TIDMJPR
RNS Number : 6453V
Johnston Press PLC
11 August 2015
11 August 2015
JOHNSTON PRESS PLC
RESULTS FOR THE 26 WEEK PERIOD ENDED 4 JULY 2015
Underlying profit before tax increased by GBP9.5m to
GBP17.8m;
Net debt reduced by GBP10.9m from the year end to
GBP183.3m(1)
Johnston Press plc ("Johnston Press" or "the Group"), one of the
leading local media groups in the UK, announces its interim results
for the 26 weeks ending 4 July 2015.
The Group traded well in the first quarter and while the second
quarter was impacted by a slowdown in general trading, July has
shown some improvement.
Key highlights(1) :
-- Digital audience grew by over 20% to an average monthly
audience of 19.9m in H1 2015 (2014: 16.7m)
-- Digital revenues: Up 17.5% for the period, from GBP14.1m to
GBP16.5m now representing 20.5% of advertising revenues (H1 2014:
16.6%)
-- Revenue: Total underlying revenues of GBP128.9m (H1 2014:
GBP135.1m) reflect a decline of 4.6% for the period (H1 2014:
(4.3)%)
-- Costs: Cost savings of GBP7.6m (gross) offset revenue
declines, and funded digital investment of GBP2.6m in the
period
-- Operating profit: Underlying operating profit reduced GBP1.2m
to GBP27m, sustaining a market leading margin of 20.9%Profit before
tax: Underlying profit before tax increased 114.3% to GBP17.8m from
GBP8.3m, reflecting reduced interest expense following
refinancing
-- Continued debt reduction: Net debt reduced to GBP183.3m (2014 FY: GBP194.2m)
Financial Highlights:
GBP million Continuing Operations Continuing Operations
- Underlying(1) - Statutory
2015 2014 Change 2015 2014 Change
26 weeks 26 weeks % 26 weeks 26 weeks %
Revenue 128.9 135.1 (4.6) 128.9 135.8 (5.1)
Operating profit 27.0 28.2 (4.3) 22.2 24.9 (10.8)
Profit before tax 17.8 8.3 114.3 2.2 (6.3) 134.9
Net Debt 183.3(2) 185.5(2) 1.2 183.1 181.6 0.01
Earnings per share 11.44p(3) 7.43p(3) 54.0 1.43p(4) (0.11p)(4) n/a
(1) The results are presented on a continuing underlying basis which
is excluding exceptional items and including adjustments to reflect
pensions, share based payments, bond mark-to-market valuations and
adjustments made to the prior year comparative for the Letterbox direct
delivery business which was outsourced in October 2014.
(2) Underlying net debt is stated excluding fair value mark to market
valuation adjustments on the Group's bonds.
(3) Underlying EPS presented above represents the pro forma underlying
(fully diluted) earnings per share and has been calculated using the
closing weighted average number of ordinary shares (105.3 million)
at 4 July 2015 and applied to each period. Weighted average number
of shares in H1 2015 was 105.3 million compared to 2.464 billion in
H1 2014. This excludes shares held by the company's employee benefit
trust of 0.6 million (0.5 million 3 January 2015) and includes the
maximum potential dilutive impact of unvested awards under the Company's
share schemes and warrants.
(4) The Statutory figures presented represent both Basic and Diluted
earnings per share for H1.
----------------------------------------------------------------------------------------
Strategic progress
The Group continues to transform the business in line with the
strategic priorities previously set out. The Group has completed
the first phase of a major structural change, implementing Newsroom
of the Future (which aims to increase digital engagement, and
arrest print decline rates, whilst improving operational
efficiencies) across the Group, and has commenced the planning and
design for the implementation of Salesforce of the Future (a
project aiming to increase customer penetration, focus on solution
selling and improve digital upsell). These strategic initiatives
are designed to underpin the further development of the
business.
Build overall audiences
-- Average monthly audience (across print and digital) for the
period was up 8.7% year on year to 29.4m.
-- Digital audiences grew 3.4m (20.4%) to 19.9m unique users a month, year on year.
Growing digital substantially
-- Digital advertising grew 17.5% year on year to GBP16.5m.
Excluding the Employment category, which was particularly impacted
in Q2, our overall digital growth was 22.9% year on year.
-- Digital display advertising revenues of GBP6.1m were up 30%
year on year, including strong growth in 1XL - our digital
advertising exchange partnership with other local media groups.
-- Mobile revenues almost doubled in the period from January to
June 2015 while the proportion of mobile inventory sold at premium
rates grew 50%.
Returning to top line revenue growth
-- Total underlying advertising revenue has declined 5.1% in the
first half of this year (H1 2014: 4.6%). Although the Group traded
well in the first quarter, the second quarter was impacted by a
slowdown in general trading, with May down 9.5%*. Trading in July
has improved, reflecting a year on year advertising revenue decline
of 7.7** for the month.
-- Print advertising revenue declined 9.5% in the period to GBP64.1m (H1 2014: (8.7)%).
-- Underlying newspaper sales revenue declined 5.3% year on year
to GBP37.6m for the first half (H1 2014: (4.0)%), reflecting a
decision to keep cover prices unchanged in over 60 of our
titles.
(* after adjusting to comparable number of weeks)
(** based on Week 30 YTD Sales analysis)
Managing costs
Underlying operating costs were reduced by a net GBP5.0 million
(5.3%), balancing tight cost control with further investment in the
digital business.
Growing profitability
Underlying profit before tax increased by GBP9.5m, or 114.3%, to
GBP17.8m (H1 2014: GBP8.3m), benefiting from the reduced underlying
finance charges of GBP9.2m (H1 2014: GBP19.9m) as a result of the
2014 refinancing.
Pay down debt
Net debt was GBP183.3 million, a reduction of GBP10.9 million
from the 2014 year-end. Net debt after mark-to-market adjustments
was GBP183.1 million, a reduction of GBP1.5 million from the
year-end, as the market price of the 8.625% bonds traded up GBP9.3m
during the period.
Net debt has fallen from c.GBP300m at the start of 2014 pre
refinancing to c.GBP183m at the 2015 half year and our interest
rate over the same period has fallen from 11.7% to 8.625%.
Our aim is to continue to pay down debt and we will consider
opportunities to repurchase bonds as they arise where financially
attractive to do so.
Outlook
As highlighted in the trading update of 14 July 2015, as a
result of the off-trend trading in the second quarter, the business
enters the second half from a lower base than planned. The
advertising revenue results for July 2015 down 7.7% represent an
improvement on the rate of decline in Q2 2015. We believe in our
strategy and are confident that our transformation projects will
position the Group well for the future.
Ashley Highfield, Chief Executive, commented:
"Trading conditions in the first half of 2015 have undoubtedly
been challenging, with May and June being particularly difficult -
a time when there was also a high degree of uncertainty in the
wider market.
"However, we believe, local publishing, with SMEs representing
80% of our advertising revenue, is not as volatile as national
publishing. We have seen some improvement in reducing the decline
in advertising revenues in July compared to July 2014. We will
continue to drive for further improvement in revenues, albeit off a
lower base, and will also continue to target further cost
savings.
"Our strategy remains constant and is showing real traction.
Digital now accounts for over 20% of advertising revenues, up from
13% two years ago. Digital display saw growth of 30% in the period
and we are developing new digital products such as AdPerfect(#) and
Powerlistings aimed at small businesses. Our participation in the
industry-wide 1XL national advertising exchange has contributed to
our national digital advertising revenues growing by 120% in the
period to GBP2.0m."
# Ad Perfect - A self-serve advertising solution that allows you
to create your own advert on-line
Power Listings (Yext) - We manage the customer's profile across
multiple business listing services.
For further information please contact:
Johnston Press
Ashley Highfield, Chief Executive
Officer 020 7612 2601
David King, Chief Financial Officer 020 7612 2602
-------------------------------------- ----------------
Bell Pottinger
Dan de Belder
Zoë Pocock
Stephanie Sheffrin 020 3772 2561
-------------------------------------- ----------------
Investor presentation and audio/webcast: A presentation for
analysts and live audio/webcast will be held at 9.00am on Tuesday
11 August 2015 at Bell Pottinger, Holborn Gate, 330 High Holborn,
London, WC1V 7QD.
Webcast link:
https://secure.emincote.com/client/johnston_press/johnston002/
A replay will be available after 2.00pm on the Group website
www.johnstonpress.co.uk
Please see the conference call dial in details below:
Number: +44 20 3059 8125 (no pin needed)
The announcement for the period ended 4 July 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.
Basis of presentation
In preparing the 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 review.
Underlying results have been adjusted to exclude exceptional
items, and other adjustments have been made to reflect the
'underlying business' including the impact of pensions, share based
payment charges, Bond mark-to-market valuation and adjustments made
to remove the revenue and operating costs from the prior period
comparative for Letterbox direct delivery business which was
outsourced in October 2014.
Results for the six months ended 4 July 2015
A summary of the key financial results is set out in the table
below:
Comparison of Statutory to Adjusted and Underlying Performance
26 weeks ended 4 July Statutory Exceptionals(1) Other(2) Underlying(2)
2015
GBPm GBPm GBPm GBPm
----------------------------- ---------- ---------------- --------- --------------
Total continuing revenues 128.9 - - 128.9
----------------------------- ---------- ---------------- --------- --------------
Operating costs(3) (103.5) 4.2 0.6 (98.7)
----------------------------- ---------- ---------------- --------- --------------
EBITDA(4) 25.4 4.2 0.6 30.2
Depreciation & amortisation (3.2) - - (3.2)
----------------------------- ---------- ---------------- --------- --------------
Operating profit 22.2 4.2 0.6 27.0
Net finance costs (20.0) - 10.8 (9.2)
Share of results of - - - -
associates
----------------------------- ---------- ---------------- --------- --------------
Profit before tax 2.2 4.2 11.4 17.8
Operating margin 17.2% 20.9%
----------------------------- ---------- ---------------- --------- --------------
26 weeks ended 28 June Statutory Exceptionals(1) Other(2) Underlying(2)
2014
GBPm GBPm GBPm GBPm
----------------------------- ---------- ---------------- --------- --------------
Total continuing revenues 135.8 - (0.7) 135.1
----------------------------- ---------- ---------------- --------- --------------
Operating costs(3) (108.2) 2.9 1.1 (104.2)
----------------------------- ---------- ---------------- --------- --------------
EBITDA(4) 27.6 2.9 0.4 30.9
Depreciation & amortisation (2.7) - - (2.7)
----------------------------- ---------- ---------------- --------- --------------
Operating profit 24.9 2.9 0.4 28.2
Net finance costs (31.2) 9.0 2.3 (19.9)
Share of results of - - - -
associates
----------------------------- ---------- ---------------- --------- --------------
(Loss)/profit before
tax (6.3) 11.9 2.7 8.3
Operating margin 18.3% 20.9%
----------------------------- ---------- ---------------- --------- --------------
(1) Exceptional items are set out in Note 4 to the financial
statements.
(2) Other adjustments reflects the impact of pensions (Note
15), share based payments (Note 17), Bond mark-to-market valuation
and adjustments made to the prior period comparative for Letterbox
direct delivery business which was outsourced in October 2014.
(3) Operating costs include cost of sales and are stated before
depreciation and amortisation.
(4) EBITDA is earnings before interest, tax, depreciation and
amortisation.
