devices (2013: 31.7%).
Strong cost discipline
Underlying operating costs were reduced by GBP13.8m (6.2%) to
GBP210.4m, net of digital investment, while financing costs
(excluding exceptional items) of GBP21.5m in H1 were reduced to
GBP9.7m in H2.
Exceptional items
The results include a net charge before tax of GBP53.8m in
respect of exceptional items. Exceptional operating costs of
GBP44.7m relate to further write-downs of publishing titles and
other assets, along with business restructuring. Exceptional
finance costs of GBP9.0m were associated with the refinancing and
include an interest accrual release offset by the write off of term
debt issue costs and debt refinancing fees.
Net debt and financing costs
Successful refinancing of existing debt facilities completed in
June 2014 through a GBP140m placing and rights issue and raising
GBP220.5m in a GBP225m 8.625% bond issue due 2019.
-- Net debt post refinancing was reduced to GBP184.6m (2013:
GBP302.0m) after initial discount and marking to market.
-- Net cash inflow from operating activities was GBP7.8m, after
annual pension contributions of GBP6.3m and exceptional pension
contributions of GBP8.2m and redundancy costs of GBP9.9m. Excluding
exceptional items, the Group generated operating cashflows of
GBP30.7m, while the disposal of the Republic of Ireland business in
April 2014 to Iconic Newspapers Limited generated GBP7.1m.
-- Total finance costs reduced from GBP45.8m in 2013 to GBP34.6m.
Bond buy-back
Consistent with the strategy to use surplus cashflow to reduce
the overall leverage of the Company over time, the Company has
allocated GBP5.0m of its cash to buy-back bonds in the open market
over the coming months.
Capital structure
Further to the refinancing carried out in 2014, the Company has
lodged a petition with the Court of Session seeking approval for
the reduction of the Company's share premium account by GBP275.0m
to eliminate the accumulated deficit on the profit and loss account
and create distributable reserves going forward.
Dividend
The provisions of the bond restrict the Company's ability to pay
dividends until certain conditions, including that net leverage is
below 2.25x EBITDA, are met. Although the Board wishes to resume
dividend payments as soon as is appropriate, no ordinary dividend
is proposed for the period.
Earnings per share
The rights issue and subsequent share consolidation distorts the
EPS metrics. For information, underlying and proforma calculations
are presented below:
Continuing operations Underlying Proforma
Basic EPS Basic EPS Fully diluted
EPS
-------------------------- -------------------- ------------ ---------------
2014 2013 2014 2013 2014 2013
-------------------------- ---------- -------- ----- ----- ------- ------
Earnings (GBPm) 26.9 13.0 26.9 13.0 26.9 13.0
Number of ordinary shares
(m) 3,520.0(1) 237.8(1) 105.4 105.4 120.7 120.7
--------------------------- ---------- -------- ----- ----- ------- ------
EPS (pence) 0.76 5.46 25.57 12.38 22.33 10.81
--------------------------- ---------- -------- ----- ----- ------- ------
(1 Weighted average number of shares)
--------------------------------------------------------------------------------
-- Proforma underlying earnings equates to net underlying profit
of GBP27.1 million (28 December 2013: GBP13.2 million) less
preference share dividends of GBP0.15 million (28 December 2013:
GBP0.15m).
-- Proforma basic EPS has been calculated based on the closing
number of shares in issue of 105.9 million and deducting the number
of shares held by the Company's employee share trust of 0.5
million. Proforma fully diluted EPS assumes the maximum potential
dilutive impact and the maximum number of shares the Group could be
called upon to issue to satisfy the full vesting of VCP and
employee share and deferred bonus schemes.
Outlook
-- The period to date to 28 February 2015 is an 8 week period
compared to the 9 week period in 2014. Advertising revenues for the
comparable 8 week period to 28 February 2015 were down 4.1%. The
group remains focused on digital growth and driving increased
audiences. Business transformation remains at the forefront of our
plans, and following a successful pilot, Newsroom of the Future is
being rolled out across the group, together with the new sales
model.
-- The group will retain cash for investment in support of the
growth strategy, while 2015 will see the full year benefit of
reduced financing costs.
Commenting on the annual results and outlook, the Chief
Executive, Ashley Highfield, said:
"Following the refinancing we are seeing the business transform
into a modern multimedia organisation. The strong growth in our
digital audiences and accelerated growth of digital revenues, aided
by the roll-out of Digital Kitbag and the launch of Sky Adsmart and
1XL are changing the shape of the Company. We are excited about the
future for the business and confident of delivering on our
strategic objectives of growing an engaged audience base and
returning our business to top line growth".
For further information please contact:
Johnston Press
Ashley Highfield, Chief Executive
Officer
David King, Chief Financial Officer 020 7612 2601
------------------------------------- --------------
Bell Pottinger
Dan de Belder
Zoë Pocock
Stephanie Sheffrin 020 3772 2774
------------------------------------- --------------
Investor presentation and audio/webcast:
A presentation for analysts and live audio/webcast will be held
at 11.00am on Wednesday 25 March 2015 at Bell Pottinger, Holborn
Gate, 330 High Holborn, London, WC1V 7QD.
Webcast link:
https://secure.emincote.com/client/johnston_press/johnston001/
A replay will be available after 2.00pm on the Group website
www.johnstonpress.co.uk
To ensure admission to the presentation or to request conference
call details, please confirm your attendance with Stephanie
Sheffrin (ssheffrin@bellpottinger.com).
Please see the conference call dial in details below:
Number: +44 20 3059 8125 (no pin needed)
The announcement for the period ended 3 January 2015 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
2014 was the year we started to see signs of an improving
economic climate and further positive results from delivery of our
strategy.
We have seen another year of profound change, both for the
Company and the industry in which we operate. Throughout this time
we have continued to innovate and to maintain our place at the
forefront of the changes in our sector.
Strategy
The successful completion of our refinancing plan in June 2014
has helped to provide a level of financial stability which has
allowed us to focus on the pursuit of our increasingly digital
strategic objectives. The refinancing saw GBP140 million being
raised through a placing and rights issue and a further GBP220.5
million through the issue of bonds. In addition, we agreed a new
GBP25 million revolving credit facility (which remains undrawn) and
entered into revised pension arrangements. The refinancing allowed
us to exit from our previous borrowing arrangements - lengthening
the duration of our borrowing facilities, significantly reducing
the Company's financing costs and removing the operational
restrictions which those facilities imposed. One effect of the
placing and rights issue was that the Company had a very large
number of shares in issue with a correspondingly low share price.
The 50 to one share consolidation we undertook towards the end of
the year addressed this, placing our share price at a more
appropriate level.
Throughout 2014 we have continued to focus on our strategic
priorities. We have remained at the forefront of our sector's shift
to digital and our initiatives in 2015 will seek to maintain that
advantage. I have previously identified our digital business as key
to our future and our plans to change the way in which we create
content in our newsrooms and structure our sales teams to reflect
this. We are working hard to deliver a return to revenue growth and
have reached the digital tipping point on 290 occasions in 2014(1).
It is essential that we drive further digital growth while
continuing to protect our print-based revenues. Our key initiatives
are set out in detail in the Strategic Report.
Results
Although the latter part of the year saw increased economic
confidence, trading for the year as a whole continued to be
affected by challenging economic conditions in many parts of the
UK. In addition, our results reflect the increased investment in
very targeted aspects of the business. Overall, the strong
performance in some categories of our business was very
encouraging. Total statutory revenues were affected by the disposal
of our business in the Republic of Ireland in April and ended the
year down 7.3% from GBP290.0 million to GBP268.8 million. Statutory
print advertising was down 8.2% from GBP150.4 million to GBP138.1
million.
Combined print and digital advertising revenue was down 4.2% to
GBP167.2 million in 2014; whilst underlying advertising revenue was
down 4.7%. The overall rate masks several areas of strong
performance with employment total underlying advertising revenue
growth of 3.4% leading the drive towards the advertising tipping
point.
Once again, underlying digital revenues grew strongly in the
year by 20.0% from GBP24.0 million to GBP28.8 million. Property,
motors and local display all joined employment in showing strong
year-on-year growth.
Underlying newspaper sales revenue, supported by cover price
increases, was down 4.8% from GBP81.8 million to GBP77.9
million.
Underlying operating costs were reduced to GBP210.4 million from
GBP224.2 million in 2013, a GBP13.8 million year-on-year reduction
net of investment in the digital business, reflecting our focus on
cost leadership. Our programme of process and efficiency
improvements and digital investment will continue in 2015.
The resulting statutory operating profit was GBP10.7 million, a
significant improvement on the prior year operating loss of
GBP245.7 million including exceptional items. On an underlying
basis, operating profit was up 2.8% from GBP54.0 million to GBP55.5
million with underlying operating profit margins improving from
19.4% to 20.9% year-on-year.
Underlying basic earnings per share, from continuing operations,
was 0.76p, compared to 5.46p in 2013, comparatives have been
restated to show additional bonus and rights issues of the Capital
Refinancing Plan and share consolidation (Refer Note 14 and 27 for
further detail). Statutory loss after tax, from continuing
operations, was GBP15.3 million (2013: GBP215.7 million loss). Cash
flow performance in the second half of the year benefited from the
impact of the refinancing. Net debt at the end of the year was
GBP184.6 million, a reduction of GBP117.4 million on 2013.
Total pre-tax exceptional items were GBP53.8 million (2013:
GBP300.2 million). The 2014 exceptional items included GBP24.5
million of write-down or impairments on publishing titles, property
and assets held for sale, GBP16.5 million of restructuring and
pension costs, GBP4.6 million relating to our long term incentive
plans, GBP9.1 million of financing costs resulting from the
refinancing and a GBP0.9 million gain on property disposals. More
information on the exceptional items can be found in the Financial
Review section of this report and Note 6 of the financial
statements.
(1)Digital tipping point is defined where 2014 revenue exceeds
2013 revenue within a category, within a Publishing Unit, within a
given month.
Dividend
As we explained when details of the refinancing were announced,
the provisions of our bonds restrict the Company's ability to pay
dividends until certain conditions are met. Although the Board
wishes to resume dividend payments as soon as is appropriate, no
dividend is proposed for the year.
Industry Issues
2014 marked the establishment of the Independent Press Standards
Organisation (IPSO) as a new independent monitoring and complaints
body for our industry. We have joined IPSO and believe it offers a
system of redress which is both accessible and effective for those
with a complaint while being tough, fair and proportionate for
local newspapers. We have used the launch of the organisation to
review our internal and external procedures to ensure that they
comply with IPSO's requirements.
Board
I would like to thank my Board colleagues for their leadership,
particularly during the refinancing process in the first half of
the year. In order to ensure stability during that time, the Board
determined that it would not review its make up until the
completion of the refinancing.
The Board regularly reviews both the balance of its membership
and the issues it considers when it meets. The agenda for the
Board's meetings continue to be structured to scrutinise both
strategic and operational matters in an atmosphere of constructive
challenge and debate. I am satisfied that the Board remains
effective.
Employees
We are well aware of the hard work of our employees and the
considerable change they have seen in recent years. On behalf of
the Board I again wish to express our gratitude to them for their
dedication. Once more they have continued to deliver high quality
work and play an essential role in our ambition to be the fabric
which binds local people with local businesses.
Outlook
We are seeing encouraging results from focusing on those areas
of growth which have the potential to deliver the greatest benefit.
Our aim is to continue to improve our effectiveness in all areas of
the business whilst driving innovation for the benefit of our
audience and our advertisers. We plan to seek to take advantage of
not only that innovation, but also more favourable conditions in
some of our markets and the beneficial platform that the
refinancing has given us to improve our performance in 2015.
Ian Russell
Chairman
Chief Executive Officer's Report
Second consecutive year of underlying operating profit
growth.
During 2014 we continued at pace to transform our business into
a modern multimedia organisation; the changes implemented supported
us in continuing to meet our strategic objectives of growing an
engaged audience base and returning our business to top line
growth.
2014 was the second consecutive year where we posted underlying
operating profit growth, a satisfying achievement given that growth
in 2013 followed seven years of operating profit decline. It was
also a year in which we were hailed as one of the most attractive
turnaround stories in the UK market(1), with Digital Kitbag and Sky
Adsmart heralded as exciting initiatives.
Review of the Year
Underlying digital advertising grew by 20.0%, with strong growth
in key categories such as Entertainment (WOW247) growing by 244%,
The Smartlist, one of our employment offerings, grew by 211%,
Motors up 88%, Property up 52% and Local Display up 19%.
Our aggregate audiences have continued to grow; our average
monthly audience for the year was 27.3 million, up from 24.5
million in 2013, a growth of 11.4%. A key driver for this growth
was our digital audience which grew by 35.8% from an average in
2013 of 12.3 million unique users a month, to an average of 16.7
million in 2014.
Our digital kitbag offering had its first full year, having
launched in late 2013, and an agreement was signed with Sky to sell
their Sky AdSmart solution. Both of these initiatives support our
advertisers to target the customers more precisely and with a clear
return on investment I'm excited about these and other digital
initiatives that we will deliver in 2015. In October 2014 alone we
sold digital kitbag offerings to 390 new customers.
We were instrumental in developing and launching the 1XL
initiative which will substantially change the way national
advertisers engage with local press for digital advertising. 1XL is
a collaboration of local and regional press organisations that
gives us a truly national reach. This is yet another initiative
that will support our objective of top line advertising revenue
growth in 2015 and beyond.
In 2012 we extended our existing lending facilities through to
September 2015. The terms of those facilities provided strong
incentives to implement a debt refinancing by the end of 2014. I am
pleased to report that in 2014 we achieved that through a
fundamental restructuring of our debt, and pension obligations,
which has provided a more balanced capital structure with a
significant reduction in leverage and in turn has provided a
significantly improved platform for the Company to continue its
strategic initiatives.
At the end of 2014, our net debt stood at GBP184.6 million, down
from GBP302.0 million at the end of 2013. With this substantial
reduction of debt we have also been able to secure a lower interest
rate and therefore a significantly reduced interest charge and we
have also extended the maturity of our debt. This saving will allow
us to increase the investments we make in our business in order to
deliver on our strategic objectives, while continuing to pay down
debt.
We managed production costs tightly and supported by lower
prices for paper, we reduced our production costs by 3.3%. We
recorded savings across pre-press, printing, newsprint and
distribution. Our total underlying costs, driven by headcount
reductions reduced by GBP13.8 million, net of investment in our
digital business, a year-on-year reduction of 6.2%. All this
supported underlying operating profit growth of 2.8%.
Priorities for 2015
Significant progress has been made in implementing the
longer-term vision for the future of Johnston Press with changes
and innovations being undertaken to grow our audiences, transform
our revenue base and maintain our cost leadership position.
Transformation programmes such as 'Newsroom of the Future',
alongside new ways of working in our sales and operational teams,
will be key to how we adapt to our changing environment, and the
new approach will enable our teams across the business to
concentrate on the things that are most important - delivering what
our readers and advertisers want, in a cost effective and efficient
manner.
The focus on quality will continue to be key. We want to achieve
a big increase in customer and reader satisfaction by continuing to
improve our end-to-end processes across our sales and editorial
functions. To enable these priorities, we are focusing on two core
transformation programmes in 2015, which have already started to
make substantial progress. These projects are:
Audience strategy - driven by the 'Newsroom of the Future'
project, a concept that we piloted during 2014 and will roll out
this year. This will re-engineer our newsrooms to equip us to cope
with the demands of reporting in the modern age. In the future our
newsrooms will deliver;
(1)Source: Peel Hunt, November 2014.
Chief Executive Officer's Report (continued)
-- Larger and more engaged digital audiences
-- An improvement in the print product
-- More contributed / user generated content will appear on more platforms, more of the time
-- Staff will have new workflows, technology and tools, freeing
up time for more investigative journalism and improving
productivity, whilst reducing costs.
Commercial strategy - we are starting to pilot new models for
our sales teams and equipping our operational teams to work in
different ways, enabling both to deliver high quality and effective
solutions for our customers. Salesforce of the future will aim
to;
-- Retain more existing customers
-- Improve yields
-- Move to solution selling
-- Improve customer satisfaction
-- Reduce field sales costs
Summary
We continue to be exceptionally well placed to meet the demands
for information from the communities we serve, but the way we do
this is changing and the growth of our mobile audiences continues
to reflect this. Successful implementation of our transformation
projects will ensure that we continue to be well placed to serve
our communities in the years to come.
Our financial performance, underpinned by our refinancing, is
stabilising and provides us with the confidence and ability to
invest in transforming our business into a modern multimedia
organisation.
Ashley Highfield
Chief Executive Officer
Operational Review
Delivering our Strategy
Throughout 2014 we focused on delivering our key audience and
commercial development strategies, supported by digital product and
market innovation. Our audience strategies concentrated on content
improvement in print and improved digital engagement and
differentiation, has led to overall average monthly audience growth
of 11.4% from 24.5 million to 27.3 million.
The commercial strategy has focused on improving end-to-end
service quality and design led advertising initiatives to improve
the relevance of our service offerings and advertiser customer
experience. On-going development of our Media Sales Centre has
focused on improving service quality and efficiency.
Audience Development:
Print quality improvement has been driven through our content
improvement plan and enabled through increased sharing of high
quality content. This has been facilitated by the 'Great Sharing
Hub' and our three centralised design hubs, providing smarter and
faster newspaper design.
During the year, our design hubs have broadened their remit
considerably to become important providers of editorial content to
the business.
As well as frequent Group supplements, the hubs now produce many
pages of new, feature and lifestyle material which can be used in
titles across the Group. These pages are accessed through a central
website portal - called Great Content - and placed on the page
without the need for editing (made possible through the use of
common page designs). A new single Weekend section has been
developed to replace the multitude of approaches in our daily
titles' Saturday editions, featuring better content and clearer
design, curated entirely by the hubs.
Great Content is also home to the work of many of our columnists
whose work can appear in multiple titles, as well as a live feed of
shareable content written by reporters and feature writers in the
Group. This emphasis on 'create once - use many times' is a key
part of the Group's Print Content Improvement Project and 'Newsroom
of the Future' strategy.
The design hubs are now leading the development of visual
storytelling in editorial, both online and in print. Designers are
creating central repositories of infographic resources and working
with editors to produce new ways of explaining content to readers
with evolving demands.
