TIDMJPR
RNS Number : 8296S
Johnston Press PLC
22 March 2016
22 March 2016
JOHNSTON PRESS PLC
RESULTS FOR THE 52 WEEKS ENDED 2 JANUARY 2016
Adjusted(1) profit before tax of GBP31.5m up 22.6%; Net debt
down by GBP14.8m(2)
Johnston Press plc ("the Group"), one of the leading local media
groups in the UK, announces its results for the 52 weeks ended 2
January 2016.
We are pleased to confirm that the Group achieved Adjusted
EBITDA for the period of GBP57.3m, in line with expectations. The
Group traded well in the first quarter, while the second quarter
was impacted by a sector-wide slowdown which continued through the
second half and into 2016. Cost savings substantially mitigated
revenue declines; and the benefit of reduced financing costs (down
34.1%) resulted in improved profit before tax and earnings per
share. We continued to invest in our digital products and
platforms. We reduced our pension obligations by GBP63m to a
closing IAS19 deficit of GBP27m.
We are also pleased to confirm that the proposed acquisition of
the i was approved at a general shareholder meeting held on 21
March 2016 achieving 99.85% of votes cast in favour. We look
forward to completion on 10 April 2016 and the opportunities it
brings to accelerate the transformation of the Group.
Key highlights(1) :
Growing digital audiences
Digital audience grew by 40.7% year on year to 22.6m Unique
Users in December 2015 (2014: 16.1m). Total monthly audience across
print and online grew 19.8% to 31.9m in December 2015.
Growing digital revenues
Total digital revenues grew 12.4% to GBP30.6m for the period,
representing 20.6% of advertising revenues (2014 FY: 16.9%) with
revenue from the key strategic category of digital display
advertising up 26.7%.
Continued cost reduction
Total operating costs were reduced by GBP13.6m (6.7%) after
investment in digital of GBP6.0m. (2014 cost reduction:
GBP13.8m)
Increased profit before tax
Adjusted profit before tax increased 22.6% to GBP31.5m (2014:
GBP25.7m)
Increased EPS (fully diluted)
EPS increased by 30.1% to 21.2p
Continued debt reduction
Cash generated of GBP14.8m reduced net debt to GBP179.4m (2014:
GBP194.2m)
Financing Costs
Interest cost reduced to GBP19.1m (2014: GBP29m)
Pensions
Pension deficit under IAS19 has reduced by GBP63m (70%) to
GBP27m.
Acquisition of the i (to complete 10 April 2016)
Gained shareholder approval yesterday. The acquisition will be
earnings enhancing.
Financial Highlights:
GBP'million Continuing Operations Continuing Operations
- Adjusted(1) - Statutory
2015 2014 Change 2015 2014 Change
52 weeks % 52 53 %
weeks weeks
Revenue 242.3 260.0 (6.8) 245.1 268.8 (8.8)
Operating profit 50.6 54.7 (7.5) 1.0 10.7 (90.7)
Profit/(loss)
before tax 31.5 25.7 22.6 2.9 (23.9) 112.1
Net Debt 179.4(2) 194.2(2) (7.6) 146.1 184.6 (20.9)
EPS - fully
diluted 21.2p(3) 16.3p(3) 30.1 10.5p (0.44)p n/a
------------------- --------- --------- ------- ------- -------- -------
(1. The results are presented on a continuing adjusted
basis which excludes the following items: mark-to-market
gain on the bond, restructuring costs, impairment
of intangible assets, items related to the defined
benefit pension plan, share based payment costs,
trading and write downs relating to the closure of
titles and digital operations, one off legal costs
and disposal gains and adjusting for the week 53
effect in 2014.)
(2. Adjusted net debt is stated excluding fair value
mark to market valuation adjustments on the bond.)
3. Adjusted EPS presented above represents the pro-forma
adjusted (fully diluted) post tax earnings per share
and has been calculated using the closing weighted
average number of ordinary shares (105.3 million
at 2 January 2016) and applied to each period. Weighted
average number of shares in 2015 was 105.3 million
compared to 3.519 billion in 2014. This excludes
share held by the company's employee benefit trust
of 0.6 million (0.6 million 3 January 2015) and includes
the maximum potential dilutive impact of unvested
awards under the Company's share schemes and warrants.
The Statutory figures presented represent Diluted
earnings per share.
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Audience and revenues
Our digital audience grew by 40.7% to 22.6m in December 2015
(2014 16.1m) while our total audience (across print and digital) in
the same month was 31.9m, up 19.8% year on year. The fourth quarter
saw us launch redesigned websites for the Scotsman, Yorkshire Post,
Sheffield Star and Portsmouth News, with significant audience
uplift, with the rollout of the new design to other large brands
happening during 2016.
Total revenues of GBP242.3m declined 6.8% for the period.
Digital advertising was up 12.4% to GBP30.6m for the period,
representing 20.6% of the total advertising revenues (2014 FY:
16.9%). Print publishing revenues (advertising and circulation)
were down 9.7% to GBP193.9m including print advertising down
11.9%.
National display revenues (print and digital) were up 11.8% year
on year driven by a 99% increase in revenue from 1XL, our digital
advertising exchange partnership.
Digital display revenue, including 1XL was up 26.7% to
GBP12.4m.
Operating profit, profit before tax and earnings per share
Operating profit was GBP50.6m (after a GBP6.0m investment in
digital), a decrease of 7.5% (GBP4.1m) on the prior period.
Operating costs of GBP191.7m were reduced by GBP19.6 million (net
GBP13.6m or 6.7%) (2014 net reduction GBP13.8m). The operating
margin remains strong at 20.9%. Profit before tax increased by
22.6% to GBP31.5m, benefiting in part from reduced finance charges
of GBP9.9m. EPS (fully diluted) increased 30.1% to 21.2p.
Net debt
Net debt excluding mark-to-market and after GBP5m bond buy back,
reduced by GBP14.8m to GBP179.4m (2014: GBP194.2m). Net debt has
reduced from c. GBP300m at the start of 2013. The post refinancing
debt structure has allowed us to significantly reduce the interest
we pay, having reduced both the interest rate and the absolute
amount of debt. Total adjusted financing costs reduced from
GBP29.0m in 2014 to GBP19.1m in 2015 (down 34.1%). Net cash from
operations before bond buy back was GBP14.8m.
Pensions
The IAS19 Pensions Deficit of GBP27m has reduced by GBP63m (70%)
from the prior period end including GBP53m reflecting changes in
demographic assumptions resulting from its pension study and the
benefit of changes in the Scheme Rules entitling the Group to
participate in any surplus when the scheme closes.
Ashley Highfield, Chief Executive, commented:
"The challenging trading conditions experienced in the second
half of 2015 have continued into Q1 2016. We have reduced costs to
maintain profitability, reset our portfolio and refocused on
priority markets with attractive audiences that offer the best
opportunity for growth. Success in driving our national display
advertising business in 2015 and the rollout of our local display
advertising Sales Force initiative gives me confidence for the
future despite the fact that the market remains difficult.
"The acquisition of the i newspaper is also incredibly exciting
for us. It gives us scale, with a combined JP plus i daily print
circulation of over 600,000 papers making us the UK's 4(th) largest
news publisher, and thus numerous revenue and cost synergy
opportunities. Further, not only will the i contribute positively
to earnings but it will allow us to accelerate growth in digital,
and help stabilise our circulation revenues. In conjunction with
the planned asset disposals this will enable us to continue to
reduce debt levels and cut financing costs further."
For further information please contact:
Johnston Press
Ashley Highfield, Chief
Executive Officer 020 7612 2601
David King, Chief Financial
Officer 020 7612 2602
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Bell Pottinger
Dan de Belder
Zoë Pocock 020 3772 2561
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Investor presentation and audio/webcast: A presentation for
analysts and live audio/webcast will be held at 9.00am on Tuesday
22 March 2016 at Bell Pottinger, Holborn Gate, 330 High Holborn,
London, WC1V 7QD.
Webcast link:
https://secure.emincote.com/client/johnston_press/johnston003/
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 2 January 2016 will be
available at www.johnstonpress.co.uk/investors.
Statutory and adjusted basis
In the Management Report, performance is stated on an adjusted
basis to provide a more meaningful comparison of the Group's
performance taking account of the closure of businesses, week 53 in
2014 and other non-trading items. The adjusted results aim to
demonstrate the performance of the Group without the volatility
created by non-recurring items, restructuring charges in respect of
cost reduction measures and accounting items such as the impairment
of intangible assets, pension finance and administrative expenses,
the impact of fair value changes on the value of the bond and the
impact of tax legislation changes. A reconciliation between the
statutory and the adjusted results is provided under Non-GAAP
measures within this financial information.
Forward-looking statements
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
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.
END OF FRONT PART OF PRESS RELEASE
Management Report - 52 week period ended 2 January 2015
Chairman's Statement
In 2015 the Group has delivered adjusted operating profit of
GBP50.6 million, restructured its business and reduced its debt and
pension liabilities.
The industry faced continued downward pressure on its print
advertising revenue. The relentless pace of change continues and we
have worked hard to remain at the forefront of digital development
in our markets. We have restructured our business, removing a layer
of regional management, and reshaped how our regional newsrooms
operate to prepare them for the future in which digital will be
ever-more prominent. We will now do the same to our sales
operations.
Strategy
Digital growth (audiences and revenues) remains key to our
long-term future. 2015 saw further growth in digital revenues, up
12.4% year-on-year, underpinned by a 99% increase in national
digital revenues following the launch of 1XL, our national digital
advertising network, operated in collaboration with other media
owners. Our focus on audience growth has seen an 24% increase in
our average unique browsers year-on-year - with particularly strong
growth amongst mobile users. Our continued progress in driving the
digital transformation has been achieved against a backdrop of a
further shift (part structural, part economic) away from print
advertising from spring 2015 onwards.
2016 will see us focus on and invest in our primary brands,
operating in growth markets with attractive audiences, with an
emphasis being put on national and local display advertising. The
review and refocus of our portfolio has led us to close or merge
some titles and exit low marginal digital products. Our 'Newsroom
of the Future' project in 2015 saw the realignment of our newsrooms
to better serve their communities and digital audiences, and we are
currently undertaking a reorganisation of our sales organisation to
improve customer service to key accounts and reduce cost to serve
for low spending accounts.
Results
The Group saw improving revenue trends in 2014 and in quarter
one of 2015. The run up to the General Election saw trading slow
down and the anticipated post-election recovery did not
materialise, with print revenues remaining soft through the year.
Action was taken to cut costs and maintain profit as it became
clear that the UK's economic performance remains uneven outside
London.
Revenues were down 6.8% from GBP260.0 million in 2014, to
GBP242.3 million. Total advertising revenue (combined print and
digital) was down 7.8% to GBP148.7 million in 2015. Print
advertising was down 11.9% from GBP134.1 million to GBP118.1
million, while digital revenues grew 12.4% year-on-year from
GBP27.2 million to GBP30.6 million.
Newspaper sales revenue, was down 7.0% from GBP77.8 million to
GBP72.4 million.
Once again the Group delivered an effective cost performance
with operating costs (including depreciation and amortisation)
reducing to GBP191.7 million from GBP205.3 million in 2014,
reflecting our ongoing cost control while also making strategic
investments, particularly in our digital business.
Operating profit was GBP50.6 million, a GBP4.1 million decrease
on the prior year. EBITDA of GBP57.3 million was achieved in 2015,
compared to GBP60.2 million in 2014. The Group's strong operating
margin has been maintained, decreasing slightly from 21.0% to 20.9%
year-on-year.
Proforma adjusted basic earnings per share, was 23.7 pence,
compared to 18.2 pence in 2014 (refer to the Financial Review
section).
Net debt, excluding bond mark-to-market, was GBP179.4 million,
compared to GBP194.2 million at the end of 2014.
More information on the adjusted items can be found in the
Financial Review section of this report and the reconciliation of
statutory to adjusted items
Pensions Liabilities
The Group conducted a pension study to understand better its
long-term pension liability. The study looked at the proportion of
males and female members, the number of members with spouses and
the age and health of the members surveyed. As a result of the
study, at 2 January 2016, the IAS 19 accounting pension deficit
stood at GBP27.0 million, a reduction of GBP63.0 million.
Dividend
The provisions of our bonds restrict the Company's ability to
pay ordinary dividends until certain conditions are met. The Board
wishes to resume ordinary dividend payments as soon as is
appropriate, but no ordinary dividend is proposed for the year.
Industry Issues
The Independent Press Standards Organisation (IPSO), which we
joined on launch in 2014, has operated throughout the year. We
believe it has offered an effective and economic system to address
complaints in our industry - accessible for complainants and
proportionate to local newspapers. We are as yet unconvinced by
proposals to extend IPSO's remit to the provision of arbitration
services. 2015 has also seen the start of the process to renew the
BBC's charter. Through the News Media Association we are making the
case for a co-operative relationship which sees the local press
recognised and rewarded for the quality local content that it is
uniquely well placed to provide.
Board
During a period of enormous change it has been a great benefit
to have the guidance of a stable and experienced Board and I would
like to thank my Board colleagues for their work throughout the
year. We have indicated previously that, following the Company's
refinancing, we would look at the process of renewing Board
membership and we are pursuing this process during 2016. Stephen
van Rooyen will step down from the Board at the end of our
forthcoming Annual General Meeting. He has made an enormous
contribution to the Group over the past three years and, on behalf
of the Board, I would like to thank him for this.
The Board has now recommenced the process for renewal of its
membership and anticipates the appointment of at least one new
Non-Executive Director during 2016 following the decision of Mr van
Rooyen not to seek re-election at the forthcoming Annual General
Meeting. In considering candidates to fill Board vacancies, the
Nomination Committee has regard to the benefits of, and the need to
encourage, diversity (including gender) within the Board's
membership and this is a specific consideration of the recruitment
process and is included in the Committee's terms of reference.
The Board regularly reviews both the balance of its membership
and the issues it considers when it meets. The agenda for the
Board's meetings continue to be structured in such a way as to
scrutinise both strategic and operational matters in an atmosphere
of constructive challenge and debate. I am satisfied that the Board
remains effective.
Employees
We are exceptionally well served by our colleagues across the
locations where we operate. 2015 has seen significant change and we
are well aware of the commitment and hard work of our employees.
Once again, the Board wishes to thank them for their efforts. They
are essential to our future and to the central role that we wish to
continue to play in communities across the country.
Outlook
The sector experienced tough trading conditions in the second
half of 2015 and this has continued into the early part of 2016.
The outlook for 2016 remains challenging, and we are maintaining
our focus on those areas which can deliver the greatest benefits
while continuing to innovate our product portfolio and our
editorial and sales processes. Total revenues for the eight week
period to 27 February 2016 were down 13% against strong year on
year comparatives in the first quarter of 2015, which in line with
the sector weakened substantially during the second half of 2015.
We remain focused on driving increased audiences and providing
creative solutions for our advertisers. We will also continue to
explore opportunities for the disposal of assets, with a view to
deleveraging the balance sheet and further cutting financing
costs.
On 12 February 2016, we announced the proposed acquisition of
the i newspaper, a business which has a growing circulation income
and an attractive audience and customer base. The acquisition,
which was approved by shareholders on 21 March 2016, will provide
the Group with significantly increased scale, a national footprint,
and add a major brand to its portfolio.
Ian Russell
Chairman
22 March 2016
Chief Executive Officer's Report
Johnston Press is now a very different business compared to the
start of 2015.
Not only did we see significant change across the press and
media industry but we implemented one of the biggest structural
changes within our own business to allow us to be better positioned
for growth heading into 2016.
Review of the Year
Throughout last year (and prior to adding the i to our
portfolio) our core purpose and strategy remained on track in the
challenging environment.
We sharpened our focus on our growth strategy and cost reduction
programmes that, whilst delivering part benefit in 2015, will only
be fully realised throughout 2016. We carefully managed costs, paid
off more of our debt and invested in our key markets.
Signs of improving advertising trends in the early part of 2015
were halted by an unexpected downturn in spring - with property and
jobs particularly affected.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
However, certain business sectors are worthy of mention for
delivering growth. The performance of 1XL - the digital advertising
exchange partnership - is particularly pleasing. Our National
display revenues (print and digital) were up 11.8% year-on-year
driven by a 99% increase in revenue from 1XL, which has gained real
traction in its first full year of trading. Overall, digital
revenue grew by 12.4% following significant investment throughout
2015.