Revenue
Total statutory reported revenue in the first half of 2015
declined 5.1% to GBP128.9m. Underlying revenues declined 4.6% to
GBP128.9m.
Performance Review for Continuing Operations
Statutory Underlying(1)
------------------------------------------ ------------------------------------------
2015 2014 change(2) change(2) 2015 2014 change(2) change(2)
GBP'm GBP'm GBP'm % GBP'm GBP'm GBP'm %
---------------------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Advertising revenue
Print 64.1 70.8 (6.7) (9.5%) 64.1 70.8 (6.7) (9.5%)
Digital 16.5 14.1 2.4 17.5% 16.5 14.1 2.4 17.5%
----------------------
Total advertising
revenue 80.6 84.9 (4.3) (5.1%) 80.6 84.9 (4.3) (5.1%)
---------------------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Non advertising
revenue
Newspaper sales 37.6 39.7 (2.1) (5.3%) 37.6 39.7 (2.1) (5.3%)
Contract printing 6.3 6.3 - - 6.3 6.3 - -
Other 4.4 4.9 (0.5) (10.2%) 4.4 4.2 0.2 4.8%
Total other revenues 48.3 50.9 (2.6) (5.1%) 48.3 50.2 (1.9) (3.8%)
-------- -------- ---------- ---------- -------- -------- ---------- ----------
Total continuing
revenues 128.9 135.8 (6.9) (5.1%) 128.9 135.1 (6.2) (4.6%)
---------------------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
Operating costs(3) (106.7) (110.9) (4.2) 3.8% (101.9) (106.9) (5.0) 5.3%
Operating profit 22.2 24.9 (2.7) (10.8%) 27.0 28.2 1.2 (4.3%)
Operating profit
margin 17.2% 18.3% 20.9% 20.9%
---------------------- -------- -------- ---------- ---------- -------- -------- ---------- ----------
(1) Underlying results excludes Exceptional items (Note 4) and
includes adjustments made to reflect pensions (Note 15), share
based payments (Note 17), Bond mark-to-market valuations and adjustments
made to the prior year comparative for Letterbox direct business
which was outsourced in October 2014.
(2) % change variance and amount has been calculated based on
unrounded numbers.
(3) Operating costs include cost of sales, depreciation, amortisation
and operating exceptional items.
Underlying Revenue Analysis
The business earns GBP103m, 80% of its income, from publishing
its own newspapers and magazines, GBP16.5m, 13%, from digital
publishing and the balance from contract printing and third party
publishing titles.
26 week period
----------------------------
2015 2014 % change(1)
------------
GBPm GBPm
--------------------------- ------ ------ ------------
Print revenues
Circulation 37.6 39.7 (5.3%)
Advertising (JP owned
titles) 62.0 68.3 (9.0%)
Other print related
revenues 3.6 3.4 (5.9%)
--------------------------- ------ ------ ------------
Total Print revenues 103.2 111.4 (7.4%)
--------------------------- ------ ------ ------------
Digital revenues 16.5 14.11 17.5%
Contract revenues
Printing 6.3 6.3 0.0%
Other 0.8 0.8 0.0%
Publishing (Advertising) 2.1 2.5 (13%)
Total Contract revenues 8.4 8.8 (4.5%)
Total revenues 128.9 135.1 (4.6%)
--------------------------- ------ ------ ------------
Print and Digital Advertising Revenue
Underlying Advertising Revenue
Analysis
26 week period Print Digital
------------------------------ -------------------------- --------------------------
2015 2014 % change(1) 2015 2014 % change(1) 2015 2014 % change(1)
---------------- ------------ ------------
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ----- ----- ---------------- ----- ----- ------------ ----- ----- ------------
Property 10.9 12.2 (10.6%) 10.1 11.5 (12.0%) 0.8 0.7 12.2%
Employment 10.3 10.8 (5.1%) 5.7 6.4 (11.7%) 4.6 4.4 4.6%
Motors 6.8 7.3 (6.0%) 5.8 6.5 (9.7%) 1.0 0.8 25.6%
Other 20.2 20.6 (1.7%) 16.2 17.1 (5.3%) 4.0 3.5 16.1%
Display 32.4 34.0 (4.8%) 26.3 29.3 (10.5%) 6.1 4.7 30.0%
Total 80.6 84.9 (5.1%) 64.1 70.8 (9.5%) 16.5 14.1 17.5%
---------------- ----- ----- ---------------- ----- ----- ------------ ----- ----- ------------
(1) % and variance change has been calculated based on unrounded
numbers.
Within total advertising revenue, print advertising ended 9.5%
down year on year with the second quarter performance being
off-trend having suffered from advertisers holding back spend
during May and June. Digital revenues grew by 17.5% (from GBP14.1m
to GBP16.5m) in the period.
-- Property was disappointing, the sector continuing to suffer
from a lack of supply of properties for sale, so impacting
advertising.
-- Employment - office of national statistics reported a rise in
unemployment for the period March to May 2015. Other market insight
shows a fall in permanent and temporary placements in June 2015
relative to June 2014. In the company, following a good January
activity slowed down, coming off further in the second quarter.
While Smartlist and other outbound activity performed well, inbound
calls in particular slowed significantly during the second
quarter.
-- Motors showed strong growth in digital, up 25.6% driven by a
strong car sales market in the period, a continuation of growth
seen in the second half of 2014.
-- Other, including digital kitbag, saw good growth in the period, up 16.1%.
-- Display display revenues, having grown 30% from H1 2013 to
2014, grew a further 30% from H1 2014 to 2015, benefitting in 2015
from the launch of 1XL, the digital advertising exchange
partnership with other local media groups (excluding Trinity
Mirror). In Print display, both local and national display tracked
expectations in quarter one, local display slowing in quarter two,
while national display, although a smaller category, saw a
substantial slow-down in quarter two (GBP800k down), offsetting
much of the digital gains in the half.
Newspaper sales
Underlying newspaper sales revenues were down 5.3% in the first
half of the year, reflecting a conservative approach to cover price
increases whilst we focus on improving volume run-rates. As a
result 66 titles are now declining at less than 11%, an improvement
from 49 titles in June 2014.
Contract printing
Underlying Contract print revenues in the first half of the year
were in line with the prior year, delivering GBP6.3m of revenue in
the first half of 2015 and 2014. In March the Group won a
significant four-title print contract with Express Newspapers in a
multi-million pound, five year deal; printing commenced at the
Group's Dinnington plant in July. The print slot was formerly
occupied by a Trinity Mirror contract.
Other revenues
Statutory other revenues declined GBP0.5m period on period,
which can be attributed to the outsourcing of the Letterbox leaflet
business in October 2014. On an underlying basis, other revenues
improved GBP0.2m period on period. Other revenues include reader
offers, syndication revenue, and waste sales.
Gross margin and operating profit
The Group achieved a statutory operating profit of GBP22.2m in
the first half (28 June 2014: GBP24.9m profit).
Trading results in the first half of the year have been
challenging. The Group has continued to balance the need for
investment in digital and journalism with cost savings. Within
operating profit, underlying operating expenses continue to be
actively managed and have reduced by GBP5.0m (GBP7.6m cost savings
delivered net of GBP2.6m digital investment) compared with the same
period in 2014. The reduction in costs includes current year
savings (through lower headcount, office rationalisation and other
initiatives) as well as the full year effect of the savings made
last year. We are confident that we will achieve further cost
savings in the year.
The tight management of costs has allowed us to maintain a
robust underlying operating margin for the first half at 20.9% (28
June 2014: 20.9%).
Finance costs(1) 2015 2014 change
GBPm GBPm GBPm
----------------------------- ------- ------- -------
Interest on bond (9.7) (2.3) (7.4)
Interest on bank overdrafts
and loans (0.2) (11.6) 11.4
Payment-in-kind interest - (5.3) 5.3
Amortisation of term
debt issue costs (0.1) (2.3) 2.2
----------------------------- ------- ------- -------
Total operating finance
costs (10.0) (21.5) 11.5
----------------------------- ------- ------- -------
Total exceptional finance
costs - (9.0) 9.0
----------------------------- ------- ------- -------
Total finance costs (10.0) (30.5) 20.5
----------------------------- ------- ------- -------
(1) Finance costs (included in the table above) exclude the Bond
mark to market, pension finance costs and investment income.
Finance costs (continued)
Operational finance costs have decreased by GBP11.5m compared to
prior year, a direct result of the refinancing completed in May
2014. Refer to note 14.
Exceptional finance costs totalling GBP9.0m were incurred in
relation to the refinancing in the prior period. Refer to note
4.
In the period, an adjustment to the value of the bond and charge
to the income statement of GBP9.3m has been recognised on the Bond,
compared to GBP0.6m loss in the comparative period. Refer to note
6b.
Exceptional Items
Exceptional operating items totalling GBP4.2m have been
recognised in the first half of 2015 (28 June 2014: GBP2.9m). This
comprises GBP2.4m of restructuring costs, GBP0.9m of Pension
Protection Fund levy, GBP0.5m of one-off Value Creation Plan costs
and GBP0.4m of business development costs. In 2014, a gain on
disposal of GBP0.8m was recognised within exceptional items. Refer
to Note 4.
Of the GBP4.2m charge to exceptional items in the period ended 4
July 2015 (28 June 2014: GBP2.9m), GBP3.6m were cash items (28 June
2014: GBP1.9m).
Taxation
Corporation tax for the interim period is charged at 21.5% (28
June 2014: credited at 58.3%, 3 January 2015: credited at 35.9%),
including deferred tax. In the prior periods, the effective tax
rate is higher than the nominal rate, due to the timing of deferred
tax movements. Refer to Note 7.
Dividends
Following the completion of the GBP275m capital reduction
referred to below, the Group has paid preference share dividends
relating to 2014 and the first half of 2015.
The provisions of the bond restrict the Company's ability to pay
dividends on the Company's ordinary shares 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 2014 rights issue and subsequent share consolidation distort
the EPS metrics for the prior year. For information, underlying and
proforma calculations are presented below (note 9):
The proforma table is presented based on the number of shares
now in issue having adjusted for the effect of the rights issue and
subsequent consolidation of 50:1.
Underlying Basic Proforma Underlying Proforma Underlying
Continuing operations EPS Basic EPS(2) Fully diluted EPS(3)
---------------------- ------------------ --------------------- -----------------------
H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014
---------------------- -------- -------- ---------- --------- ----------- ----------
Earnings (GBPm)(1) 14.1 9.2 14.1 9.2 14.1 9.2
Number of ordinary
shares (m) 105.3 2,464.2 105.3 105.3 123.4 123.4
---------------------- -------- -------- ---------- --------- ----------- ----------
EPS (pence)(4) 13.41 0.37 13.41 8.71 11.44 7.43
---------------------- -------- -------- ---------- --------- ----------- ----------
(1) All figures are shown post tax and exclude exceptionals and
other underlying adjustments.
(2) Underlying Proforma uses underlying profit and the 4 July
2015 half year weighted average number of shares.
(3) Underlying Fully diluted Proforma takes into account all
current unvested shares that have a dilutive effect (18.1 million).
At the current share price these options are unlikely to be
exercised and therefore for statutory reporting purposes there is
no dilution impact.
(4) EPS has been calculated based on unrounded numbers.