Their design skills, honed for print, are also being adapted for
digital long-form-storytelling platforms - a great example being
the Scottish Independence Referendum which repurposed Scotsman
content into a dynamic online package featuring a variety of
multimedia elements.
Photographic services were outsourced in 2014, providing an
enhanced service while reducing costs.
Digital Product and Market Development:
In 2014 we launched improved platforms for our Jobstoday.co.uk
business, which continued to strengthen its digital performance,
including the launch of the new Smartlist specialised recruitment
service.
Our WOW247.co.uk entertainment platform continued to grow,
nearing 500,000 unique users per month during peak months of
festivals in the UK. Development and expansion of this business
will continue in 2015.
Our newsrooms now have real-time data on web site usage that is
helping them create the right content for digital platforms based
on the interests of the audience.
We also launched redesigned web sites for 2015 which will
position our business for the significant anticipated growth in
mobile usage in 2015. We experienced accelerating mobile traffic
throughout 2014 and are now in a strong position to exploit this
trend.
In 2014 we signed an agreement with Sky to sell their Sky
AdSmart solution, which is a unique proposition to deliver targeted
television advertising. This initiative supports our advertisers to
target the customers more precisely, combining Sky household data
and the power of television with JP advertiser relationships.
Commercial Development
Design-led advertising was initiated to provide customers with
improved advertising services and the ability to commission a
coherent, professionally designed, multi-channel campaign. For
smaller, less frequent advertisers, template designs have been
developed to provide customers with a range of standard creative
solutions together with a simplified booking process and focus on
reducing advertising errors. In addition, these template
advertisements provide benefits in the newsrooms as advertising is
more predictable and to standards formats, sizes and shapes.
Both initiatives lead to an enhanced final product in print or
online with modern, professional adverts improving the look and
feel of the final product.
Operational Review (continued)
The Media Sales Centre continues to deliver significant growth
and had revenue improvements throughout 2014.
All four combined classified categories (Employment, Public
Notices, BMDs, Other Classified) saw year-on-year growth of 7% with
a 20% year-on-year improvement in digital revenues, on an
underlying basis.Group investment in the new digitally led outbound
recruitment team saw a significant return in 2014 with the
Employment category performing +3.4% year-on-year, on an underlying
basis. This team will be well positioned to take full advantage of
the strong recruitment market going into 2015. In Other Classified,
several new product launches in the A5 magazine market and a focus
on our digital products saw this category grow year-on-year for the
first time in over five years. The new digital recruitment
platform, the sales of mobile display inventory and the
consolidation of digital birth, marriage and death announcements
and Public Notices all contributed to the 29% year-on-year
improvement in digital revenues across the media sales centre.
We monitor very closely to how we are rated by two of our key
stakeholders: our customers and our staff. We are rated by our
customers using the Net Promoter Score (NPS) and have just
completed our fourth staff satisfaction survey. We have been
encouraged by improvement in some of our NPS scores.
Staff engagement through 2013/2014 had a positive impact on the
overall performance of the Media Sales Centre in particular. In
2014 the mean average score for engagement improved markedly on the
previous year. Four of the key indicators were staff recognition,
job satisfaction, line management support and living the values,
all of which contributed to the result.
Operations and Production
The Group's printing business operates out of three sites in
Portsmouth, Dinnington and Carn. With the continuing reduction of
press availability in the industry the Group has strengthened its
position in the contract print market. The Group's state of the art
presses continue to perform at optimum quality and produce print
products with increasing efficiency.
Major customers include Local World, Tindle Newspapers, Times
Educational, Guardian Media Group, Trinity Mirror, as well as many
niche publications. The print sites are well placed geographically
to meet publisher's distribution requirements with integrated
logistics services.
A full review of the Group's logistics operations was undertaken
in 2014 with the majority of the delivery routes now being
outsourced to a single supplier specialising in the distribution of
time sensitive products. This initiative has significantly improved
the efficiency and timeliness of product delivery to market and
substantially reduced costs.
In 2014, the Group appointed a Chief Creative Officer with a
brief to greatly improve the Company's creative capability and
digital advertisement product innovation. Our Customer Service
Department has also been consolidated so that all customer
interactions for any digital or print product can be handled by a
single point of contact, improving the customer experience.
With the continued strong growth in our digital audience it has
been vital to continue to improve the infrastructure on which the
Group's websites rely. In 2014, a number of substantial upgrade
programmes have been completed including the roll-out of a 'Content
Delivery Network' to all websites and the introduction of a new
storage platform.
Following the completion of the Mobile Journalist project in
2013, a number of enhancements to the Group's remote working
systems were made during 2014 with the aim of further improving the
ability of Editorial staff to work from the heart of their local
communities.
Work to further improve the quality and delivery speed of
reporting and analytics data continued throughout 2014. A new
system for analysing the behaviour of website visitors has been
implemented across all of the Group's websites. This system allows
journalists to see the audience engagement level of each and every
article that is published throughout that article's entire
life-cycle. These metrics can then be used to make real-time
decisions on how to improve engagement and increase traffic
volumes.
Property & Estate
We have continued to review our property portfolio to identify
markets and centres that have accommodation which no longer meets
the requirements of the business. During 2014 we disposed of 23
freehold properties and removed ourselves from 15 leases (net of
relocations). These include significant relocations including The
Scotsman, to new offices in Edinburgh, and the remaining digital
and accounts teams to new fit-for-purpose offices in central
Peterborough. Overall we have reduced the total number of
properties within the portfolio from 188 at the start of the review
in 2012 to 150 at the end of 2014, with nearly half of all staff
either having relocated or having seen investment in their
environment.
Although a great deal of progress has been made during 2014, the
projects will continue as the portfolio is rationalised further
with an expectation of the overall number of properties eventually
falling below 100.
This emphasis on 'create once - use many times' is a key part of
the Group's Print Content Improvement Project and Newsroom of the
Future strategy.
Financial Review
In 2014 we achieved a statutory operating profit of GBP10.7
million; underlying operating profit grew by 2.8% year-on-year to
GBP55.5 million, and underlying profit before tax increased from
GBP8.9 million to GBP29.9 million. The Group also completed its
refinancing, raising GBP360.5 million from a placing and rights
issue and bond offer.
Introduction
This Financial Review, based on the consolidated financial
statements of the Group, provides commentary on the Group's
performance during the 53 week period ended 3 January 2015 (2013:
52 weeks).
Basis of Presentation
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 underlying results is provided below along with a
description of the nature of the adjustments made.
In the first half of 2014 the Group disposed of its Republic of
Ireland business, which comprised 12 titles and revenues of GBP2.8
million in the 3 months until disposal. As this business has been
reported as discontinued, the results are not included in the
comparison of statutory to underlying performance table.
Comparatives have been restated accordingly.
2014 was a 53 week trading period; and the underlying results
have been adjusted to exclude the impact of the extra week and the
narrative has been focused on underlying performance.
Comparison of Statutory to Underlying Performance
53 weeks ended 3 January 2015 Statutory Exceptionals(1) 53 week Other(2) Underlying
GBPm GBPm effect GBPm GBPm
GBPm
Total continuing revenues 268.8 (2.9) - 265.9
Operating costs(3) (252.6) 44.7 1.5 1.5 (204.9)
--------------------------------------------- --------- --------------- ------- -------- ----------
EBITDA(4) 16.2 44.7 (1.4) 1.5 61.0
Depreciation and amortisation (5.5) (5.5)
--------------------------------------------- --------- --------------- ------- -------- ----------
Operating profit 10.7 44.7 (1.4) 1.5 55.5
Net finance costs(6) (34.6) 9.1 (25.6)
--------------------------------------------- --------- --------------- ------- -------- ----------
(Loss)/profit before tax from continuing
operations6 (23.9) 53.8 (1.4) 1.5 29.9
Tax 8.6 (11.4) - - (2.8)
(Loss)/profit for the period from
continuing operations (15.3) 42.4 (1.4) 1.5 27.1
--------------------------------------------- --------- --------------- ------- -------- ----------
Operating profit margin from continuing
operations 20.9%
Financial Review (continued)
53week
Statutory Exceptionals(1) effect Other(2) Underlying
52 weeks ended 29 December 2013 GBPm GBPm GBPm GBPm GBPm
Total continuing revenues 290.0 (10.0) (1.8) 278.2
Operating costs(3) (527.9) 309.5 1.9 (216.5)
--------------------------------------------- --------- --------------- ------- -------- ----------
EBITDA(4) (237.9) 299.5 - 0.1 61.7
Depreciation and amortisation (7.7) (7.7)
--------------------------------------------- --------- --------------- ------- -------- ----------
Operating (loss)/profit(6) (245.7) 299.5 - 0.1 54.0
Net finance costs (45.8) 0.7 - (45.1)
--------------------------------------------- --------- --------------- ------- -------- ----------
(Loss)/profit before tax from continuing
operations (291.4) 300.2 0.1 8.9
Tax 75.7 (71.4) 4.3
--------------------------------------------- --------- --------------- ------- -------- ----------
(Loss)/profit for the period from
continuing operations (215.7) 228.8 0.1 13.2
--------------------------------------------- --------- --------------- ------- -------- ----------
Operating (loss)/profit margin from
continuing operations 19.4%
(1)Exceptional items are set out in Note 7 to the condensed
financial statements.
(2)Other adjustments reflect the impact of pension plan admin
expenses recognised due to the adoption of IAS19R (Note 18), share
based payments and disposed titles as well as the impact of the
termination of the News International (NI) printing contracts in
2013.
(3)Operating costs include cost of sales and are stated before
depreciation and amortisation.
4EBITDA is earnings before interest, tax, depreciation and
amortisation.
5 In October 2014, the Letterbox Direct business was outsourced.
There has been no adjustment made to the Underlying results in
2014, but an adjustment will be reflected in 2015 comparators to
for underlying purposes.
6 Calculated on unrounded numbers.
Exceptional Items
Exceptional items, totalling GBP53.8 million (2013: GBP300.2
million), include GBP24.5 million of publishing title impairment,
and property and asset held for sale write-downs, GBP21.1 million
on restructuring and other costs, GBP9.1 million of financing costs
resulting from the refinancing and a GBP0.9 million gain on sale of
property. For additional discussion refer to Note 7 to the
condensed financial statements and further detailed explanation of
Exceptional items provided within the Financial Review section.
53 Week Adjustments to Reflect 'Underlying' Business
The effect of the 53(rd) week of trading in 2014 has been
included as an adjustment to the underlying results with the
revenue adjustments equating to the final week of revenue of GBP2.9
million, and an estimate made for the final week of production and
other operating costs of GBP1.5 million.
Other Adjustments to Reflect 'Underlying' Business
The detail of the Other adjustments made are as follows:
-- In 2014, GBP1.5 million of other adjustments were made to
reflect the underlying business, including GBP0.8 million of
pension plan admin expenses recognised due to the adoption of
IAS19R (Note 18); and GBP0.7 million of share based payments
charges.
-- In 2013, GBP1.8 million is included as an adjustment to
underlying revenues, and GBP1.9 million to underlying operating
costs.
o Three titles disposed of during 2013, an adjustment for
revenues of GBP0.9 million and associated production costs of
GBP0.3 million have been removed from the underlying results.
o A GBP0.9 million revenue adjustment was made for the loss of a
printing contract with News International in 2013, together with a
cost adjustment of GBP0.3 million. (Refer to the 2013 Annual Report
for details on the calculation basis).
o GBP0.8 million adjustment for pension plan expenses (Note 18);
and
o GBP0.5 million share based payments.
Financial Review (continued)
Performance Review of Continuing Operations
53 weeks ended 3 January Statutory Underlying(1)
2015
2014 2013 change change 2014 2013 change change
GBP'm GBP'm GBP'm % GBP'm GBP'm GBP'm %
Advertising revenue
Print advertising 138.1 150.4 (12.3) (8.2%) 136.9 149.9 (13.0) (8.7%)
Digital advertising 29.1 24.1 5.0 20.7% 28.8 24.0 4.8 20.0%
------------------------------ ------- ------- ------- -------- ------- ------- ------ -------
Total advertising revenue 167.2 174.5 (7.3) (4.2%) 165.7 173.9 (8.2) (4.7%)
------------------------------ ------- ------- ------- -------- ------- ------- ------ -------
Non-advertising revenue
Newspaper sales 79.1 82.1 (3.0) (3.7%) 77.9 81.8 (3.9) (4.8%)
Contract printing(3) 12.8 21.2 (8.4) (39.6%) 12.6 10.3 2.3 22.3%
Other 9.7 12.2 (2.5) (20.5%) 9.7 12.2 (2.5) (20.5%)
Total other revenues 101.6 115.5 (13.9) (12.0%) 100.2 104.3 (4.1) (3.9%)
------------------------------ ------- ------- ------- -------- ------- ------- ------ -------
Total continuing revenues 268.8 290.0 (21.2) (7.3%) 265.9 278.2 (12.3) (4.4%)
------------------------------ ------- ------- ------- -------- ------- ------- ------ -------
Operating costs (258.1) (535.6) (277.5) 51.8% (210.4) (224.2) (13.8) 6.2%
Operating profit/(loss) 10.7 (245.7) 256.4 (104.4%) 55.5 54.0 1.5 2.8%
Operating profit/(loss)
margin 20.9% 19.4%
(1)Underlying results excludes Exceptional items (Note 6) and
includes adjustments made to remove the 53week effect, reflect the
impact of pension plan admin expenses recognised due to the
adoption of IAS19R (Note 18), share-based payments and disposed
titles as well as the impact of the termination of the News
International printing contracts in 2013.
(2)Operating costs include depreciation, amortisation and
exceptional items.
(3)Contract print revenues earned in the nine months since
disposal of the Irish business to Iconic Newspapers on 1 April 2014
were GBP0.8 million.
(4) The % change variance has been calculated based on unrounded
numbers.
Financial Review (continued)
Advertising Revenue
Total advertising revenues in 2014 were GBP167.2 million, a
statutory decline of 4.2% from the previous year. The underlying
decline was 4.7% after adjusting for the effect of 53 trading weeks
in 2014 and disposing of a number of smaller titles in 2013. On an
underlying basis, the decline in total advertising revenues was
4.6% in the first half and 4.9% in the second half.
Underlying Print and Digital Advertising Revenue Analysis
Full year underlying Print Digital
----------------- -------------------------------- ---------------------------- ------------------------
2014 2013 % 2014 2013 % 2014 2013 %
GBPm GBPm change(1) GBPm GBPm change(1) GBPm GBPm change(1)
----------------- --------- --------- ---------- --------- ----- ---------- ----- ----- ----------
Property 22.5 24.4 (7.8%) 21.2 23.5 (10.0%) 1.3 0.9 52.0%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
Employment 20.5 19.8 3.4% 12.0 12.3 (2.0%) 8.5 7.5 12.3%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
Motors 14.5 14.5 (0.1%) 12.8 13.6 (5.8%) 1.7 0.9 88.2%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
Other 40.4 42.3 (4.6%) 33.1 36.0 (8.1%) 7.3 6.3 15.4%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
Display 67.8 72.9 (7.0%) 57.8 64.5 (10.4%) 10.0 8.4 18.8%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
Total underlying
revenue 165.7 173.9 (4.7%) 136.9 149.9 (8.7%) 28.8 24.0 20.0%
================= ========= ========= ========== ========= ===== ========== ===== ===== ==========
(1)The % change variance has been calculated based on unrounded
numbers.
Property
2014 remained a difficult year for our property category.
Property prices grew in most of the regions in which we operate,
however the market remained challenging for Estate Agents, our core
advertising base, with volumes and sales commissions not matching
the pace of price rises. The property category decline was 7.8%
year-on-year in 2014, with January to June declines of 8.1%,
reducing to a decline of 7.4% in the second half of the year.
Digital advertising grew 52.0%, albeit from a low base.
Employment
In our employment category the 'revenue tipping point' was
reached, as digital revenue growth of 12.3% year-on-year outweighed
the print revenue declines of 2.0% to achieve an overall growth of
3.4% in this category. This was driven by further investment in
sector specific recruitment products, such as the 'Accountancy
List'. Our employment category was our strongest performing
category over the year and generated GBP20.5 million in 2014. While
the Employment market remains strong, our improving performance in
this category and changing mix from print to digital is expected to
continue into 2015.
Motors
Overall the motors category generated GBP14.5 million of revenue
in 2014, broadly flat on prior year. In the second half of the year
motors achieved a tipping point, off the back of a first half year
decline of 1.8%. The print category declined 5.8% with digital
growing by 88.2%.
Other
The 'Other' category includes Entertainment, Public Notices,
Birth, Marriages and Deaths (BMD's) and Other Classified,
DealMonster and other digital income. This combined category
generated GBP40.4 million in revenue, an annual decline of 4.6%,
with print declining 8.1% and digital growing by 15.4%.
Display
Display advertising remains our core advertising category and
helps to build brand awareness for our local and national
advertisers. Overall display advertising generated GBP67.8 million
in 2014, an annual decline of 7.0%, following softening national
retail advertising in the lead up to Christmas.
Financial Review (continued)
Underlying Print and Digital Advertising Half-Yearly Revenue
Analysis
Full year underlying First half Second half
----------- --------------------------------------------------------- ------------------------------------------ ---------------------------------------
2013 2014 2013
2014 2013 26 week 26 week 26 week
52 week period 52 week period % 2014 period % period period %
26 week period
GBPm GBPm change(1) GBPm GBPm change(1) GBPm GBPm change(1)
----------- ------------------- ------------------- --------------- ------------------- -------- ----------- ------------ ------------ -----------
Property 22.5 24.4 (7.8%) 12.2 13.2 (8.1%) 10.3 11.2 (7.4%)
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
Employment 20.5 19.8 3.4% 10.8 10.4 4.4% 9.7 9.4 2.4%
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
Motors 14.5 14.5 (0.1%) 7.3 7.4 (1.8%) 7.2 7.1 0.3%
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
Other 40.4 42.3 (4.6%) 20.6 21.8 (5.8%) 19.8 20.5 (3.3%)
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
Display 67.8 72.9 (7.0%) 34.0 36.2 (5.8%) 33.8 36.7 (8.2%)
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
Total 165.7 173.9 (4.7%) 84.9 89.0 (4.6%) 80.8 84.9 (4.9%)
=========== =================== =================== =============== =================== ======== =========== ============ ============ ===========
(1)The % change variance has been calculated on unrounded
numbers.