Our Media Sales Centre (MSC) delivered strong results in 2015 -
achieving growth for the second growth in a row. The MSC covers the
increasingly important tele-sales operations for the company, and
includes such areas as Births, Marriages & Deaths
announcements, Public Notices & other classified advertisements
across print and online.
Against declining market trends, BMD and Public Notice revenue
saw gains of 11% and 8% respectively. In Other Classified our
commitment to engage customers with JP's growing digital portfolio
saw year-on-year growth of almost 100% - with mobile and desktop
display being the main drivers.
Underpinned by focused productivity and a real service level
efficiency drive (introduced by the management team), both the
Sheffield and Edinburgh MSC teams entered 2016 well placed to
continue the success of the last two years. This will be further
enhanced by the restructuring of the Digital Kitbag team and the
absorption of transactional display business.
Our Printing Division continues to flourish, winning GBP12.8
million worth of new contracts to print the Daily Express, Daily
Star, Daily Star Sunday and Sunday Express at Dinnington, near
Sheffield.
In addition new business was secured with Tindle Newspapers to
print their flagship title, The Farnham Herald, all of which
contributed to growing external contract print revenues by 11.4%
year-on-year.
The Company has also renegotiated a number of key contracts,
including the outsourcing of its in-house advertising creation team
and its advertising production and software development
contract.
Digital Product Development
We launched a number of new digital products and repositioned
some of our largest sites to respond to the growth of our mobile
and social audiences.
We relaunched Scotsman.com, to coincide with a print redesign,
on a responsive platform which automatically optimises for mobile,
tablet and computer screens. At the same time, we launched new
native apps for mobile and tablet devices, that offer advanced
capabilities, targeting and messaging to our readers.
These new products have seen strong growth of users and revenue
offered by these more modern and mobile-oriented products. The
rollout of this platform and apps continues in 2016, with new sites
introduced at The Star (Sheffield), The News (Portsmouth), The
Yorkshire Post and a further 15 totally responsive sites and apps
due to be in place by the end of April 2016, and a rollout that
will continue to our titles with the best audience and commercial
potential in 2016.
Across Johnston Press, we have also launched a number of new
commercial products aimed at offering new opportunities for
advertisers to reach their customers, including through VoiceLocal,
a native advertising offering that leverages our content-creation
capabilities and integrates commercial content into our
offerings.
In Q4, we also launched an automated program, BoostLocal, which
allows an advertiser to digitise its print advertising and publish
it for local discovery on our sites, as well as to contribute to
the business' search engine optimisation efforts.
Our WOW247 entertainment platform was re-developed and launched
in May, now with more than 300 contributors across the UK in 13
city editions who created 7,500 articles, reached by 750,000 unique
users in January 2016.
Business Change Projects
During 2015, we also saw significant change within our editorial
function - following the implementation of our Newsroom of the
Future initiative to help us to respond to the rapidly-changing
audience demands for the information we provide them.
Our 'Salesforce of the Future' initiative is now also gaining
traction, with deployment expected to start in the first half of
2016. We are restructuring the sales teams based on high and low
value customer segments and transferring low value, highly
infrequent transactional customers into a new team in the MSC to
allow our sales teams to fully focus on the higher yield
customers.
The pilot for the Salesforce of the Future project is currently
underway and is testing:
-- the performance benefits of aligning salespeople to the high
and medium-value customer segments;
-- the ability of the MSC to service the low value/infrequent
transactional customer segment and the business performance
benefit; and
-- the performance benefit of creating a new customer acquisition team.
Employee Involvement
In January the introduction of our 'One JP' engagement
initiative signalled a step-change in our culture and, throughout
the first half of the year, every team member in every part of the
business had the chance to share the Company values and vision
through dozens of workshops.
I'm delighted to report that over 80% of our employees took part
in these sessions and, as a result, we are working together like
never before - putting quality, innovation, creativity and
outstanding service at the heart of this business.
We simplified our leadership structure to ensure we work more
effectively as one team with a single vision. These changes are
helping us create and share content better across the organisation
and speed up how we take advertising products to customers in a
more consistent way, in order to deliver overall revenue
growth.
Priorities for 2016
Our focus this year is to develop our primary news brands,
stabilise circulation revenues and build both our national display
advertising and our local display, features and entertainment
revenue (LDFE) advertising revenue income, in integrated 'print
plus online' offerings to our advertisers.
We will, therefore, concentrate on attractive geographies,
serving more defined audience groups that represent the best
opportunities for growth, both digitally and in print, and target
higher value display advertising customers.
We intend to continue to invest in both digital and print
products, though we will focus resources on brands and markets
where we believe the best returns will be derived.
We have identified a number of newsbrands that are now
considered non-core and such will be either divested or run with
less costs, reflecting the medium-term outlook for the identified
assets that fall into this category.
The Company will run a formal process, with advisers, to market
defined asset groups for sale during 2016. Interest by third
parties, enquiring about assets, has been encouraging so far.
i Acquisition
As this Annual Report went to press we were poised to take
ownership of our first national newspaper the i - a
transformational acquisition for Johnston Press and an important
step towards delivering our long-term strategy. The acquisition of
the i was approved by shareholders, with 99.85% of those votes cast
being in favour of the transaction, on 21 March 2016.
The i is a highly regarded newspaper with a clear market
position and a loyal readership. By joining with Johnston Press the
combined circulation will be equal to 9% of national daily
circulation, making us the fourth-largest player in the national
newspaper market.
With our considerable digital experience, the combination of
Johnston Press and the i will also allow us to grow digital
audiences and revenues through the creation of inews.co.uk.
The acquisition will offer:
-- Increased scale: Greater reach improves ability to gain
greater share of national advertising market.
-- Growing revenues: the i has growing circulation revenues, and
new opportunities arise from the proposed digital product, new
geographic markets and from cross-selling JP to the i's advertiser
base and vice-versa.
-- Accelerated digital transformation: Leveraging JP's digital
expertise to fully realise the i brand across digital platforms;
the extensive JP network enables cross-promotion to grow audiences
at minimal cost; the regionally-oriented digital display network
1XL is enhanced by the addition of a national brand.
The key financial benefits:
-- Immediately earnings enhancing.
-- Strong cash generation.
-- Cost savings and revenue synergies.
Summary
Four years ago, when I joined Johnston Press, I set out to
create the right team and culture to transform this business and I
truly believe that the Company is now where it needs to be, with
attractive news brands and commercial products, loyal audiences
across print and online, and structured in the right way to take
market share and return to overall growth.
Ashley Highfield
Chief Executive Officer
22 March 2016
Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which
have been identified by the Company that could have a material
impact on the Group's long-term performance.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
The principal risks and uncertainties described are not a
complete list of all those risks identified but those that the
Directors feel could have a significant impact on the Group and the
general economic conditions in the markets in which we operate. By
including risks within this section, the Directors make no
prediction as to the particular likelihood of any event or set of
events occurring. The business could also be affected by other
risks not currently identified or considered to be significant.
Other risks that remain the most important in terms of the overall
performance of the Group, but also relate to issues over which the
Group has no control, namely:
-- change in Gross Domestic Product;
-- change in the unemployment rate;
-- levels of property transactions;
-- levels of new car sales;
-- levels of consumer confidence;
-- Facebook and other global digital market entrants;
-- public sector spending; and
-- impact of uncertainty surrounding the outcome of the Europe Referendum.
Description of Risk Impact Mitigation
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Further Reductions in Print Advertising
Print advertising Consumer confidence The Group continues
revenues could decline remains low in some to develop its digital
at a faster rate of the markets in advertising offering
due to further migration which we operate, through partnerships,
of customer spending and both national mobile apps and
to online media and local businesses products such as
and weak consumer spend on advertising Digital Kitbag,
confidence in some may remain constrained, The Smartlist and
of the markets in while others may Voice Local, and
which we operate. choose to move advertising the rollout of a
spend into digital new suite of websites
media. It also continues
to invest in its
KPI measure: Print sales expertise
Advertising Revenue to ensure both a
more proactive and
effective approach
and that the sales
offering is fully
understood by sales
staff and appropriate
for customers' needs.
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Newsprint Price and Supply Risk
Although paper prices In 2015 newsprint The Group carefully
have fallen over represented approximately manages its consumption
the course of the 9% of the Group's of newsprint through
past 12 months future cost base. A significant waste management,
price rises represent increase in price recycling, pagination
a risk to the Group would impact the and distribution
in terms of both Group's profitability of free titles.
supply and pricing and a reduction The Group also has
of newsprint that, in supply could some of the most
after staff costs, impact the quantity efficient printing
is the largest single of newspapers we presses in the industry.
expense incurred distribute in the Contracts are put
by the business. market, which could in place with key
in turn have an suppliers to ensure
KPI measure: Operating impact on advertising security of supply
costs revenues. and optimum pricing.
------------------------------ --------------------------- ---------------------------
Failure to Monetise Increased Readership of our News
Websites
This is an industry Readership continues Our digital strategy
issue. Online and to migrate to a focuses on building
mobile advertising digital environment digital audiences
rates are lower where the advertising and revenues through
than print and it rates per reader new platforms and
is difficult to are significantly enhancing the content
charge for accessing lower. Much greater available to readers
news online because audiences are therefore and advertisers.
free alternatives needed to retain There is considerable
exist. an equivalent level effort to maximise
of income. the advertising
rates attained for
digital inventory,
KPI measure: Digital and to sell more
Revenue inventory at premium
rates through services,
such as1XL.
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Pension Deficit Funding
--------------------------------------------------------------------------------------------
The Group's defined Cash contributions The Group entered
benefit pension to the pension deficit into a revised arrangement
scheme is currently reduce the Group's with the scheme
in deficit, leaving capacity to pay trustees during
the Group responsible down debt and invest 2014 with increased
for potential shortfalls, in growth. contribution levels
in particular, driven which are designed
by sustained low to address the deficit
interest rates. over time. These
were agreed with
the trustees concurrently
with the refinancing
and take account
of Group cashflow
forecasts. The scheme
is closed to future
accrual and pension
KPI measure: n/a exchange exercises
have taken place
to limit the level
of pension increases,
reducing the liability
further.
The Group is also
working with the
trustees and actuarial
advisors to manage
all controllable
items, most recently
conducting a survey
of scheme members
with a view to reducing
future contributions.
------------------------------ --------------------------- ---------------------------
Business Opportunities Constrained by Debt
The Group continues The Group may be The refinancing
to operate with unable to take advantage completed in 2014
greater than optimal of opportunities provided greater
levels of gearing, to substantially financial stability
hence reduction invest in its core for the Group. Cash
of debt over time business or new on balance sheet
remains a priority. revenue streams and access to revolving
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However, this focus thus impacting its credit facilities
could lead to missed long-term growth to permit a degree
revenue opportunities prospects. of investment in
if insufficient its core business
funds are left available or new revenue streams.
for investment.
KPI measure: Net
debt Excluding Mark-to-Market
------------------------------ --------------------------- ---------------------------
Business Change
The Group is implementing The implementation The Group has developed
two major projects of this key change a planned phased
to revise the organisation initiative could approach to implementing
of its sales and lead to disruption the changes including
editorial models in our business full communications
which may cause which could affect with staff and unions.
disruption during quality of output The business has
the transition. and staff morale also updated its
and industrial relations business continuity
KPI measure: n/a and impact advertising plan to cater for
and circulation the changes.
revenue.
------------------------------ --------------------------- ---------------------------
Adequacy of Human Resources
As with most organisations, Should some of these The Group has put
there is an element key people leave in place succession
of dependency on the organisation planning across
certain key individuals there could be the the organisation
in the Group. loss of industry and this is reviewed
knowledge, supplier at least annually
KPI measure: n/a relationships, technical by the Executive
expertise and leadership. Directors and by
the Board
------------------------------ --------------------------- ---------------------------
Lifestyle and Technology Changes Affect Newspaper Circulations
Newspaper circulations The reduction in The Group continues
continue to decline circulations can to promote loyalty
due to increased lead to reduced schemes to encourage
availability of newspaper sales increased frequency
news through alternative revenues as well of newspaper purchase.
media channels and as reduced audience In response to changing
reductions in the for our advertisers. reader habits we
regularity of purchase. are in the process
This change is in of rolling out responsive
part driven by demographic news websites that
and societal change. auto adjust to the
mobile device, while
KPI measure: Circulation also increasing
Revenue the frequency of
content updates.
------------------------------ --------------------------- ---------------------------
Slowdown in Rate of Digital Growth and Reduction in
Advertising Rates for Mobile
The Group has experienced A slowdown in digital The Group continues
strong growth in revenue growth and/or to invest in improving
its digital income reduction in advertising its understanding
streams in recent rates achieved could of its audience
years. The rate impact profitability and in growing its
of growth could and the carrying overall audience,
slow if customers value of assets. as well as developing
seek alternative In addition, the new products to
routes to audiences Group adopts a long-term enable customers
served. The industry growth rate of 1% to reach their targeted
as a whole has seen from year three audience and enable
a shift towards in assessing the the Group to continue
accessing digital valuation of publishing to participate in
content through titles. In order growth in digital
mobile devices which to achieve this advertising spend.
generally attract growth rate continued
lower advertising levels of growth
rates than the rates in digital is required
achieved for desktop for the foreseeable
devices. future.
In particular the
Group has seen increased
competition from
Facebook in display
and Indeed in Employment.
KPI measures: Digital
Revenue, Operating
Profit, EBITDA
------------------------------ --------------------------- ---------------------------
Operational Review
Delivering Our Strategy
During 2015, despite challenging market conditions, we continued
to simplify and transform our business in line with the strategic
priorities initially set out in 2012. We deliver compelling content
across our media portfolio, keeping pace with the changing needs of
our audience and providing a range of new products to our
advertisers. Our National platform has performed well and the
addition of the i provides opportunities to accelerate the delivery
of our strategy.
Audience Development
Our audience strategies concentrated on content improvement in
print and improved digital engagement and differentiation, has led
to overall average monthly audience growth of 10.0% from 26.8
million to 29.6 million. The 2015 average audience of 29.6 million
comprises 20.8 million digital unique users (2014: 16.7 million),
and 8.8 million print circulation (2014: 10.1 million).
Our digital audience grew by 40.7% to 22.6m unique users in
December 2015 (2014 16.1m) while our total audience in December
2015 of 31.9m (across print and digital), up 19.8% year on year.
The fourth quarter saw us launch redesigned websites for the
Scotsman, Yorkshire Post, Sheffield Star and Portsmouth News, with
significant audience uplift, with the rollout of the new design to
other large brands happening during 2016.
Digital Product and Market Development
In 2015, we updated and upgraded our digital presence across all
platforms in order to reach readers on all screens and to deliver
the right customers to our advertisers. This took the form of a new
responsive web platform beginning on our largest site,
Scotsman.com, launching with new native apps across smartphones and
tablets in Apple and Android platforms. The rollout of that
platform, which is faster and a better experience for readers and
advertisers, continues in 2016.
We also have implemented new underlying digital technology
platforms to allow us to develop products more quickly, as the web
moves more mobile and onto the social platforms. We have introduced
new sources of data to inform our newsrooms and our product
development. We have launched new content verticals in key markets
to generate new digital revenue streams, including sections around
food and drink in Yorkshire and Scotland, and a lifestyle site in
Belfast.
With our commercial products, we have introduced innovative new
solutions for local advertisers in Digital Kitbag (DKB) and
introduced the UK's first local native advertising program to bring
content-led marketing solutions to our advertisers.
Commercial Development
1XL was a big success in 2015, with year-on-year revenue growth
of 99%, following its online advertising network launch in November
2014. Working with other regional media companies the Group was
able to optimise the fast-growing online newsbrands audience.
Year-on-year this helped provide growth overall in National Display
advertising.
The Media Sales Centre, our high volume transaction business,
continued to provide excellent levels of customer service to
advertisers enabling the business to achieve year-on-year growth
across its Public Notices, BMDs and Other Classified customer
segments boosted by a strong performance in online mobile
sales.
Our DKB marketing services group of products offered the SME
businesses new opportunities to reach their customers, in their
local markets. Following a very strong 2014 for employment, 2015
was a challenging year. The team responded through innovation and
built out the SmartList proposition, created new affiliate and
partnership opportunities and entered into the e-commerce by
offering recruitment candidates training courses and other
specialised services.
Operations and Production
The Group's printing business operates out of three sites in
Portsmouth, Dinnington and Carn. The sites are well located to meet
various publisher distribution requirements and can provide
integrated logistics services. They are, therefore, well placed to
play an integral part in the future consolidation of the print
industry.