Cash Flow/Net Debt
Net debt is GBP183.3 million excluding the GBP9.3 million
mark-to-market loss on the bond, a reduction of GBP10.9 million
from the year-end position. Net debt after mark-to-market is
GBP183.1 million, a reduction of GBP1.5 million from the year-end
position.
Net cash inflow from continuing operations in the 26 weeks ended
4 July 2015 amounted to GBP25.0m after pension contributions of
GBP3.3m and redundancy costs of GBP5.3m. Refer to note 18.
Cash held at 4 July 2015 was GBP41.7m, an increase of GBP10.9m
compared to 3 January 2015 and GBP2.2m compared to 28 June 2014.
During the period to 4 July 2015 redundancies payments amounted to
GBP5.3 million (28 June 2014: GBP14.0 million, 3 January 2015:
GBP17.2 million) a reduction of 62% compared to prior year. Pension
funding contributions were GBP3.3 million (28 June 2014: GBP6.2
million, 3 January 2015: GBP14.5 million). The Group continues to
maintain a tight control of working capital and capital expenditure
with GBP4.3m having been spent on asset purchases (28 June 2014:
GBP3.7m, 3 January 2015: GBP8.7m) offset by GBP0.7m received from
non-essential asset sales (28 June 2014: GBP6.3m, 3 January 2015:
GBP8.0m).
Cash interest paid in the first half was GBP9.9m (28 June 2014:
GBP16.5m, 3 January 2015: GBP27.0m), a decrease of 40.0% on the
same period in 2014.
Pensions
The Group's defined benefit pension plan obligation has
decreased by GBP2.9m, from the year-end, to GBP87.1m reflecting
increased contributions (GBP3.3m in the period), partially offset
by movements in the financial assumptions including an increased
discount rate and inflation assumptions compared to June 2014.
Following the renegotiations of contributions to the deficit
reduction plan, the minimum amount of contributions committed to be
paid to the scheme during 2015 is GBP6.5m, this contribution level
has increased from prior year contributions of GBP6.3m. Refer to
Note 15.
Bond buy-back
As announced in February 2015, 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. The Group will effect the purchase as soon as it is
able.
Share capital reduction
At the Company's Annual General Meeting on 27 June 2014, a
special resolution was approved to initiate a process to reduce the
Company's share premium account by GBP275 million. The completion
of the capital reduction was confirmed by an Order of the Court of
Session, Scotland on 29 April 2015 and registered at Companies
House on 5 May 2015. The capital reduction eliminates the opening
accumulated deficit of GBP179.9 million on the Company's profit and
loss account and created positive distributable reserves of GBP98.2
million at 30 May 2015. This will enable the Company to make
distributions and provide loans to the Johnston Press plc Employee
Share Trust ("JP EST") to satisfy options under the Group's share
ownership schemes. Since the successful capital reduction the Group
has paid preference share dividends relating to 2014 and the first
half of 2015.
Acquisition
On 3 July 2015 Johnston Publishing Limited, a subsidiary of
Johnston Press plc, acquired 100% of the share capital of Love News
Media Limited, the publisher of the Brighton & Hove
Independent, a free weekly title with a circulation of over 13,000
copies, for a total consideration of GBP90,000. Of this GBP30,000
has been deferred and will be settled subject to performance
requirements set out in the acquisition agreement. The title,
including its popular associated website:
www.brightonandhoveindependent.co.uk and @BrightonIndy twitter
following complements the South portfolio of assets. This title now
allows the Group to serve customers along the Sussex coast.
Events after balance sheet date
Refer to note 21 for details of significant post balance sheet
events.
Related party transactions
Related party transactions are disclosed in Note 20.
There have been no material changes in the related party
transactions described in the last annual report.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
have been identified by the business that could have a material
impact on the Group's long-term performance.
The following significant market risks are important to the
overall performance of the Group, and the Group has no control over
these risk factors. The Directors consider the most significant
market risks to include changes in gross domestic product and
unemployment rates, levels of property transactions, new car sales
and consumer confidence, and public sector spending.
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the 53 week period ended 3 January 2015. A detailed
explanation of the risks summarised below, and how the Group seeks
to mitigate the risks can be found on pages 21 to 22 of the annual
report which is available at
http://www.johnstonpress.co.uk/investors/reports-results-presentations.
Further Reductions in Print Advertising
Print advertising revenues could decline at a faster rate due to
further migration of customer spending to online media and a lack
of consumer confidence in some of the markets in which we
operate.
Newsprint Price and Supply Risk
Although paper prices have fallen over the course of the past 12
months future price rises represent a risk to the Group in terms of
both supply and pricing of newsprint which, after staff costs, is
the largest single expense incurred by the business.
Failure to Monetise Increased Readership of our content on
Websites and Mobile devices.
This is an industry issue. On-line advertising rates are lower
and it is difficult to charge for accessing news on-line because
free alternatives exist.
Pension Deficit Funding
The Group Defined Benefit pension scheme is currently in deficit
leaving the Group responsible for potential shortfalls, in
particular driven by sustained low interest rates.
Business Opportunities Constrained by Debt
The Group continues to operate with greater than optimal levels
of gearing, hence continued reduction of debt over time remains a
priority. However, this focus could lead to missed revenue
opportunities if insufficient funds are left available for
investment.
Business Change
The Group is implementing two major projects to revise the
organisation of its news rooms and its sales model which may cause
disruption during the transition.
Adequacy of Human Resources
Like most organisations there is an element of dependency on
certain key individuals in the Group.
Lifestyle and Technology Changes Affect Newspaper
Circulations
Newspaper circulations continue to decline due to increased
availability of news through alternative media channels and
changing reader habits.
Slowdown in Rate of Digital Growth and Reduction in Advertising
Rates for Mobile
The Group experienced strong growth in its digital income
streams in recent years. The rate of growth could slow down if
customers seek alternative routes to audiences served. The industry
as a whole has seen a shift towards accessing digital content
through mobile devices which generally attract lower advertising
rates than the rates achieved for desktop devices.
Liquidity and Going Concern
At the period end, the Group has gross debt of GBP225m, cash on
balance sheet of GBP41.7m, and the Group has access to a GBP25m
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.
Progress on Strategic Projects
Newsroom of the Future
Re-engineering our newsrooms to better equip us to cope with the
demands of reporting in the modern age is nearing completion, over
88% of our newsrooms are now working with the Newsroom of the
Future approach. Teams have new workflows, technology & tools
to improve productivity and audience engagement whilst reducing
costs. To date, there have been 1,000 people involved and we are
seeing an improvement of 14.9% in unique users.
Salesforce of the Future
We will restructure our sales team to ensure retention of high
yielding customers, acquisition of new high potential customers and
the provision of a cost-effective model to serve low yielding
customers. These plans are at an advanced stage and will commence
roll out in Q4 2015 with a view to delivering a step change in
performance in 2016.
Outlook
As highlighted in the trading update of 14 July 2015, as a
result of the off-trend trading in the second quarter, the business
enters the second half from a lower base than planned. The
advertising revenue results for July 2015 down 7.7% represent an
improvement on the rate of decline in Q2 2015. We believe in our
strategy and are confident that our transformation projects will
position the Group well for the future.
Responsibility Statement
The directors confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
11 August 2015 11 August 2015
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Address of Registered office
Johnston Press plc,
Orchard Brae House
30 Queensferry Road
Edinburgh
EH4 2HS
26 weeks to 4 July 26 weeks to 28 53 weeks to 3
2015 June 2014 January 2015
Before Exceptional Total Before Exceptional Total Before Exceptional Total
exceptional items(2) exceptional items exceptional items
items items items
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 3(a) 128,871 - 128,871 135,811 - 135,811 268,823 - 268,823
Cost of sales (70,827) - (70,827) (76,884) - (76,884) (151,759) - (151,759)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Gross profit 58,044 - 58,044 58,927 - 58,927 117,064 - 117,064
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Operating expenses 4 (31,646) (4,156) (35,802) (31,090) (2,919) (34,009) (61,612) (20,204) (81,816)
Impairment - - - - - - - (24,535) (24,535)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Total operating
expenses (31,646) (4,156) (35,802) (31,090) (2,919) (34,009) (61,612) (44.739) (106,351)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Operating profit
/ (loss) 26,398 (4,156) 22,242 27,837 (2,919) 24,918 55,452 (44,739) 10,713
Financing
Investment income 5 762 - 762 50 - 50 2,209 - 2,209
Net finance expense
on pension
liabilities/assets(1) 6(a) (1,504) - (1,504) (1,750) - (1,750) (3,330) - (3,330)
Change in fair
value of borrowings 6(b) (9,333) - (9,333) (563) - (563) 5,063 - 5,063
Change in fair
value of hedges 6(b) - - - (1,353) - (1,353) (1,267) - (1,267)
Retranslation
of debt 6(b) - - - 2,929 - 2,929 2,929 - 2,929
Finance costs 6(c) (9,987) - (9,987) (21,483) (9,046) (30,529) (31,187) (9,046) (40,233)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Total financing
costs (20,062) - (20,062) (22,170) (9,046) (31,216) (25,583) (9,046) (34,629)
Profit /(loss)
before tax 6,336 (4,156) 2,180 5,667 (11,965) (6,298) 29,869 (53,785) (23,916)
Tax 7 (1,284) 610 (674) 1,190 2,485 3,675 (2,847) 11,427 8,580
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Profit/(loss)
from continuing
operations 5,052 (3,546) 1,506 6,857 (9,480) (2,623) 27,022 (42,358) (15,336)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Net profit/(loss)
from discontinued
operations(1) 8 (2) - (2) 366 - 366 203 33 236
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
Consolidated profit/
(loss) for the
period 5,050 (3,546) 1,504 7,223 (9,480) (2,257) 27,225 (42,325) (15,100)
----------------------- ------ ------------ ------------ --------- ------------ ------------ --------- ------------ ------------ ----------
(1) 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.
(2) Items which are deemed to be non-recurring by virtue of
their nature or size. Refer to note 4.
26 weeks to 4 July 26 weeks to 28 53 weeks to 3
2015 June 2014 January 2015
Before Exceptional Total Before Exceptional Total Before Exceptional Total
exceptional items exceptional items exceptional items
items items items
Notes
-------------- ------ ------------ ------------ ------ ------------ ------------ ------- ------------ ------------ -------
From
continuing
and
discontinued
operations 9
-------------- ------ ------------ ------------ ------ ------------ ------------ ------- ------------ ------------ -------
Earnings per
share
(p)
Basic 4.73 (3.36) 1.43 0.29 (0.38) (0.09) 0.77 (1.20) (0.43)
Diluted 4.73 (3.36) 1.43 0.29 (0.38) (0.09) 0.77 (1.20) (0.43)
-------------- ------ ------------ ------------ ------ ------------ ------------ ------- ------------ ------------ -------
From
continuing
operations 9
-------------- ------ ------------ ------------ ------ ------------ ------------ ------- ------------ ------------ -------
Earnings per
share
(p)
Basic 4.73 (3.36) 1.43 0.28 (0.38) (0.11) 0.76 (1.20) (0.44)
Diluted 4.73 (3.36) 1.43 0.28 (0.38) (0.11) 0.76 (1.20) (0.44)
-------------- ------ ------------ ------------ ------ ------------ ------------ ------- ------------ ------------ -------
Revaluation Translation Retained
Notes reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------------ ------------ ---------- --------
Profit for the period - - 1,504 1,504
Items that will not be
reclassified subsequently
to profit or loss :
Actuarial gain on defined
benefit pension schemes
(net of tax) (2) 15 - - 995 995
- - 2,499 2,499
-------------------------------- -------- ------------ ------------ ---------- --------
Items that may be reclassified
subsequently to profit
or loss :
Revaluation adjustment - - - -
Exchange differences on
translation of foreign
operations(1) - (283) - (283)
Deferred tax on exchange - - - -
differences
- (283) - (283)
-------------------------------- -------- ------------ ------------ ---------- --------
Total comprehensive income
for the period - (283) 2,499 2,216
-------------------------------- -------- ------------ ------------ ---------- --------
(1) Movements in the translation reserve relate to the
translation of interests in dormant Irish subsidiaries.