Audience Growth
Our aggregate audiences have continued to grow year-on-year, our
average monthly audience for the year was 27.3 million up from 24.5
million in 2013, a growth of 11.4%. A key driver for this growth
was our digital audience which grew by 35.8% from an average in
2013 of 12.3 million to an average of 16.7 million in 2014. Refer
to the Market trends section for further details.
Non-Advertising Revenue
Newspaper sales generated statutory revenues of GBP79.1 million
in the year against GBP82.1 million in 2013, a decline of 3.7%. The
underlying decline was 4.8% after taking account of the 53 week
effect and adjusting for three disposed titles in 2013.
Statutory contract printing revenue was down 39.6% year-on-year
almost exclusively a result of the termination of the News
International contract in 2013. On an underlying basis revenues
improved by 22.3% as a result of the full year effect of new print
contract wins, and the Iconic contract following the disposal of
the Irish titles
Operating Costs
Statutory operating costs, excluding exceptional items, were
reduced to GBP213.4 million from GBP226.1 million in 2013, a
GBP12.7 million year-on-year reduction.
On an underlying basis, after adjusting for week 53 and other
adjustments (closure of titles, stripping out the costs associated
with the termination of the News International print contract,
share-based payments and pension plan expenses), operating costs
decreased by GBP13.8 million to GBP210.4 million (2013: GBP23.6
million year-on-year cost saving). This cost saving was achieved
after continued investment in the digital business.
Statutory Underlying
---------------------- ---------------------------------------- ---------------------------------
2014 2013 % 2014 2013 %
GBPm GBPm GBPm change GBPm GBPm GBPm change
---------------------- --------- --------- --------- ------- ------- ------- ------ -------
Operating expenses (213.4) (226.1) (12.7) 5.6% (210.4) (224.2) (13.8) 6.2%
====================== ========= ========= ========= ======= ======= ======= ====== =======
Exceptional operating
expenses (44.7) (309.5) (264.8) 85.6% - - - -
====================== ========= ========= ========= ======= ======= ======= ====== =======
Total Operating costs (258.1) (535.6) (277.5) 51.8% (210.4) (224.2) (13.8) 6.2%
(1)Refer to the Exceptional items section on for further details
on these items.
Financial Review (continued)
Operating Profit
In 2014 the Group posted its first statutory operating profit
since 2012, reporting a statutory operating profit of GBP10.7
million, a GBP256.3 million improvement on 2013. Underlying
operating profit grew by 2.8% year-on-year, to GBP55.5 million from
GBP54.0 million. We have benefited from a reduction in
depreciation. The depreciation cycle has reached its low point in
2014, and will rise in 2015 off the back of digital investment in
2013 and onwards.
Despite underlying profit growth, the trading environment in
2014 remained challenging. Total underlying Group revenues were
down GBP12.3 million to GBP265.9 million, a decline of 4.4%. The
revenue declines were mitigated by cost reductions, with underlying
operating costs reducing from GBP224.2 million to GBP210.4 million,
a year-on-year underlying reduction of 6.2%. Our gross margin
remains strong and grew from 19.4% to 20.9% on an underlying basis
for the year.
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 exceptional operating expenses from
continuing operations were GBP44.7 million (2013: GBP309.5
million). Refer to Note 7 - Exceptional Items and Note 10 - Finance
costs for further information on the exceptional items. The
exceptional items comprise:
-- GBP24.5 million of impairments and write-downs on publishing
titles, property and assets held for sale was recorded in 2014
(2013: GBP270.8 million).
-- GBP10.9 million on restructuring and other costs designed to
reduce staff costs and enable operating efficiencies (2013: GBP32.0
million).
-- GBP4.6 million for one-off retention and incentivisation
plans for senior managers, one-off strategic performance bonus for
Executive Directors and the Value Creation Plan for the Executive
Directors (2013: GBPnil).
-- GBP3.3 million net charge on pension related expenses
including the PPF levy of GBP2.0 million (2013: GBP6.3
million).
-- GBP2.3 million on professional fees and aborted and other
disposal costs (2013: GBP0.5 million).
-- A GBP0.9 million gain was recorded on the sale of press
equipment and two significant property sales (2013: GBP0.2
million).
Exceptional financing costs totalling GBP9.1 million have been
recognised in 2014, relating to the refinancing of the Group. The
exceptional financing costs, which were largely reported at the
half-year, comprise:
-- GBP7.1 million of term debt issue costs representing the
remaining term debt issue costs after amortisation at the date of
repayment; and
-- GBP11.1 million of refinancing fees relates to legal and
professional fees associated with the recent refinancing that were
attributable to the equity and bond issue, the new revolving credit
facility, the repayment of former lending banks and noteholders and
the new pension framework agreement; less
-- GBP9.2 million interest accrual release, which includes the
release of the Payment-In-Kind (PIK) accrual of GBP25.7 million
less GBP6.4 million PIK payment and GBP10.1
million'Make-Whole'interest paid due to early debt repayment to
Noteholders.
Exceptional revenue of GBP10.0 million was recognised in 2013,
in relation to the termination of the News International contract.
There is no exceptional revenue reported in 2014.
All exceptional items involved cash outflows for the Group in
2014 other than the GBP24.5 million of write-downs on publishing
titles, property, plant and equipment and assets held for sale and
the GBP2.0 million gain on debt extinguishment included within the
GBP9.1m of exceptional finance costs. Further details are included
in the cash flow statement and notes and in Note 6 to the financial
statements.
Financial Review (continued)
Finance Income and Costs
Net finance costs for the 53 week period ended 3 January 2015
were GBP34.6 million (including exceptional finance costs), a
decrease of GBP11.2 million or 24.4% year-on-year, primarily due to
the refinancing of the Group. The reduction in finance costs can be
attributed to a GBP8.6 million reduction in loan interest charges,
with interest costs reducing from GBP39.8 million in 2013 to
GBP31.2 million in 2014, GBP8.3 million of one-off refinancing
costs incurred, a GBP5.0 million fair value mark-to-market gain on
borrowings and a GBP5.7 million decrease in other finance costs
including pension finance costs. Note the mark to market reflects
movements in the bond price relative to par.
Refer to Note 16 - Borrowings for further information.
Full year Full year
H1 2014 H2 2014 2014 2013
Net financing costs GBPm GBPm GBPm GBPm
------------------------------- ------------ ----------- ------------- ---------------
Interest on bond (2.3) (10.0) (12.3) -
=============================== ============ =========== ============= ===============
Interest on bank overdrafts
and loans (PIK)(1) (16.9) 0.4 (16.5) (35.6)
=============================== ============ =========== ============= ===============
Amortisation of term debt
issue costs / RCF (2.3) (0.1) (2.4) (4.2)
------------------------------- ------------ ----------- ------------- ---------------
Total operating finance
costs (21.5) (9.7) (31.2) (39.8)
------------------------------- ------------ ----------- ------------- ---------------
Total exceptional finance
costs(3) (9.1) - (9.1) (0.7)
------------------------------- ------------ ----------- ------------- ---------------
Total finance costs(3) (30.5) (9.7) (40.2) (40.5)
------------------------------- ------------ ----------- ------------- ---------------
Net finance expense on
pension liabilities/assets(2) (1.8) (1.6) (3.4) (5.5)
=============================== ============ =========== ============= ===============
Fair value (loss)/ gain
on bond (0.6) 5.6 5.0 -
=============================== ============ =========== ============= ===============
Fair value (loss) / gain
on hedges and retranslation
of foreign debt 1.7 0.1 1.8 (0.2)
=============================== ============ =========== ============= ===============
Total IFRS and other finance
costs (0.7) 4.1 3.4 (5.7)
------------------------------- ------------ ----------- ------------- ---------------
Investment income - 2.2 2.2 0.4
=============================== ============ =========== ============= ===============
Total net financing costs (31.2) (3.4) (34.6) (45.8)
------------------------------- ------------ ----------- ------------- ---------------
Loss Before Tax
The Group's loss before tax from continuing operations was
GBP23.9 million (2013: GBP291.4 million). The significant
difference between 2014 and 2013 was the exceptional expense
recognised in 2013 of GBP300.2 million (2013: GBP300.5 million
reported exceptional items has been restated for discontinued
operations and the adoption of IAS19R and restatement of pension
accruals).
Tax Rate
The statutory tax credit of GBP8.6 million (2013: GBP75.7
million tax credit) comprises a current tax credit of GBP0.7
million (2013: GBP0.7 million charge) and a deferred tax credit of
GBP7.9 million (2013: GBP76.4 million tax credit).
The tax credit of GBP8.6 million for the period was primarily
attributable to the recognition of the tax benefit arising on the
impairment write down on intangible publishing title assets of
GBP6.0 million and the release of a tax provision of GBP0.6
million.
Financial Review (continued)
The Group's effective tax rate was 35.9% for the 2014 financial
year and 26.0% for its 2013 financial year. The 21.5% basic tax
rate applied for the 2014 period was a blended rate due to the tax
rate of 23.0% in effect for the first quarter of 2014, changing to
21.0% from 1 April 2014 under the section 6 of the Finance Act
2013. Refer to Note 11 in the financial statements for further
detail.
Earnings Per Share and Dividends
Basic loss per share from continuing operations was 0.44p,
compared with a loss per share of 90.79p in 2013.
The rights issue and subsequent share consolidation distorts the
EPS metrics. For information, underlying and proforma calculations
are presented below:
Continuing operations Underlying Proforma
Basic EPS Basic EPS Fully diluted
EPS
---------------------------- ---------------------- -------------- ----------------
2014 2013 2014 2013 2014 2013
---------------------------- ----------- --------- ------ ------ ------- -------
Earnings (GBPm) 26.9 13.0 26.9 13.0 26.9 13.0
Number of ordinary shares
(m)(1) 3,520.0(1) 237.8(1) 105.4 105.4 120.7 120.7
----------------------------- ----------- --------- ------ ------ ------- -------
EPS (pence) 0.76 5.46 25.57 12.38 22.33 10.81
----------------------------- ----------- --------- ------ ------ ------- -------
(1)Weighted average number
of shares.
Proforma underlying earnings equate to net profit of GBP27.1
million (28 December 2013: GBP13.2 million) less preference share
dividends of GBP0.15 million (2013: GBP0.15 million).
Proforma fully diluted EPS has been calculated based on the
closing number of shares in issue of 105.9 million (refer to Note
19) and deducting the number of shares held by the Company's
Employee Benefit Trust of 0.5 million. Proforma fully diluted EPS
assumes the maximum potential dilutive impact and the maximum
number of shares the Group could be called upon to issue to satisfy
the full vesting of VCP and employee share and deferred bonus
schemes.
Financing
The Company announced on 23 June 2014 that it had successfully
completed its Capital Refinancing Plan (announced on 9 May 2014).
Gross proceeds of GBP140.0 million were received by the Company in
connection with the Placing and the Rights Issue, and further to
the announcement made by the Company on 14 May 2014, gross proceeds
of GBP220.5 million were received from the offering of GBP225.0
million 8.625% senior secured notes due 2019. The notes were issued
at a discount of GBP4.5 million.
All amounts previously outstanding were repaid and or cancelled
in full and, as at 23 June 2014 the Company paid in total GBP332.9
million including the residual balance of PIK interest and
Make-Whole, and the interest accrued to 23 June 2014 amounting to
GBP5 million.
In addition, under the Capital Refinancing Plan the Company
entered into a four year and six months (expiring 23 December 2018)
GBP25 million New Revolving Credit Facility which currently remains
undrawn.
Professional and legal fees associated with the refinancing have
been incurred, totalling GBP21.1 million. The fees relate to GBP9.2
million of equity related costs (refer to Note 28 - Share premium),
GBP7.1 million of bond issuance costs written off, GBP4.0 million
relating to legal and professional fees attributable to the bond
issue, the repayment of lending banks and noteholders and the new
pension framework agreement. The GBP0.8 million fee for the
revolving credit facility has been capitalised. Refer to Note 10b -
Finance costs for a breakdown of the items charged to Exceptional
finance costs, (refer to Note 7 - Exceptional items.
Cashflow and Net Debt
Net cashflow generated from operating activities was GBP7.8
million (2013: GBP51.7 million), including GBP6.3 million of annual
pension contributions,GBP8.2 million of one-off pension
contributions, GBP10.6 million of redundancy costs and payables of
GBP9.7 million. The Group also received GBP10.0 million from News
International for the termination of the print contract in 2013.
After adjusting for these one-off items, the Group generated
cashflows from operations of GBP30.6 million (2013: GBP34.7
million). Refer to Note 21 for further details. The Group maintains
tight control over capital expenditure with GBP8.7 million spent
(refer to Capital expenditure section below for further details),
while proceeds received from the disposal of surplus assets
(primarily property sales, surplus press equipment) were GBP8.0
million. The net cash consideration from the sale of the Irish
business was GBP5.9 million.
Cash generated through the issuance of bonds and capital
injection from the placing and rights issue totalled GBP360.5
million. This was used to repay bank borrowings and loan notes
totalling GBP326.5 million. Cash interest payments of GBP27.0
million were made, GBP21.1 million paid on refinancing fees (refer
to Note 10 b), and a further GBP1.9 million to the Johnston Press
defined benefit pension trust as part of the refinancing (included
within the total pension funding contributions within Note 21).
Financial Review (continued)
Cashflow and Net Debt (continued)
Following the refinancing, our interest charges on gross debt
are 8.625% (2013: 11.7%, average interest rate). The Group's net
debt position has improved significantly compared to previous
periods with fair value net debt of GBP184.6 million at 3 January
2015 (2013: GBP302.0 million), a reduction of GBP117.4 million from
the prior year. Excluding the mark-to-market on the bond and day
one discount, totalling GBP9.6 million, the Group's net debt was
GBP194.2 million at 3 January 2015 (2013: GBP304.4 million).
Discontinued Operations
As disclosed at the half year, on 1 April 2014 the Group
announced and completed the disposal of the Republic of Ireland
titles to Iconic Newspapers, for cash consideration of GBP7.1
million (proceeds net of disposal costs was GBP5.9 million). The
assets had been written down at 28 December 2013 in anticipation of
the disposal and no further profit or loss has been recorded in the
current period for the disposal. Refer Note 14 for further
details.
In accordance with IFRS 5 'Non-Current Assets Held for Sale and
Discontinued Operations', the results and cash flows of this
'disposal group' are reported separately from the performance of
continuing operations at each reporting date and comparatives have
been restated.
The net profit from discontinued operations for the period ended
3 January 2015 was GBP0.2 million, including results from trading
GBP0.1 million and net income of GBP0.1 million arising under the
transitional services agreement (TSA). As part of the disposal, a
TSA was agreed between the Group and Iconic Newspapers. The TSA
provides for the provision of services such as pre-press, human
resources, payroll, collections and information technology for
varying periods of time.
Refer Note 12 in the financial statements for further
information.
Net Asset Position
At the period end, the Group had net assets of GBP199.9 million,
an increase of GBP99.6 million on the prior year. The movement in
the net asset position from the prior year includes: GBP108.0
million reduction in borrowings following the Group restructuring;
GBP22.9 million reduction in trade and other payables largely due
to a reduction in restructuring provisions held at the end of 2013.
These were partially offset by a GBP11.7 million increase in the
deficit on the defined benefit plan as the actual return on assets
was lower than expected and a GBP27.0 million reduction in
publishing title intangible assets following the sale of the Irish
publishing titles and the further impairment of publishing titles
by GBP21.6 million, offset by the deferred tax liability which has
reduced by GBP12.0 million due to intangible asset write-downs and
pension deficit increase.
Pensions
At 3 January 2015, the Group's defined benefit pension scheme
had a deficit of GBP90.0 million (including IFRIC 14) as measured
under IAS19 Employee Benefits (Revised). This compares to a scheme
deficit of GBP78.3 million as at 28 December 2013. The increase of
GBP11.7 million in the scheme deficit is due principally to a fall
in the net discount rate applied to the scheme liabilities and the
recognition of an additional liability of GBP3.0 million as
required under IFRIC 14 (refer to Note 18 'Retirement Benefit
Obligation' for further details).
The trustees of the Johnston Press defined benefit pension
scheme and the Group concluded the pension scheme's triennial
valuation on 31 December 2012 and agreed a schedule of cash
contributions of GBP6.3 million in 2014, GBP6.5 million in 2015 and
GBP10.0 million in 2016 increasing by 3% per annum with a final
payment of GBP12.7 million in 2024. Refer to Note 18 'Retirement
Benefit Obligation' for further details.
IAS19 Employee Benefits (Revised) was adopted for the period
ended 3 January 2015 with comparatives restated. The amendments to
IAS19R have impacted the presentation of pensions related gains and
losses in the income statement and statement of comprehensive
income. For the restated period ended 28 December 2013, using the
same discount rate for assets and liabilities as required by IAS19R
reduced the level of pension income that was recognised in the
income statement leading to a higher net expense of GBP3.9
million.
The Group is also subject to the Pension Protection Fund Levy
(PPF). The levy is charged annually and runs from 1 April to 31
March. The amount payable for 2014/2015 is GBP3.2 million. The
Group has entered into a flexible apportionment arrangement with
the agreement of the Plan Trustees which will result in a decrease
in the 2015/2016 PPF levy charge. The Group expects to see the full
benefit of reduced levy charges in 2016/2017, when the increased
pension contributions commence.
In 2015, the first GBP2.5 million of any levy reduction is paid
to the deficit plan. The contribution levels agreed as part of
refinancing potentially give rise to an IFRIC 14 fund surplus as
contributions agreed are greater than the level of the deficit
recorded. In practical terms the Group believes a degree of
flexibility exists in negotiating with the pension trustees to
reset contribution levels in the medium term to reflect changes in
the funding position. Legal opinion has been obtained indicating no
unconditional right to the repayment of the surplus under the rules
however the Trustees have discretion and 'may' repay any surplus in
certain circumstances. As at 3 January 2015, the Group was liable
to an IFRIC 14 liability of GBP90.0 million which led to the
additional GBP3.0 million liability recognition.