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In 2015 the Group has strengthened its position in the contract
print market by securing a significant long-term contract with the
Express Group. Other major customers include News UK, Guardian
Media Group, Local World and Tindle Newspapers, as well as many
niche publications. Printing revenue rose, but were offset by
reduction in newsprint supply revenue.
Property and Estate
We have continued to review our property portfolio to identify
markets and centres that have an accommodation which no longer
meets the requirements of the business. During 2015 we disposed of
seven freehold properties and exited five leases (net of
relocations). Overall we have reduced the total number of
properties within the portfolio from 188 at the start of the review
in 2012 to 125 at the end of 2015, with nearly half of all staff
either having relocated or having seen investment in their work
environment. Continued progress will be made during 2016 on
rationalising the Group's property portfolio.
Financial Review
In 2015 we delivered adjusted operating profit of GBP50.6
million; EBITDA of GBP57.3 million and reduced net debt (excluding
mark-to-market) to GBP179.4 million.
Introduction
This Financial Review provides commentary on the Group's
adjusted performance during the 52-week period ended 2 January 2016
(adjusted 2014: 52 weeks). Unless otherwise stated, all figures and
growth rates presented as adjusted. A reconciliation of statutory
to adjusted figures is provided under Non-GAAP measures in this
financial information.
Adjusted(1)
===================================
2015 2014 change change(3)
GBPm GBPm GBPm %
---------------------------------- ------- ------- ------ ---------
Advertising revenue
Print advertising 118.1 134.1 (16.0) (11.9%)
Digital advertising 30.6 27.2 3.4 12.4%
================================== ======= ======= ====== =========
Total advertising revenue 148.7 161.3 (12.6) (7.8%)
================================== ======= ======= ====== =========
Non-advertising revenue
Newspaper sales 72.4 77.8 (5.4) (7.0%)
Contract printing 12.6 12.6 0.0 0.1%
Leaflet, sundry and other revenue 8.6 8.3 0.3 3.8%
Total other revenues 93.6 98.7 (5.1) (5.2%)
================================== ======= ======= ====== =========
Total continuing revenues 242.3 260.0 (17.7) (6.8%)
================================== ======= ======= ====== =========
Operating costs(1) (185.0) (199.8) 14.8 7.4%
================================== ======= ======= ====== =========
EBITDA(2) 57.3 60.2 (2.9) (4.8%)
================================== ======= ======= ====== =========
Depreciation and amortisation (6.7) (5.5) (1.2) (22.1%)
================================== ======= ======= ====== =========
Operating profit 50.6 54.7 (4.1) (7.5%)
================================== ======= ======= ====== =========
Operating profit margin 20.9% 21.0%
================================== ======= ======= ====== =========
(1) Operating costs include cost of sales and are stated before
depreciation and amortisation.
(2) EBITDA is earnings before interest, tax, depreciation and
amortisation.
(3) The % change variance has been calculated based on unrounded
numbers.
Revenue
Following a relatively positive first half of the year, with
advertising down 4.4% year-on-year, the second half of the year saw
significant year-on-year deterioration across former classified
categories (property, motors and employment) contributing to an
11.6% decline overall.
Both motors and employment grew in the second half of 2014,
making the period on period comparison more challenging. Entering
2016 off the back of difficult trading in the second half of 2015
and against a relatively strong first half (and in particular first
quarter performance) in 2015, will see challenging trading
comparatives during the first half of 2016.
Print and Digital Advertising Revenue Analysis
Full year Print Digital
========================= ========================= =========================
2015 2014 2015 2014 2015 2014
GBPm GBPm % change(1) GBPm GBPm % change(1) GBPm GBPm % change(1)
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Display(2) 62.8 66.5 (5.6%) 50.4 56.7 (11.0%) 12.4 9.8 26.7%
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Property 18.5 22.0 (16.4%) 17.2 20.7 (16.9%) 1.3 1.3 (1.4%)
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Employment 17.7 20.3 (12.5%) 9.5 11.8 (19.4%) 8.2 8.5 (4.0%)
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Motors 12.7 14.2 (10.6%) 10.8 12.5 (13.4%) 1.9 1.7 9.5%
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Other (3), 37.0 38.3 (3.3%) 30.2 32.4 (6.7%) 6.8 5.9 17.1%
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Total advertising
revenue 148.7 161.3 (7.8%) 118.1 134.1 (11.9%) 30.6 27.2 12.4%
================== ===== ===== =========== ===== ===== =========== ===== ===== ===========
(1) The % change variance has been calculated based on unrounded
numbers.
(2) Display includes National, Local and Features revenue
(3) Other print revenue includes Birth, Marriage, Deaths, Public
Notices, Other classified and entertainment.
Other digital revenue includes iannounce, Digital Kitbag,
Enterprise, public notices, entertainment, other paid content and
other internet.
Advertising Revenue
Total advertising revenues in 2015 were GBP148.7 million, a
decline of 7.8% from the previous year (2014: GBP161.3 million)
with continued growth in the digital business.
Display
Display advertising remains our core advertising category and
helps to build brand awareness for our local and national
advertisers. Overall display advertising generated GBP62.8 million
in 2015, an annual decline of 5.6%.This category benefited from the
launch of 1XL our national advertising network with other local
media businesses. 1XL offers advertisers access to one of the
largest networks of quality audience and saw revenue growth of 99%
year-on-year, offsetting decline in print.
Property
2015 remained a difficult year for our property category.
Property prices grew in most of the regions in which we operate,
however, transaction volumes meant the market remained challenging
for Estate Agents, our core advertising base, with volumes and
sales commissions not matching the pace of price rises. The
property category decline was 16.4% year-on-year in 2015.
Employment
Following growth in this category in 2014, with digital growth
exceeding print decline, 2015 saw increased competition from
Indeed, a new entrant, causing digital growth to slow, while a fall
in inbound calls, particularly in Scotland, saw print revenues fall
sharply ending the year 12.5% down.
Motors
Following growth in the second half of 2014 in motors category,
2015 saw a decline of 10.6% on prior year despite growth of 9.5% in
digital.
Other
The 'Other' category includes Digital Kitbag, Entertainment,
Public Notices, Birth, Marriages and Deaths (BMDs), Other
Classified and other digital income. This combined category
generated GBP37.0 million in revenue, with print declining 6.7% and
digital growing by 17.1%.
Revenue streams Full year
=========================
2015 2014
GBPm GBPm % change(1)
========================== ===== ===== ===========
Print revenues
Circulation 72.4 77.8 (7.0%)
Advertising (JP owned
titles) 114.0 129.2 (11.8%)
Leaflets, syndication
& other print related
revenues 7.6 7.7 (1.3%)
========================== ===== ===== ===========
Total Print Revenues 194.0 214.7 (9.6%)
========================== ===== ===== ===========
Digital 30.6 27.2 12.4%
========================== ===== ===== ===========
Contract revenues
Printing 9.8 8.8 11.4%
Newsprint supply 2.8 3.8 (26.3%)
Rent & other services 1.0 0.6 66.6%
Advertising (third party
titles) 4.1 4.9 (16.3%)
========================== ===== ===== ===========
Total contract revenues 17.7 18.1 (2.2%)
========================== ===== ===== ===========
Total revenues 242.3 260.0 (6.8%)
========================== ===== ===== ===========
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Print and Digital Advertising Half-Yearly Revenue Analysis
Full year First half Second half
========================= ========================= =========================
2015 2014 2015 2014 2015 2014
GBPm GBPm % change(1) GBPm GBPm % change(1) GBPm GBPm % change(1)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Display 62.8 66.5 (5.6%) 32.0 33.4 (4.4%) 30.8 33.1 (6.9%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Property 18.5 22.0 (16.4%) 10.7 11.8 (9.7%) 7.8 10.2 (24.2%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Employment 17.7 20.3 (12.5%) 10.2 10.8 (5.5%) 7.5 9.5 (21.8%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Motors 12.7 14.2 (10.6%) 6.8 7.2 (6.1%) 5.9 7.0 (15.7%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Other 37.0 38.3 (3.3%) 19.3 19.3 0.0% 17.7 19.0 (6.7%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
Total 148.7 161.3 (7.8%) 79.0 82.5 (4.4%) 69.7 78.8 (11.6%)
=========== ===== ===== =========== ===== ===== =========== ===== ===== ===========
(1) The % change variance has been calculated based on unrounded
numbers.
Audience Growth
Our aggregate audiences have continued to grow year-on-year, our
average monthly audience for the year was 29.6 million up from 26.8
million in 2014, a growth of 10.0%. A key driver for this growth
was our digital audience which grew by 24.3% with average monthly
audiences growing from 16.7 million in 2014 to 20.8 million in
2015.
Non-Advertising Revenue
Newspaper sales generated adjusted revenues of GBP72.4 million
in the year against GBP77.8 million in 2014, a decline of 7.0%.
Circulation volumes were down 13.0%. Daily titles in economically
challenged markets continued to see volume declines above Group
averages, and above weekly titles, reflecting local conditions.
Contract printing revenue of GBP12.6 million was flat
year-on-year. Printing revenue grew year-on-year to GBP9.8m while
newspaper supply fell to GBP2.9m as a result of price and volume
reduction of customer titles.
Operating Costs
Operating costs (including depreciation and amortisation) were
reduced to GBP191.7 million from GBP205.3 million in 2014, a
GBP13.6 million year-on-year reduction, net of GBP6.0m investment
in digital. The depreciation charge rose by GBP1.2 million to
GBP6.7 million in 2015 off the back of digital investment in 2013
and onwards, having reached the low point in the depreciation cycle
in 2014. Savings were made across all parts of the business
including production, editorial, sales and overheads.
Operating Profit
In 2015 the Group operating profit was GBP50.6 million, a 7.5%
decline on the prior year. The trading environment was challenging
in 2015. Total Group revenues were down GBP17.7 million to GBP242.3
million, a decline of 6.8%, largely mitigated by cost reductions,
with operating costs reducing to GBP191.7 million from GBP205.3
million, a year-on-year reduction of GBP13.6 million. Operating
margin remains flat at 20.9% compared to 21.0% in the prior
year.
Finance Income and Costs
Net finance costs were GBP19.1 million(2), a decrease of GBP9.9
million year-on-year. The reduction in finance costs of GBP11.2
million is due to the lower interest rate on the bond following the
May 2014 refinancing which also saw gross debt fall from GBP323
million to GBP220 million. Investment income includes dividends
received from the Press Association.
Refer to Note 13 Borrowings for further information.
Net financing costs(2) Adjusted
======================
Full Full
year year
2015 2014 Change
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Interest on bond (19.3) (12.3) (7.0)
=========================================== ====== ====== ======
Interest on bank overdrafts, loans
(PIK), RCF(1) (0.4) (16.5) 16.1
=========================================== ====== ====== ======
Amortisation of term debt issue costs/RCF (0.3) (2.4) 2.1
=========================================== ====== ====== ======
Total operating finance costs (20.0) (31.2) 11.2
=========================================== ====== ====== ======
Investment income 0.9 2.2 (1.3)
=========================================== ====== ====== ======
Total net financing costs (19.1) (29.0) 9.9
=========================================== ====== ====== ======
(1) 2014 includes interest on bank overdrafts and loans of
GBP11.6 million, PIK interest of GBP5.3 million, RCF interest fee
GBP0.2 million partially offset by overpayment refund GBP0.6
million.
(2) Adjusted net financing costs exclude the mark-to-market fair
value gain on the bond of GBP23.0 million (2014: GBP5.0 million
gain), pension finance expense and change in fair value of hedges
and foreign borrowings.
Profit Before Tax
The Group's profit before tax was GBP31.5 million (2014: GBP25.7
million). Operating cost savings and reduced finance costs compared
to the prior year have mitigated the decline in total revenues, to
deliver an improved year-on-year profit before tax for the
Group.
Tax Rate
The statutory tax credit of GBP8.5 million (2014: GBP8.6 million
tax credit) comprises a current tax credit of GBP0.5 million (2014:
GBP0.7 million credit) and a deferred tax credit of GBP8.1 million
(2014: GBP7.9 million tax credit).
The tax credit of GBP8.5 million for the period was primarily
attributable to the change in deferred tax rate of GBP9.2 million,
recognition of the tax benefit arising on the impairment write down
on intangible publishing title assets of GBP7.0 million, deferred
tax liability of GBP6.0 million on the bond (including the GBP1.0
million adjustment in respect of prior periods) and the deferred
tax liability of GBP1.2 million arising on the pension deficit
reduction.
The Group's effective tax rate was 295.2% for the 2015 financial
year (2014: 35.9%). The effective rate in the period is
significantly affected by the corporate tax rate change and
adjustment in respect of prior year bond accounting. The 20.25%
basic tax rate applied for the 2015 period was a blended rate due
to the tax rate of 21.0% in effect for the first quarter of 2015,
changing to 20.0% from 1 April 2015 under section 6 of the Finance
Act 2013. Refer to Note 8 for further detail.
Earnings Per Share and Dividends
Statutory Basic earnings per share (EPS) was 10.71 pence,
compared with a loss per share of 0.44 pence in 2014.
In the prior year, the rights issue and subsequent share
consolidation have distorted the EPS metrics. A table presenting
the adjusted and proforma earnings per share calculations are
presented below.
Proforma underlying earnings equate to net underlying profit of
GBP25.1 million (3 January 2015: GBP19.2 million) less preference
share dividends of GBP0.15 million (2014: GBP0.15 million).
Proforma Basic EPS has been calculated based on the closing
number of shares in issue of 105.9 million (refer to Note 11) and
deducting the number of shares held by the Company's Employee
Benefit Trust of 0.6 million. Proforma fully diluted EPS assumes
the maximum potential dilutive impact and the maximum number of
shares the Group could be called upon to issue to satisfy the full
vesting of VCP and employee share and deferred bonus schemes. The
proforma position has been included for prior year figures to
provide a comparable basis to see how the earning potential has
moved.
Earnings per share Adjusted Proforma
=============== ==============================
Basic EPS Basic EPS Fully diluted
=============== ============= ===============
2015 2014 2015 2014 2015 2014
-------------------------------- ------ ------- ------ ----- ------- ------
Earnings (GBPm) less preference
dividend 25.0 19.1 25.0 19.1 25.0 19.1
================================ ====== ======= ====== ===== ======= ======
Number of ordinary shares
(m) 105.3 3,519.3 105.3 105.3 117.5 117.5
================================ ====== ======= ====== ===== ======= ======
EPS (pence) 23.7 0.5 23.7 18.2 21.2 16.3
================================ ====== ======= ====== ===== ======= ======
No interim dividend was paid on the Company's ordinary shares
and the Directors recommend no final dividend for the period. The
13.75% preference share dividend was paid in June 2015 and December
2015 following the completion of the Court approved share premium
conversion and creation of distributable reserves (the "Capital
Reduction").
Share capital reduction
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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. 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.
Reconciliation of Statutory and Adjusted Results
Adjusted operating profit of GBP50.6 million (2014: GBP54.7
million) has been calculated after adjusting for revenue and cost
of sales for closed titles and digital brands. Adjustments made to
operating costs include restructuring, impairment and other
non-trading related costs. The prior year includes adjustments to
remove Week 53 trading and Letterbox which was outsourced in the
prior year.
EBITDA Operating
Revenue profit
========================= ================== ================= =============
Full Full Full Full
Full year year Full year year year
year 2015 2014 2015 2014 2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm
========================= =========== ===== ====== ========= ====== =====
Statutory 245.1 268.8 9.4 16.2 1.0 10.7
Adjustments
Closed titles (1.8) (3.1) 0.1 (0.8) 0.1 (0.8)
Closure of digital
products (1.1) (1.6) 0.0 (0.1) 1.7 (0.1)
Week 53 - (2.9) - (1.4) - (1.4)
Outsourcing of Letterbox
Direct - (1.3) - - - -
Pensions - - 1.5 4.1 1.5 4.1
Restructuring - - 9.4 10.9 9.4 10.9
Impairment - - 35.2 24.5 35.2 24.5
Other - - 1.7 6.7 1.7 6.7
Adjusted 242.3 260.0 57.3 60.2 50.6 54.7
========================= =========== ===== ====== ========= ====== =====
Cashflow and Net Debt
Net cash flow generated from operating activities was GBP40.0
million (2014: GBP7.8 million), after GBP6.5 million of annual
pension contribution, a GBP2.4 million one-off pension
contribution, as a result of successfully reducing the pension levy
contribution from GBP3.2 million to GBP0.7 million, and careful
management of working capital. Refer to Note 17 for further
details.