Consolidated statement of comprehensive income for the 26 week
period ended 28 June 2014
Revaluation Translation Retained Total
reserve reserve earnings
Notes GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------ ------------ ------------ ---------- ---------
Loss for the period - - (2,257) (2,257)
Items that will not be
reclassified subsequently
to profit or loss :
Actuarial loss on defined
benefit pension schemes
(net of tax) 15 - - (9,718) (9,718)
-------------------------------- ------ ------------ ------------ ---------- ---------
- - (11,975) (11,975)
-------------------------------- ------ ------------ ------------ ---------- ---------
Items that may be reclassified
subsequently to profit
or loss :
Revaluation adjustment (2) - 2 -
Exchange differences on
translation of foreign
operations(1) - 16 - 16
Deferred tax on exchange
differences - (7) - (7)
(2) 9 2 9
-------------------------------- ------ ------------ ------------ ---------- ---------
Total comprehensive loss
for the period (2) 9 (11,973) (11,966)
-------------------------------- ------ ------------ ------------ ---------- ---------
(1) Movements in the translation reserve relate to the
translation of interests in dormant Irish subsidiaries.
Share Share-based Own
premium payments shares
Share reserve Revaluation Translation Retained
capital reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Opening
balances 116,171 587,702 13,780 1,733 (5,206) 9,565 (523,764) 199,981
Total
comprehensive
income for
the period - - - - - (283) 2,499 2,216
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Recognised
directly
in equity :
Dividends
(Note 10) - - - - - - (76) (76)
Share capital
reduction
(Note 16b) - (275,000) - - - - 275,000 -
Provision for
share-based
payments
(Note 17) - - 802 - - - - 802
Options
exercised - - (339) - 348 - - 9
Purchase of
own shares
(Note 17) - - - - (895) - - (895)
Release on - - - - - - - -
exercise
of share
warrants
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Net change
directly
in equity - (275,000) 463 - (547) - 274,924 (160)
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Total
movements - (275,000) 463 - (547) (283) 277,423 2,056
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Equity at end
of the
period 116,171 312,702 14,243 1,733 (5,753) 9,282 (246,341) 202,037
--------------- ---------- ---------- ------------ -------------- -------- -------------- ----------- --------
Consolidated statement of changes in equity for the 26 week
period ended 28 June 2014
Share-based
Share Share payments Revaluation Own Translation Retained
capital premium reserve reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
Opening
balances 69,541 502,829 13,576 1,737 (5,312) 9,579 (494,867) 97,083
Total
comprehensive
loss for the
period - - - (2) - 9 (11,973) (11,966)
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
Recognised
directly
in equity :
Dividends - - - - - - - -
(Note 10)
Provision for
share-based
payments
(Note 17) - - 131 - - - - 131
Share capital
issued
(Note 16a) 46,630 - - - - - - 46,630
Share premium
arising
(Note 16b) - 84,869 - - - - - 84,869
Options
exercised - - - - 8 - - 8
Release on
exercise
of share
warrants - - (601) - - - 601 -
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
Net change
directly
in equity 46,630 84,869 (470) - 8 - 601 131,638
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
Total
movements 46,630 84,869 (470) (2) 8 9 (11,372) 119,672
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
Equity at end
of the
period 116,171 587,698 13,106 1,735 (5,304) 9,588 (506,239) 216,755
--------------- ---------- --------- ------------ -------------- -------- -------------- ----------- ---------
4 July 2015 28 June 2014 3 January
2015
Notes GBP'000 GBP'000 GBP'000
---------------------------------- ------ ------------ ------------- ----------
Non-current assets
Goodwill 11 85 - -
Intangible assets 11 515,258 537,436 514,324
Property, plant and equipment 12a 53,457 52,777 53,334
Available for sale investments 970 970 970
Interests in associates 22 22 22
Trade and other receivables 1 4 2
Derivative financial instruments 13 - - -
---------------------------------- ------ ------------ ------------- ----------
569,793 591,209 568,652
---------------------------------- ------ ------------ ------------- ----------
Current assets
Assets classified as held
for sale 12b 937 2,389 1,301
Inventories 2,173 2,080 2,543
Trade and other receivables 37,748 44,885 37,677
Cash and cash equivalents 41,687 39,452 30,817
Derivative financial instruments 13 - 15 -
---------------------------------- ------ ------------ ------------- ----------
82,545 88,821 72,338
---------------------------------- ------ ------------ ------------- ----------
Total assets 652,338 680,030 640,990
---------------------------------- ------ ------------ ------------- ----------
Current liabilities
Trade and other payables 49,545 61,108 46,908
Current tax liabilities 1,397 1,687 1,032
Retirement benefit obligation 15 6,489 6,300 6,489
Borrowings 14 - - -
Short-term provisions 1,703 1,604 2,087
---------------------------------- ------ ------------ ------------- ----------
59,134 70,699 56,516
---------------------------------- ------ ------------ ------------- ----------
Non-current liabilities
Borrowings 14 224,771 221,063 215,437
Retirement benefit obligation 15 80,574 80,638 83,512
Deferred tax liabilities 81,969 86,690 81,352
Trade and other payables - 133 2
Long-term provisions 3,853 4,052 4,190
---------------------------------- ------ ------------ ------------- ----------
391,167 392,576 384,493
---------------------------------- ------ ------------ ------------- ----------
Total liabilities 450,301 463,275 441,009
---------------------------------- ------ ------------ ------------- ----------
Net assets 202,037 216,755 199,981
---------------------------------- ------ ------------ ------------- ----------
Equity
Share capital 16a 116,171 116,171 116,171
Share premium account 16b 312,702 587,698 587,702
Share-based payment reserve 17 14,243 13,106 13,780
Revaluation reserve 1,733 1,735 1,733
Own shares (5,753) (5,304) (5,206)
Translation reserve 9,282 9,588 9,565
Retained earnings (246,341) (506,239) (523,764)
Total equity 202,037 216,755 199,981
---------------------------------- ------ ------------ ------------- ----------
26 weeks to 26 weeks 53 weeks
to to
4 July 2015 28 June 2014 3 January
2015
Notes GBP'000 GBP'000 GBP'000
----------------------------------- -------- ------------ ------------- ----------
Cash flows from operating
activities
Cash generated/(used in)
from operations 18 24,983 (2,465) 6,318
Income tax received/(paid) - 918 918
Cash (used in)/generated
from discontinued operations (212) 678 571
Net cash inflow/(outflow)
from operating activities 24,771 (869) 7,807
----------------------------------- -------- ------------ ------------- ----------
Investing activities
Interest received 59 19 49
Dividends received 703 31 2,160
Proceeds on disposal of - - -
publishing titles
Proceeds on disposal of
property, plant and equipment 117 6,251 484
Proceeds on disposal of
assets held for sale 628 - 7,612
Expenditure on digital intangible
assets (1,096) (1,748) (1,513)
Purchases of property, plant
and equipment (3,246) (2,015) (7,149)
Acquisition of publishing (60) - -
title
Disposal proceeds and investing
activities of discontinued
operations - 6,473 5,882
Net cash (used in)/provided
by investing activities (2,895) 9,011 7,525
----------------------------------- -------- ------------ ------------- ----------
Financing activities
Issuance of bonds - 220,500 220,500
Placing and rights issue 16a,16b - 140,680 140,022
Share exercises - option
schemes, warrants(1) - - 662
Dividends paid (228) - -
Interest paid (9,890) (16,546) (27,008)
Repayment of bank borrowings - (204,738) (204,738)
Repayment of loan notes - (121,798) (121,798)
Refinancing fees - (15,611) (21,100)
Purchase of foreign currency
options - (260) (159)
Purchase of own shares 17 (888) - -
Cash movement relating to
own shares held - 8 29
Net cash (used in)/provided
by financing activities (11,006) 2,235 (13,590)
----------------------------------- -------- ------------ ------------- ----------
Net increase in cash and
cash equivalents 10,870 10,377 1,742
Cash and cash equivalents
at beginning of period 30,817 29,075 29,075
Cash and cash equivalents
at end of period 41,687 39,452 30,817
----------------------------------- -------- ------------ ------------- ----------
(1) Share options 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 (refer to Note 28 of the 3
January 2015 published financial statements for further
details).
1. General Information
The condensed financial information for the 26 weeks to 4 July
2015 does not constitute statutory accounts for the purposes of
Section 434 of the Companies Act 2006 and has not been audited. No
statutory accounts for the period have been delivered to the
Registrar of Companies. This interim financial report constitutes a
dissemination announcement in accordance with Rule 6.3 of the
Disclosure and Transparency Rules of the United Kingdom Listing
Authority.
The condensed financial information in respect of the 53 weeks
ended 3 January 2015 has been produced using extracts from the
statutory accounts for this period. Consequently, this does not
constitute the statutory information (as defined in section 434 of
the Companies Act 2006) for the 53 weeks ended 3 January 2015,
which was audited. The statutory accounts for this period have been
filed with the Registrar of Companies. The auditor's report was
unqualified and did not contain a statement under Sections 498 (2)
or 498 (3) of the Companies Act 2006.
The next annual financial statements of the Group for the 52
weeks to 2 January 2016 will be prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS"). The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34 'Interim Financial
Reporting'. The financial information in this Interim Report has
been prepared in accordance with the recognition and measurement
criteria of IFRS and the disclosure requirements of the Listing
Rules and Disclosure and Transparency Rules. The auditor has
reviewed the financial information in this Interim Report and their
report is set out on page 35.
The Interim Report was approved by the Directors on 11 August
2015 and is being made available to shareholders on the same date
on the Company's website at www.johnstonpress.co.uk.
2. Accounting Policies
Basis of Preparation
The interim financial information has been prepared on the
historical cost basis, except for the revaluation of certain
properties, pension balances and financial instruments including
borrowings. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets.
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing the unaudited condensed consolidated
interim financial statements.
In June 2014 the Company completed its Capital Refinancing Plan.
Gross proceeds of GBP140.0 million were received through the
Placing and Rights Issue and gross proceeds of GBP220.5 million
were received from the bond of GBP225.0 million 8.625% senior
secured notes due 2019 at a discount of GBP4.5 million. In
addition, the Company entered into a 4 year and 6 month GBP25
million Super Senior Revolving Facility Agreement ("RCF") which
remains undrawn. Under the RCF, the Group has one financial
covenant, measured quarterly, requiring the achievement of a
specified ratio of consolidated leverage to consolidated EBITDA for
the last 12 months. The Company is operating with headroom on the
covenants.