Financial Review (continued)
Pensions (continued)
Since June 2014 the Plan has been invested in leveraged LDI
funds which have provided protection against around 40% of the
interest rate risk associated with the Plan's liabilities. This has
reduced the Plan's exposure to declines in interest rates over the
period invested.
Capital Expenditure
In the financial periods ended 3 January 2015 and 28 December
2013, the Group incurred capital expenditure of GBP8.7 million and
GBP7.3 million respectively. Of this, GBP5.2 million was spent on
infrastructure including leasehold improvements of GBP1.9 million
(2013 infrastructure spend: GBP4.3 million) and GBP3.5 million on
developing the digital platforms (2013: GBP3.0 million).
Financial Reporting
The IFRS standard changes applicable in 2015 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 2 to the financial statements.
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:
-- growing new revenues (particularly digital) in the Group's existing market segments;
-- 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
Following the placing and rights issue, the Group now has gross
debt of GBP225.0 million. Cash on balance sheet at 3 January 2015
was GBP30.8 million, and the Group has access to a GBP25.0 million
revolving credit facility (RCF) which remains undrawn. The bond
(Senior Secured notes) has a five-year maturity due 2019, and the
Group's RCF matures on 23 December 2018.
The Group's policy is to ensure it has committed funding in
place sufficient to meet foreseeable peak borrowing
requirements.
Based on its review, and after considering reasonably possible
downside sensitivities, the Board is of the opinion that the Group
has adequate financial resources to meet operational needs for the
foreseeable future, and have concluded that it is appropriate to
prepare the financial statements on a going concern basis.
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
3 January 2015. 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 25 March 2015 and is signed on its behalf by:
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
25 March 2015 25 March 2015
Group Income Statement
For the 53 week period
ended 3 January 2015
53 weeks to 3 January Restated(1,2)
2015
52 weeks to 28 December
2013
------------------------ ------ --------------------------------------- -------------------------------------------
Notes Before Exceptional Total Before Total
exceptional items(3) GBP'000 exceptional Exceptional GBP'000
items GBP'000 items items(3)
GBP'000 GBP'000 GBP'000
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Continuing operations
Revenue 6 268,823 - 268,823 279,978 10,000 289,978
Cost of sales (151,759) - (151,759) (164,134) - (164,134)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Gross profit 117,064 - 117,064 115,844 10,000 125,844
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Operating expenses 6 (61,612) (20,204) (81,816) (62,025) (38,704) (100,729)
Impairment and write
downs 6 - (24,535) (24,535) - (270,793) (270,793)
Total operating
expenses (61,612) (44,739) (106,351) (62,025) (309,497) (371,522)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Operating profit/(loss) 8 55,452 (44,739) 10,713 53,819 (299,497) (245,678)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Financing
Investment income 9 2,209 - 2,209 393 - 393
Net finance expense
on pension
liabilities/assets(1) 10a (3,330) - (3,330) (5,446) - (5,446)
Change in fair value
of borrowings 10b 5,063 - 5,063 - - -
Change in fair value
of hedges 10b (1,267) - (1,267) (1,691) - (1,691)
Retranslation of USD
debt 10b 2,398 - 2,398 1,749 - 1,749
Retranslation of Euro
debt 10b 531 - 531 (235) - (235)
Finance costs 10c (31,187) (9,046) (40,233) (39,808) (724) (40,532)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Total net financing
costs (25,583) (9,046) (34,629) (45,038) (724) (45,762)
Share of results of
associates - - - 2 - 2
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Profit/(loss) before
tax 29,869 (53,785) (23,916) 8,783 (300,221) (291,438)
Tax 11 (2,847) 11,427 8,580 4,359 71,367 75,726
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Profit/(loss) from
continuing operations 27,022 (42,358) (15,336) 13,142 (228,854) (215,712)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Net profit/(loss)
from discontinued
operations(2) 203 33 236 1,113 (999) 114
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
Consolidated
profit/(loss)
for the period 27,225 (42,325) (15,100) 14,255 (229,853) (215,598)
------------------------ ------ ------------- ------------ ---------- ------------- -------------- ------------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to Accounting policies section and Note
18 for further details.
(2.) Comparative income statement information has been restated
to show the Republic of Ireland business as a discontinued
operation due to its
disposal on 1 April 2014.
(3.) Items which are deemed to be exceptional by virtue of their
nature or size. Refer to Note 7 for further details.
The accompanying notes are an integral part of these financial
statements. The comparative period is for the 52 week period ended
28 December 2013.
Group Income Statement
For the 53 week period
ended 3 January 2015(continued)
53 weeks to 3 January Restated(1,2)
2015
52 weeks to 28 December
2013
---------------------------------------- ---------------------------------------
Notes Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
From continuing and
discontinued operations
Earnings per share
(p)
Earnings (GBPm) 14 27.1 (42.3) (15.2) 14.1 (229.9) (215.8)
Weighted average number
of shares (m) 14 3,520.0 3,520.0 3,520.0 237.8 237.8 237.8
------------- -------------- --------- ------------- -------------- --------
Basic 0.77 (1.20) (0.43) 5.93 (96.67) (90.74)
------------- -------------- --------- ------------- -------------- --------
Diluted 0.77 (1.20) (0.43) 5.93 (96.67) (90.74)
------------- -------------- --------- ------------- -------------- --------
From continuing operations
Earnings per share
(p)
Earnings (GBPm) 14 26.9 (42.4) (15.5) 13.0 (228.9) (215.9)
Weighted average number
of shares (m) 14 3,520.0 3,520.0 3,520.0 237.8 237.8 237.8
------------- -------------- --------- ------------- -------------- --------
Basic(5) 0.76 (1.20) (0.44) 5.46 (96.25) (90.79)
------------- -------------- --------- ------------- -------------- --------
Diluted(5) 0.76 (1.20) (0.44) 5.46 (96.25) (90.79)
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
(2.) Comparatives restated to show additional bonus and rights
issues totalling 4,603,565,483 following the Group's announcement
on 23 June
2014 of the Capital Refinancing Plan and shortly thereafter a
share consolidation of every 50 ordinary shares into one new
ordinary share.
Refer to Note 19 and the Financial Review section for further
details.
Group Statement of
Comprehensive Income
For the 53 week period
ended 3 January 2015
Revaluation Translation Retained Total
reserve reserve earnings GBP'000
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------ ------------ -------------- ----------
Loss for the period - - (15,100) (15,100)
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)(2) - - (17,591) (17,591)
--------------------------------------------------- ------------ ------------ -------------- ----------
Total items that will not be reclassified
subsequently to profit or loss - - (17,591) (17,591)
--------------------------------------------------- ------------ ------------ -------------- ----------
Items that may be reclassified subsequently
to profit or loss
Revaluation adjustment (4) - 4 -
Exchange differences on translation of
foreign operations - (21) - (21)
Deferred tax on exchange differences - 7 - 7
--------------------------------------------------- ------------ ------------ -------------- ----------
Total items that may be reclassified
subsequently to profit or loss (4) (14) 4 (14)
--------------------------------------------------- ------------ ------------ -------------- ----------
Total other comprehensive loss for the
period (4) (14) (17,587) (17,605)
--------------------------------------------------- ------------ ------------ -------------- ----------
Total comprehensive loss for the period (4) (14) (32,687) (32,705)
--------------------------------------------------- ------------ ------------ -------------- ----------
For the 52 week period ended 28 December
2013
Revaluation Translation Restated(1,2) Total
reserve reserve Retained GBP'000
GBP'000 GBP'000 earnings
GBP'000
--------------------------------------------------- ------------ ------------ -------------- ----------
Loss for the period - - (215,598) (215,598)
Other items of comprehensive (loss)/income
Items that will not be reclassified subsequently
to profit or loss
Actuarial gain on defined benefit pension
schemes (net of tax) (1,2) - - 37,039 37,039
--------------------------------------------------- ------------ ------------ -------------- ----------
Total items that will not be reclassified
subsequently to profit or loss - - 37,039 37,039
--------------------------------------------------- ------------ ------------ -------------- ----------
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)
--------------------------------------------------- ------------ ------------ -------------- ----------
Total items that may be reclassified
subsequently to profit or loss (46) 312 46 312
--------------------------------------------------- ------------ ------------ -------------- ----------
Total other comprehensive (loss)/income
for the period (46) 312 37,085 37,351
--------------------------------------------------- ------------ ------------ -------------- ----------
Total comprehensive (loss)/income for
the period (46) 312 (178,513) (178,247)
--------------------------------------------------- ------------ ------------ -------------- ----------
(1.) The adoption of IAS19R and the correction of a prior year over
accrual has affected the measurement and presentation of pension related
gains and losses. Refer to the Accounting policies section and Note
18 for further details.
(2) Relates to actuarial loss of GBP17,560,000 (28 December 2013 restated:
gain of GBP37,129,000) for the Johnston Press Pension Plan (refer
Note 18), and a net actuarial loss of GBP31,000 (28 December 2013:
GBP90,000) (refer Note 26) for two other pension related liabilities;
the
obligations for which are shown in accruals. The 2013 results have
been restated for an incorrect over accrual relating to the Johnston
Press Pension Plan. Refer to Note 18 for further details.
Group Statement of
Changes in Equity
For the 53 week period
ended 3 January 2015
Share Share Share-based Revaluation Own Translation Retained Total
capital premium payments reserve shares reserve earnings GBP'000
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
29 December 2013
as previously
reported 69,541 502,829 13,576 1,737 (5,312) 9,579 (494,867) 97,083
Effect of accruals
reversal
- PPF and Section
75
(Note 18) - - - - - - 4,176 4,176
Deferred tax
impact on
accruals reversal
(Note
18) - - - - - - (835) (835)
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
29 December 2013
as restated 69,541 502,829 13,576 1,737 (5,312) 9,579 (491,526) 100,424
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Total
comprehensive
loss
for the period - - - (4) - (14) (32,687) (32,705)
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Recognised
directly in
equity:
Preference share
dividends
accrued (Note 13) - - - - - - (152) (152)
Share-based
payments
charge - - 907 - - - - 907
Deferred tax on
share-based
payment
transactions - - (25) - - - - (25)
Share capital
issued
(Note 19) 46,630 - - - - - - 46,630
Share premium
arising
(Note 20) - 84,873 - - - - - 84,873
Performance share
plan
exercised - - (77) - 77 - - -
Company share
option
plan exercised - - - - 29 - - 29
Release on
exercise of
warrants - - (601) - - - 601 -
Net changes
directly
in equity 46,630 84,873 204 - 106 - 449 132,262
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Total movements 46,630 84,873 204 (4) 106 (14) (32,238) 99,557
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Equity at the end
of
the period 116,171 587,702 13,780 1,733 (5,206) 9,565 (523,764) 199,981
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
For the 52 week period ended 28
December 2013
Opening balances 65,081 502,818 18,959 1,783 (5,589) 9,267 (318,402) 273,917
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Total
comprehensive
loss
for the period
(restated) - - - (46) - 312 (178,513) (178,247)
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Recognised
directly in
equity:
Preference share
dividends
paid (Note 13) - - - - - - (152) (152)
Share-based
payments
charge - - 512 - - - - 512
Deferred tax on
share-based
payment
transactions - - 20 - - - - 20
Share capital
issued
(Note 19) 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 (173,124) (173,493)
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
Equity at the end
of
the period 69,541 502,829 13,576 1,737 (5,312) 9,579 (491,526) 100,424
------------------- --------- --------- ------------ ------------ --------- ------------ ---------- ----------
The accompanying notes are an integral part of these financial
statements.
Group Statement of
Financial Position
At 3 January 2015
Notes 3 January Restated(1)
2015
GBP'000 28 December
2013
GBP'000
------------------------------------ ------ ---------- -------------
Non-current assets
Intangible assets 514,324 541,360
Property, plant and equipment 53,334 54,181
Available for sale investments 970 970
Interests in associates 22 22
Trade and other receivables 2 6
568,652 596,539
------------------------------------ ------ ---------- -------------
Current assets
Assets classified as held for sale 1,301 6,625
Inventories 2,543 2,545
Trade and other receivables 37,677 36,718
Cash and cash equivalents 30,817 29,075
Derivative financial instruments 17 - 1,108
------------------------------------ ------ ---------- -------------
72,338 76,071
------------------------------------ ------ ---------- -------------
Total assets 6 640,990 672,610
------------------------------------ ------ ---------- -------------
Current liabilities
Trade and other payables(1) 46,908 69,837
Current tax liabilities 1,032 752
Retirement benefit obligation(1) 18 6,489 5,700
Borrowings 16 - 8,553
Short-term provisions 2,087 1,796
------------------------------------ ------ ---------- -------------
56,516 86,638
------------------------------------ ------ ---------- -------------
Non-current liabilities
Borrowings 16 215,437 314,863
Retirement benefit obligation(1) 18 83,512 72,634
Deferred tax liabilities 81,352 93,611
Trade and other payables 2 136
Long-term provisions 4,190 4,304
------------------------------------ ------ ---------- -------------
384,493 485,548
------------------------------------ ------ ---------- -------------
Total liabilities 441,009 572,186
------------------------------------ ------ ---------- -------------
Net assets 199,981 100,424
------------------------------------ ------ ---------- -------------
Equity
Share capital 19 116,171 69,541
Share premium account 20 587,702 502,829
Share-based payments reserve 13,780 13,576
Revaluation reserve 1,733 1,737
Own shares (5,206) (5,312)
Translation reserve 9,565 9,579
Retained earnings(1) (523,764) (491,526)
------------------------------------ ------ ---------- -------------
Total equity 199,981 100,424
------------------------------------ ------ ---------- -------------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
balances. Refer to the Accounting policies section and Note 18
for further details.
The financial statements of Johnston Press plc, registered in
Scotland (number 15382), were approved by the Board of Directors
and authorised for issue on 25 March 2015.
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 financial
statements.
Group Cash Flow Statement
For the 52 week period
ended 3 January 2015
Notes 53 weeks 52 weeks
to 3 January to 28
2015 December
GBP'000 2013
GBP'000
------------------------------------------------------------ ------ -------------- ----------
Cash flow from operating activities
Cash generated from operations(1) 21 6,318 54,145
Income tax received/(paid) 918 (2,800)
Cash generated from discontinued operations 571 392
------------------------------------------------------------ ------ -------------- ----------
Net cash inflow from operating activities 7,807 51,737
------------------------------------------------------------ ------ -------------- ----------
Investing activities
Interest received 49 16
Dividends received 2,160 377
Proceeds on disposal of publishing titles - 1,965
Proceeds on disposal of property, plant and equipment 484 1,020
Proceeds on disposal of assets held for sale 7,612 2,677
Expenditure on digital intangible assets 15 (1,513) (3,033)
Purchases of property, plant and equipment (7,149) (4,320)
Disposal proceeds and investing activities of discontinued
operations 12 5,882 1
------------------------------------------------------------ ------ -------------- ----------
Net cash provided by/(used in) investing activities 7,525 (1,297)
------------------------------------------------------------ ------ -------------- ----------
Financing activities
Issuance of bonds 16 220,500 -
Placing and Rights Issue 19,20 140,022 -
Share exercises - option schemes, warrants(2) 19,20 662 4,471
Dividends paid 13 - (152)
Interest paid (27,008) (24,803)
Repayment of bank borrowings (204,738) (26,586)
Repayment of loan notes (121,798) (6,473)
Refinancing fees (equity and debt issuance costs) (21,100) (514)
Purchase of foreign currency options (159) -
Cash movement relating to own shares held 29 (97)
Net cash used in financing activities (13,590) (54,154)
------------------------------------------------------------ ------ -------------- ----------
Net increase/(decrease) in cash and cash equivalents 1,742 (3,714)
Cash and cash equivalents at the beginning of period 29,075 32,789
------------------------------------------------------------ ------ -------------- ----------
Cash and cash equivalents at the end of the period 30,817 29,075
------------------------------------------------------------ ------ -------------- ----------
(1) Includes exceptional cash receipts of GBPnil milllion (28
December 2013: GBP10.0 million) due to the termination of the News
International printing
contract in 2013.
(2) Share option and share warrant exercises generated a net
cash inflow of GBP658,000. Issue of share capital generated
GBP594,000 and issue of
share premium generated GBP64,000. Also includes proceeds from
fractional shares of GBP4,000 (refer Note 20 for further
details).
The comparative period is for the 52 week period ended 28
December 2013.
The accompanying notes are an integral part of these financial
statements.
Notes to the Condensed Consolidated
Financial Statements
For the 53 week period
ended 3 January 2015
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 28 December 2013 have been filed with
the Registrar of Companies and those for the 53 week period ended 3
January 2015 will be filed following the Company's Annual General
Meeting in 2015. The auditor's reports on the statutory accounts
for the 52 and 53 week periods ended 28 December 2013 and 3 January
2015 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 3
January 2015.
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 2014 Annual Report and Accounts for the 53 weeks ended 3
January 2015 will be made available on the Company's website at
www.johnstonpress.co.uk, at the Company's registered office at
Orchard Brae House, 30 Queensferry Road, Edinburgh, EH4 2HS and
sent to shareholders in April 2015.
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 11 to 20.
The financial statements have been prepared for the 53 week
period ended 3 January 2015. The 2013 information relates to the 52
week period ended 28 December 2013.
3. Adoption of new or amended standards and interpretations in
the current year
The following new and amended IFRSs have been adopted for the 53
week period which commenced 29 December 2013 and ended 3 January
2015.
Accounting standard Requirements Impact on financial statements
-------------------------------------- -------------------------------------- --------------------------------------
IAS 19 'Employee Benefits' (revised Requires: Refer Note 18 for quantification of
2011) -- all re-measurements of defined this change.
benefit obligations and plan assets
to
be included in other comprehensive
income;
-- pension scheme net finance expense
to be measured using the discount
rate applied in measuring the defined
benefit obligation;
-- unvested past service costs to be
recognised in profit or loss at the
earlier of when the amendment occurs
or when the related restructuring
or termination costs are recognised;
and
-- quantitative sensitivity
disclosures.
Adopted retrospectively for the 53
week period commencing 29 December
2013.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 13 'Fair Value Measurement' Establishes a single source of None; Additional disclosures provided
guidance for all fair value in Notes 16.
measurements and requires additional
disclosures about fair value
measurements. IFRS 13 does not change
when an entity is required
to use fair value, but provides
guidance on how to measure fair value
under IFRS when it is
required or permitted.