Investment in capital expenditure was GBP7.8 million (refer to
the Financial Review - Capital expenditure section for further
details) while proceeds received from the disposal of surplus
assets (primarily property sales, surplus press equipment) were
GBP2.3 million.
The Group's net debt was GBP179.4 million at 2 January 2016
(2014: GBP194.2 million), excluding the mark-to-market on the bond
and bond discounts (totalling GBP33.4 million (including GBP29.0
million mark-to-market on Bond and GBP4.4 million Bond discount).
The principal GBP5.0 million bond buy back in August 2015 was
purchased at 98% (GBP4.9 million cash).
Reconciliation of statutory net debt
to net debt excluding mark-to-market Net debt
====================================== =====================
Full year Full year
2015 2014
GBPm GBPm
====================================== ========== =========
Gross bond debt 225.0 225.0
Bond repurchase (5.0) -
Cash and cash equivalents (40.6) (30.8)
====================================== ========== =========
Net debt excluding mark-to-market 179.4 194.2
Mark-to-market on Bond(1) (29.0) (5.1)
Bond discount (net) (4.4) (4.5)
Statutory net debt(2) 146.1 184.6
====================================== ========== =========
(1) Mark-to-market on bond represents from inception
(2) Statutory net debt calculated on unrounded numbers.
Net Asset Position
At the period end, the Group had net assets of GBP259.1 million,
an increase of GBP59.1 million on the prior year. The movement in
the net asset position from the prior year includes: GBP63.0
million reduction in the pension deficit, GBP28.8 million reduction
in borrowings and impairment write-down of GBP35.2 million on
intangible assets (discussed further below). The reduction in the
pension deficit is attributed to the pension study conducted in the
period (discussed further below). The GBP28.8 million reduction in
borrowings is due to the fair value gain of GBP23.9 million
recorded in the period and bond repurchase of GBP5.0 million.
Asset Impairment
The Group conducts a review of the carrying value of assets
every six months. In light of the tough trading conditions in the
second half of 2015, running into 2016, and the resulting fall in
operating profit of GBP4.1million, the Group has determined that it
is prudent to write-down the carrying value of certain assets by
GBP35.2 million, reducing the asset carrying value by 6.9%. Refer
to Note 12 in the financial statements.
Pensions
At 2 January 2016, the Group's defined benefit pension scheme
had a deficit of GBP27.0 million as measured under IAS19 Employee
Benefits (Revised). This compares to a deficit of GBP90.0 million
as at 3 January 2015 (including GBP3.0 million IFRIC 14
liability).
The Rules of the Plan were revised such that the Company has an
unconditional right to any surplus on the eventual wind up of the
Plan. As such the additional IFRIC 14 liability has been
reversed.
During the period the Group commissioned a review of the IAS19
assumptions used in determining the closing liability of the
Johnston Press Pension Plan specifically focusing on demographic
assumptions. A medically underwritten study was carried out by KPMG
to identify the current health of a statistical sample group of
existing Plan members, assessed via telephone interviews targeted
towards members with the most significant liabilities in the Plan.
The output was interpreted by underwriters and then analysed
alongside the results from a postcode analysis performed in the
prior year. This was then used in calculating the IAS19 scheme
liabilities. The methodology used was compliant with the applicable
Technical Actuarial Standards in force published by the Financial
Reporting Council.
This study of current mortality gives an age rating of +3.0
years to the standard Self-Administered Pension Scheme (SAPS)
tables used for the IAS19 disclosure (previously this assumption
had been set in line with 104% of SAPS tables). The futures
Improvement model has been updated to reflect the most recent
Continuous Mortality Investigation (CMI) 2015 projections and the
allowance long-term rates of improvement of 1.25% p.a. for males
and 1.0% p.a. for females remains unchanged. This is equivalent to
a life expectancy at 65 of 19.7 years (3 January 2015: 22.0 years)
for males and 21.3 years (3 January 2015: 23.9 years) for females.
The reduction in assumed life expectancy is equivalent to a
reduction in liabilities of GBP53.0 million.
Agreed cash contributions based on the 2012 triennial valuation,
GBP6.5 million in 2015 and GBP10.0 million in 2016 increasing by 3%
per annum with a final payment of GBP12.7 million in 2024. Refer to
Note 14 'Retirement Benefit Obligation' for further details. The
triennial valuation at 2 January 2016 has now commenced and outcome
will be known later in 2016.
The Group is also subject to the Pension Protection Fund Levy
(PPF). The levy is charged annually and runs from 1 April to 31
March. The amount payable for 2015/2016 is GBP0.7 million
(2014/2015: GBP2.7 million). The Group entered into a flexible
apportionment arrangement with the agreement of the Plan Trustees
which resulted in the decrease in the 2015/2016 PPF levy charge.
The Group expects to see the full benefit of reduced levy charges
in 2016/2017, when the increased pension contributions
commence.
Capital Expenditure
The Group capitalised GBP7.8 million of assets in the period
(2014: GBP8.7 million). Of this, GBP4.5 million was spent on
developing the digital platforms (2014: GBP3.5 million) and GBP3.3
million on infrastructure, including GBP0.5 million on leasehold
improvements (2014: GBP5.2 million of infrastructure spend
including GBP1.9 million leasehold improvements).
Financial Reporting
The IFRS standard changes applicable in 2016 are not expected to
have a material impact on the financial statements of the Group in
future periods. Additional details on changes in the standards are
included in Note 3 to the financial statements.
Factors Affecting Future Group Performance
The performance of the Group will continue to be affected by the
economic conditions in our markets, cyclical conditions, structural
and business-specific circumstances and trends in employment,
property transactions, new car sales and the levels of consumer and
SME confidence. However, the outlook for the Group will also depend
on a number of other factors, including:
-- growing new digital revenues in the Group's existing market segments;
-- ability to adapt to customer requirements through new sales
propositions and advertising channels;
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March 22, 2016 03:02 ET (07:02 GMT)
-- continually improving existing efficient operations through
technology infrastructure and improved processes;
-- the impact of new entrants and competitors to the market;
-- further re-engineering of the cost base of the business
-- the implementation of salesforce initiatives; and
-- acquisition of the i.
Assessment of the Group's prospects
Liquidity and Going Concern
Following the bond buy-back in August 2015, the Group now has
gross debt of GBP220.0 million (refer to the Financial Review -
cash flow and net debt for a reconciliation between gross debt and
net debt). Cash on balance sheet at 2 January 2016 was GBP40.6
million, and the Group has access to a GBP25.0 million revolving
credit facility (RCF) which remains undrawn. The bond (senior
secured notes) has a five-year maturity due 2019, and the Group's
RCF matures on 23 December 2018.
Subject to shareholder approval, the Group committed to pay
GBP22.0 million for the i newspaper on 10 April 2016 from cash
reserves, with a further GBP2.0 million in April 2017.
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.
Viability Statement
In accordance with provision C.2.2. of the Code, the directors
have assessed the prospects of the Group over a longer period than
the 12 months required to determine the going concern basis for the
preparation of the Group's financial statements.
The directors have reasonable expectations that the Group will
be able to continue in operation and meet its liabilities as they
fall due over the three-year time period of their assessment.
The directors have determined that the period of three years
from the balance sheet date is appropriate for the purposes of
conducting this review. This period was selected with reference to:
the Group's strategy and planning cycle. The Board formally reviews
strategy twice a year in May and September, with a view to
informing the subsequent annual budget setting. The budget forms
year one the of the three year plan, with projections for years two
and three.
The annual budget provides a more detailed reflection of the
groups immediate plans and is reviewed and approved by the Board
before the start of the financial year.
In setting the annual budget and three year plan the Board
considers the current trading position and the principal risks and
opportunities identified by the Group. In particular:
o The opportunity to invest and grow it's audiences and its
digital revenue streams;
o The ability of the Group to continue to reduce costs, to
mitigate the continuing decline in print based circulation and
advertising revenues;
o The level of capital expenditure required to support
investment in growth, and the level of restructuring costs needed
to support further cost reduction initiatives;
o The funding required to support the recovery plan of the
historic closed defined benefit pension scheme obligations and
o The cash generated to meet bond interest commitments as they
fall due.
The Group operates in an industry which is undergoing a
sustained period of significant structural change. This is driven
in part by new competitors and new methods of accessing content
which are provided by rapidly-changing technology and which are in
turn facilitating very significant and ongoing changes in consumer
behaviour. The Group's ability to adapt to this constantly changing
environment will determine its prospects over the three year
period.
In reviewing its plan the Group conducts sensitivity analysis,
to understand the impact of continued or accelerated decline in
revenues, as well as considering what actions the Group might take
to mitigate those risks. The future assessments and plans adopted
by the Board are subject to change and a level of market
uncertainty. As a result of the risks and uncertainties faced by
the business (including those outlined in the Principal Risks &
Uncertainties section) the outcomes reflected in its plan cannot be
guaranteed. In the event of sustained decline in print revenues
that cannot be matched or mitigated through digital revenue growth,
or cost reduction, then the Group's ability to secure new sources
of debt capital will be adversely affected. The Board will continue
to oversee the development of the strategy, the market and the
performance of the business, across the three year period, and the
business's preparation for the replacement of the GBP220m high
yield bond, due no later than June 2019.
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report,
the Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation and have elected to prepare the parent company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Group and the Company for
that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs as adopted by the European
Union and applicable United Kingdom Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Group and parent company financial statements
respectively; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's and
the Group's transactions and disclose with reasonable accuracy at
any time the financial position of the Company and the Group and
enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the
IAS Regulation. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the financial and corporate governance information included on
the Company's website (www.johnstonpress.co.uk). Legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
In accordance with Section 418 of the Companies Act 2006, each
Director in office at the date the Directors' Report is approved,
confirms that:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- he/she has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information.
We confirm that to the best of our knowledge the:
1. financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole;
2. strategic report includes a fair review of the development
and performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
3. Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
By order of the Board:
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
22 March 2016 22 March 2016
Group Income Statement
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For the 52 week period ended 2 January 2016
52 weeks 53 weeks
ended ended
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
-------------------------------------------------- ----- ---------- ----------
Continuing operations
Revenue 5 245,089 268,823
Cost of sales (140,612) (151,759)
================================================== ===== ========== ==========
Gross profit 104,477 117,064
================================================== ===== ========== ==========
Operating expenses (68,216) (81,816)
Impairment and write downs (35,234) (24,535)
================================================== ===== ========== ==========
Total operating expenses (103,450) (106,351)
================================================== ===== ========== ==========
Operating profit 5, 6 1,027 10,713
================================================== ===== ========== ==========
Financing
Investment income 854 2,209
Net finance expense on pension liabilities/assets 7a (2,933) (3,330)
Change in fair value of borrowings 7b 23,918 5,063
Other - 1,662
Finance costs 7c (19,973) (40,233)
================================================== ===== ========== ==========
Total net financing costs 1,866 (34,629)
Profit/(Loss) before tax 2,893 (23,916)
Tax 8 8,538 8,580
================================================== ===== ========== ==========
Profit/(Loss) from continuing operations 11,431 (15,336)
================================================== ===== ========== ==========
Net profit from discontinued operations - 236
================================================== ===== ========== ==========
Consolidated profit/(loss) for the
period 11,431 (15,100)
================================================== ===== ========== ==========
The accompanying notes are an integral part of these financial
statements. The comparative period is for the 53 week period ended
3 January 2015.
52 weeks 53 weeks
ended ended
2 January 3 January
Notes 2016 2015
-------------------------------------------- ----- ---------- ----------
From continuing and discontinued operations
Earnings per share (p)
Earnings (GBPm) 11 11.3 (15.3)
Weighted average number of shares
(m) 11 105.3 3,519.3
============================================ ===== ========== ==========
Basic 10.71 (0.43)
============================================ ===== ========== ==========
Diluted 10.71 (0.43)
============================================ ===== ========== ==========
From continuing operations
Earnings per share (p)
Earnings (GBPm) 11 11.3 (15.5)
Weighted average number of shares
(m) 11 105.3 3,519.3
============================================ ===== ========== ==========
Basic 10.71 (0.44)
============================================ ===== ========== ==========
Diluted 10.71 (0.44)
============================================ ===== ========== ==========
Group Statement of Comprehensive Income
For the 52 week period ended 2 January 2016
Revaluation Translation Retained
reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- ---------- --------
Profit for the period - - 11,431 11,431
Other items of comprehensive income
Items that will not be reclassified
subsequently to profit or loss
Actuarial gain on defined benefit
pension schemes (net of tax) (1) - - 57,648 57,648
========================================== =========== =========== ========== ========
Total items that will not be reclassified
subsequently to profit or loss - - 57,648 57,648
========================================== =========== =========== ========== ========
Items that may be reclassified
subsequently to profit or loss
Revaluation adjustment (2) - - (2)
Exchange differences on translation
of foreign operations - (245) - (245)
Deferred tax on pension balances - - (10,956) (10,956)
========================================== =========== =========== ========== ========
Total items that may be reclassified
subsequently to profit or loss (2) (245) (10,956) (11,203)
========================================== =========== =========== ========== ========
Total other comprehensive (loss)/gain
for the period (2) (245) 46,692 46,445
========================================== =========== =========== ========== ========
Total comprehensive (loss)/gain
for the period (2) (245) 58,123 57,876
========================================== =========== =========== ========== ========
For the 53 week period ended 3 January 2015
Revaluation Translation Retained
reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- ---------- --------
Loss for the period - - (15,100) (15,100)
Other items of comprehensive loss
Items that will not be reclassified
subsequently to profit or loss
Actuarial (loss) on defined benefit
pension schemes (net of tax)(1) - - (17,591) (17,591)
========================================== =========== =========== ========== ========
Total items that will not be reclassified
subsequently to profit or loss - - (17,591) (17,591)
========================================== =========== =========== ========== ========
Items that may be reclassified
subsequently to profit or loss
Revaluation adjustment (4) - 4 -
Exchange differences on translation
of foreign operations - (21) - (21)
Deferred tax on exchange differences - 7 - 7
========================================== =========== =========== ========== ========
Total items that may be reclassified
subsequently to profit or loss (4) (14) 4 (14)
========================================== =========== =========== ========== ========
Total other comprehensive loss
for the period (4) (14) (17,587) (17,605)
========================================== =========== =========== ========== ========
Total comprehensive loss for the
period (4) (14) (32,687) (32,705)
========================================== =========== =========== ========== ========
(1) Relates to actuarial gain of GBP57,021,000 (3 January 2015:
loss of GBP17,560,000) for the Johnston Press Pension Plan (refer
to Note 14), and a net actuarial gain of GBP627,000 (3 January
2015: loss of GBP31,000). For other pension related liabilities,
the obligations are shown in provisions.
Group Statement of Changes in Equity
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March 22, 2016 03:02 ET (07:02 GMT)
For the 52 week period ended 2 January 2016
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 116,171 587,702 13,780 1,733 (5,206) 9,565 (523,764) 199,981
=========================== ======== ========= =========== =========== ======== =========== ========= ========
Total comprehensive
(loss)/profit
for the period - - - (2) - (245) 58,123 57,876
=========================== ======== ========= =========== =========== ======== =========== ========= ========
Recognised directly in
equity:
--------------------------- -------- --------- ----------- ----------- -------- ----------- --------- --------
Preference share dividends
(Note 10) - - - - - - (152) (152)
Share-based payments charge - - 2,188 - - - - 2,188
Deferred tax on share-based - - - - - - - -
payment transactions
Share capital reduction
(Note
15)(3) - (275,000) - - - - 275,000 -
Performance share plan
exercised - - (321) - 321 - - -
Company share option plan
exercised - - - - 17 - - 17
Deferred bonus plan
exercised - - (18) - 18 - - -
Purchase of own shares - - - - (895) - - (895)
Release of SBP reserve for
expired share schemes(1) - - (8,666) - - - 8,666 -
Release of own shares(2) - - - - 2,163 - (2,163) -
=========================== ======== ========= =========== =========== ======== =========== ========= ========
Net changes directly in
equity - (275,000) (6,817) - 1,624 - 281,351 1,158
=========================== ======== ========= =========== =========== ======== =========== ========= ========
Total movements - (275,000) (6,817) (2) 1,624 (245) 339,474 59,034
=========================== ======== ========= =========== =========== ======== =========== ========= ========
Equity at the end of the
period 116,171 312,702 6,963 1,731 (3,582) 9,320 (184,290) 259,015
=========================== ======== ========= =========== =========== ======== =========== ========= ========
(1) On lapse of schemes balances held are released to
distributable reserves.