Basis of Accounting
The financial statements have been prepared on the basis of the
significant accounting policies set out in the financial statements
for the 53 week period ended 3 January 2015 with the exception of
the adoption of new or amended standards and interpretations in the
current year as follows:
The following new and amended IFRSs have been adopted for the 26
week period which commenced 3 January 2015 to 4 July 2015:
Accounting standard Requirements Impact on financial statements
-------------------------------------- -------------------------------------- --------------------------------------
IFRIC 21 Levies Clarifies how an entity should None; Refer to Pensions disclosures
account for liabilities to pay levies in relation to PPF and Section 75
imposed by governments. levies recognised in
the income statement in prior
periods.
-------------------------------------- -------------------------------------- --------------------------------------
Amendments to IAS 19 - Defined Introduces a narrow-scope amendment None; Refer to Pensions disclosures.
Benefit Plans: Employee to simplify the accounting for
Contributions 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.
-------------------------------------- -------------------------------------- --------------------------------------
There are numerous standards which have a mandatory application
date of on or after 1 January 2016, the details of which will be
assessed in further detail during the course of the year and
disclosed in the annual financial statements. No significant
changes are however envisaged as a result of their application.
2. Accounting Policies (continued)
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 (including
redundancy and business transformation consultancy costs) along
with material items including for example significant pension
related costs, the disposal or exit of a significant property
directly linked to restructuring, one time incentive plans or Value
Creation Plan 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.
Valuation of publishing titles on acquisition
The Group's policies require that a fair value at the date of
acquisition be attributed to the publishing titles owned by each
acquired entity. The Group's management uses its judgement to
determine the fair value attributable to each acquired publishing
title taking into account the consideration paid, the earnings
history and potential of the title, any recent similar
transactions, industry statistics such as average earnings
multiples and any other relevant factors.
The publishing titles are considered to have indefinite economic
lives due to the historic longevity of the brands and the ability
to evolve the brands in the changing media environment.
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
that are set out in Note 31 of the 3 January 2015 financial
statements, and are amended to take account of estimated levels of
share vesting and exercise.
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 where the
unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
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.
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 period,
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 six 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. At the interim period an
impairment review has been undertaken resulting in a reduction of
headroom however, no impairment charge is considered necessary for
recognition in the period (28 June 2014: nil, 3 January 2015:
GBP21.6m). The carrying value of publishing titles at 4 July 2015
was GBP511.6 million (28 June 2014: GBP533.1m; 3 January 2015:
GBP511.6m). Details of the impairment reviews that the Group
performs are provided in Note 11.
Determining whether print presses are impaired requires an
estimation of the value in use of each print site. The value in use
calculation requires the Group to estimate the future cash flows
expected to arise from the print sites and a suitable discount rate
in order to calculate present value.
Valuation of pension liabilities
The Group records in its Statement of Financial Position a
liability equivalent to the greater of the deficit on the Group's
defined benefit pension schemes or the discounted value of agreed
future contributions required under IFRIC14. This liability is
determined with advice from the Group's actuarial advisers each
year and can fluctuate based on a number of factors, some of which
are outside the control of management. The main factors that can
impact the valuation include:
-- the discount rate used to discount future liabilities back to
the present date, determined 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 4
July 2015 are set out in Note 15.
3. Business Segments
Information reported to the Group's Chief Executive for the
purposes of resource allocation and assessment of segment
performance is focused on the two operating segments of Publishing
(in print and online) and Contract Printing. These are the only two
operating segments of the Group.
a) Segment Revenues and Results
Publishing Contract Eliminations Group
printing
26 weeks period ended 4 July GBP'000 GBP'000 GBP'000 GBP'000
2015
--------------------------------------- ----------- ---------- ------------- --------
Revenue
Print advertising 64,112 - - 64,112
Digital advertising 16,527 - - 16,527
Newspaper sales 37,557 - - 37,557
Contract printing - 6,247 - 6,247
Other 3,564 864 - 4,428
--------------------------------------- ----------- ---------- ------------- --------
Total external sales 121,760 7,111 - 128,871
Inter-segment sales(1) - 16,008 (16,008) -
Exceptional items - - - -
Total revenue 121,760 23,119 (16,008) 128,871
--------------------------------------- ----------- ---------- ------------- --------
Operating profit/(loss)
Segment result before exceptional
items 25,018 1,380 - 26,398
Exceptional items (3,806) (350) - (4,156)
Net segment result 21,212 1,030 - 22,242
--------------------------------------- ----------- ---------- ------------- --------
Investment income 762
Net finance expense on pension
liabilities/assets (1,504)
Change in fair value of borrowings(2) (9,333)
Net finance costs (9,987)
Share of result of associates -
--------------------------------------- ----------- ---------- ------------- --------
Profit before tax 2,180
Tax (674)
--------------------------------------- ----------- ---------- ------------- --------
Profit after tax for the period
- continuing operations 1,506
--------------------------------------- ----------- ---------- ------------- --------
Loss after tax for the period
- discontinued operations (2)
--------------------------------------- ----------- ---------- ------------- --------
Consolidated Profit after
tax for the period 1,504
--------------------------------------- ----------- ---------- ------------- --------
(1) Inter segment sales are charged at prevailing market
prices.
(2) Relates to changes in fair value of hedges, retranslation of
USD and retranslation of Euro denominated debt.
Publishing Contract Eliminations Group
printing
26 weeks period ended 28 GBP'000 GBP'000 GBP'000 GBP'000
June 2014
----------------------------------- ----------- ---------- ------------- ---------
Revenue
Print advertising 70,853 - - 70,853
Digital advertising 14,068 - - 14,068
Newspaper sales 39,720 - - 39,720
Contract printing - 6,314 - 6,314
Other 4,099 757 - 4,856
----------------------------------- ----------- ---------- ------------- ---------
Total external sales 128,740 7,071 - 135,811
Inter-segment sales(1) - 19,089 (19,089) -
Exceptional items - - - -
Total revenue 128,740 26,160 (19,089) 135,811
----------------------------------- ----------- ---------- ------------- ---------
Operating (loss)/profit
Segment result before exceptional
items 26,140 1,697 - 27,837
Exceptional items (2,765) (154) - (2,919)
Net segment result 23,375 1,543 - 24,918
----------------------------------- ----------- ---------- ------------- ---------
Investment income 50
Net finance expense on pension
liabilities/assets (1,750)
Net IAS 21/39 adjustments(2) 1,013
Net finance costs (30,529)
Share of result of associates -
----------------------------------- ----------- ---------- ------------- ---------
Loss before tax (6,298)
Tax 3,675
----------------------------------- ----------- ---------- ------------- ---------
Loss after tax for the period
- continuing operations (2,623)
----------------------------------- ----------- ---------- ------------- ---------
Profit after tax for the
period - discontinued operations 366
----------------------------------- ----------- ---------- ------------- ---------
Consolidated loss after tax
for the period (2,257)
----------------------------------- ----------- ---------- ------------- ---------
(1) Inter segment sales are charged at prevailing market
prices.
(2) Relates to 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 described in the Group's annual
consolidated financial statements for the 53 weeks to 3 January
2015. Segment result represents the 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 for the purposes of
resource allocation and assessment of segment performance.
The Group, in common with the rest of the publishing industry,
is subject to the main holiday periods of Easter, summer and
Christmas as well as school and bank holidays. Since these fall
across both half years, the Group's financial results are not
usually subject to significant seasonal variations.
b) Segment Assets
4 July 2015 28 June 2014 3 January
2015
Notes GBP'000 GBP'000 GBP'000
--------------------------- ------- ------------ ------------- ----------
Assets
Publishing 620,123 646,466 609,452
Contract printing 32,215 33,549 31,538
------------------------------------ ------------ ------------- ----------
Total segment assets 652,338 680,015 640,990
------------------------------------ ------------ ------------- ----------
Unallocated assets - 15 -
Consolidated total assets 652,338 680,030 640,990
------------------------------------ ------------ ------------- ----------
For the purposes of monitoring segment performance and
allocating resources between segments, the Group's Chief Executive
monitors the tangible, intangible and financial assets attributable
to each segment. All assets are allocated to reportable segments
with the exception of available-for-sale investments and derivative
financial instruments.
c) Other Segment Information
26 weeks to 4 July 26 weeks to 28 June 53 weeks to 3
2015 2014 January 2015
Contract Contract Contract
Publishing printing Group Publishing printing Group Publishing printing Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- --------- -------- ----------- ---------- -------- ----------- ---------- --------
Additions to
property,
plant and
equipment 2,698 548 3,246 1,987 28 2,015 7,044 105 7,149
Depreciation
expense 1,758 1,242 3,000 1,883 819 2,702 3,869 1,638 5,507
Impairment of
property,
plant and
equipment - - - - - - 2,667 - 2,667
Impairment of
intangibles - - - - - - 21,568 - 21,568
-------------- ----------- --------- -------- ----------- ---------- -------- ----------- ---------- --------
4. Exceptional Items
Exceptional items included with the Group Income Statement
are:
26 weeks to 26 weeks 53 weeks
4 July 2015 to to
28 June 2014 3 January
2015
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ------------- -------------- -----------
Operating expenses
Pensions
Plan expenses 15 - (380) (380)
Pension protection fund
contribution (859) (680) (2,038)
Section 75 pension debt - - -
Newspaper Society Pension
Scheme - - (873)
Restructuring costs (2,390) (2,315) (10,896)
One-off incentive plans - - (4,321)
Value creation plan 17 (463) - (231)
Gain on disposal - 860 869
Other (444) (404) (2,334)
Total exceptional operating
expenses (4,156) (2,919) (20,204)
------------------------------- ------ ------------- -------------- -----------
Impairment of :
Intangible assets - - (21,568)
Property, plant and equipment - - (2,667)
Assets held for sale - - (300)
------------------------------- ------ ------------- -------------- -----------
Total exceptional impairment - - (24,535)
------------------------------- ------ ------------- -------------- -----------
Total exceptional finance
costs 6c - (9,046) (9,046)
------------------------------- ------ ------------- -------------- -----------
Net exceptional items (4,156) (11,965) (53,785)
Taxation on exceptional
items 610 2,485 11,427
------------------------------- ------ ------------- -------------- -----------
Total exceptional items
after tax (3,546) (9,480) (42,358)
------------------------------- ------ ------------- -------------- -----------
Operating expenses - pensions
The Pension Protection Fund levy is estimated to be GBP0.7m for
the year ending 31 March 2016 (2014/2015 invoice: GBP2.7million).
In the event that the 2015/2016 PPF levy is less than GBP3.2
million, the Group will also pay additional contributions to the
Johnston Press Pension Plan equal to the amount the levy falls
below GBP3.2 million, up to a maximum of GBP2.5 million. Refer note
15. Historically, the pension levy was charged at the capped rate,
reflecting historic high gearing. The charge is expected to fall in
2015 reflecting the reduced gearing and actions to optimise
flexible apportionment.
In the period there are no exceptional pension plan expenses, in
the prior year additional administration expenses of GBP0.4 million
were incurred in connection with refinancing.
In the prior year, the Group recognised GBP0.9 million charge
reflecting commitment over the next 24 years to address the deficit
of the Newspaper Society's defined benefit pension scheme. At the
half-year a provision is held on the balance sheet for the
remaining unpaid commitment.