Adopted prospectively from 29
December 2013.
-------------------------------------- -------------------------------------- --------------------------------------
3. Adoption of new or amended standards and interpretations in
the current year (continued)
The following describes narrow scope amendments applicable for
annual periods beginning on or after 1 January 2014 but which have
been early adopted in the financial statements for the 53 week
period commencing 29 December 2013 and ending 3 January 2015.
Accounting standard Requirements Impact on financial statements
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IFRS 10, IFRS 12 and Defines an investment entity and None .
IAS 27 - Investment Entities introduces an exception to
consolidating particular subsidiaries
for investment entities.
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IAS 32 - Offsetting Addresses inconsistencies in current No offsetting of Debtor and Creditor
Financial Assets and Financial practice when applying the offsetting balances with the same party takes
Liabilities criteria in IAS place.
32. The amendment clarifies
offsetting when there is a legally
enforceable right of set off
and where settlement in intended on a
net basis or to realise the asset and
settle to liability
simultaneously.
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IAS 36 - Recoverable Clarifies the scope of certain None; disclosures not required prior
Amount Disclosures for Non-Financial disclosures about the recoverable to IFRS13.
Assets amount of impaired assets.
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IAS 39 - Novation of Introduces a narrow-scope exception None; Refer Note 17 - derivatives
Derivatives and Continuation of Hedge to the requirement for the expired in the current period.
Accounting discontinuation of hedge accounting
the continuation where a derivative
designated as a hedging instrument is
novated from one
counterparty to a central
counterparty, as a consequence of new
laws or regulations, if specific
conditions are met.
-------------------------------------- -------------------------------------- --------------------------------------
New and amended IFRS issued by the IASB but not yet effective
for the 53 week period ended 3 January 2015
The following standards and interpretations are applicable to
companies with periods beginning during 2014 and which were
endorsed by the EU in December 2014. These will be mandatory for
Johnston Press plc in the 52 weeks ended 2 January 2016. Earlier
application is permitted.
Accounting standard Requirements Impact on financial statements
-------------------------------------- -------------------------------------- --------------------------------------
IFRIC 21 Levies Clarifies how an entity should None; Refer Note 18 in relation to
account for liabilities to pay levies PPF and Section 75 levies recognised
imposed by governments. in the income statement.
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IAS 19 - Defined Introduces a narrow-scope amendment None; Refer Note 18.
Benefit Plans: Employee Contributions to simplify the accounting for
contributions that are
independent of the number of years of
employee service eg, employee
contributions that are
calculated according to a fixed
percentage of salary.
-------------------------------------- -------------------------------------- --------------------------------------
Annual improvements to IFRSs Minor amendments to IFRS 2, 3, 8, 13 None; Minor revisions taken into
2010-2012 cycle and IAS 16 and 38 and IAS 24. consideration when applying
standards.
-------------------------------------- -------------------------------------- --------------------------------------
Annual improvements to IFRSs Minor amendments to IFRS 1, 3, 13 and None; Minor revisions taken into
2011-2013 cycle IAS 40. consideration when applying
standards.
-------------------------------------- -------------------------------------- --------------------------------------
3. Adoption of new or amended standards and interpretations in
the current year (continued)
New standards applicable to accounting periods beginning after
2015
Accounting standard Requirements Effective date
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 9 Financial Instruments (Issued IFRS 9 sets out the requirements for Effective for annual periods
24 July 2014)* recognising and measuring financial beginning 1 January 2018; the impact
assets, financial is yet to be assessed.
liabilities and some contracts to buy
or sell non-financial items. IFRS 9
will supersede IAS
39 Financial Instruments: Recognition
and Measurement.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 14 Regulatory Deferral Accounts IFRS 14 Regulatory Deferral Accounts Annual periods beginning on or after
(Issued 30 January 2014)* specifies the reporting requirements 1 January 2016 and is not likely to
for regulatory deferral be relevant to the
account balances that arise when an Group.
entity provides goods or services to
customers at a price
or rate that is subject to rate
regulation.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 15 Revenue from Contracts with IFRS 15 (which replaces IAS 11 and 18 Published May 2014, the standard is
Customers* and SIC 31, IFRIC 13, 15 and 18) expected to be endorsed Q1 '15 and
provides a single, likely applicable to
principles-based five-step model that annual periods beginning on or after
should be applied to determine how 1 January 2017.
and when to recognise A detailed assessment of the
revenue from contracts with implications of the standard on the
customers. business will be undertaken
IFRS 15's core principle is that particularly as it relates to digital
revenue is recognised to depict the marketing services contracts and
transfer of promised longer term advertising
goods or services to customers in an agreements delivered across multiple
amount that reflects the platforms.
consideration to which an entity
expects to be entitled in exchange
for those goods or services.
A five-step approach to revenue
recognition is required:
-- Identify the contract(s) with a
customer.
-- Identify the performance
obligations in the contract.
-- Determine the transaction price.
-- Allocate the transaction price to
the performance obligations in the
contract.
-- Recognise revenue when (or as)
performance obligations are
satisfied.
IFRS 15 also includes requirements
for accounting for costs related to a
contract with a customer.
These are recognised as an asset if
certain criteria are met.
The standard requires qualitative and
quantitative disclosures in respect
of revenue, contract
balances, performance obligations,
significant judgements and assets
recognised from costs
to obtain or fulfill a contract.
-------------------------------------- -------------------------------------- --------------------------------------
*Not yet EU endorsed.
-------------------------------------- -------------------------------------- --------------------------------------
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.
4. Critical Accounting Judgements and Key Sources of Estimation
Uncertainty (continued)
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.
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. GBP21.6 million
impairment loss has been recognised for the period ended 3 January
2015 (28 December 2013: GBP202.4 million). The carrying value of
publishing titles at 3 January 2015 was GBP511.6 million (28
December 2013: GBP538.5 million). Details of the impairment reviews
that the Group performs are provided in Note 15.
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 (Note 15).
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 increased where appropriate to include an estimate
for the present value of agreed future contributions as required
under IFRIC 14. The pension 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 3
January 2015 are set out in Note 18.
5. Business Segments
Information reported to the Chief Executive Officer for the
purpose of resource allocation and assessment of segment
performance is focused 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.
6. Segment Information
a) Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment:
53 weeks period ended Restated(1)
3 January 2015 52 weeks period ended 28
December 2013
------------------------------------------------ -------------------------------------------------
Publishing Contract Eliminations Group Publishing Contract Eliminations Group
GBP'000 printing GBP'000 GBP'000 GBP'000 printing GBP'000 GBP'000
GBP'000 GBP'000
----------- --------- ------------- --------- ----------- --------- ------------- ----------
Revenue
Print advertising 138,087 - - 138,087 150,397 - - 150,397
Digital advertising 29,116 - - 29,116 24,112 - - 24,112
Newspaper sales 79,144 - - 79,144 82,086 - - 82,086
Contract printing - 12,804 - 12,804 - 11,206 - 11,206
Other 9,672 - - 9,672 10,587 1,590 - 12,177
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Total external
sales 256,019 12,804 - 268,823 267,182 12,796 - 279,978
Inter-segment
sales(2) - 36,727 (36,727) - - 39,436 (39,436) -
Exceptional items - - - - - 10,000 - 10,000
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Total revenue 256,019 49,531 (36,727) 268,823 267,182 62,232 (39,436) 289,978
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Operating
(loss)/profit
Segment result
before
exceptional items 50,704 4,748 - 55,452 49,435 4,384 - 53,819
Exceptional items (44,478) (261) - (44,739) (245,406) (54,091) - (299,497)
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Net segment result 6,226 4,487 - 10,713 (195,971) (49,707) - (245,678)
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Investment income 2,209 393
Net finance expense
on pension
assets/liabilities (3,330) (5,446)
Net IAS 21/39
adjustments(3) 6,725 (177)
Net finance costs
(including
exceptionals) (40,233) (40,532)
Share of results of
associates - 2
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Loss before tax (23,916) (291,438)
Tax 8,580 75,726
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Loss after tax for
the period -
continuing
operations (15,336) (215,712)
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Profit after tax
for
the period -
discontinued
operations 236 114
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
Consolidated loss
after
tax for the period (15,100) (215,598)
-------------------- ----------- --------- ------------- --------- ----------- --------- ------------- ----------
(1) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
(2) Inter-segment sales are charged at standard internal
charging rates.
(3) Relates to changes in fair value of borrowings, changes in
fair value of hedges, retranslation of USD and retranslation of
Euro-denominated
debt.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. 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
3 January 28 December
2015 2013
GBP'000 GBP'000
--------------------------- ---------- ------------
Assets
Publishing 609,452 638,679
Contract printing 31,538 32,823
--------------------------- ---------- ------------
Total segment assets 640,990 671,502
--------------------------- ---------- ------------
Unallocated assets - 1,108
--------------------------- ---------- ------------
Consolidated total assets 640,990 672,610
--------------------------- ---------- ------------
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 derivative financial
instruments.
6. Segment Information (continued)
c) Other segment information
53 weeks to 3 January 52 weeks to 28 December
2015 2013
------------------------------ ------------------------------- -------------------------------
Contract Contract
Publishing printing Group Publishing printing Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- -------- ---------- --------- --------
Additions to property, plant
and equipment 7,044 105 7,149 4,320 - 4,320
Depreciation and amortisation
expense (continuing) 3,869 1,638 5,507 4,108 3,644 7,752
Impairment of property, plant
and equipment 2,667 - 2,667 1,443 62,252 63,695
Net impairment of intangibles 21,568 - 21,568 202,427 - 202,427
------------------------------ ---------- --------- -------- ---------- --------- --------
7. Exceptional Items
Notes 53 weeks Restated(1,2)
to 52 weeks
3 January to
2015 28 December
GBP'000 2013
GBP'000
---------------------------------------------------- ------ ----------- --------------
Revenue
Termination of printing contract - 10,000
---------------------------------------------------- ------ ----------- --------------
Total revenue - exceptional items - 10,000
---------------------------------------------------- ------ ----------- --------------
Operating expenses
Pensions
Plan expenses 18 (380) -
Pension protection fund contribution(1) 18 (2,038) (6,347)
Newspaper Society Pension Scheme (873) -
Restructuring costs (10,896) (32,061)
One-off incentive plans (4,552) -
Gains on disposal of property, plant and equipment 869 199
Other (2,334) (495)
Total exceptional operating expenses (20,204) (38,704)
---------------------------------------------------- ------ ----------- --------------
Impairment and write down of:
Intangible assets (21,568) (202,427)
Property, plant and equipment (2,667) (63,695)
Assets held for sale (300) (4,671)
Total exceptional impairment (24,535) (270,793)
---------------------------------------------------- ------ ----------- --------------
Total exceptional finance costs 10c (9,046) (724)
---------------------------------------------------- ------ ----------- --------------
Net exceptional items (53,785) (300,221)
Taxation on exceptional items 11,427 71,367
---------------------------------------------------- ------ ----------- --------------
Total exceptional items after tax (42,358) (228,854)
---------------------------------------------------- ------ ----------- --------------
(1) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related gains and losses. Refer to the Accounting policies
section and Note 18 for further details.
(2) Comparative income statement information has been restated
to show the Republic of Ireland business as a discontinued
operation due to its disposal on 1 April 2014.
Revenue
In 2013, the Group recognised revenue of GBP10.0 million from
the termination of a long-term printing contract with News
International following its closure of News of the World in 2012.
There is no exceptional revenue reported for the year ended 3
January 2015.
Operating expenses - pensions
Plan expenses in 2014 comprise GBP0.4 million additional
administration expenses incurred in connection with refinancing
(2013: GBPnil).
During 2014, the pension regulator has requested payment of
Pension Protection Fund levy of GBP2.7 million for the year ending
31 March 2015 (2013: GBP3.1 million and GBP3.2 million for the
years ending 31 March 2013 and 31 March 2014 respectively). The
pension levy was charged at the capped rate, reflecting historic
high gearing. The charge has fallen to GBP2.7 million and is
expected to reduce as reduced gearing and flexible apportionment is
reflected in the levy assessment.
During 2014, the Group recognised a GBP0.9 million (2013:
GBPnil) charge reflecting a commitment over the next 24 years to
address the deficit of the Newspaper Society's defined benefit
pension scheme. Refer to Note 26 for further details.
7. Exceptional Items (continued)
Operating expenses - restructuring costs
Restructuring costs of GBP7.3 million relate to reorganisations
designed to reduce costs largely carried out in 2013 but further
continued in 2014 (2013: GBP23.9 million). Other restructuring
costs include early lease termination costs, empty property costs,
dilapidations and dual-running office cost of GBP1.3 million (2013:
GBP5.4 million), and other associated legal and consulting fees of
GBP2.3 million (2013: GBP2.8 million).
Operating expenses -incentive plans
Costs include a bonus arrangement for the retention and
incentivisation of senior managers (excluding Executive Directors)
of GBP3.9 million which will be payable in March 2016 (2013:
GBPnil). A one-off further bonus opportunity of GBP0.4 million will
be made available to the Executive Directors (2013: GBPnil). A
GBP0.2 million charge for the value creation plan was incurred in
the year, following the completion of the capital refinancing plan
(2013: GBPnil) (refer Note 31).
Operating expenses - gains on disposal of property, plant and
equipment
In line with Group policy, disposal gains of GBP0.8 million were
recognised in Exceptional Items during the period relating to two
significant property disposals, which were held as Assets
Classified as Held for Sale at 28 December 2013. Print press
equipment was sold in the period with gains on disposal of GBP0.1
million (2013: GBP0.2 million).
A net gain of GBP1.0 million from several property disposals
were included in operating profit during the period; this is in
line with Group policy.
Operating expenses - other
The Group incurred other operating expenses of GBP2.0 million
(2013: GBP0.5 million) relating to one-off trade obligations and
professional fees for corporate strategy review and aborted and
other disposals. A GBP0.3 million charge has been expensed for
significant legal fees arising from a dispute that will be settled
in early 2015.
Impairment of intangible assets, property, plant and equipment
and assets held for sale
An impairment of GBP21.6 million was required for intangible
assets in the 2014 period (2013: GBP202.4 million) (refer Note
15).
In the year, GBP2.7 million has been written down on property
assets. There was no write-down on the 3 printing presses (2013:
GBP63.7 million).
A GBP0.3 million write-down of assets held for sale was charged
in the year (2013: GBP4.6 million).
Finance costs
Exceptional finance costs totalling GBP9.0 million (2013:
GBPnil) includes the GBP9.2 million interest accrual release, and
term debt issue costs written off in the period of GBP7.1 million,
following the refinancing. Other refinancing fees of GBP11.1
million (2013: GBP0.7 million) charged to exceptionals in the
period relate to legal and professional fees associated with
refinancing that were attributable to the equity and bond issue,
the new revolving credit facility, the repayment of lending banks
and noteholders and the new pension framework agreement. Refer to
Note 6c for further details.
Tax-effect of exceptional items
The Group has disclosed a GBP11.4 million tax credit (2013:
GBP72.6 million) in relation to the total exceptional items of
GBP54.3 million (2013: GBP300.2 million).
8. Operating (Loss)/Profit
53 weeks 52 weeks
to to
3 January 28 December
2015 2013
GBP'000 GBP'000
-------------------------------------------------------------- ----------- -------------
Operating (loss)/profit is shown after charging/(crediting):
Depreciation of property, plant and equipment 5,313 7,543
Exceptional write down in value of presses(1) 2,667 63,695
Exceptional write down of assets classified
as held for sale 300 4,671
Profit on disposal of property, plant and equipment:
Operating disposals (1,110) (1,065)
Exceptional disposals (869) (199)
Movement in allowance for doubtful debts (695) (1,019)
Staff costs excluding redundancy costs 100,703 107,320
Redundancy costs 7,320 23,794
Auditor's remuneration:
Company and Group accounts 159 173
Subsidiaries 240 240
Operating lease charges:
Property 4,938 5,040
Vehicles 1,752 1,887
Rentals received on sub-let property (91) (115)
Net foreign exchange gains (39) (148)
Cost of inventories recognised as expense 27,027 27,720
--------------------------------------------------------------- ----------- -------------
(1.) Includes GBP1,500,000 relating to the Sheffield property
which has a redundant press hall in its basement and GBP1,167,000
of
redundant assets in Score Press Limited (2013: GBP63,695,000
relates to write down of the presses).
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 GBP1.0 million for the period ended
3 January 2015 (28 December 2013: GBP0.6 million) from property
sales were included in operating (loss)/profit. There were 21 such
sales for the period ended 3 January 2015. The Group expects to
continue to realise profits from asset disposals for the 52 week
period ended 2 January 2016.
Staff costs shown above include GBP2,566,000 (28 December 2013:
GBP1,410,000) relating to remuneration of Directors. In addition to
the auditor's remuneration shown above, the auditor received the
following fees for non-audit services.
53 weeks 52 weeks
to to
3 January 28 December
2015 2013
GBP'000 GBP'000
--------------------------------------- ----------- -------------
Audit-related assurance services 55 55
Taxation compliance services 55 68
Other taxation advisory services 37 5
Other services related to refinancing 305 6
--------------------------------------- ----------- -------------
452 134
--------------------------------------- ----------- -------------
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 (28 December 2013: GBP19,000) was paid to the
external auditor for the audit of the Group's pension scheme.
9. Investment Income
53 weeks 52 weeks
to to
3 January 28 December
2015 2013
GBP'000 GBP'000
-------------------------------------------- ----------- -------------
Income from available for sale investments 2,109 378
Income from other investments 51 -
Interest receivable 49 15
-------------------------------------------- ----------- -------------
2,209 393
-------------------------------------------- ----------- -------------
10. Finance Costs
53 weeks Restated(1)
to
3 January 52 weeks
2015 to
GBP'000 28 December
2013
GBP'000
------------------------------------------------------ ----------- -------------
a) Net finance expense on pension liabilities/assets
Interest on assets 19,376 16,781
Interest on liabilities (22,706) (22,227)
------------------------------------------------------ ----------- -------------
Net finance expense on pension liabilities/assets (3,330) (5,446)
------------------------------------------------------ ----------- -------------
(1) The adoption of IAS19R has affected the measurement and
presentation of pension related gains and losses. Refer to the
Accounting policies section for further details.