(2) Revaluation of own shares reserve to reflect the weighted
average price of shares purchased.
(3) During 2015 the Group reduced its share premium by
GBP275,000,000 increasing distributable reserves, see Note 6 for
full details.
For the 53 week period ended 3 January 2015
Opening balances 69,541 502,829 13,576 1,737 (5,312) 9,579 (491,526) 100,424
==================================== ======= ======= ====== ===== ======= ===== ========= ========
Total comprehensive loss for
the period - - - (4) - (14) (32,687) (32,705)
==================================== ======= ======= ====== ===== ======= ===== ========= ========
Recognised directly in equity:
------------------------------------ ------- ------- ------ ----- ------- ----- --------- --------
Preference share dividends
paid (Note 10) - - - - - - (152) (152)
Share-based payments charge - - 907 - - - - 907
Deferred tax on share-based
payment transactions - - (25) - - - - (25)
Share capital issued (Note
15) 46,630 - - - - - - 46,630
Share premium arising (Note
16) - 84,873 - - - - - 84,873
Performance share plan exercised - - (77) - 77 - - -
Company share option plan exercised - - - - 29 - - 29
Release on exercise of warrants - - (601) - - - 601 -
==================================== ======= ======= ====== ===== ======= ===== ========= ========
Net changes directly in equity 46,630 84,873 204 - 106 - 449 132,262
==================================== ======= ======= ====== ===== ======= ===== ========= ========
Total movements 46,630 84,873 204 (4) 106 (14) (32,238) 99,557
==================================== ======= ======= ====== ===== ======= ===== ========= ========
Equity at the end of the period 116,171 587,702 13,780 1,733 (5,206) 9,565 (523,764) 199,981
==================================== ======= ======= ====== ===== ======= ===== ========= ========
The accompanying notes are an integral part of these financial
statements.
Group Statement of Financial Position
At 2 January 2016
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
----------------------------------- ----- --------- ---------
Non-current assets
Intangible assets 12 479,047 514,324
Property, plant and equipment 52,713 53,334
Available for sale investments 970 970
Interests in associates - 22
Trade and other receivables 2 2
=================================== ===== ========= =========
532,732 568,652
=================================== ===== ========= =========
Current assets
Assets classified as held for sale 82 1,301
Inventories 2,383 2,543
Trade and other receivables 31,628 37,262
Current tax asset 247 -
Cash and cash equivalents 40,564 30,817
74,904 71,923
=================================== ===== ========= =========
Total assets 5 607,636 640,575
=================================== ===== ========= =========
Current liabilities
Trade and other payables 44,549 45,560
Current tax liabilities - 1,032
Retirement benefit obligation 14 10,016 6,489
Short-term provisions 1,835 2,087
=================================== ===== ========= =========
56,400 55,168
=================================== ===== ========= =========
Non-current liabilities
Borrowings 13 186,619 215,437
Retirement benefit obligation 14 16,946 83,512
Deferred tax liabilities 84,196 81,352
Trade and other payables 819 935
Long-term provisions 3,641 4,190
=================================== ===== ========= =========
292,221 385,426
=================================== ===== ========= =========
Total liabilities 348,621 440,594
=================================== ===== ========= =========
Net assets 259,015 199,981
=================================== ===== ========= =========
Equity
Share capital 15 116,171 116,171
Share premium account 16 312,702 587,702
Share-based payments reserve 6,963 13,780
Revaluation reserve 1,731 1,733
Own shares (3,582) (5,206)
Translation reserve 9,320 9,565
Retained earnings (184,290) (523,764)
=================================== ===== ========= =========
Total equity 259,015 199,981
=================================== ===== ========= =========
The financial statements of Johnston Press plc, registered in
Scotland (number 15382), were approved by the Board of Directors
and authorised for issue on 22 March 2016.
They were signed on its behalf by:
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer
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The accompanying notes are an integral part of these financial
statements.
Group Cash Flow Statement
For the 52 week period ended 2 January 2016
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
------------------------------------------------- ----- ---------- ----------
Cash flow from operating activities
Cash generated from operations 17 41,025 6,318
Income tax (paid)/received (816) 918
Cash generated from discontinued operations - 571
================================================= ===== ========== ==========
Net cash inflow from operating activities 40,209 7,807
================================================= ===== ========== ==========
Investing activities
Interest received 148 49
Dividends received 706 2,160
Proceeds on disposal of property, plant
and equipment 200 484
Proceeds on disposal of assets held for
sale 2,139 7,612
Proceeds on disposal of investments in
associates 10 -
Expenditure on digital intangible assets (1,772) (1,513)
Purchases of property, plant and equipment (6,084) (7,149)
Disposal proceeds and investing activities
of discontinued operations - 5,882
Expenditure incurred on disposal of discontinued
operations (46) -
================================================= ===== ========== ==========
Net cash (used in)/provided by investing
activities (4,699) 7,525
================================================= ===== ========== ==========
Financing activities
Issuance of bonds 13 - 220,500
Placing and Rights Issue - 140,022
Share exercises - option schemes, warrants - 662
Purchase of own shares (895) -
Dividends paid(1) 10 (304) -
Interest paid (19,658) (27,008)
Repayment of Bond (4,900) -
Repayment of bank borrowings - (204,738)
Repayment of loan notes - (121,798)
Refinancing fees (equity and debt issuance
costs) - (21,100)
Purchase of foreign currency options - (159)
Cash movement relating to own shares held - 29
Financing fees (25)
Settlement of share schemes 19 -
================================================= ===== ========== ==========
Net cash used in financing activities (25,763) (13,590)
================================================= ===== ========== ==========
Net increase in cash and cash equivalents 9,747 1,742
Cash and cash equivalents at the beginning
of period 30,817 29,075
================================================= ===== ========== ==========
Cash and cash equivalents at the end of
the period 40,564 30,817
================================================= ===== ========== ==========
(1) In 2015 the Group settled preference dividends relating to
2014 and 2015, 2014 dividends were accrued at the end of 2014.
The comparative period is for the 53 week period ended 3 January
2015.
The accompanying notes are an integral part of these financial
statements.
Notes to the Condensed Consolidated Financial Statements
For the 52 week period ended 2 January 2016
1. General information
The financial information in the Preliminary Results
Announcement is derived from but does not represent the full
statutory accounts of Johnston Press plc. The statutory accounts
for the 53 week period ended 3 January 2015 have been filed with
the Registrar of Companies and those for the 52 week period ended 2
January 2016 will be filed following the Company's Annual General
Meeting in 2016. The auditor's reports on the statutory accounts
for the 53 and 52 week periods ended 3 January 2015 and 2 January
2016 were unqualified. Neither report contained a statement under
Sections 498 (2) or (3) of the Companies Act 2006.
The condensed consolidated financial statements of Johnston
Press Plc have been prepared on a going concern basis (discussed
further in the Financial Review) and under the historical cost
convention, except for the revaluation of certain properties and
financial instruments, share-based payments and defined benefit
pension obligations that are measured at revalued amounts or fair
value at the end of each reporting period. The accounting policies
adopted in the preparation of this condensed consolidated financial
statement are consistent with those applied by the Group in its
audited consolidated financial statements for the period ended 2
January 2016.
Whilst the financial information included in this Results
Announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. This Results
Announcement constitutes a dissemination announcement in accordance
with Section 6.3 of the Disclosure and Transparency Rules (DTR).
The 2015 Annual Report and Accounts for the 52 weeks ended 2
January 2016 will be made available on the Company's website at
www.johnstonpress.co.uk, at the Company's registered office at
Orchard Brae House, 30 Queensferry Road, Edinburgh, EH4 2HS and
sent to shareholders in April 2016.
2. Basis of Preparation
Johnston Press plc ("Johnston Press" or "the Group") is a public
limited liability company incorporated in Scotland under the
Companies Act 2006 and listed on the London Stock Exchange. The
registered office is Orchard Brae House, 30 Queensferry Road,
Edinburgh, EH4 2HS. The principal activities of the Group are
described in the Operational Review and Financial Review sections
of the Strategic Report.
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS') issued by the
International Accounting Standards Board as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies preparing their accounts under IFRS.
These financial statements have been prepared for the 52 week
period ended 2 January 2016 (2014: 53 week period ended 3 January
2015).
These financial statements have been prepared in accordance with
the accounting policies set out in the 2014 Annual Report. The
financial statements have also been adjusted, where appropriate, by
new or amended IFRS described below.
These financial statements have been prepared on a going concern
basis (discussed further in the Financial Review) and under the
historical cost basis except for the revaluation of certain
properties and financial instruments, share-based payments and
defined benefit pension obligations that are measured at revalued
amounts or fair value at the end of each reporting period.
3. Significant Accounting Policies
Adoption of new or amended standards and interpretations in the
current year
The following new and amended IFRSs have been adopted for the 52
week period which commenced 4 January 2015 and ended 2 January
2016.
Impact on financial
Accounting standard Requirements statements
-------------------------- ---------------------------------- ------------------------
IFRS 10 Consolidated Establishes a single None; additional
Financial Statements basis - control - to disclosure requirements
determine whether an included within
entity (including a structured accounting policies
or special purpose entity) under header
should be included in 'Accounting
the consolidated financial for subsidiaries'.
statements.
Provides additional guidance
to assist in the determination
of control in circumstances
in which this is difficult
to assess, such as control
with less than 50% of
voting rights, potential
voting rights and agency
relationships (e.g.,
investment managers).
========================== ================================== ========================
IFRS 12 Disclosure Sets out new and comprehensive None.
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March 22, 2016 03:02 ET (07:02 GMT)
of Interests in disclosure requirements
Other Entities for all forms of interests
in other entities including
subsidiaries, joint arrangements,
associates, structured
or special purpose entities
and off-balance sheet
entities.
========================== ================================== ========================
IAS 27 Separate Contains the accounting None.
Financial Statements and disclosure requirements
for investment in subsidiaries,
joint arrangements and
associates when an entity
prepares separate financial
statements. The requirements
in respect of consolidated
financial statements
are superseded by IFRS
10.
========================== ================================== ========================
IAS 28 Investments Prescribes the equity None.
in Associates and method for investments
Joint Ventures in associates and joint
ventures, and slightly
modifies the accounting
required when a portion
of an investment in an
associate or joint venture
is held for sale.
========================== ================================== ========================
Amendments to IFRS Provides additional transition None.
10, IFRS 11 and relief in IFRSs 10, 11
IFRS 12 - Consolidated and 12 by limiting the
Financial Statements, requirement to provide
Joint Arrangements adjusted comparative
and Disclosure information to only the
of Interests in preceding comparative
Other Entities: period.
Transition Guidance
========================== ================================== ========================
Amendments to IFRS Defines an investment None.
10, IFRS 12 and entity and introduces
IAS 27 - Investment an exception to consolidating
Entities particular subsidiaries
for investment entities.
========================== ================================== ========================
Amendments to IAS Addresses inconsistencies None.
32 - Offsetting in current practice when
Financial Assets applying the offsetting
and Financial Liabilities criteria in IAS 32. The
amended standard clarifies
that the right of set-off
must be legally enforceable
not only in the normal
course of business but
also in the event of
default or insolvency
or bankruptcy of either
the entity or all of
the counterparties and
that it must not be contingent
on a future event.
========================== ================================== ========================
Amendments to IAS Clarifies the scope of None; refer
36 - Recoverable certain disclosures about Note 12 to the
Amount Disclosures the recoverable amount condensed financial
for Non-Financial of impaired assets. Additional statements -
Assets disclosures are required Intangible Assets
when the recoverable where the recoverable
amount of impaired assets amount is based
is based on fair value on value in
less costs of disposal. use instead
of fair value
less costs of
disposal.
========================== ================================== ========================
IFRIC 21 Levies Clarifies how an entity None; refer
should account for liabilities Note 14 to the
to pay levies imposed condensed financial
by governments. statements in
relation to
PPF levies recognised
in the income
statement.
========================== ================================== ========================
Amendments to IAS Introduces a narrow-scope None; refer
19 - Defined Benefit amendment to simplify Note 14 to the
Plans: Employee the accounting for contributions condensed financial
Contributions that are independent statements.
of the number of years
of employee service,
e.g., employee contributions
that are calculated according
to a fixed percentage
of salary.
========================== ================================== ========================
Annual improvements Minor amendments to IFRS None; minor
to IFRSs 2010-2012 2, 3, 8, 13 and IAS 16 revisions taken
cycle and 38 and IAS 24. into consideration
when applying
standards.
========================== ================================== ========================
Annual improvements Minor amendments to IFRS None; minor
to IFRSs 2011-2013 1, 3, 13 and IAS 40. revisions taken
cycle into consideration
when applying
standards.
========================== ================================== ========================
New and amended IFRS issued by the IASB but not yet effective
for the 52 week period ended 2 January 2016
The following standards and interpretations are applicable to
companies with periods beginning after 2015. These will be
mandatory for Johnston Press plc in the 52 weeks ended 1 January
2017.
Accounting Impact on financial
standard Requirements statements
------------------------ ------------------------------- ---------------------------
Amendments to Prohibits revenue-based None; refer Note 12
IAS 16 and IAS depreciation methods - Intangible Assets
38 - Clarification and generally presumes to the condensed financial
of Acceptable that such methods are statements
Methods of Depreciation an inappropriate basis
and Amortisation for amortising intangible
assets.
======================== =============================== ===========================
Amendments to Allows entities to use None.
IAS 27 - Equity the equity method to
Method in Separate account for investment
Financial Statements in subsidiaries, joint
ventures and associates
in their separate financial
statements.
======================== =============================== ===========================
Amendments to Encourages companies None.
IAS 1 - Disclosure to apply professional
Initiative judgement in determining
what information to disclose
in their financial statements.
======================== =============================== ===========================
Annual improvements Minor amendments to IFRS None; minor revisions
to IFRSs 2012-2014 5 and 7, IAS 19 IAS 34. taken into consideration
cycle when applying standards.
======================== =============================== ===========================
* Not yet EU endorsed.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
New standards applicable to accounting periods beginning after
2016
Accounting
standard Requirements Effective date
------------------ ------------------------------------------------------------ ----------------------------
IFRS 15 IFRS 15 (which replaces Effective for annual
Revenue IAS 11 and 18 and SIC periods beginning 1
from Contracts 31, IFRIC 13, 15 and January 2018.
with Customers(*) 18) provides a single,
principles-based five-step A detailed assessment
model that should be of the implications
applied to determine of the standard on the
how and when to recognise business will be undertaken
revenue from contracts particularly as it relates
with customers. to digital marketing
services contracts and
IFRS 15's core principle longer term advertising
is that revenue is recognised agreements delivered
to depict the transfer across multiple platforms.
of promised goods or
services to customers
in an amount that reflects
the consideration to
which an entity expects
to be entitled in exchange
for those goods or services.
A five-step approach
to revenue recognition
is required:
* Identify the contract(s) with a customer.
* Identify the performance obligations in the contract.
* Determine the transaction price.
* Allocate the transaction price to the performance
obligations in the contract.
* Recognise revenue when (or as) performance
obligations are satisfied.
IFRS 15 also includes
requirements for accounting
for costs related to
a contract with a customer.
These are recognised
as an asset if certain
criteria are met.
The standard requires
qualitative and quantitative
disclosures in respect
of revenue, contract
balances, performance
obligations, significant
judgements and assets
recognised from costs
to obtain or fulfil a
contract.
================== ============================================================ ============================
IFRS 9 Financial IFRS 9 sets out the requirements Effective for annual
Instruments for recognising and measuring periods beginning 1
(Issued financial assets, financial January 2018; the impact
24 July liabilities and some is yet to be assessed.
2014)(*) contracts to buy or sell
non-financial items.
IFRS 9 will supersede
IAS 39 Financial Instruments:
Recognition and Measurement.
================== ============================================================ ============================
IFRS 16 IFRS 16 provides a comprehensive Effective for annual
(Issued) model for the identification periods beginning 1
Leases of lease arrangements January 2019; the impact
and their treatment in is yet to be assessed.
the financial statements
of both lessees and lessors.
It supersedes IAS 17
Leases and its associated
interpretative guidance
and applies a control
model to the identification
of leases, distinguishing
between leases and service
contracts on the basis
of whether there is an
identified asset controlled
by the customer -
================== ============================================================ ============================
* Not yet EU endorsed.