Operating expenses - restructuring costs
Restructuring costs primarily relate to reorganisation including
redundancy and business transformation programme costs. In the
prior year other restructuring costs include early lease
termination costs, empty property costs, dilapidations, and other
associated legal and consulting fees and dual-running office
costs.
Operating expenses - incentive plans
A GBP0.5 million charge non-cash for the value creation plan was
incurred in the period, (3 January 2015: GBP0.2 million). The prior
year includes a one time refinancing bonus, payable in March 2016
aimed at incentivisation and retention of senior managers (3
January 2015: GBP3.9 million) and a one-off bonus opportunity made
available to the Executive Directors (3 January 2015: GBP0.4
million).
Operating expenses - gain on disposal
In the period there were no exceptional gains on disposal. In
the prior year, in line with Group policy, disposal gains of GBP0.8
million were recognised in exceptional items and a GBP0.1 million
gain on disposal of print press equipment.
Within operating profit, a net gain of GBP0.3m (28 June 2014:
GBP0.5m gain, 3 January 2015: GBP1.0 million gain) from several
property and vehicle disposals was reported in the period; this is
in line with Group policy.
Operating expenses - other
The Group incurred other operating expenses of GBP0.4 million
(28 June 2014: GBP0.4 million, 3 January 2015: GBP2.3 million)
relating to professional fees for corporate strategy review and
aborted and other disposals and one-off trade obligations.
Impairment of intangible assets, property, plant and equipment
and assets held for sale
In the period there was no impairment of intangible assets (3
January 2015: GBP21.5 million), and no write-downs in the value of
presses or property assets in the period (3 January 2015: GBP2.9
million).
Finance costs
There are no exceptional finance costs in the period. In the
prior year the exceptional finance costs were incurred in relation
to the refinancing, refer to the 2014 Annual report for further
detail.
Tax-effect of exceptional items
The Group has disclosed a GBP0.6 million tax credit (28 June
2014: GBP2.5m, 3 January 2015: GBP11.4m) in relation to the total
exceptional items of GBP4.2 million (28 June 2014: GBP12.0m, 3
January 2015: GBP53.8m)
5. Investment Income
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------- ----------
Income from available
for sale investments 703 - 2,109
Income from other investments - 31 51
Interest receivable 59 19 49
-------------------------------- ------------ ------------- ----------
762 50 2,209
------------------------------- ------------ ------------- ----------
6. Finance Costs
a) Net Finance Expense on Pension Liabilities/Assets
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
----------------------------- --- ------------ ------------- ----------
Interest on assets 8,389 9,590 19,376
Interest on liabilities (9,893) (11,340) (22,706)
----------------------------- --- ------------ ------------- ----------
Net finance expense on
pension liabilities/assets 15 (1,504) (1,750) (3,330)
----------------------------- --- ------------ ------------- ----------
b) Fair value adjustment
In the period the market price of the 8.625% Senior Secured
Bonds 2019 traded up from the ask price at 3 January 2015 of
95.750% to 99.898% at 4 July 2015 (28 June 2014: 98.250%). This
resulted in an adjustment to the value of the bond and charge to
the income statement of GBP9.3 million (28 June 2014: GBP0.6
million loss; 3 January 2015: GBP5.1million gain). Refer to note
14.
c) Finance Costs
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------- ----------
Interest on bond (9,703) (2,286) (12,290)
Interest on bank overdrafts
and loans (187) (11,561) (11,163)
Payment-in-kind interest - (5,345) (5,345)
Amortisation of term debt
issue costs (97) (2,291) (2,389)
Total operational finance
costs (9,987) (21,483) (31,187)
------------------------------ ------------ ------------- ----------
Interest accrual release - 9,181 9,181
Term debt issue costs - (7,145) (7,145)
------------------------------ ------------ ------------- ----------
Gain on debt extinguishment - 2,036 2,036
------------------------------ ------------ ------------- ----------
Refinancing fees - (11,082) (11,082)
Total exceptional finance
costs - (9,046) (9,046)
------------------------------ ------------ ------------- ----------
Total finance costs (9,987) (30,529) (40,233)
------------------------------ ------------ ------------- ----------
7. Tax
The tax charge/(credit) comprises:
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------- ----------
Current tax
Corporation tax charge 75 - -
Adjustment in respect
of prior periods 253 - (665)
------------------------------- ------------ ------------- ----------
Total Current tax charge
/ (credit) 328 - (665)
------------------------------- ------------ ------------- ----------
Deferred tax
Deferred tax charge /
(credit) 346 (3,675) (7,915)
------------------------------- ------------ ------------- ----------
Total Deferred tax charge
/ (credit) 346 (3,675) (7,915)
------------------------------- ------------ ------------- ----------
Total tax charge / (credit) 674 (3,675) (8,580)
------------------------------- ------------ ------------- ----------
Reconciliation of tax % % %
charge / (credit)
Standard rate of corporation
tax 20.3 (21.5) (21.5)
Tax effect of items that
are not deductible or
not taxable in determining
taxable profit 0.4 (35.7) (12.8)
Unrecognised deferred
tax assets - - 1.5
Prior period adjustment 2.3 - (2.8)
Effect of other tax rates (1.5) (1.1) (0.3)
Tax charge / (credit)
rate 21.5 (58.3) (35.9)
------------------------------- ------------ ------------- ----------
Corporation tax for the interim period is charged at 21.5% (28
June 2014: credited at 58.3%, 3 January 2015: credited at 35.9%),
including deferred tax, this represents the best estimate of the
average annual effective tax rate expected for the full year,
applied to the pre-tax income of the six month period.
The basic rate tax applied for the 2015 period of 20.25% (2014:
21.5%) was a blended rate due to the tax rate of 21% in effect for
the first quarter of 2015, changing to 20% from 1 April 2015 under
the 2013 Finance Act. (2014: 23% in effect for first quarter and
21% from 1 April 2014). Note 4 includes details of tax effect on
exceptionals.
The calculation of the tax charge for the period includes the
increase or decrease in the bond mark to market valuation. Refer to
note 6b.
Legislation was introduced in the Summer Finance Bill 2015 to
reduce the main rate of corporation tax from 20% to 19% from 1
April 2017 and 18% from 1 April 2020. The impact of deferred tax
re-measurement should be recorded when the legislation is
substantively enacted for IFRS purposes. We expect the Finance Bill
to be substantively enacted in September 2015. As this is after the
Interim balance sheet date, adjustment is not required for the
purposes of the estimated annual effective tax rate.
8. Discontinued operations
There were no activities discontinued in the period.
-- On 1 April 2014 the Group completed the disposal of the
Republic of Ireland titles to Iconic Newspapers, part of Mediaforce
Limited, for a cash consideration of GBP7.1 million. For full
details of the transaction refer to note 12 of the 3 January 2015
financial statements.
-- In October 2014 the activities of the Letterbox free title
and leaflet distribution business were outsourced to Mediaforce.
They were not considered material for the purposes of disclosure as
discontinued business however they have been disclosed as an
"underlying adjustment" in the 26 week period end 4 July 2015
financial statements.
9. Earnings Per Share
The calculation of earnings per share is based on the following
profits/(losses) and weighted average number of shares:
Continuing and discontinued operations
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------- ----------
Earnings
Profit/(loss) for the
period 1,504 (2,257) (15,100)
Preference dividend(1) (76) - (152)
--------------------------------- ------------ ------------- ----------
Earnings for the purposes
of basic and diluted earnings
per share 1,428 (2,257) (15,252)
Exceptional items (after
tax) 3,546 9,480 42,325
Underlying adjustments(3) 9,142 2,313 (1,613)
--------------------------------- ------------ ------------- ----------
Earnings for the purposes
of underlying earnings
per share 14,116 9,536 25,460
--------------------------------- ------------ ------------- ----------
000's 000's 000's
-------------------------------- -------- ---------- ----------
Number of shares
Weighted average number
of ordinary shares for
the purpose of basic earnings
per share and diluted
earnings per share(2) 105,273 2,464,161 3,519,924
--------------------------------- -------- ---------- ----------
Pence Pence Pence
------------------------ ------ ------- -------
Earnings per share (p)
Basic 1.43 (0.09) (0.43)
Underlying(3) 13.41 0.39 0.72
Diluted(4) 1.43 (0.09) (0.43)
------------------------- ------ ------- -------
Based on the current share price 18,081,000 outstanding shares
will not crystalise and no dilution is reflected.
(1) In line with IAS 33, the preference dividend and the number
of preference shares are excluded from the calculation of earnings
per share.
(2) The weighted average number of ordinary shares are shown
excluding share held by the company's employee benefit trust.
(3) Underlying figures are presented to show the effect of
excluding exceptional items and other underlying adjustments from
earnings per share. Underlying adjustments have been included in
prior period comparatives to allow consistent reporting of EPS for
underlying purposes.
(4) 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.
000's 000's 000's
-------------------------------------------- -------- ---------- ----------
Weighted average number
of ordinary shares for
the purpose of basic earnings
per share and diluted
earnings per share(2) 105,273 2,464,161 3,519,924
Effect of dilutive potential
ordinary shares assuming
all outstanding shares
vest:
* warrants and employee share options 18,081 145,991 14,472
Number of shares for the
purposes of diluted earnings
per share 123,354 2,610,152 3,534.396
--------------------------------------------- -------- ---------- ----------
Pence Pence Pence
--------------------------- ------ ------ ------
Earnings per share (p)
Proforma Underlying fully
diluted(5) 11.44 0.37 0.72
---------------------------- ------ ------ ------
(5) The fully diluted position assumes all outstanding existing
shares vest in full.
9. Earnings Per Share (continued)
Continuing operations
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------- ----------
Earnings
Profit/(loss) for the
period 1,506 (2,623) (15,336)
Preference dividend(1) (76) - (152)
--------------------------------- ------------ ------------- ----------
Earnings for the purposes
of basic and diluted earnings
per share 1,430 (2,623) (15,488)
Exceptional items (after
tax) 3,546 9,480 42,358
Underlying adjustments(3) 9,142 2,313 (1,613)
--------------------------------- ------------ ------------- ----------
Earnings for the purposes
of underlying earnings
per share 14,118 9,170 25,257
--------------------------------- ------------ ------------- ----------
000's 000's 000's
-------------------------------- -------- ---------- ----------
Number of shares
Weighted average number
of ordinary shares for
the purpose of basic earnings
per share and diluted
earnings per share(2) 105,273 2,464,161 3,519,924
--------------------------------- -------- ---------- ----------
Pence Pence Pence
-------------------------------- -------- ---------- ----------
Earnings per share (p)
Basic 1.43 (0.11) (0.44)
Underlying(3) 13.41 0.37 0.72
Diluted(4) 1.43 (0.11) (0.44)
--------------------------------- -------- ---------- ----------
Based on the current share price 18,081,000 outstanding shares
will not crystalise and no dilution is reflected.
(1) In line with IAS 33, the preference dividend and the number
of preference shares are excluded from the calculation of earnings
per share.
(2) The weighted average number of ordinary shares are shown
excluding share held by the company's employee benefit trust of 0.6
million (0.5 million 3 January 2015).
(3) Underlying figures are presented to show the effect of
excluding exceptional items and other underlying adjustments from
earnings per share. Underlying adjustments have been included in
prior period comparatives to allow consistent reporting of EPS for
underlying purposes.