IAS19R replaces the finance cost on the defined benefit
obligation and the expected return on plan assets with a net
finance charge, based on the defined benefit liability and the
discount rate, measured at the start of the period (29 December
2013). Accordingly, a discount rate of 4.65% has been applied on
both interest on assets and liabilities (28 December 2013:
4.50%).
b) 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 GBP1.3 million (2013:
GBP1.7 million net charge). The retranslation of foreign
denominated debt resulted in a net gain of GBP2.9 million (2013:
net gain GBP1.5 million). This is a result of GBP appreciating
against the US Dollar and the Euro currencies, 3.4% and 4.4%
respectively, to 3 January 2015. The retranslation of the Euro
denominated publishing titles held at fair value is shown in the
Statement of Comprehensive Income.
In addition, the fair value movement on the 8.625% Senior
Secured Bonds 2019 resulted in a gain of GBP5.1 million and was
based on quoted market fair value. Refer to Note 16.
53 weeks 52 weeks
to to
3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------------------------------------ ----------- -------------
c) Finance Costs
Interest on bond (12,290) -
Interest on bank overdrafts and loans (11,163) (23,504)
Payment-in-kind interest (5,345) (12,148)
Amortisation of term debt issue costs (2,389) (4,156)
------------------------------------------------------ ----------- -------------
Total operational finance costs (31,187) (39,808)
------------------------------------------------------ ----------- -------------
Payment-in-kind interest accrual release(1) 9,181 -
Term debt issue costs written off on previous repaid (7,145) -
loan services(1)
------------------------------------------------------ ----------- -------------
Gain on debt extinguishment 2,036 -
------------------------------------------------------ ----------- -------------
Refinancing fees on new capital raising(2) (11,082) (724)
------------------------------------------------------ ----------- -------------
Total exceptional finance costs (9,046) (724)
------------------------------------------------------ ----------- -------------
Total finance costs (40,233) (40,532)
------------------------------------------------------ ----------- -------------
(1.) The interest accrual release of GBP9.2 million includes a
release of the PIK accrual of GBP25.7 million less GBP6.4 million
PIK payment and GBP10.1
million Make- Whole interest paid due to early debt repayment.
The term debt issue costs write off of GBP7.1 million represents
the remaining
term debt issue costs after amortisation at the date of
repayment.
(2) The GBP11.1 million refinancing fees relates to legal and
professional fees associated with the recent refinancing that were
attributable to the
equity and bond issue, the new revolving credit facility, the
repayment of lending banks and noteholders and the new pension
framework
agreement. These have been recorded in the Income Statement.
11. Tax
53 weeks Restated(1)
to
3 January 52 weeks
to
2015 28 December
2013
GBP'000 GBP'000
Current tax
------------------------------------------------------ ----------- -------------
Charge for the period - -
Adjustment in respect of prior periods (665) 669
------------------------------------------------------ ----------- -------------
(665) 669
------------------------------------------------------ ----------- -------------
Deferred tax
Credit for the period (1,874) (13,738)
Adjustment in respect of prior periods - (1,629)
Deferred tax adjustment relating to the impairment
of publishing titles in the period (6,041) (41,667)
Credit relating to reduction in deferred tax rate to
20% (2013: 23.0%) - (19,361)
------------------------------------------------------ ----------- -------------
(7,915) (76,395)
------------------------------------------------------ ----------- -------------
Total tax credit for the period (8,580) (75,726)
------------------------------------------------------ ----------- -------------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
UK corporation tax is calculated at 21.5% (28 December 2013:
23.25%) of the estimated assessable loss for the period. The 21.5%
basic tax rate applied for the 2014 period was a blended rate due
to the tax rate of 23.0% in effect for the first quarter of 2014,
changing to 21.0% from 1 April 2014 under the 2013 Finance Act.
Taxation for other jurisdictions is calculated at the rates
prevailing in the relevant jurisdiction.
The tax credit for the period can be reconciled to the loss per
the Income Statement as follows:
53 weeks % Restated(1) %
to
3 January 52 weeks
2015 to
GBP'000 28 December
2013
GBP'000
----------------------------------------------- ----------- ------ ------------- ------
Loss before tax (23,916) 100.0 (291,438) 100.0
Tax at 21.5% (28 December 2013: 23.25%) (5,142) 21.5 (67,759) 23.3
Tax effect of items that are not deductible
or not taxable in determining taxable profit (2,729) 11.4 6,794 (2.3)
Tax effect of investment income (321) 1.3 (88) -
Effect of other tax rates (81) 0.3 2,838 (1.0)
Unrecognised deferred tax assets 358 (1.5) 2,508 (0.8)
Effect of reduction in deferred tax rate - - (19,361) 6.6
Adjustment in respect of prior years (665) 2.8 (658) 0.2
----------------------------------------------- ----------- ------ ------------- ------
Total tax credit (8,580) 35.9 (75,726) 26.0
----------------------------------------------- ----------- ------ ------------- ------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
12. Discontinued Operations
On 1 April 2014 the Group announced and completed the disposal
of the Republic of Ireland titles to Iconic Newspapers, part of
Mediaforce Limited, for a cash consideration of GBP7.1 million. The
assets were written down by GBP8.0 million at 28 December 2013 in
anticipation of the disposal and therefore no profit or loss has
been recorded in the current period for the disposal.
In accordance with IFRS 5 'Non-Current Assets Held for Sale and
Discontinued Operations', the results and cash flows of this
'disposal group' are reported separately from the performance of
continuing operations at each reporting date and comparatives have
been restated.
The net profit from discontinued operations for the period ended
3 January 2015 was GBP0.3 million. As part of the disposal, a
transitional services agreement (TSA) was agreed between the Group
and Mediaforce. The TSA includes services such as pre-press, human
resources, payroll, collections and information technology for
varying periods of time. Since the disposal, the Group has
recognised income of GBP0.6m under the TSA. This income has been
included in the net profit/(loss) from discontinued operations for
the period.
12. Discontinued Operations (continued)
Profit on disposal of operations
53 weeks
to
3 January
2015
GBP'000
------------------------------------------------ -----------
Publishing titles 5,406
Property, plant and equipment 267
------------------------------------------------ -----------
Net assets disposed 5,673
Add: Disposal costs 1,369
------------------------------------------------ -----------
Carrying value of disposed operations 7,042
------------------------------------------------ -----------
Consideration satisfied by cash 7,042
------------------------------------------------ -----------
Loss on disposal of Republic of Ireland titles -
------------------------------------------------ -----------
Disposal proceeds and investing activities of discontinued
operations
3 January
2015
GBP'000
---------------------------- ----------
Cash consideration (above) 7,042
Disposal costs (1,160)
---------------------------- ----------
Net cash consideration 5,882
---------------------------- ----------
13. Dividends
53 weeks 52 weeks
to to
3 January 28 December
2015 2013
GBP'000 GBP'000
-------------------------------------------------------- ----------- -------------
Amounts recognised as distributions to equity holders
in the period:
Preference Dividends
13.75% Cumulative Preference Shares (13.75p per share) 104 104
13.75% 'A' Preference Shares (13.75p per share) 48 48
-------------------------------------------------------- ----------- -------------
152 152
-------------------------------------------------------- ----------- -------------
No ordinary dividend is to be recommended to shareholders at the
Annual General Meeting making a total for the period ended 3
January 2015 of GBPnil (28 December 2013: GBPnil).
As disclosed previously in our 28 December 2013 Annual Report
and agreed by the shareholders, the Group is in the process of
undertaking a capital reduction (refer Note 43) which will allow
the resumption of payment of dividends including the payment of
preference dividends which has been accrued.
14. Earnings Per Share
The calculation of earnings per share is based on the following
losses and weighted average number of shares:
Continuing and discontinued operations
53 weeks Restated(1)
to
3 January 52 weeks
to
2015 28 December
2013
GBP'000 GBP'000
--------------------------------------------------------- ----------- -------------
Earnings
Loss for the period (15,100) (215,598)
Preference dividend(2) (152) (152)
--------------------------------------------------------- ----------- -------------
Earnings for the purposes of basic and diluted earnings
per share (15,252) (215,750)
Exceptional items (after tax) 42,325 229,853
--------------------------------------------------------- ----------- -------------
Earnings for the purposes of underlying earnings per
share 27,073 14,103
--------------------------------------------------------- ----------- -------------
14. Earnings Per Share (continued)
Continuing and discontinued operations (continued)
Restated(3)
000's 000's
------------------------------------------------------- ---------- ------------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share(3,4) 3,519,924 237,756
Effect of dilutive potential ordinary shares:
- warrants and employee share options - -
- deferred bonus shares - -
------------------------------------------------------- ---------- ------------
Number of shares for the purposes of diluted earnings
per share 3,519,924 237,756
------------------------------------------------------- ---------- ------------
Earnings per share (p)
Basic (0.43) (90.74)
Underlying(5) 0.77 5.93
Diluted(6) (0.43) (90.74)
------------------------------------------------------- ---------- ------------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
(2) In line with IAS 33, the preference dividend and the number
of preference shares are excluded from the calculation of earnings
per share.
(3.) Comparatives restated to show additional bonus and rights
issues totalling 4,603,565,483 following the Group's announcement
on 23 June
2014 of the Capital Refinancing Plan and shortly thereafter a
share consolidation of every 50 ordinary shares into one new
ordinary share.
Refer to Note 19 for further details.
(4) The weighted average number of ordinary shares are shown
excluding treasury shares.
(5) Underlying figures are presented to show the effect of
excluding exceptional items from earnings per share.
(6) 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.
Continuing operations
3 January Restated(1)
2015 28 December
2013
GBP'000 GBP'000
--------------------------------------------------------- ---------- -------------
Earnings
Loss for the period (15,336) (215,712)
Preference dividend(2) (152) (152)
--------------------------------------------------------- ---------- -------------
Earnings for the purposes of basic and diluted earnings
per share (15,488) (215,864)
Exceptional items (after tax) 42,358 228,854
--------------------------------------------------------- ---------- -------------
Earnings for the purposes of underlying earnings per
share 26,870 12,990
--------------------------------------------------------- ---------- -------------
Restated(3)
000's 000's
------------------------------------------------------- ---------- ------------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share(3,4) 3,519,924 237,756
Effect of dilutive potential ordinary shares:
- warrants and employee share options - -
- deferred bonus shares - -
------------------------------------------------------- ---------- ------------
Number of shares for the purposes of diluted earnings
per share 3,519,924 237,756
------------------------------------------------------- ---------- ------------
Earnings per share (p)
Basic (0.44) (90.79)
Underlying(5) 0.76 5.46
Diluted(6) (0.44) (90.79)
------------------------------------------------------- ---------- ------------
(1.) The adoption of IAS19R and the correction of a prior year
over accrual has affected the measurement and presentation of
pension related
gains and losses. Refer to the Accounting policies section and
Note 18 for further details.
(2) In line with IAS 33, the preference dividend and the number
of preference shares are excluded from the calculation of earnings
per share.
(3.) Comparatives restated to show additional bonus and rights
issues totalling 4,603,565,483 following the Group's announcement
on 23 June
2014 of the Capital Refinancing Plan and shortly thereafter a
share consolidation of every 50 ordinary shares into one new
ordinary share.
Refer to Note 19 for further details.
(4) The weighted average number of ordinary shares are shown
excluding treasury shares.
(5) Underlying figures are presented to show the effect of
excluding exceptional items from earnings per share.
(6) 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.
Refer to the Financial Review section for further details on
earnings per share.
15. Intangible Assets
Note Publishing Digital Total
titles intangible GBP'000
GBP'000 assets
GBP'000
----------------------------------- ------ ------------ ------------- ----------
Cost
Opening balance 1,302,277 3,033 1,305,310
Additions - 1,513 1,513
Disposals (153,154) - (153,154)
Transfers to property, plant and
equipment - (1,533) (1,533)
-------------------------------------------- ------------ ------------- ----------
Closing balance 1,149,123 3,013 1,152,136
-------------------------------------------- ------------ ------------- ----------
Accumulated impairment losses and
amortisation
Opening balance 763,741 209 763,950
Amortisation for the period - 194 194
Disposals (147,748) - (147,748)
Impairment losses for the period 21,568 - 21,568
Transfers to property, plant and
equipment - (152) (152)
Closing balance 637,561 251 637,812
-------------------------------------------- ------------ ------------- ----------
Carrying amount
Opening balance 538,536 2,824 541,360
-------------------------------------------- ------------ ------------- ----------
Closing balance 511,562 2,762 514,324
-------------------------------------------- ------------ ------------- ----------
Publishing titles
On 1 April 2014 the Group completed the disposal of the Republic
of Ireland titles.
The carrying amount of publishing titles by cash generating unit
(CGU) is as follows:
Impairment Disposal 3 January
28 December GBP'000 GBP'000 2015
2013 GBP'000
GBP'000
------------------------------------- -------------- ----------- --------- ----------
Scotland 52,127 - - 52,127
North 217,231 - - 217,231
Northwest 61,512 (13,652) - 47,860
Midlands 120,082 - - 120,082
South 46,291 (7,916) - 38,375
Northern Ireland 35,887 - - 35,887
Republic of Ireland 5,406 - (5,406) -
------------------------------------- -------------- ----------- --------- ----------
Total carrying amount of publishing
titles 538,536 (21,568) (5,406) 511,562
------------------------------------- -------------- ----------- --------- ----------
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. 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 for the period ended 3 January 2015 was 12.0% (28
December 2013: 12.0%). 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.
15. Intangible Assets (continued)
Discounted cash flow forecasts are prepared using:
the most recent financial budgets and projections approved by
management for 2015 which reflect management's current experience
and future expectations of the markets the CGUs operate in;
net cash inflows for future years are extrapolated based on an
estimated annual long-term growth rate of 1.0%; 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 impairment charge recognised for the period ended 3
January 2015 was GBP21.6 million (28 December 2013: GBP202.4
million). The impairment charge in the period comprises GBP13.7
million in the North West and GBP7.9 million in the South of
England.
The Group has conducted sensitivity analysis on the impairment
test of each CGUs carrying value. A decrease in the long-term
growth rate of 0.5% would result in an impairment for the Group of
GBP5.4 million and an increase in the discount rate of 0.5% would
result in an impairment of GBP4.9 million.
Growth Discount
rate rate
sensitivity sensitivity
GBP'000 GBP'000
------------------------------------------------------ ------------- -------------
Scotland - -
North - -
Northwest 2,173 2,067
Midlands 1,211 939
South 1,992 1,894
Northern Ireland - -
Total potential impairment from sensitivity analysis 5,376 4,900
------------------------------------------------------ ------------- -------------
While the value in use of the Northwest and South CGUs have
decreased during the period, the values in use of Scotland, North,
Midlands and Northern Ireland CGUs have increased. No impairment
would arise in the Scotland, North and Northern Ireland CGUs after
applying the sensitivities as their values in use would continue to
remain higher than their respective carrying values. A decrease in
the long term growth rate of 0.5% would however reduce the headroom
across these CGUs by GBP16.2 million while an increase in the
discount rate of 0.5% would reduce headroom by GBP15.4 million.
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 two to five years. Amortisation for the year has been
charged through cost of sales.
16. Borrowings
The Group announced on 23 June 2014 that it had successfully
completed its Capital Refinancing Plan (announced on 9 May 2014).
Gross proceeds of GBP140.0 million were received by the Group in
connection with the Placing and the Rights Issue, and further to
the announcement made by the Group on 14 May 2014, gross proceeds
of GBP220.5 million from the offering of GBP225.0 million 8.625%
senior secured notes due 2019. The notes were issued at a discount
of GBP4.5 million.
All amounts previously outstanding were repaid and cancelled in
full; as at 23 June 2014 the Group paid in total GBP332.9 million
of which the total Payment-In- Kind (PIK) interest and Make-Whole
amounted to GBP16.5 million and the interest accrued up to 23 June
2014 amounted to GBP5 million.
In addition, under the Capital Refinancing Plan the Group
entered into a 4 year and 6 months (expiring 23 December 2018)
GBP25 million New Revolving Credit Facility (RCF) which is
currently undrawn. The Group incurred a GBP0.9 million arrangement
fee associated with the RCF, which the Group will amortise over the
term.
16. Borrowings (continued)
The borrowings at 3 January 2015 are recorded at quoted market
fair value and classified as Level 1 according to IFRS 13. As the
borrowings are shown at fair value the associated issue costs
against the 8.625% Senior secured notes 2019 have been charged to
the Income Statement (refer to Note 10c). The borrowings at
previous period ends were recorded at amortised cost.
3 January 28 December
2015 2013
GBP'000 GBP'000
-------------------------------------------------- ---------- ------------
Bank loans - 200,851
Private placement loan notes - 110,994
Payment-In-Kind interest accrual - 20,372
8.625% Senior secured notes 2019(1) 215,437 -
-------------------------------------------------- ---------- ------------
Total borrowings excluding term debt issue costs 215,437 332,217
Term debt issue costs - (8,801)
Total borrowings 215,437 323,416
-------------------------------------------------- ---------- ------------
The borrowings are disclosed in the financial statements as:
3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------ ---------- ------------
Current borrowings - 8,553
Non-current borrowings 215,437 314,863
------------------------ ---------- ------------
Total borrowings 215,437 323,416
------------------------ ---------- ------------
The Group's net debt(2) is:
3 January 28 December
2015 2013
GBP'000 GBP'000
----------------------------------------------- ---------- ------------
Gross borrowings as above 215,437 323,416
Cash and cash equivalents (30,817) (29,075)
Impact of currency hedge instruments - (1,104)
----------------------------------------------- ---------- ------------
Net debt including currency hedge instruments 184,620 293,237
Term debt issue costs - 8,801
----------------------------------------------- ---------- ------------
Net debt excluding term debt issue costs 184,620 302,038
----------------------------------------------- ---------- ------------
(1) 8.625% Senior secured notes 2019 breakdown
3 January
2015
GBP'000
Principal Amount 225,000
Bond discount (4,500)
Fair value gain (5,063)
Total 215,437
------------------ ----------
(2) 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.