4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical judgements in applying the Group's accounting
policies
In the process of applying the Group's accounting policies
management has made the following judgements that have the most
significant effect on the amounts recognised in the financial
statements (apart from those involving estimations, which are dealt
with below).
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
Provisions for onerous leases and dilapidations
Where the Group exits a rented property, an estimate of the
anticipated total future cost payable under the terms of the
operating lease, including rentals, rates and other related
expenses, is charged to the Income Statement at the point of exit
as an onerous lease. Where there is a break clause in the contract,
rentals are provided for up to that point. In addition, an estimate
is made of the likelihood of sub-letting the premises and any
rentals that would be receivable from a sub-tenant. Where receipt
of sub-lease rentals is considered reasonable, these amounts are
deducted from the rentals payable by the Group under the lease and
provision charged for the net amount.
Under the terms of a number of property leases, the Group is
required to return the property to its original condition at the
lease expiry date. The Group has estimated the expected costs of
these dilapidations and charged these costs to the Income
Statement. No discounting has been applied to the provision as the
effect of the discounting is not considered material.
Valuation of share-based payments
The Group estimates the expected value of equity-settled
share-based payments and this is charged through the Income
Statement over the vesting periods of the relevant awards. The cost
is estimated using a Black-Scholes valuation model. The
Black-Scholes calculations are based on a number of assumptions and
are amended to take account of estimated levels of share vesting
and exercise.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the period end date that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Impairment of publishing titles, print presses and other
intangible assets
Determining whether publishing titles are impaired requires an
estimation of the value in use of the cash generating units (CGUs)
to which these assets are allocated. Key areas of judgement in the
value in use calculation include the identification of appropriate
CGUs, estimation of future cash flows expected to arise from each
CGU, the long-term growth rates and a suitable discount rate to
apply to cash flows in order to calculate present value. The Group
has identified its CGUs based on the seven geographic regions in
which it operates. This is considered to be the lowest level at
which cash inflows generated are largely independent of the cash
inflows from other groups of assets and has been consistently
applied in the current and prior periods. GBP35.2 million
impairment loss has been recognised for the period ended 2 January
2016 (3 January 2015: GBP21.6 million) in relation to publishing
titles. A future change in the composition of CGUs may result in a
different outcome. The carrying value of publishing titles at 2
January 2016 was GBP476.4 million (3 January 2015: GBP511.6
million).
Determining whether print presses are impaired requires an
estimation of the value in use of each print site. The value in use
calculation requires the Group to estimate the future cash flows
expected to arise from the print sites and a suitable discount rate
in order to calculate present value (Note 12).
GBP1.6 million accelerated depreciation/amortisation has been
taken in relation to digital intangible assets. Details of the
impairment reviews that the Group performs are provided in Note 12
to the condensed financial statements.
Valuation of pension liabilities
The Group records in its Statement of Financial Position a
liability equivalent to the deficit on the Group's defined benefit
pension schemes. The pension liability is determined with advice
from the Group's actuarial advisers each year and can fluctuate
based on a number of factors, some of which are outside the control
of management. The main factors that can impact the valuation
include:
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
-- the discount rate used to discount future liabilities back to
the present date, determined each year from the yield on corporate
bonds;
-- the actual returns on investments experienced as compared to
the expected rates used in the previous valuation;
-- the actual rates of salary and pension increase as compared
to the expected rates used in the previous valuation;
-- the forecast inflation rate experienced as compared to the
expected rates used in the previous valuation; and
-- mortality assumptions based on standard base table adjusted
to reflect specific conclusions and conditions based on a study of
the actual scheme members.
Details of the assumptions used to determine the liability at 2
January 2016 are set out in Note 14 to the condensed financial
statements.
5. Segment Information
Business segments
Information reported to the Chief Executive Officer for the
purpose of resource allocation and assessment of segment
performance is focused on the two areas of Publishing (in print and
online) and Contract Printing. Geographical segments are not
presented as the primary segment is the UK which is greater than
90% of Group activities.
a) Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment:
52 week period ended 2 January 53 week period ended
2016 3 January 2015
============================================= =============================================
Contract Contract
Publishing printing Eliminations Group Publishing printing Eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- --------- ------------ -------- ---------- --------- ------------ --------
Revenue
Print advertising 119,607 - - 119,607 138,087 - - 138,087
Digital advertising 31,719 - - 31,719 29,116 - - 29,116
Newspaper sales 72,461 - - 72,461 79,144 - - 79,144
Contract printing - 12,627 - 12,627 - 12,804 - 12,804
Other 7,568 1,107 - 8,675 8,177 1,495 - 9,672
======================== ========== ========= ============ ======== ========== ========= ============ ========
Total external sales 231,355 13,734 - 245,089 254,524 14,299 - 268,823
Inter-segment sales(1) - 30,182 (30,182) - - 36,727 (36,727) -
Total revenue 231,355 43,916 (30,182) 245,089 254,524 51,026 (36,727) 268,823
======================== ========== ========= ============ ======== ========== ========= ============ ========
Operating profit/(loss)
Segment result (1,829) 2,856 - 1,027 6,443 4,270 - 10,713
======================== ========== ========= ============ ======== ========== ========= ============ ========
Investment income 854 2,209
Net finance expense
on pension
assets/liabilities (2,933) (3,330)
Net IAS 21/39
adjustments(2) 23,918 6,725
Net finance costs (19,973) (40,233)
Profit/(Loss) before
tax 2,893 (23,916)
Taxation
(expense)/credit 8,538 8,580
======================== ========== ========= ============ ======== ========== ========= ============ ========
Profit/(Loss) after
tax for the period 11,
- continuing operations 431 (15,336)
======================== ========== ========= ============ ======== ========== ========= ============ ========
Profit after tax
for the period -
discontinued operations - 236
======================== ========== ========= ============ ======== ========== ========= ============ ========
Consolidated
profit/(loss)
after tax for the
period 11,431 (15,100)
======================== ========== ========= ============ ======== ========== ========= ============ ========
(1) Inter-segment sales are charged at standard internal
charging rates.
(2) Relates to changes in fair value of borrowings, changes in
fair value of hedges, retranslation of US dollars and retranslation
of euro-denominated debt.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. The segment result represents
the (loss)/profit earned by each segment without allocation of the
share of results of associates, investment income, finance costs
(including in relation to pension assets and liabilities) and
income tax expense. This is the measure reported to the Group's
Chief Executive Officer for the purpose of resource allocation and
assessment of segment performance.
b) Segment assets
2 January 3 January
2016 2015
GBP'000 GBP'000
-------------------------- --------- ---------
Assets
Publishing 574,975 609,452
Contract printing 32,661 31,538
========================== ========= =========
Total segment assets 607,636 640,990
========================== ========= =========
Unallocated assets - -
========================== ========= =========
Consolidated total assets 607,636 640,990
========================== ========= =========
For the purposes of monitoring segment performance and
allocating resources between segments, the Group's Chief Executive
Officer monitors the tangible, intangible and financial assets
attributable to each segment. All assets are allocated to
reportable segments.
c) Other segment information
52 weeks to 53 weeks to
2 January 2016 3 January 2015
=============================== ===============================
Contract Contract
Publishing printing Group Publishing printing Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- --------- -------- ---------- --------- --------
Additions to property, plant
and equipment 5,837 247 6,084 7,044 105 7,149
Depreciation and amortisation
expense (continuing) 6,403 1,965 8,368 3,869 1,638 5,507
Impairment of property, plant
and equipment - - - 2,667 - 2,667
Net impairment of intangibles 35,234 - 35,234 21,568 - 21,568
============================== ========== ========= ======== ========== ========= ========
6. Operating Profit
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
------------------------------------------------------ ----- ---------- ----------
Operating profit is shown after charging/(crediting):
Depreciation of property, plant and equipment 6,553 5,313
Amortisation of intangible fixed assets 12 1,815 194
Impairment of publishing titles 12 35,234 21,568
Write down in value of fixed assets(1) - 2,667
Write down of assets classified as held
for sale 4 - 300
Profit on disposal of property, plant
and equipment:
Profit on disposal of plant and equipment 187 1,968
Profit on disposal of property 783 1,739
Cost of inventories recognised as expense 21,382 27,027
Movement in allowance for doubtful debts 17 (695)
Staff costs excluding redundancy costs 93,090 100,703
Redundancy costs 4,474 7,320
Long Term Incentive Plans - 4,321
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
Share-based payments 596 676
Value Creation Plan 993 231
Operating lease charges:
Property 4,617 4,938
Vehicles 1,395 1,752
Rentals received on sub-let property 77 91
Net foreign exchange gains (9) (39)
Pension Protection Fund levy 14 1,221 2,038
Auditor's remuneration:
Company and Group accounts 230 159
Subsidiaries 200 240
====================================================== ===== ========== ==========
(1) 2014 includes GBP1,500,000 relating to the Sheffield
property which has a redundant press hall in its basement and
GBP1,167,000 of redundant assets in Score Press Limited.
Profit on disposal of property
The Group operates a large portfolio of properties, and
regularly exits and renews leases, as well as sale and leaseback of
freehold properties. Profits of GBP0.8 million for the period ended
2 January 2016 (3 January 2015: GBP2.0 million) from property sales
were included in operating profit/(loss). There were seven such
sales for the period ended 2 January 2016 (2014: 21).
Staff costs shown above include GBP1,293,000 (3 January 2015:
GBP2,566,000) relating to remuneration of Directors. In addition to
the auditor's remuneration shown above, the auditor received the
following fees for non-audit services.
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
-------------------------------------- ---------- ----------
Audit-related assurance services 55 55
Taxation compliance services 60 55
Other taxation advisory services 84 37
Other services related to refinancing - 305
====================================== ========== ==========
199 452
====================================== ========== ==========
All non-audit services were approved by the Audit Committee. The
Audit Committee considers that these non-audit services have not
impacted the independence of the audit process. In addition, an
amount of GBP15,500 (3 January 2015: GBP19,000) was paid to the
external auditor for the audit of the Group's pension scheme.
7. Finance Costs
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
----------------------------------------------------- ---------- -----------
a) Net finance expense on pension liabilities/assets
Interest on assets 16,771 19,376
Interest on liabilities (19,704) (22,706)
===================================================== ========== ===========
Net finance expense on pension liabilities/assets (2,933) (3,330)
===================================================== ========== ===========
b) IAS 21/39 items
The fair value movement on the 8.625% Senior Secured Bonds due
2019 resulted in a gain of GBP23.9 million (2014: GBP5.1 million)
and was based on quoted market fair value. Refer to Note 13 to the
condensed financial statements. The fair value movements on the
bond are not taxable as it is accounted for under amortised cost
within Johnston Press Bond plc.
All movements in the fair value of derivative financial
instruments are recorded in the Income Statement. There are no
longer derivative financial instruments held by the Group. When
held in 2014 there was a GBP1.3 million net charge. The
retranslation of foreign denominated debt resulted in GBPnil
movement (2014: net gain GBP2.9 million). In the current period no
debt was held in foreign currencies. All euro denominated
publishing titles were disposed of in 2014 as such there was no
retranslation required in the current period.
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
c) Finance costs
Interest on bond (19,296) (12,290)
Interest on bank overdrafts and loans (374) (11,163)
Payment-in-kind interest - (5,345)
Amortisation of term debt issue costs (194) (2,389)
Financing fees (109) -
============================================== ========== ==========
Total operational finance costs (19,973) (31,187)
============================================== ========== ==========
Payment-in-kind interest accrual release(1) - 9,181
Term debt issue costs written off on previous
repaid loan services(1) - (7,145)
============================================== ========== ==========
Gain on debt extinguishment - 2,036
============================================== ========== ==========
Refinancing fees on new capital raising(2) - (11,082)
Total exceptional finance costs - (9,046)
============================================== ========== ==========
Total finance costs (19,973) (40,233)
============================================== ========== ==========
(1) The 2014 interest accrual release of GBP9.2 million includes
a release of the PIK accrual of GBP25.7 million less GBP6.4 million
PIK payment and GBP10.1 million Make-Whole interest paid due to
early debt repayment. The term debt issue costs write off of GBP7.1
million represents the remaining term debt issue costs after
amortisation at the date of repayment. There was no such amount in
the current year.
(2) The 2014 GBP11.1 million refinancing fees relates to legal
and professional fees associated with the refinancing that were
attributable to the equity and bond issue, the revolving credit
facility, the repayment of lending banks and noteholders and the
new pension framework agreement. These have been recorded in the
Income Statement. There was no such amount in the current year.
8. Tax
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
--------------------------------------------------- ---------- -----------
Current tax
Charge for the period 200 -
Adjustment in respect of prior periods (626) (665)
=================================================== ========== ===========
(426) (665)
=================================================== ========== ===========
Deferred tax
Charge / (credit) for the period 6,983 (1,874)
Deferred tax adjustment in respect of prior
periods relating to the bond 1,104 -
Deferred tax adjustment relating to the impairment
of publishing titles in the period (7,033) (6,041)
Credit relating to reduction in deferred tax
rate to 18%/19% (2014: 20.0%) (9,166) -
=================================================== ========== ===========
(8,112) (7,915)
=================================================== ========== ===========
Total tax credit for the period (8,538) (8,580)
=================================================== ========== ===========
UK corporation tax is calculated at 20.25% (3 January 2015:
21.5%) of the estimated assessable profit for the period. The 21.5%
basic tax rate applied for the 2015 period was a blended rate due
to the tax rate of 21.0% in effect for the first quarter of 2015,
changing to 20.0% from 1 April 2015 under the 2013 Finance Act.
Taxation for other jurisdictions is calculated at the rates
prevailing in the relevant jurisdiction.
The change in rate from 20% to 18% or 19% has been accounted for
in the current year resulting in a GBP9.2 million tax credit in the
consolidated income statement and GBP0.6 million credit in the
Statement of Comprehensive Income as a result of the change to the
standard rate of corporation tax substantively enacted by
parliament. GBP9.5 million of the tax credit has arisen on
recognising the publishing title intangible assets deferred tax
balance at the reduced corporate tax rate of 18%.
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A deferred tax adjustment relating to the bond accounting
treatment has been charged in the period, in respect of the prior
year. The accounting treatment of the bond differs in the Group,
compared to the subsidiary, which gives rise to the deferred tax
liability. Within the Group accounts the bond is marked-to-market.
At a subsidiary reporting level the bond is accounted for under the
amortised cost method (FRS 102 - section 10).
The tax credit for the period can be reconciled to the
profit/(loss) per the Income Statement as follows:
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 % GBP'000 %
-------------------------------------------- ---------- ------- ----------- -----
Profit/(Loss) before tax 2,893 100.0 (23,916) 100.0
-------------------------------------------- ---------- ------- ----------- -----
Tax at 20.25% (3 January 2015: 21.50%) 586 20.3 (5,142) 21.5
Tax effect of items that are not deductible
or not taxable in determining taxable
profit (169) (5.8) (2,729) 11.4
Tax effect of investment income (142) (4.9) (321) 1.3
Effect of other tax rates (122) (4.2) (81) 0.3
Unrecognised deferred tax assets (3) (0.1) 358 (1.5)
Effect of reduction in deferred tax
rate (9,166) (316.9) - -
Adjustment in respect of prior year
bond accounting 1,104 38.2 - -
Adjustment in respect of prior years (626) (21.6) (665) 2.8
============================================ ========== ======= =========== =====
Total tax credit (8,538) (295.2) (8,580) 35.9
============================================ ========== ======= =========== =====
9. Discontinued Operations
There were no significant discontinued operations in the
period.
In the Prior year the Group disposed of the Republic of Ireland
titles to Iconic Newspapers, part of Mediaforce Limited. In
accordance with IFRS 5 'Non-Current Assets Held for Sale and
Discontinued Operations', the results and cash flows of this
'disposal group' were reported separately from the performance of
continuing operations. The net profit from discontinued operations
for the period ended 2 January 2016 was nil (2014: GBP0.3
million).
10. Dividends
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Amounts recognised as distributions to equity
holders in the period:
Preference dividends
13.75% Cumulative preference shares (13.75p
per share) 104 104
13.75% 'A' preference shares (13.75p per share) 48 48
================================================ ========== ==========
152 152
================================================ ========== ==========
Under the provisions of the Bond, the Company's ability to pay
dividends in respect of ordinary shares is restricted until certain
conditions, including that the net leverage is below 2.25% EBITDA,
are met. No ordinary dividend is proposed for the period ended 2
January 2016 (3 January 2015: GBPnil).