(4) 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.
000's 000's 000's
-------------------------------------------- -------- ---------- ----------
Weighted average number
of ordinary shares for
the purpose of basic earnings
per share and diluted
earnings per share(2) 105,273 2,464,161 3,519,924
Effect of dilutive potential
ordinary shares assuming
all outstanding shares
vest:
* warrants and employee share options 18,081 145,991 14,472
Number of shares for the
purposes of diluted earnings
per share 123,354 2,610,152 3,534,396
--------------------------------------------- -------- ---------- ----------
Pence Pence Pence
--------------------------- ------ ------ ------
Earnings per share (p)
Proforma Underlying fully
diluted(5) 11.44 0.35 0.71
---------------------------- ------ ------ ------
(5) The fully diluted position assumes all outstanding existing
shares vest in full.
10. Dividends
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------- ----------
Amounts recognised as
distributions in the period
Preference dividends paid 76 - 152
------------------------------- ------------ ------------- ----------
Pence Pence Pence
------------------------- ------ ------ ------
Dividend paid per share
Preference 6.88 - 13.75
-------------------------- ------ ------ ------
Following the capital reduction in the first half of the year a
preference dividend totalling GBP228,000 was paid. Of this
GBP152,000 had been accrued in the prior period. There were no
ordinary dividends proposed but not paid or included in the
accounting records in either of the comparative periods shown.
Refer to Note 16a for additional explanations of resolutions made
on dividends on preference shares.
11. Intangible Assets
Publishing Digital Goodwill Total
titles intangible
assets
Notes GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- ----------- ------------ --------- ----------
Cost
Opening balance 1,149,123 3,013 - 1,152,136
Additions - 1,096 85 1,181
Disposals - - - -
Closing balance 1,149,123 4,109 85 1,153,317
-------------------------------------- ----------- ------------ --------- ----------
Accumulated impairment
losses and amortisation
Opening balance 637,561 251 - 637,812
Amortisation for the period - 162 - 162
Disposals - - - -
Impairment losses for the - - - -
period
----------------------------- ------- ----------- ------------ --------- ----------
Closing balance 637,561 413 - 637,973
-------------------------------------- ----------- ------------ --------- ----------
Carrying amount
Opening balance 511,562 2,762 - 514,324
Closing balance 511,562 3,696 85 515,344
-------------------------------------- ----------- ------------ --------- ----------
The carrying amounts of the publishing titles by cash generating
unit (CGU) is as follows, and remains unchanged since year end:
4 July
2015
GBP'000
-------------------------- --------
Scotland 52,127
North 217,231
Northwest 47,860
Midlands 120,082
South 38,375
Northern Ireland 35,887
Total carrying amount of
publishing titles 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 of a possible triggering
event or any potential evidence 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 was 12.0% (3 January 2015:
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.
Discounted cash flow forecasts are prepared using:
-- the most recent financial budgets and projections approved by
management updated to reflect current trading trends to the half
year and revised estimates for the full 2015 year 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.
There was no impairment charge recognised for the period ended 4
July 2015 (3 January 2015: GBP21.6 million). There has been no
change in the carrying value of any CGU's in the period, as values
in use remain higher than this respective carrying value.
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
GBP9.0 million and an increase in the discount rate of 0.5% would
result in an impairment of GBP8.2 million. Applying both
sensitivities would result in an impairment being recorded in North
and Midlands CGU's.
Digital intangible assets
Digital intangible assets primarily relate to the Group's local
websites and the development of the 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.
Acquisition of publishing titles
On 3 July 2015 Johnston Publishing Limited a subsidiary of
Johnston Press plc acquired 100% of the share capital of Love News
Media Limited, the publisher of the Brighton & Hove
Independent, a free weekly title with a circulation of over 13,000
copies, for a total consideration of GBP90,000. Of this GBP30,000
has been deferred and will be settled subject to performance
requirements set out in the acquisition agreement. On acquisition
the company had net assets of GBP5,000 and management consider that
the remaining GBP85,000 fair value be attributed to goodwill. The
title, including its popular associated website:
www.brightonandhoveindependent.co.uk and @BrightonIndy twitter
following complements the South portfolio of assets.
12a. Property, Plant & Equipment
Freehold
land and Leasehold Plant and Motor
buildings buildings machinery Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ---------- ---------- --------- --------
Cost
At 3 January 2015 60,786 6,132 122,460 2,672 192,050
Additions - 291 2,955 - 3,246
Acquisitions - - 5 - 5
Disposals - (27) (473) (1,267) (1,767)
Transferred to/from assets held
for sale during the period (136) - (20) - (156)
Reclassification - (2) 2 - -
Exchange differences 26 (103) 91 7 21
At 4 July 2015 60,676 6,291 125,020 1,412 193,399
-------------------------------- ---------- ---------- ---------- --------- --------
Depreciation
At 3 January 2015 38,656 2,079 95,309 2,672 138,716
Acquisitions - - 2 - 2
Disposals - (27) (460) (1,267) (1,754)
Charge for the period 238 165 2,597 - 3,000
Transferred to/from assets held
for sale during the period (31) - (20) - (51)
Reclassification - - - - -
Exchange differences 15 (84) 91 7 29
-------------------------------- ---------- ---------- ---------- --------- --------
At 4 July 2015 38,878 2,133 97,519 1,412 139,942
-------------------------------- ---------- ---------- ---------- --------- --------
Carrying amount
At 3 January 2015 22,130 4,053 27,151 - 53,334
-------------------------------- ---------- ---------- ---------- --------- --------
At 4 July 2015 21,798 4,158 27,501 - 53,457
-------------------------------- ---------- ---------- ---------- --------- --------
12b. Assets classified as held for sale
The Company held GBP0.9m assets held for sale at fair value as
shown below, the assets held for sale are classified as Level 3
accordingly to IFRS 13. The Directors have estimated the sale
values based on the current price that the asset is being marketed
at and advice from independent property agents.
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------- ----------
Freehold land and buildings 759 2,079 1,114
Leasehold buildings 178 125 5
Plant and machinery - 185 182
Carrying amount 937 2,389 1,301
------------------------------ ------------ ------------- ----------
13. Derivative Financial Instruments
The Group no longer holds any financial derivatives instruments
as the remaining derivatives from 28 June 2014 have expired. These
financial instruments were classified as Level 2 according to IFRS
13 and were valued with reference to prevailing quoted forward
exchange rates of the US Dollar to the British Pound at the balance
sheet date, the amount outstanding at 20 June 2014 was
GBP15,000.
14. Borrowings
The borrowings at 4 July 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 6b).
See below the breakdown of the 8.625% Senior secured notes
2019:
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
------------------------ ------------ ------------- ----------
Principal Amount 225,000 225,000 225,000
Bond discount (4,500) (4,500) (4,500)
Fair value (gain)/loss 4,271 563 (5,063)
Total borrowings 224,771 221,063 215,437
------------------------ ------------ ------------- ----------
14. Borrowings (continued)
The borrowings are disclosed in the financial statements as:
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
------------------------ ------------ ------------- ----------
Current borrowings - - -
Non-current borrowings 224,771 221,063 215,437
Total borrowings 224,771 221,063 215,437
------------------------ ------------ ------------- ----------
The Group's net debt is:
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------- ----------
Gross borrowings as above 224,771 221,063 215,437
Cash and cash equivalents (41,687) (39,452) (30,817)
Impact of foreign currency - (15) -
hedge instruments
---------------------------- ------------ ------------- ----------
Net debt 183,084 181,596 184,620
---------------------------- ------------ ------------- ----------
Furthermore, the Group's GBP25 million New Revolving Credit
Facility (RCF) currently remains undrawn.
15. 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).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. The Group also applies the requirements of IFRIC 14 as
they relate to the level of contributions agreed as part of
refinancing. The company has no unconditional right ot any
surplus.
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 per cent of basic
salary, for employees statutorily enrolled, through to 12 per cent
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 schemes are held separately from those of the Group.
The contributions are determined by a qualified actuary on the
basis of a triennial valuation using the projected unit method 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 Company 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 unpaid 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 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, and
settled all unpaid levies. The estimated levy expense for year
ending March 2016 is GBP0.7 million. As a result of the expected
levy reduction in 2015/16, the Group is committed to a maximum
additional pension contribution of GBP2.5 million.
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. 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 have been wound up.
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
Note 4 July 2015 28 June 2014 3 January
GBP'000s GBP'000s 2015
GBP'000s
--------------------------------- ----- ------------ ------------- ----------
Employment costs:
Defined contribution
scheme (2,188) (2,250) (4,425)
Defined benefit scheme
Plan expenses(1) (162) (729) (1,217)
Pension protection fund (859) (680) (2,038)
Net finance cost on Johnston
Press Pension Plan 6(a) (1,504) (1,750) (3,330)
--------------------------------- ----- ------------ ------------- ----------
Total defined benefit
scheme (2,525) (3,159) (6,585)
--------------------------------- ----- ------------ ------------- ----------
Total pension costs (4,713) (5,409) (11,010)
--------------------------------- ----- ------------ ------------- ----------
(1) Relates to administrative expenses incurred in managing the
pension fund amounting to GBP162,000 recognised within operating
items (2014: GBP729,000 (GBP349,000 recognised within operating
items before exceptional items and GBP380,000 recognised within
operating exceptional items)).