17. Derivative Financial Instruments
The Group no longer holds any financial derivatives instruments
as the remaining derivatives from 28 December 2013 have expired.
These financial instruments were classified as Level 2 according to
IFRS 13 and valued with reference to prevailing quoted forward
exchange rates of the US Dollar to the British Pound at the balance
sheet date.
3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------------------------ ----------- ------------
Interest rate caps - current asset - 4
Foreign exchange options - current asset - 1,104
Total derivative financial instruments - 1,108
------------------------------------------ ----------- ------------
18. Retirement Benefit Obligation
For the purposes of these financial statements, the Group has
applied the requirements of the standard IAS 19 Employee Benefits
(Revised 2011) for the period ended 3 January 2015, which
introduces changes to the recognition, measurement, presentation
and disclosure of post-employment benefits. The standard impacts
the measurement of various components in the defined benefit
pension obligation and associated disclosures, but not the Group's
total obligation. The standard replaces the finance cost on the
defined benefit obligation and the expected return on plan assets
with a net finance charge or income, based on the defined benefit
liability or asset and the discount rate, measured at the start of
the period. This has increased the finance charge in the
Consolidated Income Statement with an equal and offsetting movement
in actuarial gains and losses in the Consolidated Statement of
Comprehensive Income. Refer to the change in accounting treatment
section below for further details.
Characteristics of the Group's pension related liabilities
The Johnston Press Retirement Savings Plan
The Johnston Press Retirement Savings Plan is a defined
contribution Master Trust arrangement for current employees,
operated by Zurich. Contributions by the Group are a percentage of
basic salary. Employer contributions range from 1% of basic salary,
for employees statutorily enrolled, through to 12% of basic salary
for Senior Executives. Employees who were active members of the
Money Purchase section of the Johnston Press Pension Plan on 31
August 2013 transferred from the Johnston Press Pension Plan to the
Johnston Press Retirement Savings Plan from 1 September 2013.
The Johnston Press Pension Plan
The Johnston Press Pension Plan is a defined benefit pension
plan closed to new members and closed to future accrual. There was
formerly a defined contribution section of the Johnston Press
Pension Plan which was closed in August 2013 and members' benefits
were transferred to the Johnston Press Retirement Savings Plan. The
assets of the Plan 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 and are set
out in a Schedule of Contributions and Recovery Plan dated 29 July
2014.
A valuation of the Johnston Press Pension Plan as at 31 December
2012 was commissioned by the Trustees and takes account of the
Capital Refinancing Plan.
In conjunction with the Capital Refinancing Plan, the Plan
Trustees and the Group entered into a Pension Framework Agreement,
agreeing, inter alia to the following :
-- On implementation of the Capital Refinancing Plan in June
2014, the secured guarantee provided in favour of the Plan Trustees
by the Group and certain of its subsidiaries in relation to any
default on a payment obligation under the Johnston Press Pension
Plan has been removed. In return for the removal of this security
and the aforementioned guarantee, an unsecured cross-guarantee has
been provided on implementation of the Capital Refinancing Plan by
the Group and certain of its subsidiaries in favour of the Plan
Trustees in relation to any default on a payment obligation under
the Johnston Press Pension Plan. Each claim made under the
unsecured cross-guarantee is capped at an amount equal to the
aggregate S75 debt of the Johnston Press Pension Plan at the date
any claim made by the Plan Trustees falls due.
-- The deficit as at the 31 December 2012 valuation date will be
sought to be addressed by 31 December 2024 by entry into a recovery
plan providing for contributions starting at GBP6.3 million in
2014, GBP6.5 million in 2015 and GBP10.0 million in 2016 increasing
by 3% per annum with a final payment of GBP12.7 million in
2024.
-- Settlement of previously incurred PPF levies and Section 75 debts.
-- The Johnston Press Pension Plan will be entitled to receive
25% of net proceeds from business or asset disposals up to and
including 31 August 2015 exceeding GBP1 million in a single
transaction or GBP2.5 million over the course of a financial year,
subject to certain permitted disposals, conditions in relation to
financial leverage and other exceptions set out in the Framework
Agreement.
-- The Group will also pay additional contributions to the
Johnston Press Pension Plan in the event that the 2014/2015 PPF
levy and/or the 2015/2016 PPF levy is less than GBP3.2 million,
equal to the amount the levy falls below GBP3.2 million, up to a
maximum of GBP2.5 million.
-- Additional contributions will also be payable to the Johnston
Press Pension Plan in the event that the Group satisfies certain
conditions in relation to financial leverage.
The Group paid 25% of net proceeds from the sale of its Republic
of Ireland titles to the pension plan in September 2014.
This funding agreement needs to be reflected in the valuation
documentation of the Johnston Press Pension Plan, which must be
submitted to the Pensions Regulator who may exercise certain powers
if it is not compliant with the relevant legislation. If the
Johnston Press Pension Plan's funding position deteriorates after
successful implementation of the Capital Refinancing Plan then the
contributions may have to be revisited and additional contributions
to the Johnston Press Pension Plan may be required and/or the
length over which the deficit is addressed may be increased.
Contributions would ordinarily only be revisited in the context of
the triennial valuation of the Johnston Press Pension Plan,
although the Plan Trustees have power to call a valuation earlier
if they resolve to do so.
Irish Pension Schemes
In addition, the Group maintains liability for two defined
benefit schemes providing benefits for a small number of former
employees in Limerick and Leinster. Both schemes have been closed
to future accrual since 2010 and are in the final stages of being
wound up.
18. Retirement Benefit Obligation (continued)
Change in accounting treatment (adoption of IAS 19R and impact
of Pension Protection Levy/ Section 75 contributions )
Changes in accounting treatment have been reflected in the
Consolidated Financial Statements retrospectively and the impact on
the Consolidated Income Statement and Consolidated Statement of
Other Comprehensive Income for the period ending 28 December 2013
is as follows :
Impact on income statement
28 December
2013
GBP'000
------------------------------------------------- ------------
As reported - consolidated loss for the period (211,966)
IAS 19R - Increase in net finance charges(1) (3,870)
Pension protection fund contribution(2) (6,347)
Effect of accrual reversal - Pension Protection
Levy and Section 75 debt(2) 5,676
Deferred tax(3) 909
--------------------------------------------------- ------------
As restated - consolidated loss for the period (215,598)
--------------------------------------------------- ------------
(1) As a result of the adoption of IAS 19R, the Group records a
higher net expense within the income statement of GBP3.9 million
for the period ended 28 December 2013.
(2) The Group was required to pay a Pension Protection levy in
relation to the 2012/2013 and 2013/2014 years amounting to GBP6.3
million. An accrual of GBP4.4 million for the levy and GBP1.3
million for Section 75 debt was created in the 2013 year to meet
this liability. This was incorrect as the pension trustees had
already accounted for the Pension Protection levy on behalf of the
Group. In addition, the Section 75 debt should not have been
accrued for by the Group. The 2013 comparatives have been restated
accordingly to reflect the timing of all cash flows and the
reversal of the excess pension accruals.
(3) Tax credit of GBP1,744,000 as a result of restatements for
IAS19R and Pension Protection Levy inflows/outflows offset by tax
charge of GBP835,000 as a result of accrual reversals for Pension
Protection Levy and Section 75 debt.
Other comprehensive income - gain on pension
28 December
2013
GBP'000
------------------------------------------------------ ------------
As reported - Actuarial gain recognised net of
tax 30,156(1)
As reported - Difference between actual and expected
return (30,338)
IAS 19R - Gains/losses on plan assets in excess
of interest 34,208
-------------------------------------------------------- ------------
IAS 19R - Net finance charges(2) 3,870
-------------------------------------------------------- ------------
Pension protection fund contribution(3) 4,847
-------------------------------------------------------- ------------
Other comprehensive income - net decrease 8,717
-------------------------------------------------------- ------------
As restated - Actuarial gain recognised 38,873
Deferred tax on pension remeasurements (1,744)
-------------------------------------------------------- ------------
As restated - Actuarial gain recognised net of
tax 37,129
-------------------------------------------------------- ------------
(1) Actuarial gain recognised net of tax of GBP29,025,000 plus
additional deferred tax asset arising from changes in tax rate of
GBP1,131,000.
(2) As a result of the adoption of IAS 19R, the Group records a
higher net expense within the income statement of GBP3.9 million
for the period ended 28 December 2013.
(3) Reflects an outflow of GBP6.3 milion relating to PPF
invoices 12/13 and 13/14 paid by the pension fund on behalf of the
Group. During the period October to
December 2013, the Group reimbursed the pension fund for this by
GBP1.5 million resulting in a net other comprehensive income impact
of GBP4.8 million.
18. Retirement Benefit Obligation (continued)
Amounts arising from pensions related liabilities in the Group's
financial statements
The following tables identify the amounts in the Group's
financial statements arising from its pension related
liabilities.
Income statement - pensions and other pension related
liabilities costs
Notes 3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------------------------------- ------ ---------- ------------
Employment costs:
Defined contribution scheme (4,425) (4,322)
Defined benefit scheme
Plan expenses (IAS19R)(1) (1,217) -
Pension protection fund(2) 7 (2,038) (6,347)
Net finance cost on Johnston Press Pension Plan
(IAS19R) 10a (3,330) (5,446)
------------------------------------------------- ------ ---------- ------------
Total defined benefit scheme (6,585) (11,793)
------------------------------------------------- ------ ---------- ------------
Total pension costs (11,010) (16,115)
------------------------------------------------- ------ ---------- ------------
(1) Relates to administrative expenses incurred in managing the
pension fund amounting to GBP1,217,000 (GBP837,000 recognised
within operating items before exceptional items and GBP380,000
recognised within operating exceptional items). Plan expenses were
paid via the defined contribution scheme for period ended 28
December 2013, as a result there is no comparative figure.
(2) Relates to the payment of GBP2,718,000 to the Pension
Protection Fund for the period April 14 to March 15. GBP2,038,000
has been recognised in Note 7 - Income Statement, Exceptionals with
the remaining GBP680,000 in prepayments.
Other comprehensive income - (loss)/gain on pension
3 January 28 December
2015 2013
GBP'000 GBP'000
----------------------------------------------------- ---------- ------------
Gains/(losses) on plan assets in excess of interest 48,120 39,055
Experience gains and losses arising on the benefit
obligation (1,838) (6,116)
Changes in assumptions underlying the present value
of the benefit obligation (65,261) 13,473
Additional defined benefit obligation under IFRIC (2,971) -
14
----------------------------------------------------- ---------- ------------
Actuarial (loss)/gain recognised in the statement
of comprehensive income (21,950) 46,412
Deferred tax 4,390 (9,283)
------------------------------------------------------ ---------- ------------
Actuarial (loss)/gain recognised in the statement
of comprehensive income net of tax (17,560) 37,129
------------------------------------------------------ ---------- ------------
Statement of financial position - net defined benefit pension
(deficit)/surplus
3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------------------------------------ ---------- ------------
Amounts included in the Group Statement of Financial
Position:
Fair value of scheme assets 480,479 420,306
Present value of defined benefit obligations (567,509) (498,640)
Additional defined benefit obligation under IFRIC (2,971) -
14
------------------------------------------------------ ---------- ------------
Total liability recognised (90,001) (78,334)
Amount included in current liabilities 6,489 5,700
------------------------------------------------------- ---------- ------------
Amount included in non-current liabilities (83,512) (72,634)
------------------------------------------------------- ---------- ------------
18. Retirement Benefit Obligation (continued)
Analysis of amounts recognised of the net defined benefit
pension (deficit)/surplus
3 January 28 December
2015 2013
GBP'000 GBP'000
------------------------------------------------------------ ---------- ------------
Net defined benefit pension (deficit)/surplus at beginning
of period (78,334) (121,319)
Defined benefit obligation at beginning of period (498,640) (504,111)
Income statement:
Interest cost (22,706) (22,227)
Other comprehensive income:
Experience (gains) and losses (1,838) (6,116)
Remeasurements of defined benefit obligation:
arising from changes in demographic assumptions 1,536 25,849
arising from changes in financial assumptions (66,797) (12,376)
Cash flows:
Age related rebates - (511)
Benefits paid (by fund and Group) 20,936 20,852
------------------------------------------------------------ ---------- ------------
Defined benefit obligation at end of the period (567,509) (498,640)
------------------------------------------------------------ ---------- ------------
Fair value of plan assets at beginning of period 420,306 382,792
Income statement:
Interest income on plan assets 19,376 16,781
Pension Protection Fund payments - (6,347)
Administration costs (837) -
Other comprehensive income:
Return on plan assets less gain 48,120 39,055
Cash flows:
Company contributions(1) 14,450 8,366
Age-related rebates - 511
Benefits paid (by fund and Group) (20,936) (20,852)
------------------------------------------------------------ ---------- ------------
Fair value of plan assets at end of period 480,479 420,306
------------------------------------------------------------ ---------- ------------
Additional defined benefit obligation under IFRIC 14 (2,971) -
------------------------------------------------------------ ---------- ------------
Net defined benefit pension (deficit)/surplus at end
of period (90,001) (78,334)
------------------------------------------------------------ ---------- ------------
(1) Comprises annual employer contributions of GBP6,300,000 (28
December 2013 : GBP5,700,000), contributions in respect of property
disposals of
GBP456,000 (28 December 2013: GBP1,166,000), contributions in
respect of Irish title disposals of GBP1,280,000 (28 December 2013:
GBPnil) , plan
expenses of GBP907,000 (28 December 2013: GBPnil), pension
protection fund contributions of GBP4,239,000 (28 December 2013:
GBP1,500,000) and
S75 debt contributions of GBP1,268,000 (28 December 2013:
GBPnil).
Analysis of fair value of plan assets
3 January 28 December
2015 2013
GBP'000 GBP'000
--------------------------------- ---------- ------------
Equities 67,283 268,394
Multi-Asset Credit 99,678 67,507
Diversified Growth Funds 152,231 -
Liability Driven Investments 148,075 -
Other(1) 13,212 84,405
---------------------------------- ---------- ------------
Total fair value of plan assets 480,479 420,306
---------------------------------- ---------- ------------
(1) Other mainly includes cash and Protected Rights Funds.
Following extensive discussions with the pension trustees,
Pension Regulator and the Group, it has been agreed that the mix of
investments should be split 50% growth allocation and 50%
protection allocation.
18. Retirement Benefit Obligation (continued)
Analysis of financial assumptions
3 January 28 December
2015 2013
GBP'000 GBP'000
--------------------------------------------------- ---------- ------------
Discount rate 3.55% 4.65%
Future pension increases
Deferred revaluations (where linked to inflation
(CPI)) 1.75% 2.40%
Pensions in payment (where linked to inflation
(RPI)) 2.85% 3.25%
Future life expectancy
Male currently aged 65 22.0 22.1 years
years
Female currently aged 65 23.9 24.1 years
years
---------------------------------------------------- ---------- ------------
Sensitivity analysis of significant assumptions
The following tables present a sensitivity analysis for each
significant actuarial assumption showing how the defined benefit
obligation would have been affected, by changes in the relevant
actuarial assumptions that were reasonably possible at the
reporting date.
Changes in defined
benefit obligation
GBPm
Discount rate
+0.10% discount rate (9,082)
Inflation rate
+0.10% inflation rate 5,350
Mortality
+10.0% to base table mortality rates (15,883)
Pension Increase Exchange
Allowance for 25% take up for sections where automatically
offered 642
------------------------------------------------------------ --------------------
The sensitivity analysis is based on a change in one assumption
while holding all other assumptions constant, therefore
interdependencies between assumptions are excluded. The methodology
applied is consistent to that used to determine the recognised
pension liability.
Other pension related obligations
The Group has agreed to pay the expenses of the Johnston Press
Pension Plan and the Pension Protection Fund ('PPF') levy as they
fall due. Any funding agreement needs to be reflected in the
valuation documentation of the Johnston Press Pension Plan, which
must be formally submitted to the Pensions Regulator who may
exercise certain powers if it is not compliant with the relevant
legislation.
The Group has entered into a flexible apportionment arrangement
with the agreement of the Plan Trustees which will result in a
decrease in the 2015/2016 PPF levy charge. The Group expects to see
the full benefit of reduced levy charges in 2016/2017, when the
increased pension contributions commence.
The Johnston Press Pension Plan (the "Plan") is subject to a
potential increase in its liabilities in the event that historic
benefit equalisation has not taken effect for a specific group of
members. The Group's lawyers have advised that an application to
court should be made for a declaration that normal retirement dates
for these members were validly equalised as intended, and currently
anticipate a successful outcome in the case. The Group is aiming to
issue an application to court in early 2015 with the expectation
that the hearing would take place during the year. No provision has
been made in the Group's assessed pension deficit or financial
statements. Based on advice to the Trustees of the Plan, the Group
anticipates the maximum obligation in relation to this matter (in
the event that the court application is not successful) is expected
to be in the region of GBP8 million.
IFRIC 14
As at 3 January 2015, the Group was liable to an IFRIC 14
liability of GBP90.0 million as the cash contributions agreed as
part of the Recovery Plan dated 29 July 2014 were greater than the
level of deficit recorded. The contributions were discounted by
applying a discount rate of 3.55% resulting in an additional
liability recognition of GBP2,971,000.
18. Retirement Benefit Obligation (continued)
Five year history:
Restated(1) 29 December 31 December 1 January
2012 2011 2011
3 January 28 December GBP'000 GBP'000 GBP'000
2015 2013
GBP'000 GBP'000
-------------------------------- ----------- ------------- ------------ ------------ ----------
Fair value of scheme
assets 480,479 420,306 382,792 368,718 385,309
Present value of defined
benefit obligations (567,509) (498,640) (504,111) (472,708) (446,095)
Additional obligation (2,971) - - - -
under IFRIC 14
Deficit in the plan (90,001) (78,334) (121,319) (103,990) (60,786)
-------------------------------- ----------- ------------- ------------ ------------ ----------
Experience adjustments
on scheme liabilities
Amount (GBP'000) (67,099) 7,357 (29,332) (22,524) 2,925
-------------------------------- ----------- ------------- ------------ ------------ ----------
Percentage of plan liabilities
(%) (11.8%) 1.5% (5.8%) (4.8%) 0.7%
-------------------------------- ----------- ------------- ------------ ------------ ----------
Experience adjustments
on scheme assets(1)
Amounts (GBP'000) 48,120 39,055 8,257 (27,060) 11,139
Percentage of plan assets
(%) 10.0% 9.3% 2.2% (7.3%) 2.9%
-------------------------------- ----------- ------------- ------------ ------------ ----------
(1) The adoption of IAS19R has affected the measurement and
presentation of pension related gains and losses. Refer to the
Accounting policies
section for further details.