Following the completion of the GBP275 million capital reduction
in May 2015 the Group has paid preference dividends relating to
2014 and resumed the regular June and December payments on each
class of preference share.
11. Earnings Per Share
The calculation of earnings per share is based on the following
profit/(loss) and weighted average number of shares:
Continuing and discontinued operations
52 weeks 53 weeks
to to
2 January 3 January
2016 2015
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
Earnings
Profit/(loss) for the period 11,431 (15,100)
Preference dividend(1) (152) (152)
============================================== ========== ==========
Earnings for the purposes of diluted earnings
per share 11,279 (15,252)
============================================== ========== ==========
000's 000's
------------------------------------------------- ------- ---------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per share(2) 105,281 3,519,319
Effect of dilutive potential ordinary shares
* warrants and employee share options - -
* PSP and deferred bonus shares - -
================================================= ======= =========
Number of shares for the purposes of diluted
earnings per share 105,281 3,519,924
================================================= ======= =========
Earnings per share (p)
Basic 10.71 (0.43)
Diluted(3) 10.71 (0.43)
================================================= ======= =========
(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 treasury shares.
(3) Diluted earnings per share are presented when a company
could be called upon to issue shares that would decrease net profit
or increase loss per share.
Continuing operations
2 January 3 January
2016 2015
GBP'000 GBP'000
---------------------------------------------- --------- -----------
Earnings
Profit/(Loss) for the period 11,431 (15,336)
Preference dividend(1) (152) (152)
============================================== ========= ===========
Earnings for the purposes of diluted earnings
per share 11,279 (15,488)
============================================== ========= ===========
000's 000's
------------------------------------------------- ------- ---------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per share(2) 105,281 3,519,319
Effect of dilutive potential ordinary shares
* warrants and employee share options - -
* PSP and deferred bonus shares - -
================================================= ======= =========
Number of shares for the purposes of diluted
earnings per share 105,281 3,519,319
================================================= ======= =========
Earnings per share (p)
Basic 10.71 (0.44)
Diluted(3) 10.71 (0.44)
================================================= ======= =========
(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 treasury shares.
(3) 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.
12. Intangible Assets
Digital
Publishing intangible
titles assets Total
GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ----------- ---------
Cost
Opening balance 1,149,123 3,013 1,152,136
Additions 67 1,705 1,772
Closing balance 1,149,190 4,718 1,153,908
=================================== ========== =========== =========
Accumulated impairment losses and
amortisation
Opening balance 637,561 251 637,812
Amortisation for the period - 1,815 1,815
Impairment losses for the period 35,234 - 35,234
Closing balance 672,795 2,066 674,861
=================================== ========== =========== =========
Carrying amount
Opening balance 511,562 2,762 514,324
=================================== ========== =========== =========
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
Closing balance 476,395 2,652 479,047
=================================== ========== =========== =========
Publishing titles
The carrying amount of publishing titles by cash generating unit
(CGU) is as follows:
3 January 2 January
2015 Impairment Addition 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- ---------- -------- ---------
Scotland 52,127 - - 52,127
North 217,231 (22,273) - 194,958
Northwest 47,860 (1,560) - 46,300
Midlands 120,082 (10,973) - 109,109
South 38,375 - 67 38,442
Northern Ireland 35,887 (428) - 35,459
Total carrying amount of publishing
titles 511,562 (35,234) 67 476,395
==================================== ========= ========== ======== =========
The addition in the period, relates to the acquisition of Love
News Media Limited the publisher of the Brighton & Hove
Independent which was acquired on 3rd July 2015. 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.
The Group tests the carrying value of publishing titles held
within the publishing operating segment for impairment annually or
more frequently if there are indications that they might be
impaired. The publishing titles are grouped by CGUs, being the
lowest levels for which there are separately identifiable cash
flows independent of the cash inflows from other groups of
assets.
The recoverable amounts of the CGUs are determined from value in
use calculations. The key assumptions for the value in use
calculations are:
-- expected changes in underlying revenues and direct costs during the period;
-- growth rates; and
-- the discount rate.
The Group prepares discounted cash flow forecasts using:
-- the Board approved budget for 2016 and the projections for
2017 and 2018, which reflect management's current experience and
future expectations of the markets the CGUs operate in. 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;
-- capital expenditure cash flows to reflect the cycle of capital investment required;
-- net cash inflows for future years are extrapolated beyond
2018 based on the Board's view of the estimated annual long-term
growth rate of 1.0%; and
-- management estimate discount rates using post-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the CGUs. The post-tax discount rate applied
to the future cash flows for the period ended 2 January 2016 was
10.0% (2015 pre-tax discount rate of 12.1%, 2014: 12.0%). The
post-tax 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. The present value of the cash flows is
then compared to the carrying value of the asset to determine if
there is any impairment loss.
The total impairment charge recognised for the period ended 2
January 2016 was GBP35.2 million (3 January 2015: GBP21.6 million).
The impairment charge in the period relates to the North of
England, Midlands and Northern Ireland.
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%, beyond 2018, would result in a further Group
impairment of GBP17.7 million and an increase in the discount rate
of 0.5% would result in an additional impairment of GBP20.1
million.
Growth Discount
rate rate
sensitivity sensitivity
GBP'000 GBP'000
-------------------------------------------- ------------ ------------
Scotland 0 0
North (8,955) (10,197)
Northwest (2,128) (2,424)
Midlands (4,904) (5,584)
South 0 0
Northern Ireland (1,684) (1,918)
============================================ ============ ============
Total potential impairment from sensitivity
analysis (17,671) (20,123)
============================================ ============ ============
While the value in use of the North, Northwest, Midlands and
Northern Ireland CGUs have decreased during the period, the values
in use of Scotland and South CGUs have increased. After applying
the sensitivities, no impairment would arise in the Scotland and
South CGUs as their values in use would continue to remain higher
than their respective carrying values.
Digital intangible assets
Digital intangible assets primarily relate to the new design,
additional functionality and ongoing commercial enhancements to the
Group's local websites and the development of a Customer
Relationship Management (CRM) capability. The websites form the
core platform for the Group's digital revenue activities whereas
the CRM capability will enable the Group to accelerate the growth
of its subscriber base. These assets are being amortised over a
period of two to five years. Amortisation for the year has been
charged through cost of sales.
13. Borrowings
The borrowings at 2 January 2016 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 7c to the condensed financial
statements).
As disclosed in the 2015 interim report it was the Company's
intention to buy back GBP5 million of the Bond. This was completed
in August 2015 when funds became available at 98%.
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------- --------- ---------
Bank loans - -
Private placement loan notes - -
Payment-in-kind interest accrual - -
8.625% Senior secured notes 2019(1) 186,619 215,437
=========================================== ========= =========
Total borrowings excluding term debt issue
costs 186,619 215,437
Term debt issue costs - -
=========================================== ========= =========
Total borrowings 186,619 215,437
=========================================== ========= =========
(1) 8.625% Senior secured notes 2019 breakdown.
2 January 3 January
2016 2015
GBP'000 GBP'000
----------------------------- --------- ---------
Outstanding principal amount 220,000 225,000
Bond discount (net) (4,400) (4,500)
Fair value gain (28,981) (5,063)
============================= ========= =========
Total 186,619 215,437
============================= ========= =========
The borrowings are disclosed in the financial statements as:
2 January 3 January
2016 2015
GBP'000 GBP'000
----------------------- --------- ---------
Current borrowings - -
Non-current borrowings 186,619 215,437
======================= ========= =========
Total borrowings 186,619 215,437
======================= ========= =========
The Group's net debt(2) is:
2 January 3 January
2016 2015
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Gross borrowings as above 186,619 215,437
Cash and cash equivalents (40,564) (30,817)
Net debt including currency hedge instruments 146,055 184,620
Term debt issue costs - -
============================================== ========= =========
Net debt excluding term debt issue costs 146,055 184,620
============================================== ========= =========
(2) Net debt is a non-statutory term presented to show the
Group's borrowings net of cash equivalents, fair value of foreign
exchange options and term debt issue costs.
14. Retirement Benefit Obligation
Characteristics of the Group's pension related liabilities
The Johnston Press Retirement Savings Plan
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March 22, 2016 03:02 ET (07:02 GMT)
The Johnston Press Retirement Savings Plan is a defined
contribution Master Trust arrangement for current employees,
operated by Zurich. Contributions by the Group are a percentage of
basic salary. Employer contributions range from 1% of basic salary,
for employees statutorily enrolled, through to 12% of basic salary
for Senior Executives. Employees who were active members of the
Money Purchase section of the Johnston Press Pension Plan on 31
August 2013 transferred from the Johnston Press Pension Plan to the
Johnston Press Retirement Savings Plan from 1 September 2013.
The Johnston Press Pension Plan
The Johnston Press Pension Plan is a defined benefit pension
plan closed to new members and closed to future accrual. There was
formerly a defined contribution section of the Johnston Press
Pension Plan which was closed in August 2013 and members' defined
contribution benefits were transferred to the Johnston Press
Retirement Savings Plan. The assets of the Plan are held separately
from those of the Group. The contributions are determined by a
qualified actuary on the basis of a triennial valuation using the
projected unit method and are set out in a Schedule of
Contributions and Recovery Plan dated 29 July 2014.
A valuation of the Johnston Press Pension Plan as at 31 December
2012 was commissioned by the Trustees and takes account of the
Capital Refinancing Plan. A new triennial valuation is due as at 31
December 2015 and this is to be carried out in 2016.
In conjunction with the 2014 Capital Refinancing Plan, the Plan
Trustees and the Group entered into a Pension Framework Agreement,
agreeing, inter alia to the following:
-- On implementation of the Capital Refinancing Plan in June
2014, the secured guarantee provided in favour of the Plan Trustees
by the Group and certain of its subsidiaries in relation to any
default on a payment obligation under the Johnston Press Pension
Plan has been removed. In return for the removal of this security
and the aforementioned guarantee, an unsecured cross-guarantee has
been provided on implementation of the Capital Refinancing Plan by
the Group and certain of its subsidiaries in favour of the Plan
Trustees in relation to any default on a payment obligation under
the Johnston Press Pension Plan. Each claim made under the
unsecured cross-guarantee is capped at an amount equal to the
aggregate Section 75 (s75) debt of the Johnston Press Pension Plan
at the date any claim made by the Plan Trustees falls due.
-- The deficit as at the 31 December 2012 valuation date will be
sought to be addressed by 31 December 2024 by entry into a recovery
plan providing for contributions starting at GBP6.3 million in
2014, GBP6.5 million in 2015 and GBP10.0 million in 2016 increasing
by 3% per annum with a final payment of GBP12.7 million in
2024.
-- Settlement of previously incurred PPF levies and s75 debts.
-- The Johnston Press Pension Plan will be entitled to receive
25% of net proceeds from business or asset disposals up to and
including 31 August 2015 exceeding GBP1 million in a single
transaction or GBP2.5 million over the course of a financial year,
subject to certain permitted disposals, conditions in relation to
financial leverage and other exceptions set out in the Framework
Agreement.
-- The Group will also pay additional contributions to the
Johnston Press Pension Plan in the event that the 2014/2015 PPF
levy and/or the 2015/2016 PPF levy is less than GBP3.2 million,
equal to the amount the levy falls below GBP3.2 million, up to a
maximum of GBP2.5 million.
-- Additional contributions will also be payable to the Johnston
Press Pension Plan in the event that the Group satisfies certain
conditions in relation to financial leverage.
As part of the 31 December 2012 triennial valuation, this
Pension Framework Agreement was reflected in the valuation
documentation of the Johnston Press Pension Plan, and subsequently
it was submitted to the Pensions Regulator. The Agreement and the
required level of contributions are subject to review as part of
the 31 December 2015 triennial valuation currently on-going.
Irish Pension Schemes
In addition, the Group maintained a liability for two defined
benefit schemes providing benefits for a small number of former
employees in Limerick and Leinster. Both schemes are in the process
of being wound up and no further Employer funding contributions are
payable.
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
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
------------------------------------------- ----- --------- ---------
Employment costs:
Defined contribution scheme (3,880) (4,425)
Defined benefit scheme
Plan expenses (IAS19R)(1) (632) (1,217)
Pension protection fund(2) (1,221) (2,038)
Net finance cost on Johnston Press Pension
Plan (IAS19R) 7a (2,933) (3,330)
=========================================== ===== ========= =========
Total defined benefit scheme (4,786) (6,585)
=========================================== ===== ========= =========
Total pension costs (8,666) (11,010)
=========================================== ===== ========= =========
(1) Relates to administrative expenses incurred in managing the
pension fund.
(2) Relates to the payment of GBP722,000 to the Pension
Protection Fund for the period April 15 to March 16 (April 2014 to
March 2015: GBP2,718,000). Of this GBP180,000 has been recognised
as a prepayment (2014: GBP380,000).
Other comprehensive income - (loss)/gain on pension
2 January 3 January
2016 2015
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
(Losses)/Gains on plan assets in excess of
interest (7,610) 48,120
Gains/(Losses) from changes to financial
assumptions 8,456 (66,797)
Gains from changes to demographic assumptions 53,204 1,536
Experience gains and losses arising on the
benefit obligation - (1,838)
Additional defined benefit obligation under
IFRIC 14 2,971 (2,971)
================================================== ========= =========
Actuarial gain/(loss) recognised in the statement
of comprehensive income 57,021 (21,950)
Deferred tax(1) 10,842 4,390
================================================== ========= =========
Actuarial gain/(loss) recognised in the statement
of comprehensive income net of tax 67,863 (17,560)
================================================== ========= =========
(1) Deferred tax adjustment in the period arises due to the
reduction in corporate tax rate and reduction in pension deficit. A
19% deferred tax rate has been applied.
During the period the Group commissioned a review of the IAS19
assumptions used in determining the closing liability of the
Johnston Press Pension Plan specifically focusing on demographic
assumptions. A medically underwritten study was carried out by KPMG
to identify the current health of a statistical sample group of
existing Plan members, assessed via telephone interviews targeted
towards members with the most significant liabilities in the Plan.
The output was interpreted by underwriters and then analysed
alongside the results from a postcode analysis performed in the
prior year. This was translated into mortality assumptions for use
in calculating the IAS19 scheme liabilities. The methodology used
was compliant with the applicable Technical Actuarial Standards in
force published by the Financial Reporting Council.
The study of current mortality gives an age rating of +3.0 years
to the standard SAPS tables used for the IAS19 disclosure
(previously this assumption had been set in line with 104% of
Self-Administered Pension Scheme (SAPS) tables). The futures
Improvement model has been updated to reflect the most recent
Continuous Mortality Investigation (CMI) 2015 projections and the
allowance for long term rates of improvement of 1.25% p.a. for
males and 1.0% p.a. for females remains unchanged. This is
equivalent to a life expectancy at 65 of 19.7 years (3 January
2015: 22.0 years) for males and 21.3 years (3 January 2015: 23.9
years) for females. The reduction in assumed life expectancy is
equivalent to a reduction in liabilities of GBP51.0 million.
The Rules of the Plan were revised such that the Company has an
unconditional right to any surplus on the eventual wind up of the
Plan. As such the additional IFRIC 14 liability has been
reversed.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
Statement of financial position - net defined benefit pension
deficit
2 January 3 January
2016 2015
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Amounts included in the Group Statement of
Financial Position:
Fair value of scheme assets 473,413 480,479
Present value of defined benefit obligations (500,375) (567,509)
Additional defined benefit obligation under
IFRIC 14 - (2,971)
============================================= ========= =========
Total liability recognised (26,962) (90,001)
Amount included in current liabilities 10,016 6,489
============================================= ========= =========
Amount included in non-current liabilities (16,946) (83,512)
============================================= ========= =========
Analysis of amounts recognised of the net defined benefit
pension deficit
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Net defined benefit pension deficit at beginning
of period (90,001) (78,334)
================================================= ========= =========
Defined benefit obligation at beginning of
period (567,509) (498,640)
Income statement:
Interest cost (19,704) (22,706)
Other comprehensive income:
Experience (gains) and losses - (1,838)
Remeasurements of defined benefit obligation:
Arising from changes in demographic assumptions 53,204 1,536
Arising from changes in financial assumptions 8,456 (66,797)
Cash flows:
Benefits paid (by fund and Group) 25,178 20,936
================================================= ========= =========
Defined benefit obligation at end of the
period (500,375) (567,509)
================================================= ========= =========
Fair value of plan assets at beginning of
period 480,479 420,306
Income statement:
Interest income on plan assets 16,771 19,376
Administration costs - (837)
Other comprehensive income:
Return on plan assets less gain (7,610) 48,120
Cash flows:
Company contributions(1) 8,951 14,450
Benefits paid (by fund and Group) (25,178) (20,936)
================================================= ========= =========
Fair value of plan assets at end of period 473,413 480,479
================================================= ========= =========
Additional defined benefit obligation under
IFRIC 14 - (2,971)
================================================= ========= =========
Net defined benefit pension deficit at end
of period (26,962) (90,001)
================================================= ========= =========
(1) Comprises annual employer contributions of GBP8,908,000 (3
January 2015: GBP6,300,000), contributions in respect of property
disposals of GBPnil (3 January 2015: GBP456,000), contributions in
respect of Irish title disposals of GBPnil (3 January 2015:
GBP1,280,000), plan expenses of GBP43,000 (3 January 2015:
GBP907,000), pension protection fund contributions of GBPnil (3
January 2015: GBP4,239,000) and s.75 debt contributions of GBPnil
(3 January 2015: GBP1,268,000).