Other comprehensive income - (loss)/gain on pension
4 July 2015 28 June 2014 3 January
GBP'000s GBP'000s 2015
GBP'000s
------------------------------------ ------------ ------------- ----------
(Losses)/gains on plan assets
in excess of interest (3,897) 1,208 48,120
Experience gains and losses
arising on the benefit obligation - (1,481) (1,838)
Changes in assumptions underlying
the present value of the
benefit obligation 9,041 (11,874) (65,261)
Additional defined benefit
obligation under IFRIC 14 (3,900) - (2,971)
Actuarial (loss)/gain recognised
in the statement of comprehensive
income 1,244 (12,147) (21,950)
Deferred tax (249) 2,429 4,390
------------------------------------ ------------ ------------- ----------
Actuarial (loss)/gain recognised
in the statement of comprehensive
income net of tax 995 (9,718) (17,560)
------------------------------------ ------------ ------------- ----------
Statement of financial position - net defined benefit pension
(deficit)/surplus and other pension related liabilities
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------- ----------
Amounts included in the
Group Statement of Financial
Position :
Fair value of scheme assets 477,602 425,718 480,479
Present value of defined
benefit obligations (557,794) (512,656) (567,509)
Additional defined benefit
obligation under IFRIC 14 (6,871) - (2,971)
Total liability recognised (87,063) (86,938) (90,001)
Amount included in current
liabilities 6,489 6,300 6,489
Amount included in non-current
liabilities (80,574) (80,638) (83,512)
-------------------------------- ------------ ------------- ----------
15. Retirement Benefit Obligation (continued)
Analysis of amounts recognised of the net defined benefit
pension (deficit)/surplus
4 July 28 June 2014 3 January
2015 2015
Notes GBP'000 GBP'000 GBP'000
----------------------------------------------- ------ --------- ------------- ----------
Net defined benefit pension (deficit)/surplus
at beginning of period (90,001) (78,334) (78,334)
----------------------------------------------- ------ --------- ------------- ----------
Defined benefit obligation at
beginning of period 567,509 498,640 (498,640)
Income statement :
Current service cost - - -
Past service cost - - -
Interest cost 6a 9,893 11,340 (22,706)
Other comprehensive income :
Experience (gains) and losses - 1,481 (1,838)
Re-measurements of defined benefit
obligation :
arising from changes in demographic
assumptions - - 1,536
arising from changes in financial
assumptions (9,041) 11,874 (66,797)
Cash flows :
Age related rebates - - -
Benefits paid (by fund and Group) (10,567) (10,679) 20,936
----------------------------------------------- ------ --------- ------------- ----------
Defined benefit obligation at
end of the period 557,794 512,656 (567,509)
Fair value of plan assets at beginning
of period 480,479 420,306 420,306
Income statement :
Interest income on plan assets 6a 8,389 9,590 19,376
Pension Protection Fund payments - (680) -
Administration costs - (729) (837)
Other comprehensive income :
Return on plan assets less gain (3,897) 1,208 48,120
Cash flows :
Company contributions - receivable - 503 -
Company contributions 18 3,198 6,199 14,450
Age related rebates - - -
Benefits paid (by fund and Group) (10,567) (10,679) (20,936)
----------------------------------------------- ------ --------- ------------- ----------
Fair value of plan assets at end
of period 477,602 425,718 480,479
Additional defined benefit obligation
under IFRIC 14 (6,871) - (2,971)
----------------------------------------------- ------ --------- ------------- ----------
Net defined benefit pension (deficit)/surplus
at end of period (87,063) (86,938) (90,001)
----------------------------------------------- ------ --------- ------------- ----------
Analysis of fair value of plan assets
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------- ----------
Equities 81,827 63,593 67,283
Multi-asset credit - 99,678
Bonds 110,189 101,804 -
Diversified Growth Funds 169,246 147,198 152,231
Liability Driven Investments 112,548 - 148,075
Others(1) 3,792 113,123 13,212
--------------------------------- ------------ ------------- ----------
Total fair value of plan assets 477,602 425,718 480,479
--------------------------------- ------------ ------------- ----------
(1) Other mainly includes LDI, protected Rights Funds, index
linked gilts, cash and cash equivalents.
Following extensive discussions with the pension trustees,
Pension Regulator and the Company, it has been agreed that the mix
of investments should be split 50% growth allocation and 50%
protection allocation.
Analysis of financial assumptions
Valuation at Valuation Valuation
at at
4 July 2015 28 June 2014 3 January
2015
------------------------------ ------------- ------------- -----------
Discount rate 3.85% 4.35% 3.55%
Future pension increases
Deferred revaluations (CPI) 2.20% 2.05% 1.75%
Pensions in payment (RPI) 3.20% 3.25% 2.85%
Life expectancy
Male 22.0 years 22.2 years 22.0 years
Female 23.9 years 24.2 years 23.9 years
------------------------------ ------------- ------------- -----------
Other pension related obligations
The Company 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 2015/16 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 at the intended time. The Group's lawyers 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 has finalised an application to court which it has
provided to lawyers acting on behalf of a representative
beneficiary for the relevant members of the Plan, prior to its
submission to the Court. The Company expects the application to be
submitted shortly with the expectation that the hearing would take
place during the year or early next 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) to be in
the region of GBP8 million.
IFRIC 14
At 4 July 2015, the Group was liable to an IFRIC 14 liability of
GBP87.1 million (3 January 2015: GBP90.0 million) as the cash
contributions agreed as part of the Recovery Plan dated 29 July
2014 were greater than the level of the deficit recorded. The
contributions were discounted by applying a discount rate of 3.85%
resulting in an additional liability recognition of
GBP6,871,000.
16a. Share Capital
Ordinary Shares GBP'000
------------------------------------------------------------------- ------------------ --------
Opening Balance 3 January 2015 and closing balance at 4 July 2015 105,877,777 1,059
Preference Shares GBP'000
------------------------------------------------------------------- ------------------ --------
Opening Balance 3 January 2015 & Closing Balance 4 July 2015 1,105,600 1,106
------------------------------------------------------------------- ------------------ --------
Total Share Capital 3 January 2015 & Closing Balance 4 July 2015 116,171
------------------------------------------------------------------- ------------------ --------
4 July 2015 3 Jan 2015
GBP'000 GBP'000
---------------------------------------------------------- ------------ -----------
Issued
105,877,777 ordinary shares of 1p each 1,059 1,059
690,294,608 deferred shares of 9p each 62,126 62,126
5,293,888,850 deferred shares of 0.98p each 51,880 51,880
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 Issued share capital 116,171 116,171
---------------------------------------------------------- ------------ -----------
The Company has only one class of ordinary shares which has no
right to fixed income. All the preference shares carry the right,
subject to the discretion of the Company to distribute profits, to
a fixed dividend of 13.75% and rank in priority to the ordinary
shares. Given the discretionary nature of the dividend right, the
preference shares are considered to be equity under IAS 32.
Share warrants
During the period there were no share warrants exercised (2014:
4,833,738 ordinary shares of 10p each were issued following the
exercise of share warrants, generating GBP483,374 of cash for the
Company). At the balance sheet date 30,359,979 warrants were
outstanding, each giving the holder the right to subscribe for
0.1533799 ordinary shares at an exercise price of GBP1.9745 per
share.
16b. Share Premium
4 July 2015
GBP'000
-------------------------------- ------------
Opening Balance 3 January 2015 587,702
Share capital reduction (275,000)
Closing Balance 4 July 2015 312,702
-------------------------------- ------------
At the Company's Annual General Meeting on 27 June 2014, a
special resolution was approved to initiate a process to reduce the
Company's share premium account by GBP275 million. The capital
reduction eliminates the opening accumulated deficit of GBP179.9
million on the Company's profit and loss account and creates
positive distributable reserves of GBP98.2 million at 30 May 2015.
This enables the Company to pay out dividends and provide loans to
the Johnston Press plc Employee Share Trust ("JP EST") to satisfy
options under the Group's share ownership schemes. The completion
of the capital reduction was confirmed by an Order of the Court of
Session, Scotland on 29th April 2015 and registered at Companies
House on 5th May 2015.
17. Share-Based Payments
The Group issues share-based benefits to employees. These
share-based payments have been measured at their fair value at the
date of grant and the fair value of expected shares is being
expensed to the Income Statement on a straight-line basis over the
vesting period. Fair value has been measured using the Black
Scholes model and adjusted to reflect the most likely share vesting
and exercise pattern. The impact on the accounting periods has
been:
4 July 2015 28 June 2014 3 January
2015
GBP'000 GBP'000 GBP'000
PSP, SAYE, CSOP, Deferred
Bonus 339 131 676
Value Creation Plan(1) 4 463 - 231
----------------------------- --- ------------ ------------- ----------
Included in operating
expenses 18 802 131 907
----------------------------- --- ------------ ------------- ----------
(1) Value Creation Plan treated as exceptional.
The cumulative provision for share-based payments of
GBP14,243,000 (28 June 2014: GBP13,106,000; 3 January 2015:
GBP13,780,000) is shown as a reserve in the Group Statement of
Financial Position.
During the period the Group purchased own shares with a net cash
value of GBP888,000 to satisfy accumulated deferred bonus and CSOP
obligations.
18. Notes to the Cash Flow Statement
4 July 2015 28 June 2014 3 January
2015
Notes GBP'000 GBP'000 GBP'000
------------------------------------ ------ ------------ ------------- ----------
Operating profit 22,242 24,918 10,713
Adjustments for non-cash
exceptional items:
Impairment of publishing
titles - - 21,568
Write down of print presses - - 2,667
Write down in carrying value
of assets held for sale - - 300
Exceptional pension protection
fund levy 859 1,060 2,038
Exceptional refinancing
bonus - - 3,911
Exceptional legal and other - (1,169) -
professional fees
Exceptional redundancy costs 949 - 7,320
Value Creation plan 17 463 - 231
Cash exceptional items:
Exceptional legal and other
professional fees (1,483) - (1,169)
Exceptional redundancy costs (5,311) (14,003) (17,210)
Exceptional protection fund
contribution - - (2,718)
Adjustments for non cash
items:
Amortisation of intangible
assets 162 265 194
Depreciation charges 3,000 2,430 5,306
Charge for share based payments 17 339 131 676
Pensions administrative
expenses - 349 837
Profit on disposal of property,
plant and equipment (263) (1,589) (1,979)
Currency differences (288) 16 (34)
Operating items before working
capital changes:
Net pension funding contributions 15 (3,341) (6,199) (14,450)
Movement in long term provisions (557) (381) 613
------------------------------------ ------ ------------ ------------- ----------
Cash generated from operations
before workings capital
changes 16,771 5,828 18,814
Working capital changes
:
Decrease in inventories 370 465 2
(Increase)/decrease in receivables (143) (8,248) (2,528)
Increase/(decrease) in payables 7,985 (510) (9,970)
------------------------------------ ------ ------------ ------------- ----------
Cash generated from operations
after working capital changes 24,983 (2,465) 6,318
Adjustment for non-operating
items:
Net pension funding contributions
Annual contribution 3,179 2,850 6,300
PPF levy, S75 contributions
and plan expenses 162 3,349 6,414
Asset and business disposals - - 1,736
One-off adjustment - net
pensions funding contributions 3,341 6,199 14,450
------------------------------------ ------ ------------ ------------- ----------
Redundancy costs
Non cash exceptional redundancy
costs (949) - (7,320)
Cash exceptional redundancy
costs 5,311 14,003 17,210
------------------------------------ ------ ------------ ------------- ----------
One-off adjustment - redundancy
costs 4,362 14,003 9,890
------------------------------------ ------ ------------ ------------- ----------
Cash generated from operations
after working capital changes
and adjustment for one off
items 32,686 17,737 30,658
Adjustment for one-off items
Net pensions funding contributions (3,341) (6,199) (14,450)
Redundancy costs (4,362) (14,003) (9,890)
------------------------------------ ------ ------------ ------------- ----------
Cash generated from operations 24,983 (2,465) 6,318
------------------------------------ ------ ------------ ------------- ----------
19. Contingent Liability
On 1 April 2014, the Group entered into a sale agreement with
Iconic Newspaper Limited for the sale of the trade and assets of
the Group's regional newspapers in the Republic of Ireland,
including Donegal titles, for GBP7.1 million.
As a condition of the sale, Johnston Press plc agreed to provide
guarantee in respect of the performance of certain obligations of
the entities within the Group making the disposal of the trade and
assets up to a maximum aggregate limit of GBP3 million.
That guarantee will be effective for up to 36 months following
the completion of the sale.
20. Related Party Transactions
There have been no related party transactions that have occurred
during the first 26 week of the financial year that have materially
affected the financial position or performance of the Group during
that period and there have been no changes in the related party
transactions described in the 2014 Annual Report and Accounts that
could do so.
21. Post Balance Sheet Events
Other than changes to tax legislation not yet enacted as
mentioned in note 7 there were no significant post balance sheet
events requiring disclosure in the accounts.
Independent review report to Johnston Press plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 week period ended 4 July 2015 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated statement of
changes in equity, the condensed consolidated balance sheet, the
condensed consolidated cash flow statement and related notes 1 to
21. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 week period ended 4
July 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
11 August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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