19. Share Capital
The Group underwent two share capital reorganisations in the
2014 year; a Placing and Rights Issue which was announced on 9 May
and completed on 29 May (as part of the "Capital Refinancing Plan"
which the Group announced was completed on 23 June) followed by a
sub-division and consolidation of its ordinary share capital
announced on 24 October and completed on 13 November.
Placing and Rights Issue
As part of the Placing and Rights issue, total gross proceeds of
GBP140.0 million were received by the Group, approximately GBP2.3
million through a Placing of 13,676,149 new placing shares at 17.0
pence per share (the "Placing Shares") and GBP137.7 million through
the issue of 4,589,889,334 new ordinary shares at 3.0 pence (the
"Issue Price") per share ("Rights Issue Ordinary Shares") on the
basis of 6.52 Rights Issue Ordinary Shares for each existing
ordinary share as at close of business on 27 May 2014 ("Existing
Ordinary Shares"). As the Issue Price per Rights Issue Ordinary
Share was below the nominal value of the Existing Ordinary Shares
(of 10 pence per share) the Group implemented a sub-division of
each Existing Ordinary Share into one ordinary share of one penny
nominal value ("Post-Rights Issue Ordinary Shares") and one
Deferred Share with very limited rights of nine pence nominal value
each (the "Capital Reorganisation"). The Capital Reorganisation and
allotment of shares in respect of the Rights Issue were approved by
the shareholders at a general meeting of the Group held on 27 May
2014 in order to implement the Capital Refinancing Plan. Following
completion of the Placing and Rights Issue, the number of
Post-Rights Issue Ordinary Shares in issue was 5,293,860,091. In
addition 690,294,608 Deferred Shares were in issue.
Share Consolidation
On 24 October 2014, the Group announced the sub-division and
consolidation of every 50 of the Post-Rights Issue Ordinary Shares
into one new ordinary share (each a "New Ordinary Share") in order
to reduce the number of shares in issue (the "Share Capital
Reorganisation"). The share consolidation exercise was structured
so as to retain the nominal value of one penny each per New
Ordinary Share, which allows the Group to retain the flexibility
which a lower nominal value provides.
The Share Capital Reorganisation exercise consisted of :
-- a sub-division of each Post-Rights Issue Ordinary Shares of
one penny each into one intermediate ordinary share of 1/50 pence
each and one second class deferred share ("Second Class Deferred
Share") of 49/50 pence each;
-- immediately thereafter, a consolidation of every 50
intermediate ordinary shares of 1/50 pence each into one New
Ordinary Share of one penny each;
-- the aggregation of fractional entitlements resulting from the
consolidation (where any individual shareholding were not exactly
divisible by 50) into New Ordinary Shares and the sale of such
aggregated fractional entitlements in the market after the Share
Capital Reorganisation became effective;
-- the amendment of the Company's Articles to set out the rights
and restrictions attaching to the Second Class Deferred Shares;
and
-- the amendment of the rules of the share schemes to reflect
the impact of the Capital Refinancing Plan and the Share Capital
Reorganisation in relation to the calculation of dilution limits
under those share schemes.
The Share Capital Reorganisation was approved by shareholders at
a general meeting on 12 November 2014 and became effective on 13
November 2014. Immediately prior to the approval of the Share
Capital Reorganisation by shareholders, the Group issued 15
Post-Rights Issue Ordinary Shares such that the total number of
shares of the Company in issue was exactly divisible by 50.
19. Share Capital (continued)
Share capital reorganisation movements
The table below illustrates the analysis of share capital as a
result of both capital reorganisations.
Ordinary Shares
No of Nominal GBP'000
shares Price
per share
-------------- ----------- --------
Opening balance 28 December 2013 684,352,165 0.10 68,435
Cash generated through exercises under the Group
share schemes(1) 1,108,705 0.10 111
Cash generated through exercise of share warrants(1) 4,833,738 0.10 483
------------------------------------------------------ -------------- ----------- --------
Closing balance pre Capital Refinancing Plan
(as at 27 May 2014) 690,294,608 0.10 69,029
------------------------------------------------------ -------------- ----------- --------
Capital reorganisation on 27 May 2014 - sub-division
of shares(2) 690,294,608 0.01 6,902
Placing shares(3) 13,676,149 0.01 137
Rights issue(3) 4,589,889,334 0.01 45,899
------------------------------------------------------ -------------- ----------- --------
Closing balance post-rights issue 5,293,860,091 0.01 52,938
------------------------------------------------------ -------------- ----------- --------
Cash generated through exercises under the Group
share schemes 28,744 0.01 -
Allotment of shares to effect share consolidation 15 0.01 -
------------------------------------------------------ -------------- ----------- --------
Closing balance pre Share Capital Reorganisation 5,293,888,850 0.01 52,938
------------------------------------------------------ -------------- ----------- --------
Capital reorganisation on 12 November 2014 -
sub-division of shares (creation of intermediate
ordinary shares of 1/50 pence each and Second
Class Deferred Shares)(4) 5,293,888,850 0.0002 1,059
Share consolidation (of every 50 intermediate
ordinary shares into 1 New Ordinary Share) (5) 105,877,777 0.01 1,059
Closing balance 3 January 2015 105,877,777 0.01 1,059
------------------------------------------------------ -------------- ----------- --------
Deferred Shares
No of Nominal GBP'000
shares price
per share
------------ ----------- --------
Opening balance 28 December 2013 - - -
Capital reorganisation on 27 May 2014 - sub-division
of existing ordinary shares(2) 690,294,608 0.09 62,126
Closing balance 3 January 2015 690,294,608 0.09 62,126
------------------------------------------------------ ------------ ----------- --------
Second Class Deferred Shares(6)
No of Nominal GBP'000
shares price
per share
-------------- ----------- --------
Opening balance 28 December 2013 - - -
Capital Reorganisation on 12 November 2014 -
sub-division and consolidation of shares(4) 5,293,888,850 0.0098 51,880
---------------------------------------------- -------------- ----------- --------
Closing balance 3 January 2015 5,293,888,850 0.0098 51,880
---------------------------------------------- -------------- ----------- --------
Preference Shares
No of Nominal GBP'000
shares price
per share
---------------------------------------------- ---------- ----------- --------
Opening balance 28 December 2013 and Closing
Balance 3 January 2015 1,105,600 1.00 1,106
---------------------------------------------- ---------- ----------- --------
(1) Share scheme option and share warrant exercises generated a
net cash inflow of GBP658,000 (refer to cash flow statement). Issue
of share capital generated GBP594,000 and issue of share premium
generated GBP64,000 (refer Note 20).
(2) In total generated 690,294,608 shares at GBP69,029,461.
Capital reorganisation occurred whereby each Existing Ordinary
Share of 10p nominal value was subdivided into one Post-Rights
Issue Ordinary Share of 1p and one Deferred Share of 9p.
(3) The Group's Capital Refinancing Plan raised gross proceeds
of GBP2,325,000 through a placing of 13,676,149 Placing Shares at a
placing price of 17p and GBP137,697,000 through the issue of
4,589,889,334 new ordinary shares (on the basis of a 6.52 for 1
rights issue) at 3p per Rights Issue Ordinary Share. This raised
gross proceeds of GBP140,022,000 (refer to the cash flow statement
for further details). Placing proceeds of GBP2,325,000 were
generated from the issue of share capital of GBP137,000 and share
premium of GBP2,188,000 (refer to Note 20). Rights issue proceeds
of GBP137,697,000 generated comprised the issue of share capital
GBP45,899,000 and share premium GBP91,798,000 (refer to Note
20).
(4) Prior to the Share Capital Reorganisation, the Group
sub-divided each existing ordinary shares of one penny each into
one intermediate ordinary share of 1/50 pence each and one Second
Class Deferred Share of 49/50 pence each.
(5) Consolidation of every 50 Post-Rights Issue Ordinary Shares
5,293,888,850 in total into 1 resulting in the creation of
105,877,777 new Ordinary Shares.
(6) The Deferred Shares created on the Capital Reorganisation
becoming effective will have no voting or dividend rights and, on a
return of capital on a winding up, will have no valuable economic
rights. No share certificates have been issued in respect of the
Deferred Shares.
19. Share Capital (continued)
In summary:
3 January 28 December
2015 2013
GBP'000 GBP'000
-------------------------------------------------------- ---------- ------------
Issued
Ordinary Shares
105,877,777 ordinary shares of 1p each (28 December
2013: 684,352,165 ordinary shares of 10p each) 1,059 68,435
-------------------------------------------------------- ---------- ------------
Total ordinary shares 1,059 68,435
-------------------------------------------------------- ---------- ------------
Deferred Shares
690,294,608 deferred shares of 9p each 62,126 -
-------------------------------------------------------- ---------- ------------
Second Class Deferred Shares
5,293,888,850 deferred shares of 0.98p each 51,880 -
-------------------------------------------------------- ---------- ------------
Total Deferred Shares and Second Class Deferred Shares 114,006 -
-------------------------------------------------------- ---------- ------------
Preference Shares
756,000 13.75% Cumulative Preference Shares of GBP1
each 756 756
349,600 13.75% 'A' Preference Shares of GBP1 each 350 350
-------------------------------------------------------- ---------- ------------
Total preference shares 1,106 1,106
-------------------------------------------------------- ---------- ------------
Total issued share capital 116,171 69,541
-------------------------------------------------------- ---------- ------------
The Group 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 Group 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.
As disclosed in our 2013 Annual Report the Directors were
advised that certain distributions made on the 13.75% Cumulative
Preference Shares and 13.75% 'A' Preference Shares in financial
years ending 28 December 2013, 29 December 2012 and 31 December
2011 and in the period ended June 2012 had been made without fully
complying with the relevant requirements of the Companies Act
2006.
At the Group's Annual General Meeting on 27 June 2014 and at
reconvened meetings of the holders of 13.75% Cumulative Preference
Shares and 13.75% 'A' Cumulative Preference Shares held on 16 July
2014, a special resolution was approved to ratify the dividend
payments and as a result the Group and Directors have been released
of any obligation associated with the breach of the Companies Act
2006 in respect of these dividends.
Share warrants
The Company has issued share warrants over 12.5% of its issued
share capital to lenders (with 5.0% issued 28 August 2009, 2.5%
issued 24 April 2012 and 5.0% issued 21 September 2012). All of the
share warrants have an exercise price of 10p and expire 30
September 2017. The warrant instruments will be settled by the
Company delivering a fixed number of ordinary shares and receiving
a fixed amount of cash in return and so qualify as equity under IAS
39. The Binomial Option pricing model was used to assess the fair
value of the share warrants issued in the financial year that they
were issued.
During the period, 4,833,738 ordinary shares of 10p each were
issued following the exercise of share warrants, generating
GBP483,374 of cash for the Group.
Each of the placing and rights issue forming part of the Capital
Refinancing Plan and the Share Capital Reorganisation constituted
an "Adjustment Event" for the purposes of the warrants, as a result
of which the number of warrants were adjusted pursuant to
adjustment provisions in the respective Warrants Instruments
governing their terms. 39,359,979 warrants were outstanding prior
to the announcement of the Capital Refinancing Plan. In accordance
with the terms of the Warrants, the Adjustment Event resulted in
each warrant giving the holder the right to subscribe for 7.6689949
ordinary shares at an exercise price of GBP0.03949 per share. The
warrants were subsequently further adjusted following the Share
Capital Reorganisation. As a consequence, the number of warrants
outstanding at the balance sheet date was 30,359,979 with each
warrant giving the holder the right to subscribe for 0.1533799
ordinary shares at an exercise price of GBP1.9745 per share.
20. Share Premium
3 January
2015
GBP'000
--------------------------------------------------------------- ----------
Opening balance 28 December 2013 502,829
--------------------------------------------------------------- ----------
Share premium generated under the Group savings related share
option scheme(1) 64
Placing shares(2) 2,188
Rights issue(2) 91,798
Capitalised costs associated with raising new capital (9,181)
Fractional shares(3) 4
--------------------------------------------------------------- ----------
Total movement 84,873
--------------------------------------------------------------- ----------
Closing balance 3 January 2015 587,702
--------------------------------------------------------------- ----------
(1) Share option and share warrant exercises generated a net
cash inflow of GBP658,000 (refer cash flow statement). Issue of
share capital generated GBP594,000 (refer Note 19) and issue of
share premium generated GBP64,000.
(2) The Group's Capital Refinancing Plan raised gross proceeds
of GBP2,325,000 through a placing of 13,676,149 new placing shares
at a placing price of 17p and GBP137,697,000 through the issue of
4,589,889,334 new ordinary shares (on the basis of a 6.52 for 1
rights issue) at 3p per Rights Issue Ordinary Share (refer Note
19). This in total generated a capital injection of GBP140,022,000
(refer to cash flow statement). Proceeds from the placing shares of
GBP2,325,000 were generated from the issue of share capital of
GBP137,000 (refer Note 19) together with share premium of
GBP2,188,000. Rights issue proceeds of GBP137,697,000 were
generated from the issue of share capital GBP45,899,000 (refer Note
19) and share premium of GBP91,798,000.
(3) As a result of the Share Capital Reorganisation exercise
(refer Note 19); where an individual shareholding was not exactly
divisible by 50, the Share Capital Reorganisation generated an
entitlement to a fraction of a New Ordinary Share. Fractional
entitlements were aggregated to form whole New Ordinary Shares
which were sold in accordance with the relevant provisions of the
Company's Articles of Association resulting in proceeds of
GBP4,000. Under relevant regulatory provisions, the Group was not
required to distribute the net proceeds of such a sale to the
relevant shareholders and as a result of the disproportionate costs
of doing so the Board determined that it was not in the Group's
best interest to do so and those proceeds were instead retained for
the benefit of the Group. Refer to the cash flow statement.
As detailed in Note 19, the Group completed its Capital
Refinancing Plan on 23 June 2014. The costs associated with raising
new equity amounted to GBP9.2 million and have been recognised
against share premium.
At the Group's Annual General Meeting on 27 June 2014, a special
resolution was approved to initiate a process to reduce the Group's
share premium account by GBP275 million which was subsequently
effected.
The Group has lodged a petition with the Court of Session
seeking approval of the reduction of the Group's share premium
account of GBP275 million to eliminate the accumulated deficit on
the profit and loss account and create distributable reserves for
the Group going forward.
21. Notes to the Cash Flow Statement
Restated(1,2)
Notes 3 January 28 December
2015 2013
GBP'000 GBP'000
--------------------------------------------------------- ------ ---------- --------------
Operating profit/(loss) 10,713 (245,678)
Adjustments for exceptional items:
Non cash exceptional items:
Impairment of publishing titles 7 21,568 202,427
Write-down of print presses(3) 7 2,667 63,695
Write-down in carrying value of assets held for
sale 7 300 4,671
Exceptional protection fund contribution 7 2,038 6,347
Exceptional refinancing bonus 7 3,911 -
Exceptional legal and other professional fees 7 - 3,989
Exceptional redundancy costs 7 7,320 24,444
Cash exceptional items:
Exceptional legal and other professional fees (1,169) (2,820)
Exceptional redundancy costs (17,210) (6,624)
Exceptional protection fund contribution 7,18 (2,718) -
Adjustments for non cash items:
Amortisation of intangible assets 194 209
Depreciation charges 5,306 7,497
Charge for share-based payments 907 507
Profit on disposal of property, plant and equipment (1,979) (1,266)
Pensions administrative expenses 837 -
Currency differences (34) (148)
Operating items before working capital changes:
Net pension funding contributions - cash 18 (14,450) (8,366)
Movement in long-term provisions 613 499
--------------------------------------------------------- ------ ---------- --------------
Cash generated from operations before workings
capital changes 18,814 49,383
Working capital changes:
Decrease in inventories 2 305
(Increase)/decrease in receivables (2,528) 4,753
Decrease in payables (9,970) (296)
--------------------------------------------------------- ------ ---------- --------------
Cash generated from operations after working
capital changes 6,318 54,145
Adjustment for one-off items:
Net pension funding contributions
Annual contribution 18 6,300 5,700
Pension protection fund contribution 18 4,239 1,500
S75 debt 18 1,268 -
Property disposals 18 456 1,166
Irish title disposals 18 1,280 -
Plan expenses 18 907 -
One-off adjustment - net pensions funding contributions 18 14,450 8,366
--------------------------------------------------------- ------ ---------- --------------
Redundancy costs
Non cash exceptional redundancy costs 7 (7,320) (24,444)
Cash exceptional redundancy costs 17,210 6,624
--------------------------------------------------------- ------ ---------- --------------
One-off adjustment - redundancy costs 9,890 (17,820)
--------------------------------------------------------- ------ ---------- --------------
Termination of News International printing contract 7 - (10,000)
--------------------------------------------------------- ------ ---------- --------------
Cash generated from operations after working
capital changes and adjustment for one-off items 30,658 34,691
Adjustments for one-off items:
Net pensions funding contributions (14,450) (8,366)
Redundancy costs (9,890) 17,820
Termination of News International printing contract - 10,000
--------------------------------------------------------- ------ ---------- --------------
Cash generated from operations 6,318 54,145
--------------------------------------------------------- ------ ---------- --------------
(1) The adoption of IAS19R and an incorrect over accrual has
affected the measurement and presentation of pension related gains
and losses. Refer to the Accounting policies section and Note 18
for further details.
(2.) Comparative income statement information has been restated
to show the Republic of Ireland business as a discontinued
operation due to its disposal on 1 April 2014.
(3.) Includes GBP1,500,000 relating to the Sheffield property
which has a redundant press hall in its basement and GBP1,167,000
of redundant assets
in Score Press Limited (2013: GBP63,695,000 relates to write
down of the presses).
21. Notes to the Cash Flow Statement (continued)
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.
22. Post Balance Sheet Events
There were no material post balance sheet events requiring
disclosure.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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