Analysis of fair value of plan assets
2 January 3 January
2016 2015
GBP'000 GBP'000
-------------------------------- --------- ---------
Equities 76,162 67,283
Multi-asset credit 110,464 99,678
Diversified growth funds 167,124 152,231
Liability-driven investments 115,625 148,075
Other(1) 4,038 13,212
================================ ========= =========
Total fair value of plan assets 473,413 480,479
================================ ========= =========
(1) Other mainly includes cash and Protected Rights Funds.
Analysis of financial assumptions
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------------- ---------- ---------
Discount rate 3.75% 3.55%
Future pension increases
Deferred revaluations (where linked to inflation
(CPI)) 2.00% 1.75%
Pensions in payment (where linked to inflation
(RPI)) 2.95% 2.85%
Future life expectancy
22.0
Male currently aged 65 19.7 years years
23.9
Female currently aged 65 21.3 years years
================================================= ========== =========
Sensitivity analysis of significant assumptions
The following tables present a sensitivity analysis for each
significant actuarial assumption showing how the defined benefit
obligation would have been affected, by changes in the relevant
actuarial assumptions that were reasonably possible at the
reporting date:
Changes
in defined
benefit
obligation
GBPm
----------------------------------------------------------- -----------
Discount rate
+0.10% discount rate 7,395
Inflation rate
+0.10% inflation rate (4,808)
Mortality
+10.0% to base table mortality rates 16,060
Pension increase exchange
Allowance for 25% take up for sections where automatically
offered 380
=========================================================== ===========
The sensitivity analysis is based on a change in one assumption
while holding all other assumptions constant, therefore
interdependencies between assumptions are excluded. The methodology
applied is consistent to that used to determine the recognised
pension liability.
Other pension related obligations
The Group has agreed to pay the expenses of the Johnston Press
Pension Plan and the Pension Protection Fund (PPF) levy as they
fall due.
The Group entered into flexible apportionment arrangements in
March 2014 and again in March 2015 with the agreement of the Plan
Trustees, which resulted in a decrease in the 2014/15 and 2015/2016
PPF levy charges. The Group expects to see the full benefit of
reduced levy charges in 2016/2017, when the increased pension
contributions commence. The Company was required to pay a levy in
relation to 2014/15 amounting to GBP2.7 million and 2015/16 of
GBP0.7 million. The reduction in both of these levies from the
2013/14 level of GBP3.2 million resulted in payments of GBP0.5
million and GBP2.5 million being made to the Plan in September 2014
and September 2015 respectively, in accordance with the Pension
Framework Agreement. Current expectations for the 2016/17 PPF levy
is that it will be lower again than the 2015/16 PPF levy which will
benefit the Group in full given the top-up payments to the Plan in
relation to the PPF levy have now ceased.
The Johnston Press Pension Plan (the "Plan") is subject to a
potential increase in its liabilities in the event that historic
benefit equalisation has not taken effect for a specific group of
members. The Group's lawyers have advised that an application to
court should be made for a declaration that normal retirement dates
for these members were validly equalised as intended, and currently
anticipate a successful outcome in the case. A court application
has been made and the hearing is due to take place in May 2016. No
provision has been made in the financial statements. Based on
advice to the Trustees of the Plan, the Group anticipates the
maximum obligation in relation to this matter (in the event that
the court application is not successful) is expected to be in the
region of GBP8 million.
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
Five year history:
2 January 3 January 28 December 29 December 31 December
2016 2015 2013 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ------------- ----------- -----------
Fair value of scheme assets 473,413 480,479 420,306 382,792 368,718
Present value of defined benefit
obligations (500,375) (567,509) (498,640) (504,111) (472,708)
Additional obligation under IFRIC
14 - (2,971) - - -
================================== =========== =========== ============= =========== ===========
Deficit in the plan (26,962) (90,001) (78,334) (121,319) (103,990)
================================== =========== =========== ============= =========== ===========
Experience adjustments on scheme
liabilities
Amount (GBP'000) 61,660 (67,099) 7,357 (29,332) (22,524)
================================== =========== =========== ============= =========== ===========
Percentage of plan liabilities
(%) 12.3% (11.8%) 1.5% (5.8%) (4.8%)
================================== =========== =========== ============= =========== ===========
Experience adjustments on scheme
assets
Amounts (GBP'000) (7,610) 48,120 39,055 8,257 (27,060)
================================== =========== =========== ============= =========== ===========
Percentage of plan assets (%) (1.6%) 10.0% 9.3% 2.2% (7.3%)
================================== =========== =========== ============= =========== ===========
News Media Association Pension Scheme
The Group is a member of the News Media Association (NMA)
(formerly Newspaper Society), an unincorporated body representing
the interests of local newspaper publishers. During 2014 the
Newspaper Society incorporated itself as a company limited by
guarantee and entered into a merger with the Newspaper Publishers'
Association (a body representing the interests of publishers of
national newspapers). As part of the merger, existing members
entered into a deed of covenant in respect of the deficit to the
Society's defined benefit pension scheme. The members agreed to
make contributions over a period of 25 years or until such time as
the deficit has been addressed. Applying a discount rate of 12%,
the Group's best estimate of this at present value is GBP783k.
The first payment of GBP90k was made in 2015 and the discount
unwound resulting in an GBP82k movement, the closing liability
having reduced to GBP775k.
News Media Association Pension Scheme liabilities have been
included within provisions.
Other pension related liabilities
The closing provision relating to unfunded pensions for senior
employees was GBP0.8 million (2 January 2015: GBP1.4 million). The
unfunded pension provision is assessed by a qualified actuary at
each period end.
Post-retirement medical benefit pension related liabilities for
former Portsmouth and Sunderland members of GBP0.1 million (2
January 2015: GBP0.2 million). The post retirement medical benefits
represent management's best estimate of the liability
concerned.
On 6 January 2015, the Trustees of the Limerick Leader Plan
accepted the offer of additional funding to the Plan in
consideration for the Trustees agreeing to proceed to wind up the
Plan. The total amount of this additional funding was EUR320,000.
At the end of the period there was GBPnil liability (3 January
2015: GBP0.2 million).
Other pension related liabilities have been included within
provisions.
15. Share Capital
In summary:
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------------ --------- -----------
Issued
Ordinary shares
105,877,777 ordinary shares of 1p each (3
January 2015 and 2 January 2016) 1,059 1,059
================================================ ========= ===========
Total ordinary shares 1,059 1,059
================================================ ========= ===========
Deferred shares
690,294,608 deferred shares of 9p each 62,126 62,126
================================================ ========= ===========
Second class deferred shares
5,293,888,850 deferred shares of 0.98p each 51,880 51,880
================================================ ========= ===========
Total deferred shares and second class deferred
shares 114,006 114,006
================================================ ========= ===========
Preference shares
756,000 13.75% cumulative preference shares
of GBP1 each 756 756
349,600 13.75% 'A' preference shares of GBP1
each 350 350
================================================ ========= ===========
Total preference shares 1,106 1,106
================================================ ========= ===========
Total issued share capital 116,171 116,171
================================================ ========= ===========
The Group has only one class of ordinary shares which has no
right to fixed income. All the preference shares carry the right,
subject to the discretion and ability of the Group to distribute
profits, to a fixed dividend of 13.75% and rank in priority to the
ordinary shares. Given the discretionary nature of the dividend
right, the preference shares are considered to be equity under IAS
32.
Share warrants
The Company has issued share warrants over a total of 12.5% of
its issued share capital to former lenders (with 5.0% issued 28
August 2009, 2.5% issued 24 April 2012 and 5.0% issued 21 September
2012). Each of the share warrants have the right to subscribe for
0.1533799 ordinary shares at an exercise price of GBP1.9745 per
share and expire on 30 September 2017. The warrant instruments will
be settled by the Company delivering a fixed number of ordinary
shares and receiving a fixed amount of cash in return and so
qualify as equity under IAS 39. The Binomial Option pricing model
was used to assess the fair value of the share warrants issued in
the financial year that they were issued. At the balance sheet date
30,359,979 warrants were outstanding.
During the period, no ordinary shares of 1 pence each were
issued following the exercise of share warrants (2014: 4,833,738),
generating no cash for the Group (2014: GBP483,374).
16. Share Premium
2 January 3 January
2016 2015
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Opening balance 3 January 2015 587,702 502,829
Share premium generated under the Group savings
related share option scheme - 64
Placing shares - 2,188
Rights issue - 91,798
Capitalised costs associated with raising
new capital - (9,181)
Fractional shares - 4
Share capital reduction (275,000) -
Closing balance 2 January 2016 312,702 587,702
================================================ ========= =========
At the Group's Annual General Meeting on 27 June 2014, a special
resolution was approved to initiate a process to reduce the Group's
share premium account by GBP275 million. 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.
17. Notes to the Cash Flow Statement
2 January 3 January
2016 2015
Notes GBP'000 GBP'000
------------------------------------------- ----- --------- ---------
Operating profit 1,027 10,713
Adjustments for non cash items:
Impairment of publishing titles 35,234 21,568
Write-down of print presses(1) - 2,667
Write-down in carrying value of assets
held for sale - 300
=========================================== ===== ========= =========
36,261 35,248
Amortisation of intangible assets 1,815 194
Depreciation charges 6,553 5,306
Charge for share-based payments 2,188 907
Profit on disposal of property, plant
and equipment (968) (1,979)
Pensions administrative expenses - 837
Disposal of interest in associates 12 -
Currency differences (249) (34)
=========================================== ===== ========= =========
(MORE TO FOLLOW) Dow Jones Newswires
March 22, 2016 03:02 ET (07:02 GMT)
45,612 40,479
=========================================== ===== ========= =========
Operating items before working capital
changes:
Net pension funding contributions - cash 14 (8,928) (14,450)
Movement in long-term provisions (29) 613
=========================================== ===== ========= =========
Cash generated from operations before
workings capital changes 36,655 26,642
Working capital changes:
Decrease in inventories 160 2
Decrease/(Increase) in receivables 2,905 (2,528)
Increase/(Decrease) in payables/ including
restructuring payables and redundancy
accruals(1) 1,305 (17,798)
=========================================== ===== ========= =========
Cash generated from operations 41,025 6,318
=========================================== ===== ========= =========
1 A reconciliation of statutory to adjusted figures is provided
under Non-GAAP measures in the financial information.
Cash and cash equivalents (which are presented as a single class
of assets on the face of the Statement of Financial Position)
comprise cash at bank and other short-term highly liquid
investments with a maturity of three months or less.
18. Related Party Transactions
Associated parties
The Group did not undertake any related party transactions
during the current or preceding period.
Transactions with Directors
There were no material transactions with Directors of the
Company during the year, except for those relating to remuneration
and shareholdings, disclosed in the Directors' Remuneration
Report.
For the purposes of IAS 24, Related Party Disclosures,
management below the level of the Company's Board are not regarded
as related parties.
The remuneration of the Directors at the year-end, who are the
key management personnel of the Group, is set out in aggregate in
the audited part of the Directors' Remuneration Report.
19. Post Balance Sheet Events
On 12 February 2016 the Group announced its intention to
purchase i, part on the Independent Group, for a total
consideration of GBP24 million, GBP22 million payable on completion
and GBP2 million payable in April 2017. The purchase was approved
by shareholders on 21 March 2016 and is expected to complete on 10
April 2016.
There have been no other post-balance sheet events requiring
disclosure.
Non-GAAP measures
Adjusting Items - Other Supplementary Information
Consolidated Income Statement - Reconciliation of Statutory and
Adjusted Numbers
52 weeks ended 53 weeks ended
2 January 2016 3 January 2015
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
GBP'000s items GBP'000s GBP'000s items GBP'000s
Notes GBP'000s GBP'000s
=============================== ====== ========= ========= ========= ========= ================= =========
Advertising revenue
Print advertising A 119,607 (1,553) 118,054 138,087 (4,042) 134,045
Digital advertising A 31,719 (1,091) 30,628 29,116 (1,869) 27,247
=============================== ====== ========= ========= ========= ========= ================= =========
Total advertising
revenue 151,326 (2,644) 148,682 167,203 (5,911) 161,292
======================================= ========= ========= ========= ========= ================= =========
Non advertising revenue
Newspaper sales A 72,461 (78) 72,383 79,100 (1,308) 77,792
Contract printing A 12,627 - 12,627 12,820 (200) 12,620
Leaflet, sundry and
other A 8,675 (103) 8,572 9,700 (1,441) 8,259
=============================== ====== ========= ========= ========= ========= ================= =========
Total other revenue 93,763 (181) 93,582 101,620 (2,949) 98,671
======================================= ========= ========= ========= ========= ================= =========
Total continuing
revenues 245,089 (2,825) 242,264 268,823 (8,860) 259,963
======================================= ========= ========= ========= ========= ================= =========
Cost of sales B (132,243) 2,616 (129,627) (146,259) 5,874 (140,385)
Operating costs (103,450) (103,450) (106,351) (106,351)
======================================= ========= ========= ========= ========= ================= =========
Restructuring costs C 9,362 10,896
Impairment of publishing
titles D 35,234 24,535
Other E 3,484 11,495
=============================== ====== ========= ========= ========= ========= ================= =========
Total adjustments 48,080 48,080 46,926 46,926
======================================= ========= ========= ========= ========= ================= =========
Total operating costs (103,450) 48,080 (55,370) (106,351) 46,926 (59,425)
======================================= ========= ========= ========= ========= ================= =========
Total costs (235,693) 50,696 (184,997) (252,610) 52,800 (199,810)
======================================= ========= ========= ========= ========= ================= =========
EBITDA 9,396 47,871 57,267 16,213 43,940 60,153
======================================= ========= ========= ========= ========= ================= =========
Depreciation and
amortisation F (8,369) 1,668 (6,701) (5,500) 11 (5,489)
=============================== ====== ========= ========= ========= ========= ================= =========
Operating profit/(loss) 1,027 49,539 50,566 10,713 43,951 54,664
Investment income 854 - 854 2,209 - 2,209
Net finance expense
on pension assets/liabilities G (2,933) 2,933 - (3,330) 3,330 -
Fair value gain on
borrowings H 23,918 (23,918) - 5,063 (5,063) -
Other - - - 1,662 (1,662) -
Finance cost I (19,973) 84 (19,889) (40,233) 9,046 (31,187)
=============================== ====== ========= ========= ========= ========= ================= =========
Finance costs 1,866 (20,901) (19,035) (34,629) 5,651 (28,978)
======================================= ========= ========= ========= ========= ================= =========
Profit/(Loss) before
tax 2,893 28,638 31,531 (23,916) 49,602 25,686
======================================= ========= ========= ========= ========= ================= =========
Tax 8,538 (14,959) (6,421) 8,580 (14,978) (6,398)
======================================= ========= ========= ========= ========= ================= =========
Profit/(Loss) from
continuing operations 11,431 13,679 25,110 (15,336) 34,624 19,288
======================================= ========= ========= ========= ========= ================= =========
Net profit/(Loss)
from discontinued
operations - - - 236 - 236
======================================= ========= ========= ========= ========= ================= =========
Consolidated profit/(Loss)
for the period 11,431 13,679 25,110 (15,100) 34,624 19,524
======================================= ========= ========= ========= ========= ================= =========
A Revenue
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